Chapter 6

Fundamental Of MarketingMKT243

Chapter 6

Developing and Managing Product

DHD2013MKT243 Fundamental Of Marketing1

Slide Outline


Categories of New Product New Product Development Process Product Life Cycles (PLC)


New to world products (discontinuous innovations) These products create entirely new market.


New product lines

A product that a firm has not previously offered, allow it to enter an established market.

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Additions to existing product lines

It includes new products that supplement a firm’s established line.

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Improvements/ Revisions of existing products

A product that has significant or slightly changed.

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Repositioned products

These are existing products targeted at new markets or market segments.

7


Lower priced products

Products that provide performance similar to competing brands at a lower price.

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New-Product Development Strategy

Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product

New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development

Two ways to obtain new products


Reasons for new product failure


New-Product Development Process

Major Stages in New-Product Development



Idea generation is the systematic search for new-product ideas

Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs

External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms

Idea Generation



Process to spot good ideas and drop poor ones.

Need to avoid ‘GO error’ and also ‘DROP error’

Idea Screening



Concept testing refers to testing new-product concepts with groups of target consumers

Concept Development and Testing



Marketing strategy development refers to the initial marketing strategy for introducing the product to the market

Marketing strategy statement includes: Description of the target market Value proposition Sales and profit goals

Marketing Strategy Development



Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments

Requires an increase in investment


New-Product Development Process Product Development


Develop concept into physical product

Prototypes are made Prototype must have correct

physical features and convey psychological characteristics

Test the include in Product Development stage:-

Alpha test Beta test Test market



Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings

Provides the marketer with experience in testing the product and entire marketing program before full introduction




Commercialization is the introduction of the new product When to launch Where to launch Planned market rollout

Commercialization

Product Life Cycle

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ProductLife Cycle

ProductLife Cycle

A biological metaphor that

traces the stages of a

product’s acceptance, from

its introduction (birth) to its

decline (death).

DHD2013MKT243 Fundamental Of Marketing


Product Life-Cycle Strategies

Product Life Cycle


Product development Sales are zero and investment costs mount

Introduction Slow sales growth and profits are nonexistent

Growth Rapid market acceptance and increasing profits.

Maturity Slowdown in sales growth and profits level off or

decline Decline

Sales fall off and profits drop


PLC stages

Introductory stage Growth 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

Increasing rate of sales Entrance of

competitors Market consolidation Initial healthy profits Aggressive advertising

of the differences between brands

Wider distribution


PLC stages cont…

Maturity stage Decline stage

Sales increase at a decreasing rate

Saturated markets Lengthened product

lines Heavy promotions to

consumers and dealers

Niche marketers emerge

Long-run drop in sales

Large inventories of unsold items

Elimination of all nonessential marketing expenses

Maintain product vs. harvesting product




Market modifying Product modifying Marketing mix

modifying

Maturity Stage Modifying Strategies

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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

Product Life Cycle Strategies

DHD2013MKT243 Fundamental Of Marketing





Style A basic and distinctive model of expression

Example: Clothing (formal, casual and homes (colonial, ranch, transitional)

Once style invented, it may last for generations, passing in and out of vogue



Fashion is a currently accepted or popular style in given field

Fashion tend to grow slowly, remain popular for a while, and then decline slowly.



Fads are temporary periods of unusually high sales driven by consumer

enthusiasm and immediate product or

brand popularity

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Chapter 6