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9 Dec 2010
1 | Page/MGTB0 4 We e k 8
- Apple excels at developing and managing new products
- The product life cycle presents two major challenges
o Since all products decline, a firm must be good at developing new products to replace
the aging ones (the challenge of new-product development)
o The firm must be good at adapting its marketing strategies in the face of changing
tastes, technologies, and competition (the challenge of product life-cycle)
New-Product Development Strategy
- A firm can obtain new products in two ways, through acquisition (buying a whole company,
- New-product development is the development of original products, product improvements,
- New products are important to both the customers and the marketers
o Customers: brings new solutions and variety to their lives
o Companies: new products are a key source of growth
- Innovation can be very expensive and risky where approximately 90% of all new products fail
- Some new products fail because the company may overestimate market size, product is
poorly designed, priced too high, poorly advertised, costs exceeded budget, competitors
The New-Product Development Process
- In order to successfully develop new products, must set up a customer-driven new-product
development process for finding and growing new products, there are eight major steps
1. Idea Generation
- Idea generation is the systematic search for new-product ideas (create large number of ideas)
- A company typically generates hundreds of ideas, even thousands, to find a few good ones
- Major sources of new-product ideas include internal sources and external sources
o Internal Idea Sources
By using internal sources, companies find new ideas through traditional R&D
(14% of the time), employees (41% of the time), and customers (36%)
encourages employees to think up and develop new-product ideas
o External Idea Source
Distributors and suppliers
x Since distributors are close to the market, they can pass along
information about consumer problems and new-product possibilities
x Suppliers can tell the company about new concepts, techniques, and
materials that can be used to develop new products
products (buy competing products and dissemble, analyze sales)
Other idea sources include trade magazines, shows, and seminars
Companies can also seek help from new-product consultancies and design firm
Turn to online collaborative communities to help solve problems (e.g. P&G)
Chapter 10 ± New-Product Development and Product Life-Cycle Strategies (pg. 312 ± 339)
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2 | Page/MGTB0 4 We e k 8
x Most important source of new-product ideas are customers themselves
x Companies can analyze customer questions and complaints to find new
products that better solve consumer problems
x E.g. LEGO invited 250 enthusiasts to assess new designs
x Company must be careful not to rely too heavily on what customers say
since some customers may not know what they need
2. Idea Screening
- Idea screening is the first idea-reducing stage and it screens new-product ideas to spot good
ideas and drop poor ones as soon as possible
- Many companies require their executives to write up new-product ideas in a standard format
that can be reviewed by a new-product committee
o Write up: describe the product/service, proposed customer value proposition, target
market, competition, rough estimates of market size, product price development time
and costs, manufacturing costs, and rate of return
- Marketing expert proposes an R-W-W (real, win, worth it) new-product screening framework
o R : Is it real? Is there a real need and is there a clear product concept?
o W: Can we win? Does the product offer a substantial competitive advantage?
o W: Is it worth doing? Does it offer sufficient profit potential?
3. Concept Development and Testing
- An attractive idea must be developed into a product concept which is a detailed version of
the new-product idea stated in meaningful consumer terms
- Concept Development
o A marketer may develop a new product into alternative product concepts and choose
the one that is most attractive to customers
o E.g. Concept I ± affordable midsize car designed as a second family car
Concept II ± midpriced sporty compact appealing to young singles and couples
- Concept Testing
o Concept testing is testing new-product concepts with a group of target consumers to
find out if the concepts have strong customer appeal
o Many firms test new-product concepts with consumers before making new products
o For some concept tests, a word or picture description is sufficient while others may
need a more concrete and physical presentation of the concept
4. Marketing Strategy Development
- Marketing strategy development is designing an initial marketing strategy for a new
product based on the product concept
- The marketing strategy statement consists of three parts
o Part I ± target market, planned value proposition, sales, market share, profit goals
o Part III ± describes the planned long-run sales, profit goals, & marketing mix strategy
5. Business Analysis
- Business analysis is a review of the sales, costs, and profit projections for a new product to
find out whether these factors satisfy the compDQ\¶VREMHFWLYHV
- If the business analysis is favourable, the product can move to the product development stage
6. Product Development
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