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Chapter 10Chapter 10

Developing, Positioning, Developing, Positioning,

and Differentiating and Differentiating

Products through Products through

the Life Cyclethe Life Cycle

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ObjectivesObjectives

Understand the challenges a company faces in

developing and introducing new products.

Learn the main stages in developing new

products and how they can be better managed.

Know the factors that affect the rate at which

consumers adopt new products.

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ObjectivesObjectives

Learn what marketing strategies are appropriate

at each stage of the product life cycle.

Understand how a company can choose and

communicate an effective market position.

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New Product DevelopmentNew Product Development

What is a “New” Product?

– New-to-the-world products

– New product lines

– Additions to existing product lines

– Improvements and revisions of existing products

– Repositioned products

– Cost reduction products

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New Product DevelopmentNew Product Development

New Product Failure is Rampant:– 95% of new U.S. consumer products

– 90% of new European consumer products

Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions

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New Product DevelopmentNew Product Development

Successful new products:

– Offer a strong relative advantage

– Reflect better understanding of customer needs,

and beat the competition to market

– Exhibit higher performance-to-cost ratios and

higher contribution margins

– Are launched with larger budgets

– Have stronger top management support

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Managing New ProductsManaging New Products

Idea generation

Idea screening

Concept

development

Concept testing

Marketing strategy

development

Business analysis

New Product Development Process: Ideas to Strategy

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Managing New ProductsManaging New Products

Product development

Market testing

Commercialization

New Product Development Process: Development to Commercialization

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Consumer Adoption ProcessConsumer Adoption Process

Adopters of new products move through five

stages:

– Awareness

– Interest

– Evaluation

– Trial

– Adoption

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Consumer Adoption ProcessConsumer Adoption Process

People adopt new products at different rates

– Innovators

– Early adopters

– Early majority

– Late majority

– Laggards

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Marketing Through the Marketing Through the Product Life CycleProduct Life Cycle

Five product characteristics influence the

rate of adoption:

– Degree of relative advantage

– Degree of compatibility

– Degree of complexity

– Degree of divisibility (trialability)

– Degree of communicability

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Stages of the Product Life CycleStages of the Product Life Cycle

PLC Stages

IntroductionIntroduction

Growth

Maturity

Decline

Low sales

High costs per

customer

Negative profits

Innovator customers

Few competitors

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Stages of the Product Life CycleStages of the Product Life Cycle

PLC Stages

Introduction

GrowthGrowth

Maturity

Decline

Rising sales

Average costs

Rising profits

Early adopters

customers

Growing competition

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Stages of the Product Life CycleStages of the Product Life Cycle

PLC Stages

Introduction

Growth

MaturityMaturity

Decline

Peak sales

Low costs

High profits

Middle majority

customers

Stable/declining

competition

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Stages of the Product Life CycleStages of the Product Life Cycle

PLC Stages

Introduction

Growth

Maturity

DeclineDecline

Declining sales

Low costs

Declining profits

Laggard customers

Declining competition

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Objectives and Strategies for the Objectives and Strategies for the Product Life CycleProduct Life Cycle

PLC Stages

IntroductionIntroduction

Growth

Maturity

Decline

Objective: to create awareness and trial

Offer a basic product Price at cost-plus Selective distribution Awareness – dealers and

early adopters Induce trial via heavy

sales promotion

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Objectives and Strategies for the Objectives and Strategies for the Product Life CycleProduct Life Cycle

PLC Stages

Introduction

GrowthGrowth

Maturity

Decline

Objective: maximize market share

Offer service, product extensions, warranty

Price to penetrate Intensive distribution Awareness and interest –

mass market Reduce promotions due to

heavy demand

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Objectives and Strategies for the Objectives and Strategies for the Product Life CycleProduct Life Cycle

PLC Stages

Introduction

Growth

MaturityMaturity

Decline

Objective: maximize profit while defending market share

Diversify brands/items Price to match or beat

competition Intensive distribution Stress brand differences and

benefits Increase promotions to

encourage switching

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Objectives and Strategies for the Objectives and Strategies for the Product Life CycleProduct Life Cycle

PLC Stages

Introduction

Growth

Maturity

DeclineDecline

Objective: reduce costs and milk the brand

Phase out weak models Cut price Selective distribution Reduce advertising to levels

needed to retain hard-core loyalists

Reduce promotions to minimal levels

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Positioning and DifferentiationPositioning and Differentiation

Two views of positioning:

– Ries and Trout: products are positioned in the

mind of prospect

– Treacy and Wiersema: positioning via value

disciplines Product leader firm

Operationally excellent firm

Customer intimate firm

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Positioning and DifferentiationPositioning and Differentiation

Positioning statements:– To (target group and need) our (brand) is

(concept) that (point-of-difference)Example: To young, active soft-drink

consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

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Positioning and DifferentiationPositioning and Differentiation

Differentiated products feature meaningful

and valuable differences that distinguish the

company’s offering from the competition.

Differences are stronger when they are

important, distinctive, superior, preemptive,

affordable, and profitable.

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Positioning and DifferentiationPositioning and Differentiation

Form

Features

Performance

Conformance

Durability

Reliability

Repairability

Style

Design

Product Differentiation Tools

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Positioning and DifferentiationPositioning and Differentiation

Ordering ease

Delivery

Installation

Customer

training

Customer

consulting

Maintenance and

repair

Miscellaneous

Services Differentiation Tools

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Positioning and DifferentiationPositioning and Differentiation

Competence

Courtesy

Credibility

Reliability

Responsiveness

Communication

Personnel Differentiation Tools

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Positioning and DifferentiationPositioning and Differentiation

Coverage

Expertise

Performance

Channel Differentiation Tools

• Symbols

• Media

• Atmosphere

• Events

Image Differentiation Tools