Innovation, Product Development, and the
Product Life Cycle
“It’s so new we don’t know what it does, but nobody else has it so we’re selling the hell out of it!”
• 10% of ideas reach the test market stage• 50% of new products fail in test marketing• 50% of those fail on national launch• only 2.5% ever enter the marketplace• 1 entrant for every 64 ideas• the average new product that fails costs about $50 million• some product failures have losses of over $100 million for some
companies
64 ideas
1 ideaTesting time
Idea
s
Marketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace
Product• Product variety• Quality• Design• Features• Accessories • Brand name• Packaging• Sizes• Services• Warranties• Returns, repairs & support
Place
• Distribution channels• Coverage• Assortments• Locations• Inventory management• Warehousing availability• Order processing• Transportation costs
Price
• List price• Wholesale pricing• Seasonal pricing• Discounts• Price flexibility• Allowances• Payment period• Payment methods• Credit terms• Product bundling
Promotion
• Sales promotion• Personal selling• Advertising• Sales force• Public relations• Direct marketing
Target Market
The Four Ps
http://www.sec.gov/Archives/edgar/data/930184/000095013704004274/a99191exv99w1.htm
What’s your product lifecycle mix?
Team activity: Construct a product life cycle diagram for one of the companies in your team
High growth business strong in competitive market; high point share & ideal business; promote question marks & support R&D
Low growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars
Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogs
Low relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestment
The GE/McKinsey Matrix
Business Strengths
Indu
stry
Att
racti
vene
ss
High Medium Low
Hig
h
Med
ium
Low Invest in,
growth strategy
Monitor performance, selective strategy
No growth or investment, consider divestment or liquidation
• Market size & growth• Industry profit margins• Competitive intensity• Seasonality• Cyclicity• Economies of scale• Technology• Social, environmental, legal,
& human impacts
• Relative market share• Profit margins• Ability to compete on price & quality• Knowledge of customer & market• Competitive strengths & weaknesses• Technological capability• Caliber of management
Ansoff’s Product/Market MatrixExisting products New Products
ExistingMarkets
NewMarkets
Market Penetration:• Increase product purchase in existing
markets (withdrawal, do nothing, consolidate, retrenchment)
• Revitalize brand image• Coordinate advertising and sales
training• Adapt to market change• Increase market share• Increase consumer usage (frequency,
quantity, new application)
Product Development:• Introduce new products into
existing markets; can be risky & expensive
• Product launch• Add product features &
refinements• Develop new products for same
market
Market Development:• Explore new markets for existing
products; when distinctive competencies rest with product not market
• Expanding geographic distribution• Targeting new customer segments
Diversification: • Introduce new products into new
markets; horizontal, vertical, conglomerate
• Acquisition/merger• New business venture
Conclusions about marketing matrix models--
• There is a risk of using matrix models is misclassifying businesses
• Use multiple models to ensure better coverage • Know the strengths and limits of each model; when
to use and avoid them • Integrate the information from matrices with other
sources of information and comparison • Don't let the matrix make decisions-- people make
decisions!
Market Team Formation
• Form team, acquainted, communication & schedules
• Team name & member names
• Decide on preference for marketing ethics team presentations (e.g., bottled water, marketing to kids, data mining/RFID & privacy, political campaigns, social media marketing)
• Current practices & facts
• Pro/con arguments
• Ethical issues
• Your position/resolution
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