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POM
Lecture 7-b
BBA 2K10-A
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Managing New-Product Development
Product Life Cycle Strategies
Other Product Considerations
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Successful new-product development
should be:
Customer centered
Team centered
Systematic
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New-Product Development Strategies
Customer-centered new product
developmentfocuses on finding newways to solve customer problems and
create more customer satisfying
experiences
Begins and ends with solving customer
problems
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Sequential new-product developmentis adevelopment approach where company
departments work closely togetherindividually to complete each stage of theprocess before passing along to the nextdepartment or stage
Increased control in risky or complex projects
Slow
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Team-based new-product developmentisa development approach where
company departments work closelytogether in cross-functional teams,
overlapping in the product-development
process to save time and increase
effectiveness
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New-Product Development Strategies
Team-based versus sequential new-product
development
Team based can increase tension and
confusion
Team based is faster and more flexible
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Systematic new-product developmentisan innovative development approach
that collects, reviews, evaluates, andmanages new-product ideas
Creates an innovation-oriented culture Yields a large number of new-product
ideas
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Product life cycle(PLC)isthe course that aproducts sales and
profits take over itslifetime
Product development
Introduction
Growth Maturity
Decline
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Product Life Cycle
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Product life cycle (PLC) describes:
Product class
Product form
Brand
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Product classhas the longest life cycle (e.g., gas-powered cars).
Product formtends to have the standard PLC shape(e.g., sports cars).
Brandcan change quickly because of changingcompetitive attacks and responses.
Styleis a basic and distinctive mode of expression (e.g.,formal clothing, Danish modern furniture)
Fashionis a popular style in a given field (e.g., businesscasual).
Fadsresult in a temporary period of unusually high salesdriven by consumer enthusiasm. Fads decline quickly.
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In practice, it is difficult to: Identify which stage of the PLC the product is
in.
Pinpoint when the product moves to the nextstage.
Identify factors that affect products movementthrough stages.
Forecast sales level, length of each stage, andshape of PLC.
Develop marketing strategy because strategy isboth a cause and result of the PLC.
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Introduction stage is when the new product isfirst launched
Sales:Low
Costs:High cost per customer
Profits:Negative or lowMarketing objective:Create product
awareness and trial
Product:Offer a basic product
Price:Use cost-plus formulaDistribution:Build selective distribution
Promotion:Heavy to entice product trial
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Growth stage is when the new product satisfies themarket and sales increase
Sales:Rapidly risingCosts:Average cost per customerProfits:RisingMarketing objective:Maximize market shareProduct:Offer extension, service, warrantyPrice:Penetration strategyDistribution:Build intensive distributionPromotion:Reduce to take advantage of
demand
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Maturity stage is a long-lasting stage of a productthat has gained consumer acceptance
Sales:Peak but slowing down sales
Costs:Low cost per customer
Profits:High
Marketing objective:Maximize profits whiledefending market share
Product:Diversify brand and models Price:Match or best competitors
Distribution:Build more intensive distribution Promotion:Increase to encourage brand
switching Competition:Many substitute products
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Strategies used to manage the PLC dur ing
matur ity include
Modifying Strategies
Market modifying
Product modifying
Marketing mix modifying
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Strategies used to manage the PLC dur ing
matur ity include
Market modifying strategy is when a
company tries to increase consumption ofthe current product
New users
Increased usage of existing users New market segments
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Modifying the market: Increase the consumption of the current product.
How? Look for new users and market segments.
Reposition the brand to appeal to larger or faster-growing segment.
Look for ways to increase usage among presentcustomers.
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Modifying the product: Changing characteristics such as quality,
features, or style to attract new users and toinspire more usage.
How? Improve durability, reliability, speed, taste
Improve styling and attractiveness
Add new features Expand usefulness, safety, convenience
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Modifying the marketing mix:
Improving sales by changing one or more
marketing mix elements.
How? Cut prices
Launch a better ad campaign
Move into larger market channels
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Decline stage is when sales decline or level offfor an extended time, creating a weakproduct
Sales:Declining
Costs:Low cost per customerProfits:DecliningMarketing objective:Reduce expenditures and
take maximum out of the brandProduct:Phase out weak items.Price:Cut priceDistribution:selectivephase out
unprofitable outletsPromotion:Reduce to minimal level
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Innovators
Early adopters
Early majorityLate majority
Laggards
Product
life cycle
curve
Diffusion
curve
Introduction Growth Maturity Decline
Sale
s
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Product Decisions and Social Responsibil i ty
Public policy and regulations regarding
developing and dropping products,patents, quality, and safety
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International product and service marketing
Must determine which products and services to
introduce in which countries, and how much to
standardize or adapt the offering.
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