Transcript NPD – PLC strategies

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New Product Development and
Product Life-Cycle Strategies
Principles of Marketing
Learning Objectives
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• After studying this chapter, you should be able to:
– Explain how companies find and develop new-product ideas
– List and define the steps in the new-product development
process
– Describe the stages of the product
life cycle
– Describe how marketing strategies
change during the product’s life
cycle
Prof. Jahanzaib Yousaf
Types of New Products
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• Innovative
• Enhancements or Different from existing
• Imitative
Major Stages in New Product Development
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• Idea generation: systematic search for new ideas
– Internal sources: brainstorming
– External sources: customers, competitors,
distributors and suppliers
Figure 11.1
• Idea screening: identify
good ideas and drop poor ones
– Usefulness to consumers
– Good for company
– Fit with objectives and
strategies
– Have the resources
– Add value
Prof. Jahanzaib Yousaf
Major Stages in New Product Development
• Concept development: detailed version of the
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product concept in meaningful consumer terms
• Concept testing: testing new-product concepts for
consumer appeal
Figure 11.1
• Marketing strategy: initial
strategy for product concept:
– Target market, positioning,
and sales, market share, and
profit goals
– Price, distribution, and
marketing budget
– Strategy statement, long-run
sales, profit goals, and
marketing mix
Prof. Jahanzaib Yousaf
Major Stages in New Product Development
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• Business analysis: review of sales, costs, and profit
projections to determine if they meet company
objectives.
• Product development:
Figure 11.1
developing the product
concept into a physical
product
– Large investment
– Building a prototype
– Testing for safety,
durability, and
acceptability
Prof. Jahanzaib Yousaf
Major Stages in New Product Development
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• Test marketing: testing the product in more
realistic market settings
– Determine the target market profile
– Assess consumer
acceptability, trial, repeat
purchase rate
– Evaluate trade reception
and distribution penetration
– Design effective media
plans
• Standard test markets
• Controlled test markets
• Simulated test market
Figure 11.1
Prof. Jahanzaib Yousaf
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Test marketing
When firms test
market
• New product with
large investment
• Uncertainty about
product or
marketing
program
When firms may
not test market
• Simple line
extension
• Copy of
competitor
product
• Low costs
• Management
confidence
Prof. Jahanzaib Yousaf
Major Stages in New Product Development
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• Commercialization: introducing a new product
into the market
– Introduction timing
– Market rollout or full-scale
introduction
Figure 11.1
• Sequential product
development
• Simultaneous (teambased) product
development
Prof. Jahanzaib Yousaf
Product Life-Cycle Strategies
• Product life cycle (PLC): the course of a product’s
sales and profits over its life
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Figure 11.2
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Product Life-Cycle Strategies
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Introduction Stage
• Slow sales growth
• Little or no profit
• High distribution and promotion
expense
Prof. Jahanzaib Yousaf
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Product Life-Cycle Strategies
Growth Stage
• Sales increase
• Increased Consumer awareness
• New competitors enter the market
• Price stability or decline to increase
volume
• Profits increase
• Promotion and manufacturing costs
gain economies of scale
Prof. Jahanzaib Yousaf
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Product Life-Cycle Strategies
Maturity Stage
• Slowdown in sales
• High Competition & Market
Saturation
• Substitute products
• Increased promotion and R&D to
support sales and profits
• Increased Variants
Prof. Jahanzaib Yousaf
Product Life-Cycle Strategies
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Maturity Stage Strategies
• Market modification (New Segments)
• Product modification (New Variants)
• Marketing mix modification
Prof. Jahanzaib Yousaf
Product Life-Cycle Strategies
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Decline Stage
• Low Sales Volumes resulting in
decrease in revenues & profits
• Cost cuts
• Maintain the product
• Harvest the product
• Drop the product
Prof. Jahanzaib Yousaf
Styles, Fashions, and Fads
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• Style: basic and distinctive mode of expression
• Fashion: currently accepted or popular style in a
given field
• Fad: a fashion the enters quickly, adopted with great
zeal, peaks early, and decline very fast
Figure 11.3
Prof. Jahanzaib Yousaf
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Summary of PLC (Table 11.2)
Characteristics:
Introduction
Growth
Maturity
Decline
Sales
Costs
Low
High cost
per customer
Negative
Innovators
Few
Rapidly rising sales
Average cost
per customer
Rising profits
Early adopters
Growing number
Peak
Low cost
per customer
High profits
Middle majority
Stable number
Declining sales
Low cost
per customer
Declining profits
Laggards
Declining number
Create product
awareness and trial
Maximize market
share
Maximize profit &
defend market share
Reduce expenditure
& milk brand
Product
Offer basic product
Price
Use cost-plus
Build selective
distribution
Build awareness
early adopters/dealers
Heavy sales promotion
to entice trial
Diversify brand and
models
Price to match or
best competitors
Build more
intensive distribution
Stress brand differences
and benefits
Increase to encourage
brand switching
Phase out weak
items
Cut price
Distribution
Offer product
extensions, service
Price to penetrate
market
Build intensive
distribution
Build awareness &
interest mass market
Reduce promotion due
to heavy demand
Profits
Customers
Competitors
Marketing objectives:
Strategies:
Advertising
Sales promotion
Selective; phase out
unprofitable outlets
Reduce to level needed
to retain hard-core loyals
Reduce to minimal
level
Prof. Jahanzaib Yousaf