Lamb, Hair, McDaniel 2010-2011

CHAPTER 11
Developing and Managing
Products

1
 Learning Outcomes

LO 1 Explain the importance of developing new products and

describe the six categories of new products

LO 2 Explain the steps in the new-product development process

LO 3 Discuss global issues in new-product development

LO 4 Explain the diffusion process through which new products are

adopted

LO 5 Explain the concept of product life cycles

2
 The Importance of New
Products

Explain the importance

of developing new
products and describe
the six categories of
new products

LO1 3
 Categories of
New Products
New-to-the-World
New-to-the-World

New
New Product
Product Lines
Lines

Product
Product Line
Line Additions
Additions

Improvements
Improvements or
or Revisions
Revisions

Repositioned
Repositioned Products
Products

Lower-Priced
Lower-Priced Products
Products
LO1 4
 The New-Product
Development Process

Explain the steps in

the new-product
development
process

LO2 5
 The New-Product
Development Process
New Product Success Factors

Long-term
Long-term commitment
commitment

Company-specific
Company-specific approach
approach

Capitalize
Capitalize on
on experience
experience

Establish
Establish an
an environment
environment

LO2 6
 New-Product
Development Process

New-Product Strategy

Idea Generation

Idea Screening
Business Analysis

Development
Test Marketing
Commercialization

LO2 New Product

7
 Idea Generation
Customers
Employees
Distributors
Competitors
Sources of Vendors
New-Product
Ideas R&D
Consultants

http://www.ideo.com

LO2 Online 8
 Tips for New Product
Development
 Disperse R & D around the globe

 Keep teams small and empower employees

 Flatten hierarchy

 Encourage extensive brainstorming and

generation of crazy new ideas

 Welcome mistakes

LO2 9
 Idea Screening
The first filter in the product development
process, which eliminates ideas that are
inconsistent with the organization’s new-
product strategy or are inappropriate for
some other reason.

Concept test: A test to evaluate a

new-product idea, usually before any
prototype has been created. Often
successful for line extensions.

LO2 10
 Business Analysis
Demand

Considerations
Considerations Cost
in
in
Business
Business
Analysis
Analysis Stage
Stage Sales

Profitability

LO2 11
 Development
 Creation of prototype
 Marketing strategy
 Packaging, branding, labeling
 Promotion, price, and distribution
strategy
 Manufacturing feasibility
 Final government approvals if needed

LO2 12
 Simultaneous Product
Development
A new team-oriented approach to new-
product development where all relevant
functional areas and outside suppliers
participate in the development process.

LO2 13
 Test Marketing

The limited introduction

Test
of a product and a
Marketing
marketing program to
determine the reactions
foodcom.com/signup
of potential customers
in a market situation.
Online

LO2 14
 Alternatives to
Test Marketing
 Single-source research
using supermarket
scanner data

 Simulated (laboratory)
market
testing

 Online test marketing http://www.newproductworks.com

Online
LO2 15
 Commercialization
Production
Production

Inventory
Inventory Buildup
Buildup

Distribution
Distribution Shipments
Shipments

Sales
Sales Training
Training

Trade
Trade Announcements
Announcements

Customer
Customer Advertising
Advertising

LO2 16
 New-Product
Success Factors
Listening to customers Strong leadership

Producing the best Commitment to new-

product product development

Project-based team
Vision of future market
approach

Getting every aspect right

LO2 17
 New-Product
Development Process
Idea
generation
Number of new product ideas

Idea
screening

Business
analysis

Development

Test marketing

Commercialization

LO2 0 Time
18
Beyond the Why New Products Fail

• No discernible benefits
• Poor match between features and customer
desires
• Overestimation of market size
• Incorrect positioning
Book

• Price too high or too low

• Inadequate distribution
• Poor promotion
• Inferior product

NOTE: Supplemental content – not in book.

LO2 19
Beyond the Success Factors
Factors in Successful
New Products

Match between product and market needs

Book

Different from substitute products

Benefit to large number of people

NOTE: Supplemental content – not in book.

LO2 20
 Global Issues in
New-Product Development

Discuss global
issues in new-
product
development

LO3 21
Global Marketing Questions

• Develop product for potential

worldwide distribution

• Modify for unique

• market requirements

• Design products to meet

regulations and key market
requirements

LO3 22
The Spread of New Products

Explain the diffusion

process through
which new products
are adopted

LO4 23
 Diffusion

Diffusion
The process by which the
adoption of an innovation
spreads.

LO4 24
 Categories of Adopters

Innovators
Innovators

Early
Early Adopters
Adopters

Early
Early Majority
Majority

Late
Late Majority
Majority

Laggards
Laggards

LO4 25
 Product Characteristics and
the Rate of Adoption
Complexity
Complexity

Compatibility
Compatibility

Relative
Relative Advantage
Advantage

Observability
Observability

Trialability
Trialability

http://www.electronicgadgetdepot.com

Online
LO4 26
 Marketing Implications
of the Adoption Process

Word
Wordof
ofMouth
Mouth

Communication
Communication
Aids
Aidsthe
the
Diffusion
DiffusionProcess
Process

Direct
Directfrom
from
Marketer
Marketer

LO4 27
 Product Life Cycles

Explain the concept

of product life
cycles

LO5 28
 Product Life Cycle

Product
Life Cycle

A concept that provides a way

to trace the stages of a
product’s acceptance, from its
introduction (birth) to its
decline (death).

LO5 29
 Product Life Cycle

Introductory Growth Maturity Decline

Stage Stage Stage Stage Sales
Dollars

Profits
0

Time
LO5 30
 Product Life Cycles for
Styles, Fashions, and Fads

LO5 31
 Introductory Stage

 High failure rates

 Little competition
 Frequent product modification
 Limited distribution
 High marketing and production costs
 Negative profits with slow sales increases
 Promotion focuses on awareness and information
 Communication challenge is to stimulate primary
demand

LO5 32
 Growth Stage

 Increasing rate of sales

 Entrance of competitors
 Market consolidation
 Initial healthy profits
 Aggressive advertising of the
differences between brands
 Wider distribution

LO5 33
 Maturity Stage

 Sales increase at a decreasing rate

 Saturated markets
 Annual models appear
 Lengthened product lines
 Service and repair assume important roles
 Heavy promotions to consumers and dealers
 Marginal competitors drop out
 Niche marketers emerge

LO5 34
 Decline Stage

 Long-run drop in sales

 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
 “Organized abandonment”

LO5 35
 Diffusion Process and PLC Curve

Introduction Growth Maturity Decline

Product
life cycle
Sales

curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
LO5 36
LO5
Pr oduct Life Cycles
INTRODUCTION GROWTH MATURITY DECLINE
Product Limited models. More models.
Large number Eliminate
Strategy Frequent Frequent
of models. unprofitable
changes. changes. models.

Distribution Limited Expanded Extensive. Phase out

Sales

Strategy wholesale/ dealers. Long- Margins drop. unprofitable

retail distributors. term relations. Shelf space. outlets.

Promotion Awareness. Aggressive ads. Advertise. Phase out

Strategy Stimulate Stimulate Promote promotion.
demand. Sampling. demand. heavily.

High to recoup Fall as result of Prices

competition Prices fall
Pricing development stabilize at
and efficient (usually).
Strategy costs. low level.
production.

Time 37
 E-readers

E-readers such as Amazon’s Kindle, Barnes & Noble’s

Nook, and Sony’s e-reader are increasingly available
products that have sparked serious debate among book
lovers, publishers, and techies about the future of printed
text.
– In what stage of the product life-cycle are these
different readers?
• Sony e-Readers
• Barnes & Noble's Nook
• Amazon's Kindle
– Who is adopting these products now?
– Discuss the different company’s attempts at
competitive advantage.

LO5 38