Principles of Marketing

Principles of Marketing
Chapter 09
Product Development
and Life Cycle Strategies
Chapter Contents
 New-Product Development Strategy

 Acquisition
 New-product development
 Reasons for new product failure
 The Eight Steps in the New-Product Development Process
 The major considerations in managing this process.
 The stages of the product life cycle
 Product development, Introduction, Growth, Maturity, Decline.
 Three Modifying Strategies in Maturity Stage
New-Product Development Strategy
Every product has to go through a life cycle – It is born, goes
through several phases, and eventually dies as newer
products come along that better serve consumer needs.

 A firm can obtain new products through:
• Acquisition
• New-product development
Acquisition refers to the buying of a whole company, a patent, or a license to

produce someone else’s product.
 Example: Airtel Telecom has acquired Warid in Bangladesh, Transcom ltd get the
license of KFC to produce fried chicken and other items in Bangladesh.
New product development refers to original products, product improvements,
product modifications, and new brands developed from the firm’s own
research and development.
 Example: Unilever company is producing new flavors, colors and sizes of LUX
soap under their own R&D team, and also launching new brands like Dove and
Lifebuoy.
New Product Failure: Reasons

 Marketers assess the marketing climate inadequately.
 The wrong group was targeted.
 A weak positioning strategy was used.
 A less-than-optimal "configuration" of attributes and benefits was selected.
 A questionable pricing strategy was implemented.
 The ad campaign generated an insufficient level of awareness.
 Cannibalization depressed corporate profits.
 Over-optimism about the marketing plan led to a unrealistic forecast.
 Poor implementation of the marketing plan in the real world.
 The new product was pronounced dead and buried too soon.
New Product Failure: Example

Each year the Most Memorable New Product Launch survey names the best
launches. But even brands that make the top 10 aren’t guaranteed longevity.
These products, launched “successfully” from 2002 to 2008, disappeared
within two years.
• Pepsi Edge
• Colgate Simply White
• Dr Pepper Berries & Cream
• Coca-Cola C2
• Saran Disposable Cutting Sheets
• Hershey’s Swoops
• M&M’s Mega Chocolate Candies
• Pepsi Blue
• Oral-B Brush-Ups
 https://hbr.org/2011/04/why-most-product-launches-fail
4. Marketing
5. Business
Strategy
Analysis
Development
3. Concept 6. Product
Development Development
and Testing
2. Idea 7. Test
Screening Marketing
1. Idea 8. Commercialization
Generation
1. Idea Generation
The systematic search for new product ideas.
 Internal sources refer to the company’s own formal research and
development, management and staff, and entrepreneurial programs.
 External sources refer to sources outside the company such as customers,
competitors, distributors, suppliers, and outside design firms

2. Idea Screening
Idea screening refers to reviewing new-product ideas in order to spot good
ideas and drop poor ones as soon as possible
 Considering factors while screening:
Target market and market size
Product price, development time and cost
Rate of return and potentiality

3. Concept Development and Testing
Product concept is a detailed version of the idea stated in meaningful
consumer terms.
 An attractive idea must be develop into a product concept, not the physical
product only the idea.
 For instance: Facing the utmost shortage of transport fuel thinking about an
effective alternative idea like CNG technology.

3. Concept Development and Testing
Concept testing refers testing the new-product concepts with a groups of
target consumers to find out whether the product idea has strong consumer
appeal or not?
 For the concept testing, a word or picture description might be sufficient.
But we can make a dummy of the product to make it more practical and
reliable to customers.
4. Marketing Strategy Development

Marketing strategy development refers to designing an initial marketing
strategy for a new product based on the product concept.
 The marketing strategy statement consists of three parts:
1. The first part describes the target market, the planned product
positioning, sales, market share and profit goals for the first year.
2. The second part describes the product’s planned price, distribution and
marketing budget for the first year.
3. The third part describe the planned long-run sales, profit goals and
marketing mix strategy.
5. Business Analysis
Business analysis involves a review of the sales, costs, and profit
projections to find out whether they satisfy the company’s
objectives/financial attractiveness.
 To estimate the sales, company might look at the sales history of
similar product and conduct surveys of market opinion.

5.
5. Business
BusinessAnalysis
Analysis
Review
ReviewofofProduct
ProductSales,
Sales,Costs,
Costs,and
andProfits
Profits
Projections
Projectionsto
toSee
SeeififThey
TheyMeet
MeetCompany
CompanyObjectives
Objectives
If No, Eliminate
Product Concept
If Yes, Move to
Product Development
6. Product Development
Product development involves the creation and testing of one or more
physical versions of the product by the R&D or engineering
departments in order to ensure that the product idea can be turned into
a workable product.
 It requires an increase in investment and direct involvement of
different departments.
7. Test Marketing
Test marketing is the stage at which the product and marketing program are
introduced into more realistic marketing settings.
 Test marketing provides the marketer with experience in testing the product
and entire marketing program before full introduction.
 Elements that May be Test Marketed by a Company:
• Product • Branding
• Packaging • Advertising
• Pricing • Distribution
• Positioning • Budget Levels
7. Test Marketing: Consumer Products
Approaches to test marketing:
 Standard test markets
 Controlled test markets
 Simulated test markets

 Standard test markets are small representative markets where the
firm conducts a full marketing campaign and uses store audits,
consumer and distributor surveys, and other measures to estimate
product performance.
 Results are used to forecast national sales and profits, discover
product problems, and fine-tune the marketing program.

 Characteristics of Standard test markets:
May be very costly
Can take long time
Competitors can monitor the test results
Competitor interference by cutting price
Competitors gain access to the new product before introduction

 Controlled test markets are panels of stores monitored by some
research firms that carry new products for a fee.
 Characteristics of Controlled test markets:
Less expensive than standard test markets
Faster than standard test markets
Competitors gain access to the new product

 Simulated test markets are events where the firm will create a
shopping environment and note how many consumers buy the new
product and competing products.
• E.g. Participating in Trade shows and arranging internal
Fair/Exhibitions highlighting the products.

 Advantages of simulated test markets:
• Less expensive than other test methods
• Faster and direct response
• Restricts access by competitors
 Disadvantages:
• Not considered as reliable and accurate due to the controlled setting

8. Commercialization
 Commercialization is the introduction of the new product in the
mass market. Based on the results from test marketing marketer
decide the following things while commercialization.
When to launch?
Where to launch?
How to launch?
Managing New-Product Development
Successful new product development should be:
 Customer-centered product development
 Team-centered product development
 Systematic product development

Successful new product development

 Customer-centered new-product development focuses on finding
new ways to solve customer problems and create more customer-
satisfying experiences.
• E.g. GP’s Community Information Center (CIC) offering internet services
for the villagers.
 It begins and ends with identifying and solving customer needs and
values. Massive R&D activity and involvement is needed to do so.

 Team-based new-product development is a development approach
where company’s various departments work closely together in
cross-functional teams, overlapping in the product-development
process to save time and increase effectiveness.

 Systematic new-product development is an innovative
development approach that collects, reviews, evaluates and manages
new-product ideas from the stakeholders.
It Creates an innovation-oriented culture.
Company can form a innovative management system to collect
and evaluate ideas.

Product Life-Cycle Strategies
Product Life Cycle (PLC) is the course of a product’s sales and
profits over its lifetime.

 It involves five distinct stages:
Product development
Introduction
Growth
Maturity
Decline
Product Life Cycle (PLC) is the course of a product’s sales and
profits over its lifetime.

 It involves five distinct stages:
Product development
Introduction
Growth
Maturity
Decline
Sales and Profits Over the Product’s Life From Inception to Demise
Product Development Stage begins when the company finds and
develops a product idea to offer to the market.
 During the product development stage, sales are zero as it is not
introduced to the market and the company’s investment costs
increase.
Introduction Stage is when the new product is first launched to the
market and made available for purchase.

 Characteristics of Introduction stage:
Takes time to be introduced
Slow sales growth
Little or no profit
High distribution and promotion expense needed to make awareness
among customers
Growth Stage is when the new product start to satisfy the markets and
the sales climb quickly.
 Characteristics of Growth Stage:
 Sales increase quickly
 Price stability or decline is needed to increase sale
 New competitors enter the market
 Profits increase with sales volume
 Product quality & features need to increase
 New market segments and distribution channels are entered to support
the demand
Maturity Stage is a long-lasting stage of a product that has gained

consumer acceptance.
 Characteristics of Maturity Stage:
 Rate of sales growth slowdown
 Many suppliers/competitors enter to market
 Substitute products are also available
 Increased promotion and R&D to support sales and profits
Modifying Strategies in Maturity Stage
 Market modifying
 Product modifying
 Marketing mix modifying
Modifying Strategies
Market Modifying Strategy is when a company tries to increase the
consumption of the current product.
 Increase usage rate of existing users
 Searching for new users
 New market segments

Product Modifying Strategy is when a company tries to change the
characteristics of a current product.
 Changing quality & features
 Adding new tastes & packaging
 Offering different sizes, model

Marketing Mix Modifying Strategy is when a company changes one
or more of the marketing mix elements.
 Price
 Promotion
 Distribution channels
 Increasing support services

Decline stage refers when sales decline or level off for an extended
time because of technological advancement, shift in consumer demand
and increased competition.
 Options to marketer while at Decline stage :
Maintain the product
Harvest the product
Drop the product

Product Deletion
 If a product is no longer profitable, it is important to terminate it rather
than continue to pour time & resources into reviving it.
 Deletion analysis is a systematic review of projected sales and estimated
costs associated with those sales.
 If a product no longer appears to be profitable, the analysis looks at ways
to make modifications and return it to profitability.

Product Deletion
Product Deletion
 Phase-out is the ideal method, as it enables a product to be removed in an
orderly fashion.
 A product list item replaced on the next revision of the list.
 A Run-out would be used when sales are low & costs exceed revenues.
 If the producer decides to delete the product, it may choose to deplete its
existing product stock rather than reproduce.
 An Immediate Drop is usually chosen when the product may cause harm
or complaints.
 It is best to drop the item rather than continuing to create unhappy customers .

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 New-Product Development Strategy

Every product has to go through a life cycle – It is born, goes

through several phases, and eventually dies as newer

products come along that better serve consumer needs.

Acquisition refers to the buying of a whole company, a patent, or a license to

New Product Failure: Reasons

New Product Failure: Example

The systematic search for new product ideas.

 Internal sources refer to the company’s own formal research and

development, management and staff, and entrepreneurial programs.

 External sources refer to sources outside the company such as customers,

competitors, distributors, suppliers, and outside design firms

Idea screening refers to reviewing new-product ideas in order to spot good

ideas and drop poor ones as soon as possible

 Considering factors while screening:

Target market and market size

Product price, development time and cost

Rate of return and potentiality

3. Concept Development and Testing

Product concept is a detailed version of the idea stated in meaningful

product only the idea.

effective alternative idea like CNG technology.

3. Concept Development and Testing

Concept testing refers testing the new-product concepts with a groups of

 For the concept testing, a word or picture description might be sufficient.

4. Marketing Strategy Development

Business analysis involves a review of the sales, costs, and profit

projections to find out whether they satisfy the company’s

 To estimate the sales, company might look at the sales history of

similar product and conduct surveys of market opinion.

Product development involves the creation and testing of one or more

physical versions of the product by the R&D or engineering

 It requires an increase in investment and direct involvement of

7. Test Marketing: Consumer Products

Approaches to test marketing:

 Standard test markets

 Controlled test markets

 Simulated test markets

7. Test Marketing: Consumer Products

 Standard test markets are small representative markets where the

firm conducts a full marketing campaign and uses store audits,

consumer and distributor surveys, and other measures to estimate

 Results are used to forecast national sales and profits, discover

product problems, and fine-tune the marketing program.

7. Test Marketing: Consumer Products

 Characteristics of Standard test markets:

May be very costly

Can take long time

Competitors can monitor the test results

Competitor interference by cutting price

Competitors gain access to the new product before introduction

7. Test Marketing: Consumer Products

 Controlled test markets are panels of stores monitored by some

research firms that carry new products for a fee.

 Characteristics of Controlled test markets:

Less expensive than standard test markets

Faster than standard test markets

Competitors gain access to the new product

7. Test Marketing: Consumer Products

product and competing products.

• E.g. Participating in Trade shows and arranging internal

Fair/Exhibitions highlighting the products.