Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1

Lamb, Hair, McDaniel

CHAPTER 11

Developing and Managing Products

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Categories ofNew 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 ProductsLO1


The New-Product Development Process

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

New Product Success Factors

LO2


LO2

Exhibit 11.1Exhibit 11.1New-Product New-Product Development Development

ProcessProcess


New-Product Strategy

a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.

New-Product Strategy is…

LO2


Idea Generation

Customers

Employees

Distributors

Vendors

Competitors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

LO2


Approaches for New Product Development

LO2

BrainstormingBrainstorming

Focus GroupFocus Group

The process of getting a group to think of umlimited ways to vary a product or solve a problem.

The process of getting a group to think of umlimited ways to vary a product or solve a problem.

The objective of focus group interviews is to stimulate insightful comments through group interaction.

The objective of focus group interviews is to stimulate insightful comments through group interaction.


Idea Screening

LO2

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.

Screening is…

a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions.

A Concept Test is…


Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability

LO2


Development

Creation of prototype

Sketch marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

LO2


Simultaneous Product Development

A new team-oriented approach to new-

product development where all relevant

functional areas and outside suppliers

participate in the development process.

LO2


Test Marketing

TestMarketing

TestMarketing

The limited introduction

of a product and a

marketing program to

determine the reactions

of potential customers

in a market situation.

LO2


Costs of Test Marketing

• Often take 1 year or more• Can cost over $1 million• Exposes new product to

competitors• Competitors can “jam” testing

programs with their own promotions

LO2


Alternatives toTest Marketing

Single-source research using supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

LO2


Commercialization

LO2

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales Force TrainingSales Force Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

Ordering MaterialsOrdering Materials


New-ProductSuccess Factors

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

LO2


Beyo

nd

th

e

BookWhy 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


Diffusion

The process by which the

adoption of an innovation

spreads.

DiffusionDiffusion

LO4


LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators

LO4

Categories of Adopters


TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

LO4

Product Characteristics and the Rate of Adoption


Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process

LO4

Marketing Implications of the Adoption Process


ProductLife Cycle (PLC)

ProductLife Cycle (PLC)

A concept that provides a way

to trace the stages of a

product’s acceptance, from its

introduction (birth) to its

decline (death).

LO5

Product Life Cycle


LO5

Exhibit 11.2Exhibit 11.2Four Stages of the Four Stages of the Product Life CycleProduct Life Cycle


Introductory Stage

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

LO5


Growth Stage

Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the

differences between brands Wider distribution

LO5


Maturity Stage

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

LO5


Decline Stage

Long-run drop in sales Large inventories of

unsold items Elimination of all nonessential

marketing expenses “Organized abandonment”

LO5


LO5

Exhibit 11.4Exhibit 11.4Relationships between the Diffusion Process Relationships between the Diffusion Process and the Product Life Cycle and the Product Life Cycle

Productlife cyclecurve

Diffusioncurve

Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

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