New Product and Innovation

MKTG129 Marketing Management CSUS Tong

Agenda
New products and product concept Product Life Cycle and Strategies

New Product
Radical innovations Degree of Newness
New to the world products that create an entirely new market

Continuous innovations
Minor improvements or revisions of existing products

Make or Buy?
Buy acquisition
Buy other companies Buy patents from other companies Buy a license or franchise from another company
Make - Organic growth: the development of new products from within the company Create new products in its own laboratories Contract with independent new-product developers and consultants

Innovation Success Imperatives

Most important: Unique and superior product A well-defined product concept
Transform product idea to product concept

Product concept: an elaborated version of the

product idea expressed in consumer terms Carefully define and assess the target market, product requirements, and consumer-seeking benefits; monitor the preferences of both customers and noncustomers over time and uncover evolving, difficult-to-articulate customer needs.

New Product Failure

New products fail at a disturbing rate, 50% overall, 95% in the US, and 90% in EU
Technical failure, poor design Ignored or misinterpreted market research Timing failure: too late; or too early Incorrect positioning, no clear differentiation Ineffective advertising Insufficient distribution support Shorter product lifecycles

Marketing through Product Life Cycles

Products have a limited life Product sales pass through distinct stages each with different challenges and opportunities Profits rise and fall at different stages Products require different strategies in each life cycle stage

Product Life Cycle

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Introduction Strategies
Pioneer Advantage innovators
Users often recall the pioneers brand name Establish the attributes the product class should possess Customer inertia: brand loyalty Technology leadership, patents, build barriers to entry

Second-mover advantage - imitators

Avoid heavy investment in R&D and raising needs Advantage of positioning Learn from the pioneers mistakes

Growth Stage Strategies

Improves product quality and adds new product features and improved styling Adds new models and flanker products (i.e.
products of different sizes, flavors, and so forth that protect the main product)

Enters new market segments Increases its distribution coverage and enters new channels Shifts from product-awareness advertising to product-preference advertising Lowers prices to attract the next layer of price sensitive buyers.

Maturity Stage Strategies

Three maturity stages:
Growth maturity: sales growth rate starts decline Stable maturity: sales flatten on a per capita basis because of market saturation Decaying maturing: absolute level of sales starts to decline; consumers switch to other products

Market re-structuring
A few dominant giant firms (cost leader, service leader, quality leader) A multitude of market nichers (market specialist, product specialist, customizing firms)

Decline Stage Strategies

Mostly withdraw from aging product markets. Some stay and attract the withdrawing firms customers. Harvesting strategy
Gradually reducing a product or businesss costs while trying to maintain sales. reduce R&D, quality, sales force, marginal service, and advertising

Common Product Life-Cycle Patterns

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Common Alternative Patterns

Growth-Slump-Maturity pattern
Sales grow rapidly at introduction, and fall to petrified level that is sustained by late adopters buying the product for the first time and early adopters replacing it.

Cycle-recycle pattern
First cycle is often a result of heavy promotion at introduction. When sales start declining, heavy promotion once again pushes sales to its 2nd cycle with smaller magnitude and duration.

Scalloped PLC pattern

Sales passes through a succession of lifecycles based on new discovery of new-product characteristics, uses, or users.

Style, Fashion, and Fad Life Cycles

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Style, Fashion, and Fad Life Cycles

Style
a basic and distinctive mode of expression appearing in a filed of human endeavor. Can last for generations

Fashion
A currently accepted or popular style in a given field Four stages: distinctiveness, emulation, mass fashion, and decline

Fad
Fashions that come quickly into public view, are adopted with great zeal, peak early, and decline very fast. Fails to sustain because they tend to attract short-term excitement but dont satisfy a strong need with mainstream consumers