Chapter 11 MKTG6

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

Lamb, Hair, McDaniel

CHAPTER 11Developing and Managing

Products

2012-2013

Jaspe

rWhite/Stone/GettyImages

1 2013 by Cengage Learning Inc. All Rights

Reserved.


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Categories of New Products

New-to-the-World

New Product Lines

Product Line Additions

Improvements or Revisions

Repositioned Products

Lower-Priced Products

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Exhibit 11.1

New-Product Development Process

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Idea Generation

Customers

Employees

Distributors

Vendors

Competitors

R & D

Consultants

Sources of

New-ProductIdeas



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Approaches for New ProductDevelopment

Brainstorming

Focus Group

The process of getting a group to think ofumlimited ways to vary a product or solve a

problem.

The objective of focus group interviews is tostimulate insightful comments through groupinteraction.



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the first filter in the product development process,which eliminates ideas that are inconsistent withthe organizations new-product strategy or are

inappropriate for some other reason.

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

extensions.6 2

Screening is

A Concep t Test is


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Business Analysis

ConsiderationsinBusiness

Analysis Stage

Demand

Cost

Sales

Profitability



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Development

Creation of prototype

Sketch marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution

strategy

Manufacturing feasibility



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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.



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Test Marketing

Test

Marketing The limited introduction

of a product and amarketing program to

determine the reactions

of potential customersin a market situation.



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Costs of Test Marketing

Often take 1 year or more

Can cost over $1 million

Exposes new product tocompetitors

Competitors can jam testing

programs with their own

promotions



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Alternatives toTest Marketing

Single-source research usingsupermarket scanner data

Simulated (laboratory) market testing

Online test marketing



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Commercialization

Production

Inventory Buildup

Distribution Shipments

Sales Force Training

Trade Announcements

Customer Advertising

Ordering Materials



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New-ProductSuccess Factors

Listening to customers

Producing the bestproduct

Vision of future market

Strong leadership

Commitment to new-product development

Project-based teamapproach

Getting every aspectright



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The process by which the

adoption of an innovation

spreads.

Diffusion

Diffusion

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Laggards

Late Majority

Early Majority

Early Adopters

Innovators

Categories of AdoptersCategories of Adopters

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Trialability

Observability

Relative Advantage

Compatibility

Complexity

Product Characteristics and

the Rate of Adoption



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Direct fromMarketer

Word of Mouth

CommunicationAids the

Diffusion Process

Marketing Implications of the

Adoption Process



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Product

Life Cycle (PLC)

A concept that provides a way

to trace the stages of a

products acceptance, from its

introduction (birth) to its

decline (death).

Product Life Cycle



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Introductory Stage

High failure rates

Little competition

Frequent product modification

Limited distribution High marketing and production costs

Negative profits with slow salesincreases

Promotion focuses on awareness andinformation

Communication challenge is tostimulate primary demand



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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



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Decline Stage

Long-run drop in sales

Large inventories ofunsold items

Elimination of all nonessentialmarketing expenses

Organized abandonment



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Exhibit 11.4Relationships between the Diffusion Process

and the Product Life Cycle

Product

life cycle

curve

Diffusion

curve

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Chapter 11 MKTG6

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