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Why Develop New Products?
- Follow changing market demands.
- Remain competitive.
- Keep up to changing technology.
- Replace dying products.
- Refresh and evolve existing products.
- Diversify product offering to reduce risk.
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Obtaining New Products
* Acquire
- Patents.
- Licenses.
- Companies.
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Obtaining New Products
* Develop
- New products.
- Modifications to existing products.
- Improvements to existing products.
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Some Succeed – Most Fail
* Successful new products.
- Offer a unique superior product.
- Have a well-defined product concept.
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Some Succeed – Most Fail
* Products fail.
- Market size may have been overestimated.
- Poor quality or design.
- Incorrect positioning, pricing or promotion.
- Does not deliver superior value.
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New-Product Failures
- Overestimation of market size.
- Design problems.
- Incorrectly positioned, priced or advertised.
- Pushed despite poor marketing research findings.
- Development costs.
- Competition.
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Disciplined Development Process
- Idea generation.
- Idea screening.
- Product concept.
- Marketing strategy.
- Business analysis.
- Product development.
- Test marketing.
- Commercialization.
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Sources of new ideas:
- employees
- customers
- suppliers
- partners
- competitors
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-Narrow down to those worth more time and money.
Idea Screening
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–Develop prototypes and test consumer interest.
Concept Development
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Initial Stages
- Sources of new ideas
- Idea screening
- Concept development
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•Process to spot good ideas and drop poor ones.
•Develop system to estimate: market size,
product price, development time and costs, manufacturing costs and rate of return.
•Evaluate these findings against set of
company criteria for new products.
Idea Screening
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Concept Development and Testing
- Product idea.Product concept.
- Product image.
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–idea for a possible product that the company can see itself offering.
Product Idea
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–detailed version of the idea stated in meaningful consumer terms.
Product Concept
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–the way consumers perceive an actual or potential product.
Product Image
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Business Case Stages
- Marketing strategy
- Business analysis
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–Target market.
–Product positioning.
–Sales, market share and profit objectives.
Marketing Strategy
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–Review of sales, costs and profit projections.
–Will product meet corporate objectives.
Business Analysis
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Marketing Strategy
- Phase One
- Phase Two
- Phase Three
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–Target market, planned market positioning, sales, market share, profit goals
Phase One (Marketing Strategy)
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–Product’s planned price, distribution, marketing budget
Phase Two (Marketing Strategy)
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–Sales and profit goals, marketing mix strategy
Phase Three (Marketing Strategy)
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•Involves a review of the sales, costs and profit projections to assess fit with company objectives.
•If yes, move to the product development phase.
Business Analysis
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•Develop concept into physical product.
•Calls for large jump in investment.
•Prototypes are made.
•Prototype must have correct physical features and convey psychological characteristics.
Product Development
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Commercialization Stage
- Test marketing
- Launch product / Commercialization
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–Test product in selected markets.
–Can include virtual testing.
Test Marketing
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–Full market distribution at once or in stages.
–Often heavy and costly promotion.
–Measure market acceptance.
–Adjust to meet launch sales objectives.
Launch Product / Commercialization
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Organizing New-Product Development
- Sequential approach
- Simultaneous approach
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Each stage completed before
moving to next phase of the project.
Sequential Approach
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–Cross-functional teams work through overlapping steps to save time and increase effectiveness.
Simultaneous Approach
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Product Life Cycle
Development
- Introduction
- Growth
- Maturity
- Decline
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-No customers, no profits, heavy spending.
Development
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-Early adopter customers, no profits, high
launch costs.
Introduction
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-Early majority customers, rapid sales
growth and revenues.
Growth
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-Late majority customers, flat sales, declining profits.
Maturity
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-Laggard customers, declining sales, replaced by new products.
Decline
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•Sales - low.
•Costs - high cost per customer.
•Profits - negative.
•Marketing objectives - create product awareness and trial.
•Product offer a basic product.
•Price - use cost-plus. formula
•Distribution - build selection distribution.
•Promotion - heavy to entice product trial.
Introduction Phase
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•Sales – rapidly rising.
•Costs – average cost per customer.
•Profits – rising.
•Marketing objectives – maximize market share.
•Product – offer extension, service, warranty.
•Price – penetration strategy. formula
•Distribution – build intense distribution.
•Promotion – reduce to take advantage of demand.
Growth Phase
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•Sales – peak.
•Costs – low cost per customer.
•Profits – high.
•Marketing objectives – maximize profits while defending market share.
•Product – diversify brand and models.
•Price – match or best competitors. formula
•Distribution – build more intensive distribution.
•Promotion – increase to encourage brand switching.
Maturity Phase
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•Modifying the market
•Modifying the product.
•Modifying the marketing mix.
Maturity Stage Strategy
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–Increase the consumption of the current product
Modifying the market
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–Changing characteristics such as quality, features or style to attract new users and to inspire more usage.
Modifying the product
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–Improving sales by changing one or more marketing mix elements.
Modifying the marketing mix
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•Sales – declining.
•Costs – low cost per customer.
•Profits – declining.
•Marketing objectives – reduce expenditures and milk the brand.
•Product – phase out weak items.
•Price – cut price. formula
•Distribution – selective and phase out unprofitable outlets.
•Promotion – reduce to minimum level.
Decline Phase
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