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Product Life-Cycle Strategies

New-Product Development Strategies

Strategies for Obtaining New Product Ideas


Acquired Acquired Companies Companies Original Original Products Products Product Product Improvements Improvements Product Product Modifications Modifications New New Brands Brands

Prof. P.V. Balakrishnan

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New Product Failures


One study estimated that as many as 80% of new consumer packaged products failed. Only about 40% of new consumer products are around 5 years after introduction. Why?

Improving New-Product Success


New product success depends on having a:

Unique superior product (one with higher quality, features, and value in use), & Well-defined product concept (a defined target market, product requirements, and benefits).

Overestimation of market size, Product design problems, Product incorrectly positioned, priced or advertised, Product may have been pushed despite poor marketing research findings, Costs of product development, or Competitive actions
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To create successful new products, the company must:


understand its customers, markets and competitors, & develop products that deliver superior value to customers.

Major Stages in New-Product Development


Marketing Strategy Concept Development and Testing Business Analysis

New Product Development Process. Idea Generation


Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:

Product Development

Idea Screening

Test Marketing

Customers

Competitors

Distributors

Suppliers

Idea Generation

Commercialization
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New Product Development Process. Test Marketing

New Product Development Process

Commercialization

Standard Test Market


Full marketing campaign in a small number of representative cities.

Controlled Test Market


A few stores that have agreed to carry new products for a fee.

Commercialization is the Introduction of the New Product into the Marketplace.


When When is is the the Right Right Time Time to to Introduce Introduce Product? Product? Where Where to to Launch Launch a a New New Product? Product?

Simulated Test Market


Test in a simulated shopping environment to a sample of consumers.
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Product Life Cycle

Applications of the Product Life Cycle


The PLC concept can describe a:

Sales and Profits ($) Profits

Sales

Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline

Sales and Profits Over the Products Life From Inception to Demise

Product class which has the longest life cycles (i.e. gas-powered cars), Product form which tend to have the standard PLC shape (i.e. minivans), Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus), Style which is a basic and distinctive mode of expression, Fashion which is a popular style in a given field, Fad which is a fashion that enters quickly, is adopted quickly and declines fast.
Style
To yotas R AV 4 i s mor e com pact and mor e modernlo oking than most other SUV s. What do o ther SUVs, considered new products in the ni ne tie s, lo ok li ke ?

Modifying the Product; Meeting the competition

Click or pre ss sp ac eba r to retu

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Egg Beaters had to first convince people that they needed an egg substitute (overcom ing a strong negative response to fake eggs) then demonstrate that their product was a perfect solution.

Problems Using the PLC


The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC Strategy is Both a Cause and a Result of the Products Life Cycle
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Introduction Stage of the PLC


Summary of Characteristics, Objectives, & Strategies
Sales Sales Costs Costs Profits Profits Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising Low Low sales sales High High cost cost per per customer customer Negative Negative or or low low Create Create product product awareness awareness and and trial trial Offer Offer a a basic basic product product Usually Usually is is high; high; use use cost-plus cost-plus formula formula High High distribution distribution expenses expenses Build Build product product awareness awareness among among early early adopters adopters and and dealers dealers

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Growth Stage of the PLC


Summary of Characteristics, Objectives, & Strategies
Sales Sales Costs Costs Profits Profits Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising Rapidly Rapidly rising rising sales sales Average Average cost cost per per customer customer Rising Rising profits profits Maximize Maximize market market share share Offer Offer new new product product features, features, extensions, extensions, service, and warranty service, and warranty Price Price to to penetrate penetrate market market Increase Increase number number of of distribution distribution outlets outlets Build Build awareness awareness and and interest interest in in the the mass mass market market

Strategic choices for share leaders

Flanker strategy: Proactive / Reactive

Competitor or potential competitor

Confrontation Strategy Proactive / Reactive

Fortress / Position defense Leader

Contraction / Strategic withdrawal

Market Expansion
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Strategic objectives for followers

Strategic choices for challengers

Capture repeat / replacement purchases from current customers of the leader or other target competitor by: Head-to-head positioning against competitors offering in primary target market (athletic footwear, PCs) Technological differentiation from target competitors offering in a primary target market Stimulate selective demand among later adopters by: Head-to-head positioning against target competitors offering in established market segments Differentiated positioning focused on untapped or underdeveloped segments

Leapfrog strategy Flanking attack

Guerrilla attacks

Target competitor Frontal Attack

Challenger

Encirclement strategy

Maturity Stage of the PLC


Summary of Characteristics, Objectives, & Strategies
Sales Sales Costs Costs Profits Profits Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising Peak Peak sales sales Low Low cost cost per per customer customer High High profits, profits, then then lower lower profits profits Maximize Maximize profits profits while while defending defending market market share share Diversify Diversify brand brand and and models models Price Price to to match match or or best best competitors competitors Build Build more more intensive intensive distribution distribution Stress Stress brand brand differences differences and and benefits benefits
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Maturity Stage of the PLC

Company tries to increase consumption of the current product.

Changing characteristics such as quality, features, or styles to attract new users.

Company tries to improve sales by changing one or more marketing mix elements.
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Never t oo Lat e.

Vol ks wagon m ade a com e back when one of i t s hal l m ar k pr oduct s was wel l past t he decl i ne s t age.

Technology Adoption Life Cycle (TALC)

Decline Stage of the PLC

What ot her com pani es have br ought back pr oduct s f r om t he pas t?

Cl i ck or pr es ss pacebar t o r et ur n.

Summary of Characteristics, Objectives, & Strategies


Sales Sales Costs Costs Profits Profits Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising Declining Declining sales sales Low Low cost cost per per customer customer Declining Declining profits profits Reduce Reduce expenditure expenditure and and maintain, maintain, reposition, harvest or reposition, harvest or drop drop the the product product Phase Phase out out weak weak items items Cut Cut price price Go Go selective: selective: phase phase out out unprofitable unprofitable outlets outlets Reduce Reduce to to level level needed needed to to retain retain hard-core hard-core loyal loyal customers customers
ar gg La Ea Ea te La In rs to va no rly r te op Ad rly M it y or aj

M ity or aj

ds

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Technology Adoption Life Cycle - Discontinuous Innovations

Review of Concepts

Innovators = Technology enthusiasts


Technology eventually helps improve lives; No money; Have influence; Gatekeepers to the life cycle; If they hate it implies trouble Believe in competitive advantage via discontinuous innovation; Bring $$ to table & demand modifications; Techies explore-visionaries exploit Do not love technology for its own sake; Believe in evolution not revolution; Want to improve organizational effectiveness; Difficult to convince them to shift paradigms; Prefer to buy from market leaders Technology skeptics; Price sensitive; Demanding consumers; Largely untapped opportunity for high tech Gadflies of high tech; Challenge the hype; Need to sell around them

Early adopters = Visionaries


Early majority = Pragmatists


Late majority = Conservatives


Explain how companies find and develop newproduct ideas. List and define the steps in the new-development process. Describe the stages of the product life-cycle. Describe how marketing strategies change during the products life-cycle.

Laggards = Skeptics

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