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 ...
New-Product Development Strategies
Product Life-Cycle Strategies
Strategies for Obtaining New Product Ideas
Prof. P.V. Balakrishnan
Acquired Acquired Companies Companies
Original Original Products Products
Acquired Acquired Patents Patents
Product Product Improvements Improvements
Acquired Acquired Licenses Licenses
Product Product Modifications Modifications New New Brands Brands
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New Product Failures
Improving New-Product Success
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?
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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
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).
To create successful new products, the company must:
understand its customers, markets and competitors, & develop products that deliver superior value to customers.
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Major Stages in New-Product Development Marketing Strategy Concept Development and Testing
Idea Screening
Idea Generation
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New Product Development Process. Idea Generation
Business Analysis
Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:
Product Development
Test Marketing
Customers
Competitors
Distributors
Suppliers
Commercialization 5
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New Product Development Process. Test Marketing
New Product Development Process
Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
Standard Test Market
Controlled Test Market
Full marketing campaign in a small number of representative cities.
A few stores that have agreed to carry new products for a fee.
When When is is the the Right Right Time Time to to Introduce Introduce Product? Product?
Simulated Test Market Test in a simulated shopping environment to a sample of consumers.
Where Where to to Launch Launch aa New New Product? Product?
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Product Life Cycle
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Applications of the Product Life Cycle The PLC concept can describe a:
Sales and Profits ($)
Sales
Profits
Time Product Development
Introduction
Growth
Maturity
Decline
Losses/ Investments ($)
Sales and Profits Over the Product’s 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
Modifying the Product; Meeting the competition
To yota’s R AV 4 i s mor e com pact and mor e modernlo oking than most other SUV ’s. What do o ther SUV’s, considered new products in the ni ne tie s, lo ok li ke ?
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
Introduction Stage of 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 Product’s Life Cycle 11
Summary of Characteristics, Objectives, & Strategies Sales Sales
Low Low sales sales
Costs Costs
High High cost cost per per customer customer
Profits Profits
Negative Negative or or low low
Marketing Marketing Objectives Objectives
Create Create product product awareness awareness and and trial trial
Product Product
Offer Offer aa basic basic product product
Price Price
Usually Usually isis high; high; use use cost-plus cost-plus formula formula
Distribution Distribution
High High distribution distribution expenses expenses Build Build product product awareness awareness among among early early adopters adopters and and dealers dealers
Advertising Advertising
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2
Growth Stage of the PLC
Strategic choices for share leaders
Summary of Characteristics, Objectives, & Strategies Sales Sales
Rapidly Rapidly rising rising sales sales
Costs Costs
Average Average cost cost per per customer customer
Profits Profits
Rising Rising profits profits
Marketing Marketing Objectives Objectives
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
Product Product Price Price Distribution Distribution Advertising Advertising
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
Flanker strategy: Proactive / Reactive
Competitor or potential competitor
Confrontation Strategy Proactive / Reactive
Fortress / Position defense
Contraction / Strategic withdrawal
Leader
Market Expansion 16
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 competitor’s offering in primary target market (athletic footwear, PCs) Technological differentiation from target competitor’s offering in a primary target market Stimulate selective demand among later adopters by: Head-to-head positioning against target competitor’s offering in established market segments Differentiated positioning focused on untapped or underdeveloped segments
Leapfrog strategy Flanking attack
Guerrilla attacks
Target competitor
Challenger Frontal Attack
Encirclement strategy
Maturity Stage of the PLC
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies Sales Sales
Peak Peak sales sales
Costs Costs
Low Low cost cost per per customer customer
Profits Profits
Product Product
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
Marketing Marketing Objectives Objectives
Price Price
Price Price to to match match or or best best competitors competitors
Distribution Distribution
Build Build more more intensive intensive distribution distribution
Advertising Advertising
Stress Stress brand brand differences differences and and benefits benefits
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. 22
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Never t oo Lat e.
Vol kswagon made a comeback when one of i t s hal l mar k pr oduct s was wel l past t he decl i ne st age.
Decline Stage of the PLC
Technology Adoption Life Cycle (TALC)
What ot her compani es have br ought back pr oduct s f r om t he past?
Cl i ck or pr ess spacebar t o r et ur n.
Summary of Characteristics, Objectives, & Strategies Sales Sales
Declining Declining sales sales
Costs Costs
Low Low cost cost per per customer customer
Profits Profits
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
Marketing Marketing Objectives Objectives Product Product
ar gg La ds
s
it y or aj
ity or aj
M
M
rly
te La
Ea
r te op Ad
Technology Adoption Life Cycle - Discontinuous Innovations
rly
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Ea
rs to va no
Advertising Advertising
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
In
Price Price Distribution Distribution
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
Early adopters = Visionaries
Believe in competitive advantage via discontinuous innovation; Bring $$ to table & demand modifications; Techies explore-visionaries exploit
Early majority = Pragmatists
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
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 product’s life-cycle.
Technology skeptics; Price sensitive; Demanding consumers; Largely untapped opportunity for high tech
Laggards = Skeptics
Gadflies of high tech; Challenge the hype; Need to sell around them
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