Key Concepts

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

New-Product Development Process

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product

Idea GenerationWhere Good Product Ideas Come From

Customers

Employees

Distributors

Competitors

Vendors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

Tips for Successful New Product Development

Disperse R & D around the globe

Keep teams small and empower employees

Flatten hierarchy

Encourage generation of crazy new ideas

Welcome mistakes

Business AnalysisTo Ensure Project is Feasible

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability

Product DevelopmentDifferent Aspects of Development

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

Final government approvals if needed

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.

Alternatives to Test Marketing

Single-source research using supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

CommercializationBringing Product to Market

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

New-Product Development ProcessFrom Ideas to Market

Why New Products Fail

No discernible BENEFITS POOR MATCH between features

and customer desires Overestimation of market SIZE Incorrect POSITIONING PRIE too high or too low Inadequate DISTRIBUTION Poor PROMOTION INFERIOR product

Factors in Successful New ProductsFactors in Successful New Products

Match between product and market needs

Different from substitute products

Benefit to large number of people

Success 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

The Spread of New The Spread of New ProductsProducts

The diffusion process and how new products are adopted

Diffusion

The process by which the

adoption of an innovation

spreads.

DiffusionDiffusion

Categories of Adopters

LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators

Product Characteristics and how fast new products are adopted

TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

Sales of New Audio Products

Marketing Implications of the Adoption Process

Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process

Diffusion Process for New Products

Product Life Cycle

ProductLife Cycle

ProductLife Cycle

A concept that provides a

way to trace the stages of

a product’s acceptance,

from its introduction

(birth) to its decline

(death).

Product Life Cycle

Time

Do

llar

s

Profits

SalesSalesIntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0

Product Life Cycles for Styles, Fashions, and Fads

U.S. Sales of Televisions

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

Introductory Stage How it works in Europe

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

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

Introduction Growth Maturity Decline

Sal

es

DiffusionDiffusioncurvecurve

Product Life Cycles

Time

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

Distribution

Strategy

PromotionStrategy

PricingStrategy

Limited modelsFrequent changes

More modelsFrequent 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.

Sa

les