Introduction

Like Humans Products also have a stipulated

life They are Born, grow, Mature and finally die The basic difference between both is Product has to be killed by a company. Product is killed because of declining sales and losses being occurred.

Causes of New Product Failures

Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions

To create successful new products, the company must:

understand its customers, markets and competitors develop products that deliver superior value to

customers.

New Product Development Process

Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development

Test Marketing
Commercialization

New Product Development Process

Step 1. Idea Generation

Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

 Process to spot good ideas and drop poor

ones Criteria

Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

New Product Development Process

Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the Product Concepts with Groups of Target Customers

3. Choose the Best One

New Product Development Process

Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One - Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share

Part Two - Short-Term:

Products Planned Price Distribution Marketing Budget

Part Three - Long-Term:

Sales & Profit Goals Marketing Mix Strategy

New Product Development Process

Step 5. Business Analysis Step 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If No, Eliminate Product Concept

If Yes, Move to Product Development

New Product Development Process

Step 7. Test Marketing

Standard Test Market

Full marketing campaign in a small number of representative cities.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

Simulated Test Market

Test in a simulated shopping environment to a sample of consumers.

Phases in a Product Life Cycle

The PLC curve is typically divided into four stages: Introduction A period of slow sales growth as the product is launched in the market. This phase is characterized by high operational costs and so incurs initial losses. Growth A period of rapid market acceptance and substantial profit improvement. Maturity A slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition. Decline Sales show a downward drift and profits erode.

Objectives of PLC
Stages Introduction Growth Maturity Decline

Objectives: Create Maximize product market awareness share and Trial

Maximize Reduce profits and expenses & defend milk brands market share

Product Life Cycle

Sales and Profits ($) Sales

Profits Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline

Introduction Stage of the PLC

Sales Costs Profits
Marketing Objectives

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus

Product Price Distribution Advertising

Build selective distribution Build product awareness among early adopters and dealers

Growth Stage of the PLC

Sales
Costs Profits
Marketing Objectives

Rapidly rising sales Average cost per customer

Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market
Build intensive distribution Build awareness and interest in the mass market

Product Price Distribution Advertising

Maturity Stage of the PLC

Sales
Costs Profits
Marketing Objectives

Peak sales Low cost per customer

Product Price Distribution Advertising

High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits

Decline Stage of the PLC

Sales
Costs Profits
Marketing Objectives

Declining sales Low cost per customer

Product Price Distribution Advertising

Declining profits Reduce expenditure and milk the brand Phase out weak items
Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

ALTERNATE PLC PATTERNS

The PLC concept can be used to analyze:

o o o o a product category (e.g. liquor) a product form (e.g. white liquor) a product (e.g. vodka), or a brand (e.g. Smirnoff )

Not all products exhibit an s-shaped curve.

Three common alternate patterns are described here

Growth Slump Maturity Pattern

Sales Volume

Time

Sales grow rapidly when the product is introduced, then fall to a petrified

level that is sustained by late adopters buying the product for the first time and early adopters replacing the product.
Often characteristic of small kitchen appliances such as handheld mixers and

bread makers.

Cycle-Recycle Pattern

Sales Volume

Primary Cycle

Recycle

Time

A company aggressively promotes its new product and this produces

the first cycle.

Later the sales starts declining & the company gives its product

another promotion push, which produces a second cycle of smaller magnitude & duration.
E.g. sales of new drugs of a pharmaceutical company.

Scalloped Pattern

Sales Volume

Time

Here, sales pass through a succession of life-cycles based on the

discovery of a new product characteristics, uses & users.

The sales of nylon, for example, show a scalloped pattern because of

the many new uses parachutes, hosiery, shirts, carpeting, boat sails, automobile tires, that continue to be discovered over time.

Pricing Strategies at each Stage

Introduction: Growth:

- Rapid skimming - Slow skimming - Rapid Penetration - Slow Penetration

- Penetration Pricing
- Push & pull Strategies

 Maturity

Decline

- Reduce price because of economies of scale.

- Keeping same price -Reducing promotional expenditure

Case Study- Kellogs

Summary:

- kellogs had a world wide recognition over 100 years for healthy breakfast cereals - nutrigrain, rice crispies, cornflakes etc.. - each brand holds competitve image in the market. - Nutri Grain product did quite well in the market but after a certain extent sales were declining

- Aim was to relaunch the brand. - PlC of Nutri Grain was:

PLC of Kellogs Nutri Grain

1. Launch - From launch (the first stage on the

diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in just two years. 2. Growth - Nutri-Grains sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good for the business, as it does not have to spend money on new machines or equipment for production.

businesses to start selling similar products. This indicates the third stage of the life cycle - maturity. This is the time of maximum profitability, when profits can be used to continue to build the brand. Kellogg's continued to support the development of the brand but this was not enough to offset the overall sales decline. 4. Saturation- This is the fourth stage of the life cycle and the point when the market is full. By mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%. 5. Decline - Clearly, at this point, Kellogg's had to make a key business decision. Sales were falling, the product was in decline and losing its position. Should Kellogg's let the product die, i.e. withdraw it from the market, or should it try to extend its life

3. Maturity - Successful products attract other competitor

Strategic Use Of PLC

Identifying problem
Extending Nutri Grain Cycle instead of

Diversification. Nutri Grain soft bake was launched with Promotional Pricing i.e discounted Pricing. Sales increased by 80%..