New Product Development

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New Product Development Life-Cycle Strategies
Chapter 10
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• Every product seems to go through a life cycle
• it is born...birth
• goes through several phases, then
• eventually dies as newer products come along that
  better serve consumer needs
• Product Life Cycles present two major challenges
  
• new-product development (because all products
  eventually decline, a firm must be good at
  developing new products to replace aging ones)
• the problem of product life-cycle strategies
  (the firm must be good at adapting its marketing
  strategies in the face of changing tastes,
  technologies, and competition as products pass
  through life-cycle stages)

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• New Product Development Strategies
• obtain new products in two ways
• acquisitionby buying a whole company, a patent,
  or a license to produce someone else's product
• new-product development usually through the
  company's own research-and-development department
• original products
• product improvements
• product modifications
• new brands
• (noteall done through the companys own RD
  efforts)

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Why do so many new products fail?
market size may have been overestimated
actual product may not have been designed real
well
competitors fight back harder than expected
priced too high
advertised poorly
corporate politics despite poor marketing
research findings
costs of product development are higher than
expected
incorrectly positioned in the market
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New Product Design Strategy

• Process
• Stage 1 Idea Generation
• Internal idea sources
• - R D
• - pick the brains of its executives,
  scientists, engineers, manufacturing staff, and
  salespeople
• External idea sources
• - Customers, competitors, distributors,
  suppliers

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For some products, especially highly technical
ones, customers may not know what they need.
In such cases, "customers should not be trusted
to come up with solutions they aren't expert or
informed enough for that part of the innovation
process," says the head of an innovation
management consultancy.
"That's what your RD team is for. Rather,
customers should be asked only for outcomesthat
is, what they want a product or service to do for
them."
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- Mgmt. might consider installing an idea
management system that directs the flow of new
ideas to a central point where they can be
collected, reviewed, and evaluated helps
create an innovation-oriented company culture
yields a larger number of ideas
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New Product Development Process Stage 2 Idea
Screeningthe systematic search for new-product
ideas (first idea-reducing stage) The purpose
of idea generation is to create a large number of
ideas The purpose of the succeeding stages is
to reduce that number -Product development
costs increase substantially in later
stages -Ideas are evaluated against criteria
most are eliminated
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• New Product Development Process
• Stage 3 Concept Development and Testing
• a. Product ideas possible product that the
  company can see itself offering to the market
• b. Product concept provides a detailed
  version of the idea stated in meaningful
  consumer terms
• c. Product Image the way consumers
  perceive an actual or potential product
• (ExampleDaimlerChryslers NeCar5 efficient
  fuel-celled methanol-powered vehicle)
• Concept tests ask target consumers to evaluate
  product concepts
• virtual reality (interior design)
• a word or picture description (NeCar5)

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New Product Development Process Stage 4
Marketing Strategy Development Designing an
initial marketing strategy for a new product
based on the product concept Strategy
statements consist of three parts 1. describes
the target market the planned product
positioning and the sales, market share, and
profit goals for the first few years 2.
outlines the product price, distribution, and
marketing budget for the first year 3. describes
the planned long-run sales and profit goals and
the marketing mix strategy
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New Product Development Process Stage 5
Business Analysis involves a review of the
sales, costs, and profit projections for a new
product to find out whether they satisfy the
company's objectives Stage 6 Product
Development RD or engineering develops the
product concept into a physical product -
calls for a large jump in investment - will
show whether the product idea can be turned into
a workable product Prototype development and
testing
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• New Product Development Process
• Stage 7 Test Marketing the stage where the
  product and marketing program are tested in more
  realistic market settings
• - the company tests the product and its entire
  marketing programpositioning strategy,
  advertising, distribution, pricing, branding and
  packaging, and budget levels usually utilizing
  three approaches
• Standard test markets - most widely used
  approach for major in-market testing
• Controlled test markets - usually cost less than
  standard test markets and can be completed much
  more quickly
• Simulated test markets - overcome some of the
  disadvantages of standard and controlled test
  markets usually cost much less, can be run in
  eight weeks, and keeps the new product out of
  competitors' view
• (notetest marketing is very expensive, but minor
  compared to large scale failure it also doesn't
  guarantee success)

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New Product Development Process
Stage 8 Commercialization - Introducing a new
product into the market - build or rent a
manufacturing facility - Usually spend millions
for advertising, sales promotion, and other
marketing efforts in the first year It must
decide on - introduction timing - where to
launch the new product - develop a planned
market rollout over time
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The Typical Product Life Cycle (PLC) Has Five
Stages Product Development Introduction Growth M
aturity Decline Not all products follow this
cycle Fads Styles Fashions
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Red Bull