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Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 1
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDana Freeman, B-books, Ltd.
Lamb, Hair, McDaniel 2009-2010
10
CHAPTERDeveloping
and Managing Products
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 2
Learning Outcomes
Explain the importance of developing new products and describe the six categories of new products
Explain the steps in the new-product development process
Discuss global issues in new-product development
LO1
LO2
LO3
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 3
Learning Outcomes
Explain the diffusion process through which new products are adopted
Explain the concept of product life cycles
LO4
LO5
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 4
Explain the importance of developing new
products and describe the six categories of
new products
The Importance of New ProductsThe Importance of New ProductsLO1
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 5
LO1
New Product
A product new to the
world, the market, the
producer, the seller,
or some combination
of these.
New ProductNew Product
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LO1
Categories of New Products
New-to-the-WorldNew-to-the-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements or RevisionsImprovements or Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced Products
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 7
REVIEW LEARNING OUTCOMELO1
Developing New Products
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 8
Explain the steps in the new-product
development process
The New Product The New Product Development ProcessDevelopment ProcessLO2
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The New-Product Development Process
LO2
Long-term commitmentLong-term commitment
Company-specific approachCompany-specific approach
Capitalize on experienceCapitalize on experience
Establish an environmentEstablish an environment
New Product Success Factors
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 10
New-Product Development Process
LO2
New-Product StrategyNew-Product Strategy
Idea GenerationIdea Generation
Idea ScreeningIdea Screening
Business AnalysisBusiness Analysis
DevelopmentDevelopment
Test MarketingTest Marketing
CommercializationCommercialization
New ProductNew Product
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 11
LO2
Idea Generation
Customers
Employees
Distributors
Competitors
Vendors
R & D
Consultants
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
Online
http://www.ideo.com
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 12
LO2
Tips for New Product Development
Disperse R & D around the globe
Keep teams small and empower employees
Flatten hierarchy
Encourage generation of crazy new ideas
Welcome mistakes
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LO2
Brainstorming
BrainstormingBrainstorming The process of getting a
group to think of unlimited
ways to vary a product or
solve a problem.
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LO2
Idea Screening
Idea ScreeningIdea Screening
The first filter in the product
development process, which
eliminates ideas that are
inconsistent with the
organization’s new-product
strategy or are inappropriate
for some other reason.
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LO2
Concept Testing
Concept TestingConcept Testing A test to evaluate a
new-product idea, usually
before any prototype has
been created.
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LO2
Business Analysis
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Demand
Cost
Sales
Profitability
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 17
LO2
Development
Creation of prototype
Marketing strategy
Packaging, branding, labeling
Promotion, price, and distribution strategy
Manufacturing feasibility
Final government approvals if needed
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LO2
Simultaneous Product Development
SimultaneousProduct
Development
SimultaneousProduct
Development
A new team-oriented
approach to new-product
development where all
relevant functional areas
and outside suppliers
participate in the
development process.
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 19
LO2
Test Marketing
TestMarketing
TestMarketing
Online
foodcom.com/signup.com
The limited introduction of
a product and a marketing
program to determine the
reactions of potential
customers in a market
situation.
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LO2
Alternatives to Test Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
Online test marketing
Online
http://www.newproductworks.com
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 21
LO2
Commercialization
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales TrainingSales Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 22
REVIEW LEARNING OUTCOMELO2
New-Product Development ProcessIdeageneration
Ideascreening
Businessanalysis
Development
Test marketing
CommercializationNu
mb
er
of n
ew
pro
duct
ide
as
Time0
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 23
Beyond
the
Book
Why Some Products Succeed and Others Fail
NOTE: Supplemental content – not in book.
Explain why some products succeed and
others fail
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 24
Beyond
the
Book
Why New Products Fail
NOTE: Supplemental content – not in book.
No discernible benefits Poor match between features
and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 25
Beyond
the
Book
Success Factors
NOTE: Supplemental content – not in book.
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
Match between product and market needs
Different from substitute products
Benefit to large number of people
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 26
Beyond
the
Book
Success Factors
NOTE: Supplemental content – not in book.
Listening to customers
Producing the best product
Vision of future market
Strong leadership
Commitment to new-product development
Project-based team approach
Getting every aspect right
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 27
Beyond
the
Book
Why Products Succeed and Others Fail
NOTE: Supplemental content – not in book.
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 28
Discuss global issues in new-
product development
Global Issues in Global Issues in New-Product DevelopmentNew-Product DevelopmentLO3
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Global Marketing Questions
Develop product for potential worldwide distribution
Build in unique market requirements
Design products to meet regulations and key market requirements
LO3
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 30
REVIEW LEARNING OUTCOMELO3
Global Issues in New-Product Development
Single product worldwideSingle product worldwide
Modification of productsModification of products
Multiple products in multiple countriesMultiple products in multiple countries
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 31
Explain the diffusion process through
which new products are adopted
The Spread of New ProductsThe Spread of New ProductsLO4
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Diffusion
LO4
The process by which the
adoption of an innovation
spreads.
DiffusionDiffusion
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Categories of Adopters
LO4 LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
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Product Characteristics and the Rate of Adoption
LO4
TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
Online
http://www.electronicgadgetdepot.com
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Sales of New Audio Products
LO4
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Marketing Implications of the Adoption Process
LO4
Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 37
REVIEW LEARNING OUTCOMELO4
Diffusion Process for New Products
Innovators2.5%
Early adopters13.5%
Early majority 34% Late majority
34%
Laggards34%
Percentage of total adoptions by categoryProduct Characteristics (Influence Rate of Adoption)
• Complexity
• Relative Advantage• Compatibility
• Observability• “Trialability”
Sal
es
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 38
Explain the concept of product life
cycles
Product Life CyclesProduct Life CyclesLO5
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 39
Product Life Cycle
LO5
ProductLife Cycle
ProductLife Cycle
A concept that provides a
way to trace the stages of a
product’s acceptance, from
its introduction (birth) to its
decline (death).
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 40
Product Life Cycle
LO5Time
Do
llar
s
Profits
SalesSalesIntroductoryIntroductoryStageStage
GrowthGrowthStageStage
MaturityMaturityStageStage
DeclineDeclineStageStage
0
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 41
Product Life Cycles for Styles, Fashions, and Fads
LO5
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U.S. Sales of Televisions
LO5
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Introductory Stage
LO5
High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales
increases Promotion focuses on awareness and
information Communication challenge is to stimulate
primary demand
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Growth Stage
LO5
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the
differences between brands Wider distribution
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Maturity Stage
LO5
Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 46
Decline Stage
LO5
Long-run drop in sales Large inventories of
unsold items Elimination of all nonessential
marketing expenses “Organized abandonment”
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 47
Diffusion Process and PLC Curve
LO5
Innovators
Early adopters
Early majorityLate majority
Laggards
ProductProductlife cyclelife cyclecurvecurve
Introduction Growth Maturity DeclineS
ales
DiffusionDiffusioncurvecurve
Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 48
REVIEW LEARNING OUTCOMELO5
Product Life Cycles
Time
INTRODUCTION GROWTH MATURITY DECLINE
ProductStrategy
DistributionStrategy
PromotionStrategy
PricingStrategy
Limited models.Frequent changes.
More models.Frequent changes.
Large number of models.
Eliminate unprofitable
models.
Limitedwholesale/
retail distributors.
Expanded dealers. Long-term relations.
Extensive.Margins drop.Shelf space.
Phase out unprofitable
outlets.
Awareness. Stimulate
demand. Sampling.
Aggressive ads.Stimulatedemand.
Advertise. Promote heavily.
Phase outpromotion.
High to recoupdevelopment
costs.
Fall as result ofcompetition and efficient production.
Prices fall (usually).
Prices stabilize at low level.
Sa
les