CH9 New Prod Dev and PLC Strategies OBJECTIVE 1 NEW PRODUCT DEVELOPMENT STRATEGY New Product Development The development of original products product improvements product modifications and new brands through the firms own product and development efforts The product life cycle faces two major challenges new product development and product life cycle strategies A firm can obtain new products in two ways 1 Acquisition buying a whole company a patent or license to produce someone else s product 2 The firms new product development process a New product original products product improvements product modifications and new brands that the firm develops over its own R D efforts OBJECTIVE 2A THE NEW PRODUCT DEVELOPMENT PROCESS Idea Generation Idea generation the systematic search for new product ideas great large number or ideas Internal Idea Sources Can find new ideas through formal R D It s own people executives scientists engineers and manufacturing staff Internal social networks and intrapreneurial programs External Idea Sources Distributors Suppliers Competitors Customers o Buying new products taking them apart analyze sales and decide whether or not to bring out a product of their own Crowd Sourcing Crowdsourcing inviting broad communities of people customers employees independent scientists and researchers and even the public at large into the new product innovation process Both inside and outside the company Third party crowdsourcing networks Idea Screening Idea screening screening new product ideas to spot good ideas and drop old ones as soon as possible reduce the amount of ideas from idea generation Costs rise greatly in later stages so want to weed out costs R W W Real Win Worth Doing Concept Development and Testing Product concept a detailed version of a new product idea stated in meaningful consumer terms Product idea an idea for a possible product that the company can see itself offering the market Product concept a detailed version of the idea stated in meaningful terms Product image the way consumers perceive an actual or potential product Concept Development Developing a new product into alternative product concepts find out how attractive each concept is to customers and chose the best one Concept Testing Concept testing testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal Marketing Strategy Development Marketing strategy development designing an initial marketing strategy for a new product based on the product concept 1 Describes the product market the planned value proposition and the sales market share and profit goals for the first few years 2 Outlines the product planned price distribution and marketing budget for the first year 3 Describes the planned long run sales profit goals and marketing mix strategy Business Analysis Business analysis a review of sales costs and profit for a new product to find out whether these factors satisfy the company s sales objectives Analyzes the new products attractiveness If they are attractive can move to the next stage Product Development Product development developing the product concept into a physical product Huge jump in investment Required functional features and convey psychological characteristics See if a product idea can be turned into a workable product Test Marketing Test marketing the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings Gives management the information needed to make a final decision on whether or not to launch Must pass the concept and product tests prior It lets the company test the entire marketing program targeting and positioning strategy advertising distribution pricing branding packaging and budget levels If the risks are high management is not sure of the product or its marketing program a company may do a lot of test marketing and vice versa An alternative to extensive and costly test markets include o Controlled test markets o Simulated test markets Commercialization Commercialization introducing a new product into the market Must decide on timing and where to launch the product Company faces high costs Sales promotion advertising building manufacturing facilities OBJECTIVE 2B MANAGING NEW PRODUCT DEVELOPMENT Customer Centered New Product Design Customer centered new product design new product development that focuses on finding new ways to solve customer problems and create more satisfying customer experiences Team Based New Product Development Team based new product development new product development in which various company departments work together overlapping the steps in the product development process to save time and increase effectiveness Systematic New Product Development The new product development process should be holistic and systematic rather than compartmentalized and haphazard Innovation management system collect review evaluate and manage new product ideas o Two favorable outcomes creates an innovative company culture and will yield a larger number or new product ideas New Product Development in Turbulent Times Cutting back on new products can make a company less competitive during a downturn In difficult times innovation often helps rather than hurts in making the company more competitive and positioning it better in the future OBJECTIVE 3 PRODCUT LIFE CYCLE STRATEGIES Product life cycle PLC the course of a products sales and profits over its lifetime 1 Product Development 2 3 Growth Introduction 4 Maturity 5 Decline A PLC concept can describe 1 Product class Gasoline powered automobiles a Longest life cycle 2 Product form SUVs a Standard PLC shape 3 Brand Ford Escape a Can change quickly because of changing competitive attacks and responses The PLC concept can also be applied in terms of 1 Style a basic and distinctive mode of expression 2 Fashion currently accepted or popular style in a given field 3 Fads temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity Introduction Stage Introduction stage the PLC stage in which a new product is first distributed and made available for purchase Market pioneer Growth Stage Growth stage the PLC stage in which a product s sales start climbing quickly Maturity Stage Maturity stage the PLC stage in which a product s sales growth slows or levels off 1 Modifying the market the company tries to increase competition by finding new users and
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