Chapter 7

New Product Development

&
Product Life-Cycle
Strategies
References:
•Marketing by Michael J. Walker, Bruce J. Walker & William J. Stanton ( 13th Edition)
•Marketing Management by Philip Kotler (Millennium Edition)
•Internet
 Why do new products fail?
A high-level executive pushes a favorite idea
through in spite of negative research findings.
 The idea is good, but the market size is
overestimated.
 The product is not well designed.
 The product is incorrectly positioned in the market,
not advertised effectively, or overpriced.
 The product fails to gain sufficient distribution
coverage or support.
 Development costs are higher than expected.
 Competitors fight back harder than expected.
 Product- Any offering that can satisfy a
need or want
(Mainly 10 entities which are being marketed)
 A firm can obtain new product in two
ways
I. Acquisition- By buying a whole company, a
patent or a license( franchise) to produce
some one else’s product.
II. New Product Development- The
development of original products, product
improvement, product modification, and
new brands through the firm’s own R&D
efforts.
  Six categories of new products
1. New-to-the-world products- New products that create
an entirely new market.
2. Imitative products- Products new to particular
company but not new to market. Allow company to
enter in established market for the 1st time
3. Additions to existing product lines- in terms of
package size, flavors, colors etc.
4. Improvements/revisions of existing
products/replacing existing products
5. Repositioning- Targeting new markets or segments
6. Cost reductions- new products with similar
performance with lower cost
Major Stages in New Product Development
(New Product Development Process)
1. Idea generation: systematic search for new ideas
 Internal sources: brainstorming, Research, Scientists,
engineers, employees, sales force etc.
 External sources: customers, competitors, distributors,
suppliers, institutions & environments
2. Idea screening: identify good ideas and drop poor ones
 Usefulness to consumers/company
 Execution feasibilities
 Resources/cost
 Market/profit potential
 DROP-error occurs when company drops good idea
& selects poor idea
 GO-error occurs when company permits poor idea.
3. Concept Development and Testing
 Product concepts provide detailed versions of new
product ideas stated in meaningful consumer terms. Find
out how attractive each is to customers, and choose the
best one.
 Testing new-product concepts with a group of target
consumers to find out if the concept have strong consumer
appeal.
 Concept may be presented symbolically or physically.
4. Marketing strategy: initial strategy for product
concept:
 Target market, positioning, and sales, market
share, and profit goals
 Price, distribution, and marketing budget
 Strategy statement, long-run sales, profit goals,
and marketing mix
5. Business analysis: evaluating the business
attractiveness of the proposal, review of sales, costs,
and profit projections to determine if they meet
company objectives.
 Sales history of similar products & survey of market
opinion.
6. Product development: developing the product
concept into a physical product
 Large investment
 Building a prototype
 Testing for safety, durability, and acceptability
7. Test marketing: testing the product in more
realistic market settings
 Assess consumer acceptability, trial, repeat
purchase rate
 Design effective media plans
 Standard test markets
 Controlled test markets
 Simulated test market
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 Commercialization: introducing a new product into
the market.
 An organization may commercialize its product three
choices.
 1st entry- launching new to the world product or service
or at least new to the market as 1st mover. (Pioneer
advantage)
 Parallel entry- Two or more firms simultaneously enter
in market.
 Late entry- The firm may delay its launch unstill after the
competitor has entered
 New Product Adopters Groups
1. Innovators- Venturesome, they try new ideas at some risks
2. Early adopters- they adopt new ideas early but carefully
3. Early majority- Adopt new ideas before average person
4. Late majority- Adopt new idea after a majority of people tried it.
5. Laggards- people suspicious to changes and adopt new product
when it becomes some thing of a tradition itself (essential part of
life)
 Product Life Cycle (PLC)

Not all products follow this cycle

 Product Life-Cycle
 Product life cycle (PLC): the course of a product’s sales and
profits over its life time, involves five distinct stages.
1. Product development- Begins when company finds and develops
a new-product idea. During product development sales are zero
2. Introduction- period of slow sales growth as the product is
introduced in the market. Negative or minimal profit because of
heavy expenditures.
3. Growth- rapid market acceptance and increasing profit.
Competitor may also enter in this stage
4. Maturity- Period of slowing down sales growth because the
product has achieved acceptance by most potential buyers. Profit
level touches top & then declines because of increased marketing
outlays to defend the product against competition. Although many
products remain unchanged for longer periods by modifying
marketing mix & product
Market Modification
1. Increase frequency of use by
present customers
2. Add new users
3. Find new uses
4. Enter new markets
5. Win Competitor's customers
Product
Modification 6. Change product quality or
packaging, introduce variety

5. Decline- is the period when sales fall off and profit

drops.
Overlap of Life Cycle for Products A and B

WINDOWS 3.1

WINDOWS 95
1991 1995 1996 1997
 Summary of PLC
Characteristics: Introduction Growth Maturity Decline
Sales Low Rapidly rising sales Peak Declining sales
Costs High cost Average cost Low cost Low cost
per customer per customer per customer per customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable number Declining number

Marketing objectives:
Create product Maximize market Maximize profit & Reduce expenditure
awareness and trial share defend market share & milk brand

Strategies:
Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models items
Price Use cost-plus Price to penetrate Price to match or Cut price
market best competitors
Distribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outlets
Advertising Build awareness Build awareness & Stress brand differences Reduce to level needed
early adopters/dealers interest mass market and benefits to retain hard-core loyals
Sales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal
to entice trial to heavy demand brand switching level
 Some other shapes of PLC
Styles, Fashions, and Fads
 Not all products follow product life cycle
 Style: basic and distinctive mode of expression
 Fashion: currently accepted or popular style in a given field
 Fad: a fashion that enters quickly, adopted with great zeal,
peaks early, and decline very fast
 Some other shapes of PLC

a) Grow rapidly after introduction then falls to petrified

level. The petrified level is sustained by late adopters &
early adopters replacing the product.
b) Aggressively new product promotion & when products
starts declining company gives another promotional push
(usually of smaller magnitude and duration)
c) Here sales passes through a succession of life cycles based
on discovery of new-product characteristics, uses or users.