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Chapter 10

Chapter 10 Notes

8 Pages
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Department
Management (MGM)
Course Code
MGMA01H3
Professor
Tarun Dewan

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Chapter 10:
This product life cycle presents 2 major challenges:
1) because all products eventually decline, a firm must be good at developing new products
to replace aging ones (the challenge of new-product development)
2) the firm must be good at adapting its marketing strategies in the face of changing tastes,
technologies, and competition as product pass through life-cycle stages (the challenge of
product life-cycle strategies)
New Product Development Strategy
Obtain new products in 2 ways: buying company, patent, license or new product
development
New-product development the development of original products, product improvements,
product modifications, and new brands through the firms own product-development efforts
For companies, new products are a key source of growth
For customers, they bring new solutions and variety to their lives
90% of all new products fail (lose US$20-30)
Product fails when: overestimate market size, poorly designed, incorrectly positioned,
launch at wrong time, price too high, or poorly advertised, cost higher than expected,
competitors fight back hard than expected
The New-Product Development Process
1. Idea Generation the systematic search for new-product ideas
major sources include internal sources and external sources
a)Internal Idea Sources
a.Through research and development, employees
b)External Idea Sources
a.Through distributors (close to market, can pass along information about
consumer problems and new-product possibilities)
b.Suppliers can tell the company about new concepts, techniques, and
materials that can be used to develop new products
www.notesolution.com
c.Competitors (watch competitors’ ads to get clues about their new products,
buy their product)
d.Trade magazines, shows, and seminars; government agencies; advertising
agencies; marketing research firms; university and commercial
laboratories; and inventors
e.Customers analyze customer questions and complaints to find new
products that better solve consumer problems
2. Idea Screening screening new product ideas to spot good ideas and drop poor ones as
soon as possible (first idea reducing stage)
R-W-W (real, win, worth it)
3. Concept Development and Testing
Product concept a detailed version of the new-product idea stated in meaningful consumer
terms
Product idea an idea for a possible product that the company can see itself offering to the
market
Product image the way consumers perceive an actual or potential product
1.Concept Development
2.Concept Testing testing new-product concepts with a group of target consumers to
find out if the concepts have strong consumer appeal
a.Word or picture description might be sufficient
b.A more concrete and physical presentation of the concept will increase the
reliability of the concept test
c.After exposed to the concept, consumers then may be asked to react to it by
answering questions
3. Marketing Strategy Development designing an initial marketing strategy for a new
product based on the product concept
Consist of 3 parts:
1.Describes the target market; the planned value proposition; and the sales,
market share, and profit goals for the first few years
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2.Outlines the products planned price, distribution, and marketing budget for
the first year
3.Describes the planned long-run sales, profit goals, and marketing mix
strategy
4. Business Analysis a review of the sales, cost, and profit projections for a new product
to find out whether these factors satisfy the company’s objectives
Look at the sales history of similar products and conduct market surveys
Then estimate minimum and maximum sales to assess the range of risk
Estimated the expected costs and profits, including R&D, operations, accounting,
and finance cost
Use the sales and costs figures to analyze the new products financial attractiveness
5. Product Development - developing the product concept into a physical product to
ensure that the product idea can be turned into a workable market offering
A new product must have the required functional features and also convey the
intended psychological characteristics
6. Test Marketing the stage of new-product development in which the product and
marketing program are tested in realistic market settings
Test marketing gives the marketer experience with marketing the product before
going to the great
Lets the company test the product and its entire marketing program targeting and
positioning strategy, advertising, distribution, pricing, branding and packaging, and
budget levels
When cost of developing and introducing the product are low, or when management
is already confident about the new product, the company may do little or no test
marketing
3 approaches:
1.Standard Test Markets (most widely used)
The company finds a small number of representative test cities,
conducts a full marketing campaign in those cities, and uses store
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Description
Chapter 10: This product life cycle presents 2 major challenges: 1) because all products eventually decline, a firm must be good at developing new products to replace aging ones (the challenge of new-product development) 2) the firm must be good at adapting its marketing strategies in the face of changing tastes, technologies, and competition as product pass through life-cycle stages (the challenge of product life-cycle strategies) New Product Development Strategy Obtain new products in 2 ways: buying company, patent, license or new product development New-product development the development of original products, product improvements, product modifications, and new brands through the firms own product-development efforts For companies, new products are a key source of growth For customers, they bring new solutions and variety to their lives 90% of all new products fail (lose US$20-30) Product fails when: overestimate market size, poorly designed, incorrectly positioned, launch at wrong time, price too high, or poorly advertised, cost higher than expected, competitors fight back hard than expected The New-Product Development Process 1. Idea Generation the systematic search for new-product ideas major sources include internal sources and external sources a) Internal Idea Sources a. Through research and development, employees b) External Idea Sources a. Through distributors (close to market, can pass along information about consumer problems and new-product possibilities) b. Suppliers can tell the company about new concepts, techniques, and materials that can be used to develop new products www.notesolution.com
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