New Product Development

and
Product Life-Cycle Strategies
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 it’s 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
New Product
Product Development
Development Process
Process
Step
Step 1.
1. Idea
Idea Generation
Generation

Systematic Search for New Product

Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
New
New Product
Product Development
Development Process
Process
Step
Step 2.
2. Idea
Idea Screening
Screening

 Process to spot good ideas and drop

poor ones
 Criteria
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return
New
New Product
Product Development
Development Process
Process
Step
Step 3.
3. Concept
Concept Development
Development &
& Testing
Testing

1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theBest
BestOne
One
New
New Product
Product Development
Development Process
Process
Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
Marketing Strategy Statement Formulation

Part
Part One
One -- Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share
Part
Part Two
Two -- Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
New
New Product
Product Development
Development Process
Process
Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development

Business
Business Analysis
Analysis

Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
They Meet
Meet Company
Company Objectives
Objectives

IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

IfIf Yes,
Yes, Move
Move to
to
Product
Product Development
Development
New
New Product
Product Development
Development Process
Process
Step
Step 7.
7. Test
Test Marketing
Marketing

Standard
Standard Controlled
Controlled
Test
Test Market
Market Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign AAfew
fewstores
storesthat
thathave
have
in
inaasmall
smallnumber
numberof of agreed
agreedto
tocarry
carrynew
new
representative
representativecities.
cities. products
productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testininaasimulated
simulated
shopping
shoppingenvironment
environment
to
toaasample
sampleofof
consumers.
consumers.
 Product Life
Cycle
Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments ($)
Introduction Stage
of the PLC

Sales
Sales Low
Low sales
sales
Costs
Costs High
High cost
cost per
per customer
customer
Profits
Profits Negative
Negative
Marketing
Marketing Objectives
Objectives
Create
Create product
product awareness
awareness
and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product
Price
Price Use
Use cost-plus
cost-plus
Distribution
Distribution Build
Build selective
selective distribution
distribution
Advertising
Advertising Build
Build product
product awareness
awareness
among
among early
early adopters
adopters and
and
dealers
dealers
Growth
Growth Stage
Stage of
of the
the PLC
PLC

Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Product
Product Offer
Offer product
product extensions,
extensions,
service,
service, warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market
Distribution
Distribution Build
Build intensive
intensive distribution
distribution
Advertising
Advertising Build
Build awareness
awareness and
and interest
interest in
in
the
the mass
mass market
market
Maturity
Maturity Stage
Stage of
of the
the PLC
PLC

Sales
Sales Peak
Peak sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits High
High profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize profit
profit while
while defending
defending
market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models
Price
Price Price
Price to
to match
match oror best
best
competitors
competitors
Distribution
Distribution Build
Build more
more intensive
intensive
distribution
distribution
Advertising
Advertising Stress
Stress brand
brand differences
differences and
and
benefits
benefits
Decline
Decline Stage
Stage of
of the
the PLC
PLC

Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and milk
milk
the
the brand
brand
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Distribution
Distribution Go
Go selective:
selective: phase
phase out
out
unprofitable
unprofitable outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers
The Boston
Matrix
 The Boston Matrix:
 A means of analysing the product portfolio
and informing decision making about
possible marketing strategies
 Developed by the Boston Consulting Group
– a business strategy and marketing
consultancy in 1968
 Links growth rate, market share and cash
flow
The Boston
Matrix
 Classifies Products into four simple
categories:
 Stars – products in markets
experiencing high growth rates with
a high or increasing share of the
market
- Potential for high revenue growth
The Boston
Matrix  Cash Cows:
 High market share
 Low growth
markets – maturity
stage of PLC
 Low cost support
 High cash revenue
– positive cash
flows
The Boston
Matrix
Dogs:
 Products in a low
growth market
 Have low or declining
market share (decline
stage of PLC)
 Associated with
negative cash flow
 May require large
sums of money to
support Is your product starting to
embarrass your company?
The Boston
Matrix
 Problem Child:
- Products having a
low market share in
a high growth
market
- Need money spent
to develop them
- May produce
negative cash flow Problem children – worth spending
- Potential for the good money on?
future?
 The Boston
Matrix
High Problem Children Stars
Market Growth

Dogs Cash Cows

Market Share
Low High