Chapter 10 - New-Product Development.docx

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2320A/B
Professor
John White
Semester
Winter

Description
Chapter 10: New Product Development and Product Life-Cycle Strategies Product life cycle challenges:  All firms must be good at developing new products to replace aging ones (challenge of new-product development) because all products eventually decline  All firms must be good at adapting its marketing strategies in the face of changing tastes, techonologies and competition as products pass through life-cycle stages (challenge of product life-cycle strategies) 1. New-Product Development Strategy Two ways to obtain a new product:  Acquisition: buying a whole company, patent or license to produce someone else’s product  New-product development efforts: development of original products, product improvements, product modifications and new brands through the firms own product- development efforts Why do products fail?  Overestimation of market size  Product is poorly designed, incorrectly positioned, launched at the wrong time, priced wrong, poorly advertised 2. New-Product Development 8 steps to this process:  Idea generation: systematic search for new product ideas o Internal idea sources: using formal research and development, pick brains of employees, develop “intrapreneurial” programs encouraging employees to develop new product ideas o External idea sources  Distributors and supplies: they’re close to the market, aware of new concepts, techniques, etc.  Competitors  New-product consultancies and design firms  Online collaborative communities  Customers  Idea Screening: idea-reducing stage that helps spot good ideas and drop poor ones ASAP o Real, Win, Worth it  Is it real?  Can we win? Is it a sustainable competitor?  Is it worth doing?  Concept Development and Testing o Product idea: idea for a possible product that a company can see itself offering to the market o Product concept: detailed version of the new-product idea stated in meaningful consumer terms o Product image: way consumers perceive an actual or potential product o Concept development: develop a new product into alternative product concepts, find out how attractive each option is to customers, choose the best one o Concept testing: testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal  Marketing Strategy Development o Designing an initial marketing strategy for a new product based on the product concept o 3 parts:  Describe the target market, planned value proposition, sales, market share, profit goals for the next few years  Outline the product’s planned price, distribution and marketing budget for the first year  Describe the planned long-run sales, profit goals, marketing mix strategy  Business Analysis o Review of sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives o If YES, move on to next stage  Product Development o Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering o Develop and test physical versions  Test Marketing o Stage of new-product development in which the product and marketing program are tested in realistic market settings o Test marketing is expensive and may give competitors an advantage o Declining practice o Standard test markets: company finds small number of representative test cities, conducts full marketing campaign in those cities, uses store audits, consumer and distributor surveys and other measures to gauge product performance  May be costly and take long  Competitors may monitor results  Most widely used approach o Controlled test markets: track individual consumer behaviour for new products from the television set to the checkout counter  Allows companies to evaluate their specific marketing efforts o Simulated Test Markets: test new products in a simulated shopping environment  Give consumers option of buying a product or keeping money in a simulated store, note how many actually buy the product  Ask why they purchased or not and re-interview in the future to determine attitudes toward product  Cost less, take less time however not as accurate as larger, real-world tests  Commercialization: introducing a new product into the market o High costs o Timing, where to launch (single location, national, international) Managing New-Product Development –HOLISTIC APPROACH
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