19 new product dev lec - 3
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Transcript of 19 new product dev lec - 3
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New Product Development
Product life cycle strategies
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Developing New Products
1. Must develop new products2. Consumer needs3. Source of growth for the company4. Response to environment and technology5. Every product is born, has its stages and
then dies6. New Product Development strategies: 1.
acquisition 2. new product development (original products, product improvements, product modifications, new brands)
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New Product Odds Up to 90 % of new products meet failure New Coke, Eagle Snacks, Zap Mail, Premier
“Smokeless” cigarettes, Arch Deluxe Reasons: Market overestimation Actual product poorly designed Incorrectly positioned Wrong timing for launch Price too high Poor advertisement
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Process
Idea generation Idea screening Concept development and testing Marketing strategy development Business analysis Product development Test marketing Commercialization
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Idea generation New product development starts with idea generation Finding good ideas difficult. Out of 3000 only 10 to 12
are accepted Internal sources: R & D, brains of executives,
engineers, scientists, engineers, manufacturing staff, and salespeople
3 M bootlegging rule External: customers, LEGO train, competitors – good
source of new product ideas, distributors and suppliers, trade magazines, shows, seminars, govt agencies, new product consultants, ad agencies, marketing research firms, inventors
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Idea screening Reducing the number of ideas Picking good ones, drop bad ones Workable and usable ideas are chosen for further
development Profitability factor Questions like: Usefulness Good for company or not In line with co’s strategy Value chain support Competing goods Distribution channels
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Concept development & testing Detailed version of the idea stated in meaningful
consumer terms Daimler Chrysler Fuel-cell-powered electric car Concept 1: second friendly car Concept 2: young people Concept 3: environment friendly Concept 4: high end SUV Concept Testing: concept testing calls for testing new
product concepts with groups of target customers. After being exposed to the concept, consumers than may be asked to react to it by answering questions.
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Marketing strategy development
Target market Product Positioning Sales, market share and profit goals Concept 3 Young Colors, AC, price, advertisements 3 % of car market share
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Business Analysis
Business attractiveness of the proposal Costs Sales Profits
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Product Development
After passing business test Moves to product development Physical shape give by R & D Examples Gillette, Louis Vuitton
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Test Marketing
Product introduced into more realistic market setting
To gain experience before fully introducing the product
Olay cosmetics Redbox
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Standard Test Markets
By making use of smaller number of representative test cities to gauge performance
Results used for national sales forecast Competitors can monitor test results Clorox bleach – P & G Tide with bleach
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Controlled Test Markets
Panel stores Tracking consumer behavior from television
to check counter Observing consumer reaction to price, shelf
placement, in-store promotions Reports generated
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Simulated Test Markets
Testing new products in simulated shopping environment
Some money is given to consumers to shop New products Competing products After purchase follow up
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Commercialization
Test marketing gives information Decision to launch a product based on that
information Costs will be incurred if a company decides to
launch the new product Timing Place
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Product Life Cycle
Product launch – happy life Cover costs Earn profits Length not know in advance Coca-Cola, Gillette, Budweiser, American
Express, Wells-Fargo, and Tabasco
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PLC – S Curve
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Introduction Stage
Product launch Takes time Slow growth Negative profits High promotion and distribution cost
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Growth Stage Product, if satisfies market, enters growth stage Sales climb quickly Early adopters continue, new join through favorable
word of mouth New competitors enter market Competition – increase in sale points Spread of sales, unit cost reduces Sustain rapid growth New market segments Prices may be lowered to attract more customers
(iPod)
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Maturity At some point sale slows down, product enters
maturity stage Lasts longer Marketing management most of the time deals with
mature products More producers selling the same product Greater competition Prices down, increase in sales promotion Drop in profit Well established competitors stay
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Maturity
Product manager should modify market, product and marketing mix
Market: increase consumption of product, new users, present users
Product: quality, features, style (milk pak, Honda City)
Four Ps
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Decline Stage Eventually dip Oat meal, VHS tapes, VCR, Tape recorders Reasons: technology, consumer tastes, increased
competition, profits decline, withdrawal from market Furthermore: Weak product costly to firm Management time Price adjustments Advertising/sales efforts Reputation of other co products affected Old Spice/ co can sell brands
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