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Product Development.docx

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Management Studies
MGST 391
Ahmad Ali Sohrabi

Product Development: (New Product) What is a new product:  That opens up an entirely new market  That replaces an existing product  That broadens the market of an existing product. When an old product can be new:  Introduced into a new market  Packaged in different way  Different marketing approach is used  Mix variable is changed. Degree of newness:  Unquestionably new product  Partially new product  Major product change  Minor product change Sources for new products:  Licensing  Internal product development  Customers  External innovators  Competition  Acquisition  Academic institutions  Patent agents Why so many new products fail: 1). Overestimated market size. 2). Poorly designed product. 3). Poorly priced, placed, promoted or positioned. 4). Result based on poor market research findings. 5). The costs of producing the product may have been higher than expected. 6). Sometimes competitors fight back harder than expected. 5 product characteristics affecting rate of adoption for new product: Relative advantage i.e. new technology making it superior Compatible with values and experience of potential consumers Ease of understand and use Trial option Communicability of results of using product. Product Development Process 1. Idea generation which is the systematic search for new product ideas rather than haphazard? a. Internal sources (R&D) b. External sources (customers, competitors, distributors, suppliers) 2. Idea screening Evaluation against criteria to spot good ideas and drop poor 3. Concept development and testing Product concept is a detailed version of the new-product idea stated in meaningful consumer terms. Concept testing involves testing the concepts with a group of target consumers to find out if the concepts have strong consumer appeal. 4. Marketing strategy development A marketing strategy statement should be produced. This is a statement of the planned strategy for a new product that outlines the target market, positioning, market mix and market share, long term sales, profit goals and marketing budget for the first few years. 5. Business analysis Review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives 6. Product development Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product 7. Test marketing The basic purpose is to test the product itself in real markets. 8. Commercialization Introducing a new product into the market. Stages of Product Life Cycle (PLC) 1. Introduction 2. Growth 3. Maturity 4. Decline Exceptions are Fad, Style, and Fashions. Strategies change with change in stage of PLC. Product life cycle- Characteristics, objectives and strategies: [very nice table] Introduction Growth Maturity Decline Characteristics Sales Low Rapidly rising Peak sales Declining sales Cost High per customer Average cost per Low cost per Low cost per customer customer customer Profit Negative Rising High profit Declining profit Customers Innovators
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