New-Product Overview

9-1

New products drive sales and profit growth.

New Product Failure Rate May Be 80%

New products may gain market share from competitors.

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.

9-2

9-3

WHY NEW PRODUCTS SUCCEED

Top-management commitment Start with the consumer -- not the factory Intelligent use of research Find a competitive advantage Move quickly Know when to get out Accept, but manage risk

9-4

WHAT SEPARATES NEW-PRODUCT WINNERS AND LOSERS

9-5

New Product Success Factors

Be close to the market Set a strategic direction

Play to your strengths

Strong organizational support Speed to market

9-6

THE SEVEN STAGES IN NEW-PRODUCT DEVELOPMENT

9-7

THE NEW-PRODUCT PROCESS

STAGE 1: NEW-PRODUCT STRATEGY DEVELOPMENT

New-Product Strategy Development

Type of Strategy to Utilize SWOT Analysis Conducted Porters Five Force Model

9-8

THE NEW-PRODUCT PROCESS

STAGE 2: IDEA GENERATION

Idea Generation

Open Innovation

Customer and Supplier Suggestions Employee and Co-Worker Suggestions Research and Development Laboratories

Competitive Products
Universities, Inventors, and Small Tech Firms

9-9

THE NEW-PRODUCT PROCESS

STAGE 3: SCREENING AND EVALUATION

Process to spot good ideas and drop poor ones Criteria

Market Size Product Price Development Time & Costs Manufacturing Costs Customer Demands

9-10

THE NEW-PRODUCT PROCESS

STAGE 4: BUSINESS ANALYSIS

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

If No, Eliminate Product Concept

If Yes, Move to Product Development

9-11

THE NEW-PRODUCT PROCESS

STAGE 5:PRODUCT DEVELOPMENT

Prototype Development:
Converting the concept into an actual product.

New Product Development Process

Step 6. Test Marketing

9-12

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.

9-13

THE NEW-PRODUCT PROCESS

STAGE 7: Commercialization
The firm introduces the product on a full-scale basis, involving:
Understanding Consumer Adoption
Timing Coordination

Product Life Cycle

9-14

Sales and Profits ($) Sales

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

Introduction Stage of the PLC

Sales Costs Profits
Marketing Objectives

9-15

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

Growth Stage of the PLC

9-16

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

9-17

Sales
Costs Profits
Marketing Objectives

Peak sales
Low cost per customer 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

Product Price Distribution Advertising

Decline Stage of the PLC

9-18

Sales
Costs Profits
Marketing Objectives

Declining sales
Low cost per customer 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

Product Price Distribution Advertising