New Product Development &

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12 Νοε 2013 (πριν από 3 χρόνια και 4 μήνες)

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New Product Development &

Product Life Cycles


How do companies develop and market new
products?


Come up with own ideas.


Brand new products


Product improvements & modifications


Acquire companies, patents, licenses.


New Product Development Strategy

New
-
Product Failures


Only 10% of new consumer products succeed in the
long run.



Why do most products fail?



Don’t fulfill a real need or want


Overestimation of market size


Design problems that compromise functionality


Incorrectly positioned, priced or promoted (4 Ps)


Pushed despite poor marketing research findings


Development costs go over budget


Competitive response (usually unanticipated)



Major Stages in New
-
Product Development Process

Idea Generation

Where do ideas come from?


Internal sources:


Company employees at all levels: “
Intrapraneuring



External sources:


Customers


Competitors


Distributors


Suppliers


Outsourcing partners

Idea Screening


Keep the good ideas and drop the poor ones.


Often highly subjective and non
-
scientific.


Strategic fit with core competencies and product
expertise.


“Back
-
of
-
the
-
envelope” market size estimates



Develop a working description and visualization
of the product idea and concept.


Test ideas with real consumers.

Concept Development and Testing

The Concept Board helps
companies verbalize and visualize
product concepts for consumer
testing.


Assess economic viability of the concept.


Potential Metrics:


Sales


Contribution (Profit)


NPV, IRR, ROI


ROMI


Project must clear financial hurdles to move to
the product development phase.


Business Analysis


Develop concept into physical product
prototype.


Large jump in investment


“point of no
return”.


Test and refine prototype until product passes
consumer and legal scrutiny.

Product Development

Test Marketing


Product / marketing
program introduced in
limited

# of
real

market
settings.


Avoids “broad launch”
mistakes.


Competitive Retaliation
problems


After test marketing the “Go Active”
meal (an adult happy meal) in 150
markets in Indiana, McDonald’s decided
to sell it across the U.S.


Broad launch of product if market test results
are positive.

Greenlighting



Timing of launch is important.


Potential Rollout plans


Local


Regional


National


International


“Wider Test Market”


more scattered sample


Commercialization


The Product Life Cycle


Product need

-

longest life cycle (e.g., “phone”)


Product form

-

standard PLC shape (e.g., landline telephone)


Brand



shorter PLC cycles due to competitive attacks and
wearout (e.g., T
-
Mobile, Nokia, Sprint)


Styles and Fashions



very short life cycles (different phone
designs)


Fad
-

fashion with quick adoption, quick decline (e.g., pet rocks)
and backlash



The trend towards
shorter

Product Life Cycles


Product Life
-
Cycle Lengths


Sales:

low


Costs:

high cost per customer


Profits:

negative


Marketing Objective:

create product awareness and
trial


Product:

offer a basic “core” product


Price:

based primarily on cost


Distribution:

build selective distribution


Promotion:

heavy to entice product trial


Introduction Stage of PLC


Sales:

rapidly rising


Costs:

average cost per customer


Profits:

rising


Marketing Objective:

maximize market share


Product:

offer peripheral benefits, i.e. service,
warranty, packages


Price:

penetration strategy


Distribution:

start building intensive distribution


Promotion:

reduce since demand is naturally growing


Growth Stage of PLC


Sales:

reach their peak


Costs:

lowest cost per customer


Profits:

highest ever


Marketing Objective:

“defend” high profits and
market share


Product:

diversify brand and models


Price:

match or beat competitors


Distribution:

continue building intensive distribution


Promotion:

increase to encourage brand switching


Maturity Stage of PLC


Keeping Consumption High


How?


Find new users or new market segments. (McDonald’s goes global)


Reposition the brand to appeal to a different segment. (“Not your
father’s Oldsmobile”)


Look for ways to increase or revive usage among present customers.
(Arm & Hammer)


Improve/Modify the product (Gilette)


New Ad Campaign (Coke, Pepsi, McDonald’s)


Discounting Price


Maturity Stage of PLC

Arm & Hammer gives consumers another use
for Baking Soda and avoids decline.


Maturity Stage of PLC

Modifying the Product

Gillette
: Has mastered the
art of improving product.


Fusion razor:


precision trimmer blade


five blade shaving surface
flexible comfort guard


Enhanced Indicator Lubrastrip
(contains vitamin E and aloe)


Sales:

declining


Costs:

lower (but not lowest) cost per customer


Profits:

declining


Marketing Objective:

reduce expenditures and “milk”
the brand for residual sales


Product:

phase out weak items


Price:

cut price or raise price


Distribution:

selective
-

phase out unprofitable
outlets


Promotion:

reduce to “survival” level


Decline Stage of PLC

Question du Jour

Is the PLC for real?