Product life cycle & New product development (1)

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PRODUCT PRODUCT VARIETY QUALITY DESIGN FEATURES WARRANTIES SERVICES BRAND NAME SIZE & FORM PACKAGING RETURNS Piyoosh Bajoria

Product Life Cycle: 

Time Introduction Profits Sales Growth Maturity Decline Sales and Profits Over the Product’s Life From Development to Decline Product Life Cycle Development Piyoosh Bajoria

Product Life Cycle: 

Product Life Cycle Demand / Technology life Cycle Product Form Life Cycle Brand Life Cycle Piyoosh Bajoria

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Time Product category profits Product category sales Introductory stage Growth stage Maturity stage Decline stage Product Life Cycle Piyoosh Bajoria

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The Shape of the Sales Curve May Vary... Time Time Time Time Sales Sales Sales Sales TRADITIONAL FAD SEASONAL (CYCLICAL) REVIVAL or NOSTALGIA Piyoosh Bajoria

Marketing Strategies for PLC: 

Marketing Strategies for PLC INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. Piyoosh Bajoria

Introduction stage: 

Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative or low Create product awareness and trial Offer a basic product Usually is high; use cost-plus formula Distribution High distribution expenses Advertising Build product awareness among early adopters and dealers Introduction stage Piyoosh Bajoria

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

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Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits, then lower profits Maximize profits 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 Maturity stage Piyoosh Bajoria

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Market Modification Product Modification Marketing Mix Modification Maturity Stage Product Defense Strategies Maturity stage Piyoosh Bajoria

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Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers Decline stage Piyoosh Bajoria

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NEW PRODUCT DEVELOPMENT Piyoosh Bajoria

Objectives: 

Objectives Challenges in New Product Development (NPD) Organizational Structure & NPD Stages & Management of NPD Diffusion & Adoption of New Products Look at the Product lifecycle Fads, style, etc Piyoosh Bajoria

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Original products, product improvements, product modifications and new brands that the company develops through its own research and development. What is new product Piyoosh Bajoria

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Categories of New Products New-To-The-World New Product Lines Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Six Categories of New Products Piyoosh Bajoria

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Not introducing a “superior” product Overestimation of Market Size Product Incorrectly Positioned, Priced or Advertised Blow out in costs of Product Development Competitive Actions - price wars etc Disharmony between marketing and R&D Causes of new product Failure Piyoosh Bajoria

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To create successful new products, the company must: understand its customers, markets and competitors, develop products that deliver superior value to customers. Causes of new product Failure Piyoosh Bajoria

New Product Development Process: 

New Product Development Process Idea Generation Concept Development and Testing Marketing Strategy Development Idea Screening Business Analysis Product Development Market Testing Commercialization Piyoosh Bajoria

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Original Products Product Improvements Product Modifications New Brands Acquired Companies Acquired Patents Acquired Licenses Strategies for Obtaining New Product Ideas New product development strategies Piyoosh Bajoria

Step 1: Idea Generation: 

Step 1: Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas Piyoosh Bajoria

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Attribute Listing The process of listing down major attributes of existing products & modifying each attribute for an improved product Piyoosh Bajoria

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Forced Relationships In this process several objects are considered in relationships with each other to create a new product. Piyoosh Bajoria

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Morphological Analysis This method calls for identifying structural dimensions of a problem and examining the relationship amongst them. Piyoosh Bajoria

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Need /problem identification This method calls for identifying needs, problems & even asking for ideas. Piyoosh Bajoria

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Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. Piyoosh Bajoria

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Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Then, the idea is evaluated against a set of general company criteria. Step 2: Idea Screening Piyoosh Bajoria

Step 3: Concept Development & Testing: 

1. Develop New Product Ideas into Alternative Detailed Product Concepts 2. Concept Testing - Test the New Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers Step 3: Concept Development & Testing Piyoosh Bajoria

Step 4: Market Strategy Development: 

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

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 Step 5: Business Analysis Step 6: Product development Piyoosh Bajoria

Step 7: Test Marketing: 

Advertising Packaging Product Budget Levels Positioning Strategy Distribution Pricing Branding Elements that May be Test Marketed by a Company Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings. Step 7: Test Marketing Piyoosh Bajoria

Step 8: Commercialization: 

When? Where? Commercialization is the Introduction of the New Product into the Marketplace. Step 8: Commercialization Piyoosh Bajoria

Step 8: Commercialization: 

Step 8: Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Steps in Marketing a New Product Piyoosh Bajoria

Diffusion: 

Diffusion The process by which the adoption of an innovation spreads. Piyoosh Bajoria

Categories of adopters in Diffusion process: 

Categories of adopters in Diffusion process Innovators Early adopters Early majority Late majority Laggards Piyoosh Bajoria

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Percentage of Adopters Time Innovators 2.5% Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16% Categories of Adopters Piyoosh Bajoria

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Diffusion process and product life cycle curve Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusion curve Introduction Growth Maturity Decline Sales Piyoosh Bajoria

Product characteristics and the rate of adoption: 

Product characteristics and the rate of adoption Complexity Compatibility Relative advantage Observability Triability Piyoosh Bajoria

Marketing implications of the adoption process: 

Marketing implications of the adoption process Communication aids the diffusion process Word-of-mouth Direct from marketer Piyoosh Bajoria