Principles of Marketing

Seventeenth Edition
Chapter 9

Developing
New Products
and Managing the
Product Life Cycle
SAMSUNG: Enriching Customers ’ Lives through New-
Product Innovation

Samsung has become the world’s leading consumer electronics

company through customer-focused innovation and new products that
enrich customers’ live. At Samsung , every new product has to pass the
consumer ” Wow” test.
 Learning Objectives

9-1 Explain how companies find and

develop new product ideas.

9-2 List and define the steps in the new

product development process and the
major considerations in managing this
process.
 Learning Objectives

9-3 Describe the stages of the product life

cycle and how marketing strategies
change during a product’s life cycle.

9-4 Discuss two additional product

issues: socially responsible product
decisions and international product
and services marketing.
 Learning Objective 1

Explain how companies find and develop new

product ideas.

New Product Development Strategy

New Product Development
Strategy
Ways to Obtain New Products

Acquisition
refers to the buying of a whole company,
a patent, or a license to produce someone
else’s product.

New product development

refers to original products, product
improvements, product modifications,
and new brands developed from the
firm’s own research and development.
 Learning Objective 2

List and define the steps in the new product

development process and the major considerations in
managing this process.

The New Product Development Process

 The New Product
Development Process
 The New Product
Development Process
Idea Generation
 New-product development starts with idea
generation ─ the systematic search for new-product
ideas.
 Major sources of new product ideas include internal
sources and external sources such as customers,
competitors, distributors and suppliers, and others.
 The New Product
Development Process
Idea Generation
Internal Idea Sources
 Using internal sources, the company can find new
ideas through formal R&D.
 Thus, beyond its internal R&D process, a company
can pick the brains of its own people ─ from
executives to salespeople to scientists, engineers, and
manufacturing staff.
 The New Product
Development Process
• Companies can also obtain good
new-product
Idea Generation ideas from any of a
•
numberPerhaps the sources.
of external most important sources
• External Idea
Distributors Sources
of new-product
are close toideas
the are customers
market themselves.
and can pass along
• The company can analyze customer
information about consumer
questions
problems and complaints to find new
and new-product
products that better solve consumer
possibilities. •
problems. Suppliers can tell the company
• Or it can inviteabout new concepts, techniques,
customers to share
and materials that can be used to
suggestions and ideas.
develop new products.
• Competitors are another important
source.
 The New Product
Development Process
Idea Generation
Crowdsourcing involves inviting broad communities of
people—customers, employees, independent scientists and
researchers, and even the
• Truly innovative public atdon’t
companies large—into theonnew
rely only one
product innovation
source process.
or another for new-product ideas.
• Instead, they develop extensive innovation
networks that capture ideas and inspiration from
every possible source, from employees and
customers to outside innovators and multiple
points beyond.
 The New Product
Development Process
Idea Screening
 The first idea-reducing stage is idea screening, which
New-product
helps spot good ideasScreening
and drop poor ones as soon as
possible. framework
 Product development costs rise greatly in later stages, so
the company wants AskstoThree
go ahead only with those product
Questions
ideas that
1. Is will turn into profitable products.
it real?
2. Can
 Many we win? require their executives to write up
companies
3. Is it worth
new-product doing?
ideas in a standard format that can be
reviewed by a new-product committee
 The New Product
Development Process
Concept Development and Testing
• is an idea for a possible product that the
Product idea company can see itself offering to the
market.

Product • is a detailed version of the idea stated in

concept meaningful consumer terms.

Product • is the way consumers perceive an actual

image or potential product.
 The New Product
• Concept 1: An affordably priced midsize car designed as a
second family car to be used around town for running
Development Process
errands and visiting friends.
• Concept 2: A mid-priced sporty compact appealing to young
Concept Development
singles and couples. and Testing
• Concept 3: A “green” everyday car appealing to
Concept testing refers
environmentally to testing
conscious peoplenew
who product concepts
want practical, no-
withpolluting
groups of target consumers.
transportation.
• Concept 4: A compact crossover SUV appealing to those
Lookingwhoahead,
lovethe
themarketer’s
space SUVs provide but lament the poor gas
task is to develop this new
mileage.
product into alternative
product concepts, find out how
attractive each concept is to
customers, and choose the
best one.
 The New Product
Development Process
Concept Development and Testing
 Concept testing calls for testing new-product concepts
with groups of target consumers.
 For some concept tests, a word or picture description
might be sufficient.
 However, a more concrete and physical presentation of
the concept will increase the reliability of the concept
test.
 The New Product
Development Process
Step 1
Marketing Strategy Development
Describes the target market; the planned value
proposition;
Marketing and thedevelopment
strategy sales, market share, and profitan
is designing
goals
initial for the first
marketing few years.
strategy for a new product based on
the product concept.
Step 2
Marketing
Outlinesstrategy statement
the product’s consists
planned price, of:
distribution, and
marketing
 Target marketbudget for the first year.
description
 Value proposition planned
Step
 Sales, 3
market-share, and marketing mix
Describes the planned long-run sales, profit goals, and
marketing mix strategy.
 The New Product
Development Process
Business Analysis
Business analysis is a review of the sales, costs, and
profit projections for a new product to find out whether
these factors satisfy the company’s objectives.
 The New Product
Development Process
Product Development
Product development is developing the product concept
into a physical product to ensure that the product idea can
be turned into a workable market offering.
 R&D hopes to design a prototype that will satisfy and
excite consumers and that can be produced quickly and at
budgeted costs.
 Often, products undergo rigorous tests to make sure that
they perform safely and effectively, or that consumers will
find value in them.
 The New Product
Development Process
Controlled Test Markets
Test Marketing
Test marketing
New products is theare
and tactics stage of new product development
tested
in which the product and Both controlled
its proposed marketing program
among controlled panels of shoppers test markets and
are tested
and stores. in realistic market settings.
simulated test
markets reduce
Simulated Test Markets the costs of test
marketing and
speed up the
Researchers measure consumer process.
responses to new products and
marketing tactics in laboratory stores
or simulated online shopping
environments.
 The New Product
Development Process
Test Marketing

When test marketing When test marketing

is likely is unlikely

• New product with • Simple line extension

large investment • Copy of competitor
• Uncertainty about product
product or marketing • Low costs
program • Management
confidence
 The New Product
Development Process
Commercialization
Commercialization involves introducing a
new product into the market.
 When to launch?
 Where to launch?

 Planned market rollout?

 The New Product
Development Process
Managing New Product Development
Successful new product development
Customer-Centered should be:
New-Product
 Customer centered
Development
 Team based
 Systematic
Team-Based New-Product Development

Systematic New-Product Development

 The New Product
Development Process
Managing New Product Development
Customer-centered new product development
focuses on finding new ways to solve customer problems
and creating more customer-satisfying experiences.
 Managing New Product
Development
Managing New Product Development
Team-based new product development involves
various company departments working closely together,
overlapping the steps in the product development
process to save time and increase effectiveness.
 The New Product
Development Process
Managing New Product Development
Systematic• ItNew
helpsProduct
create anDevelopment
innovation-oriented
company
 The new-product culture.
development process should be
First
holistic•and
It shows that top
systematic management
rather supports,
than compartmentalized
encourages, and rewards innovation.
and haphazard.
 To avoid these problems, a company can install an
innovation management system to collect, review,
• It will yield a larger number of new-product
evaluate, and manage new-product ideas.
ideas, among which will be found some
The innovation
Second management
especially good ones.system approach yields
two favorable outcomes.
 Learning Objective 3

Describe the stages of the product life cycle and

how marketing strategies change during a
product’s life cycle.

Product Life-Cycle Strategies

Product Life-Cycle Strategies
 Product Life-Cycle Strategies
 The product life cycle
 It is(PLC) hasoffive
a period distinctinstages:
slowdown sales
 growth because the product has
It is a period
 It begins when the company of slow sales
finds and growth
achievedGrowth
acceptance by most
Product
develops a as the product
Introduction
new-product is
idea.introduced in the
Maturity
 It is the Decline
period
development potential buyers.
market.
 During product development, salesoff
are when sales fall off
 Profits
It level
is a period or decline
of rapid because
zero, and the
Profits are nonexistent
company’s investment in costs
this stageand profits drop.
of increased
market marketing
acceptance out lays to
and
mount. because of the heavy expenses of
defend the product
increasing profits.against
product introduction.
competition.

Product
Develop- Introduction Growth Maturity Decline
ment
 Product Life-Cycle Strategies
 The PLC concept
• It is acan describe
basic a product
and distinctive class
mode of
(gasoline-powered automobiles), a product form
expression
Style or a brand (the Ford Escape).
(SUVs),
 The PLC concept also can be applied to what are known
as styles, fashions, and fads.
• It is a currently accepted or popular style
in a given field.
Fashion

• It is a temporary period of unusually high

sales driven by consumer enthusiasm and
Fad immediate product or brand popularity.
 Product Life-Cycle Strategies
Introduction Stage
 The introduction stage starts when a new product
is first launched.
 In this stage, as compared to other stages, profits are
negative or low because of the low sales and high
distribution and promotion expenses.
 A company, especially the market pioneer, must
choose a launch strategy that is consistent with the
intended product positioning.
 Product Life-Cycle Strategies
• If the new product satisfies the market, it will enter a growth
Growth Stage
stage, in which sales will start climbing quickly.

• Attracted by the opportunities for profit, new competitors will

enter the market.
• They will introduce new-product features, and the market will
expand.
• The increase in competitors leads to an increase in the number of
distribution outlets, and sales jump just to build reseller
inventories.
• Profits increase during the growth stage as promotion costs are
spread over a large volume and as unit manufacturing costs
decrease.
• The firm uses several strategies to sustain rapid market growth as
long as possible.
• It improves product quality and adds new product features and
models.
 Product Life-Cycle Strategies
Maturity Stage
At some point, a product’s sales
growth will slow down, and it
will enter the maturity stage.
The slowdown in sales growth
results in many producers with
many products to sell.
In turn, this overcapacity leads
to greater competition.
Competitors begin marking
down prices, increasing their
advertising and sales
promotions, and upping their
product development budgets
to find better versions of the
product.
This step lead to a drop in
Profit.
The company might also try
modifying the product ─
changing characteristics such
as quality, features, style,
packaging, or technology
platforms to retain current
users or attract new ones.
 Product Life-Cycle Strategies
Decline Stage
 Sales may plunge to zero, or they may drop to a low level
where they continue for many years. This is the decline
stage.
 Sales decline for many reasons, including technological
advances, shifts in consumer tastes, and increased
competition.
 A product’s failing reputation can cause customer
concerns about the company and its other products.
 Product Life-Cycle Strategies
Table 9.2 Part I
 Product Life-Cycle Strategies
Table 9.2 Part II
 Learning Objective 4

Discuss two additional product issues: socially

responsible product decisions and international
product and services marketing.

Additional Product and

Service Considerations
Additional Product and Service
Considerations
 There are two additional considerations:

Social responsibility in product

decisions

Issues of international product and

services marketing
 Additional Product and Service
Considerations
• Marketers should carefully consider public policy
Product Decisions
issues and Social
and regulations Responsibility
regarding acquiring or
dropping products, patent protection, product
quality and safety, and product warranties.

• Regarding new products, the government may prevent

companies from adding products through acquisitions if
the effect threatens to lessen competition.
• Companies dropping products must be aware that they
have legal obligations, written or implied, to their
suppliers, dealers, and customers who have a stake in
the dropped product.
 Additional Product and Service
Considerations
International Product and Service Marketing
 First Marketers must figure out what products and
services to introduce and in which countries.
 They must decide how much to standardize or adapt
their products and services for world markets.
 On the one hand, companies would like to
standardize their offerings.
 On the other hand, markets and consumers around
the world differ widely.
 Companies must usually respond to these differences
by adapting their product offerings.
The End