Lamb, Hair, McDaniel

2012-2013

CHAPTER 11

Developing and Managing Products

2013 by Cengage Learning Inc. All Rights

Chapter 1 Copyright 2012 by Cengage Learning Inc. All rights reserved Reserved.

1 1

Jasper White/Stone/Getty Images

Categories of New Products

New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products
2
2013 by Cengage Learning Inc. All Rights Reserved.

Exhibit 11.1
New-Product Development Process

2013 by Cengage Learning Inc. All Rights Reserved.

Idea Generation
Customers Employees Distributors Vendors Sources of New-Product Ideas

Competitors
R&D Consultants
2

2013 by Cengage Learning Inc. All Rights Reserved.

Approaches for New Product Development

Brainstorming
The process of getting a group to think of umlimited ways to vary a product or solve a problem.

Focus Group

The objective of focus group interviews is to stimulate insightful comments through group interaction.

2013 by Cengage Learning Inc. All Rights Reserved.

Screening is
the first filter in the product development process, which eliminates ideas that are inconsistent with the organizations new-product strategy or are inappropriate for some other reason.

A Concept Test is
a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions.

Business Analysis
Demand Considerations in Business Analysis Stage Cost

Sales

Profitability
7
2013 by Cengage Learning Inc. All Rights Reserved.

Development
Creation of prototype

Sketch marketing strategy

Packaging, branding, labeling Promotion, price, and distribution strategy Manufacturing feasibility

2013 by Cengage Learning Inc. All Rights Reserved.

Simultaneous Product Development

A new team-oriented approach to newproduct development where all relevant functional areas and outside suppliers participate in the development process.

2013 by Cengage Learning Inc. All Rights Reserved.

Test Marketing
Test Marketing

The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.
2

10

2013 by Cengage Learning Inc. All Rights Reserved.

Costs of Test Marketing

Often take 1 year or more Can cost over $1 million Exposes new product to competitors Competitors can jam testing programs with their own promotions

11

2013 by Cengage Learning Inc. All Rights Reserved.

Alternatives to Test Marketing

Single-source research using supermarket scanner data Simulated (laboratory) market testing Online test marketing

12

2013 by Cengage Learning Inc. All Rights Reserved.

Commercialization
Ordering Materials Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements Customer Advertising
13
2013 by Cengage Learning Inc. All Rights Reserved.

New-Product Success Factors

Listening to customers Strong leadership Producing the best product Commitment to newproduct development Vision of future market Project-based team approach

Getting every aspect right

14

2013 by Cengage Learning Inc. All Rights Reserved.

Diffusion

Diffusion

The process by which the adoption of an innovation spreads.

15

2013 by Cengage Learning Inc. All Rights Reserved.

Categories of of Adopters Categories Adopters

Innovators Early Adopters Early Majority Late Majority

Laggards
16
2013 by Cengage Learning Inc. All Rights Reserved.

Product Characteristics and the Rate of Adoption

Complexity Compatibility Relative Advantage Observability Trialability

17

2013 by Cengage Learning Inc. All Rights Reserved.

Marketing Implications of the Adoption Process

Word of Mouth

Communication Aids the Diffusion Process

Direct from Marketer

2013 by Cengage Learning Inc. All Rights Reserved.

18

Product Life Cycle

Product Life Cycle (PLC)
A concept that provides a way to trace the stages of a products acceptance, from its introduction (birth) to its decline (death).

19

2013 by Cengage Learning Inc. All Rights Reserved.

Exhibit 11.2
Four Stages of the Product Life Cycle

20

2013 by Cengage Learning Inc. All Rights Reserved.

Exhibit 11.3
Product Life Cycles for Styles, Fashion, and Fads

21

2013 by Cengage Learning Inc. All Rights Reserved.

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
22
2013 by Cengage Learning Inc. All Rights Reserved.

Growth Stage
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution
2013 by Cengage Learning Inc. All Rights Reserved.

23

Maturity Stage

24

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
2013 by Cengage Learning Inc. All Rights Reserved.

Decline Stage
Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses Organized abandonment

25

2013 by Cengage Learning Inc. All Rights Reserved.

Exhibit 11.4
Relationships between the Diffusion Process and the Product Life Cycle
Product life cycle curve

Diffusion curve

26

2013 by Cengage Learning Inc. All Rights Reserved.