Chapter 11: Developing and Managing Products Prepared by Amit Shah, Frostburg State University...

Chapter 11: Developing and Managing Products

Prepared by Amit Shah, Frostburg State University

Designed by Eric Brengle, B-books, Ltd.

Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1

Learning Outcomes

2

Explain the importance of developing new products and describe the six categories of new products

Explain the steps in the new-product development process

Explain why some products succeed and others fail

LO1

LO2

LO3

Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Learning Outcomes

3

Discuss global issues in new-product development

Explain the diffusion process through which new products are adopted

Explain the concept of product life cycles

LO5

LO6

LO4


The Importance of New Products

4

Explain the importance of developing new products

and describe the six categories of new products.

LO1


New Product

5

A product newto the world, the market, theproducer, the seller, or some

combination of these.


New Product Advantages

6

Being first on the market has numerous advantages:

•Increased sales through longer sales life•Increased margins•Increased product loyalty•More resale opportunities•Greater market responsiveness•A sustained leadership position


Categories of New Products

7

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


Review Learning OutcomeDeveloping New Products

8

LO1


The New Product Development Process

9

Explain the steps

in the new-product

development process.

LO2


The New-Product Development Process

10

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

New Product Success Factors


New-Product Development Process

11

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product


Idea Generation

12

Customers

Employees

Distributors

Vendors

Competitors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

Online

http://www.ideo.com


http://www.ideo.com/

http://www.ideo.com/

Brainstorming

13

The process of getting a group

to think of unlimited ways to

vary a product or

solve a problem.


Idea Screening

14

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.


Concept Test

15

A test to evaluate a

new-product idea,

usually before any prototype

has been created.


Business Analysis

16

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability


Development

17

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

Final government approvals if needed


Simultaneous Product Development

18

A team-oriented approach

to new-product development.


Test Marketing

19

The limited introduction of a product and a marketing

program to determine the reactions of

potential customers in a market situation.


Alternatives to Test Marketing

• Single-source research using supermarket scanner data

• Simulated (laboratory) market testing

• Online test marketing

20

Online

http://www.newproductworks.com


http://www.newproductworks.com/

http://www.newproductworks.com/

Commercialization

21

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising


Review Learning OutcomeNew-Product Development Process

22

LO2


Why Some Products Succeed and Others Fail

23

Explain why some products succeed and others fail.

LO3


Why New Products Fail

• 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

24Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Success Factors

25

Match between product and market needs

Different from substitute products

Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products

Benefit to large number of people


Success Factors

26

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 Willingness to fail occasionally


Review Learning OutcomeWhy Products Succeed or Fail

27

LO3


Global Issues in New-Product Development

28

Discuss global issues in

new-product development.

LO4


Global Issues

29

Develop product for potential worldwide distribution

Build in unique market requirements

Design products to meet regulations and key market requirements


Review Learning OutcomeGlobal Issues in New-Product Development

30

LO4

Single product worldwideSingle product worldwide

Modification of productsModification of products

Multiple products in multiple countriesMultiple products in multiple countries


The Spread of New Products

31

Explain the diffusion process through which

new products are adopted.

LO5


Diffusion

32

The process bywhich the adoption of an

innovation spreads.


Categories of Adopters

33

LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators


Product Characteristics and the Rate of Adoption

34

TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

Online

http://www.electronicgadgetdepot.com


http://www.electronicgadgetdepot.com/

http://www.electronicgadgetdepot.com/

Sales of New Audio Products


Marketing Implications of the Adoption Process

36

Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process


Review Learning OutcomeDiffusion Process for New Products

37

LO5


Product Life Cycles

38

Explain the concept of

product life cycle.

LO6


Product Life Cycle

39

A biological metaphor that

traces the stages of a product’s

acceptance, from its

introduction (birth) to

its decline (death).


Product Life Cycle

40Time

Do

llar

s

Profits

SalesSales

IntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0


Product Life Cycles for Styles, Fashions, and Fads


U.S. Sales of Widgets


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


Growth Stage

• Increasing rate of sales

• Entrance of competitors

• Market consolidation

• Initial healthy profits

• Aggressive advertising of the differences between brands

• Wider distribution


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


Decline Stage

• Long-run drop in sales

• Large inventories of unsold items

• Elimination of all nonessential marketing expenses

• “Organized abandonment”


Diffusion Process and PLC Curve

47

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

DiffusionDiffusioncurvecurve

Introduction Growth Maturity Decline

Sal

es


Review Learning Outcome

48

LO6

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 &

efficient production

Prices fall (usually)

Prices stabilize at

low level

Sal

es


Chapter 11: Developing and Managing Products Prepared by Amit Shah, Frostburg State University...

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