New-Product Development and Product Life-Cycle Strategies

Learning Objectives
New Product Development Different stages in PLC Strategies to be adopted for various
stages

8-2

New-Product Development Strategy

Strategies for Obtaining New-Product Ideas
Acquisition of:
Companies

New Products:
Original Products

Patents
Licenses

Improvements
Modifications
8-3

New-Product Failures
Only 10% of new products are still on the
market and profitable after 3 years. Failure rate for industrial products is as high as 30%. Why?
Overestimation of market size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Development costs Competition

8-4

Major Stages in New-Product Development

8-5

Idea Generation
Company Employees

Customers Competitors
Distributors Suppliers
8-6

Organizing New-Product Development

Sequential Approach: each stage
completed before moving to next phase of the project.

Simultaneous Approach: Cross-functional

teams work through overlapping steps to save time and increase effectiveness.

8-7

Product Life Cycle

Sales and Profits ($) Profits Time Decline Sales

Product Development Losses/ Investments ($)

Introduction

Growth

Maturity

Sales and Profits Over the Products Lifetime

8-8

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Low

Costs
Profits Marketing Objectives

High cost per customer

Negative Create product awareness and trial

Product
Price Distribution

Offer a basic product

Use cost-plus formula Build selective distribution Heavy to entice product trial
8-9

Promotion

Growth Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Rapidly rising Average cost per customer Rising Maximize market share

Product
Price Distribution Promotion

Offer extension, service, warranty

Penetration strategy Build intensive distribution

Reduce to take advantage of demand

8-10

Maturity Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Peak Low cost per customer High Maximize profits while defending market share Diversify brand and models Match or best competitors Build more intensive distribution Increase to encourage brand switching
8-11

Decline Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Declining Low cost per customer Declining
Reduce expenditures and milk the brand

Phase out weak items Cut price

Selective: phase out unprofitable outlets Reduce to minimum level
8-12