product life cycle

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Product Life-Cycle

Causes of New Product Failures:

Causes of New Product Failures Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand it’s customers, markets and competitors develop products that deliver superior value to customers.

New Product Development Process:

New Product Development Process Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization

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New Product Development Process Step 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

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Process to spot good ideas and drop poor ones Criteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return New Product Development Process Step 2. Idea Screening

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New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One

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New Product Development Process Step 4. Marketing Strategy Development Part Two - Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy Marketing Strategy Statement Formulation Part One - Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share

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New Product Development Process Step 5. Business Analysis Step 6. Product Development Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives If Yes, Move to Product Development If No, Eliminate Product Concept

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New Product Development Process Step 7. Test Marketing Standard Test Market Full marketing campaign in a small number of representative cities. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Controlled Test Market A few stores that have agreed to carry new products for a fee.

Product Life Cycle:

Product Life Cycle Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($)

Introduction Stage of the PLC:

Introduction Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers

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Growth Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market

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Maturity Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

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Decline Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers