New Product Development

9 and Product Life-Cycle

Strategies
 Acquisition refers to the buying of a
whole company, a patent, or a license to
produce someone else’s product
Two ways to
obtain new New product development refers to
original products, product improvements,
products product modifications, and new brands
developed from the firm’s own research
and development
 ▪ In 2006, Walt Disney Co. acquired Pixar for $7.4 billion.

▪ Three years after the Pixar acquisition, Disney’s CEO Bob

Igner, set out to acquire Marvel Entertainment for $4 billion.

Example ▪ In 2005, Google acquired Android for an estimated $50

Acquisition million.

▪ One of the biggest telecommunication giants in the world,

AT&T acquired BellSouth (BLS) in a deal that grossed $67
billion.
https://dealroom.net/blog/successful-acquisition-examples
 There are several reasons

▪ Although an idea may be good, the company may overestimate

market size.

▪ The actual product may be poorly designed.

Why do so Or

▪ it might be incorrectly positioned, launched at the wrong time,

many new priced too high, or poorly advertised.
products fail? ▪ A high-level executive might push a favorite idea despite poor
marketing research findings.

▪ Sometimes the costs of product development are higher than

expected, and sometimes competitors fight back harder than
expected.
New-Product Development
Process
Major Stages in New-Product Development
 1. Idea
generation

1.Idea is the systematic search for new-product ideas Sources of

new-product ideas
Generation • Internal sources refer to the company’s own formal
research and development, management and staff, and
intrapreneurial programs
• External sources refer to sources outside the company
such as customers, competitors, distributors, suppliers,
and outside design firms
 Crowdsourcing

▪Inviting broad communities of people—

customers, employees, independent scientists
and researchers, and even the public at
large—into the new-product innovation
process.
As CEO, Lafley was called "one of the most
lauded CEOs in history"and is credited with
revitalizing P&G under the mantra
“Consumer is Boss,” with a focus on billion
dollar brands like Crest, Tide,
and Pampers.But he also brought in several
new brands, like Swiffer and Febreze, by
merging P&G's internal resources with
outside “open” innovation, referred to as
Connect + Develop

https://en.wikipedia.org/wiki/A.G._Lafley
▪ Until recently, most of P&G’s innovations came from within its
own R&D labs. P&G employs more than 8,000 R&D
researchers

▪ in 26 facilities around the globe, some of the best research

talent in the world.

▪ But P&G’s research labs alone simply can’t provide the

quantity of innovation required to meet the growth needs of
the $84 billion company.

Today, thanks to Connect + Develop, P&G has a truly global

open-innovation network. More than 50 percent of its innovations
involve external partner. So far, the program has resulted in more
than 2,000 successful agreements
 Identify good ideas and drop
poor ideas R-W-W Screening
2. Framework:
Idea Screening Is it real?
Can we win?
Is it worth doing?
 ▪ One marketing expert describes an R-W-W (“real, win, worth doing”) new
product screening framework that asks three questions.

▪ First, Is it real? Is there a real need and desire for the product and
will customers buy it? Is there a clear product concept and will such a
product satisfy the market?

R-W-W ▪ Second, Can we win? Does the product offer a sustainable

competitive advantage? Does the company have the resources to make
such a product a success?

▪ Finally, Is it worth doing? Does the product fit the

company’s overall growth strategy? Does it offer sufficient profit
potential?

▪ The company should be able to answer yes to all three R-W-W questions
before developing the new product idea further
 A product idea is an idea for a
possible product that the company
can see itself offering to the market.

3. A product concept is a detailed

Concept version of the idea stated in
Development meaningful consumer terms.
and Testing

A product image is the way

consumers perceive an actual or
potential product.
 Marketing strategy development refers
to the initial marketing strategy for introducing the
4. product to the market
Marketing Marketing strategy statement
Strategy includes:
Development 1. Description of the target market
2. Value proposition
3. Sales and profit goals
 A review of the
1. sales,
2. costs, and
5.
3. profit projections
Business
for a new product to find out
Analysis
whether
these factors satisfy the company’s objectives.
 Involves the creation and testing of one or
more physical versions by the R&D or
6. engineering departments Requires an
increase in investment Shows whether the
Product product idea can be turned into a workable
Development product.
 Test marketing
7. is the stage at which the product
Test and marketing program are
introduced into more realistic
marketing marketing settings
 Introducing a new product into the
8. market.
Commercializati
on
 Commercialization is the introduction
of the new product

8. When to launch
Commercializati
Where to launch
on
 Product Life-Cycle Strategies
Product life cycle (PLC), the course that a product’s
sales and profits take over its lifetime. The PLC has five
distinct stages
 Sales and Profits over the
Product’s Life from Inception
to Decline
Product development begins when the company
finds and develops a new product idea. During product
development, sales are zero, and the company’s investment
costs mount.

Introduction is a period of slow sales growth as the

product is introduced in the market. Profits are nonexistent
in this stage because of the heavy expenses of product
introduction.
Growth is a period of rapid market acceptance
and increasing profits.

Maturity is a period of slowdown in sales growth

because the product has achieved acceptance by most
potential buyers. Profits level off or decline because
of increased marketing outlays to defend the product
against competition

Decline is the period when sales fall off

and profits drop.
 Not all products follow all five stages of
the PLC.

Some products are introduced and die

quickly, others stay in the mature stage
for a long, long time.
Note Some enter the decline stage and are then
cycled back into the growth stage
through strong promotion or
repositioning.
 ▪The PLC concept can describe a
product class (gasoline powered
automobiles)
Note
▪a product form (SUVs),
▪or a brand (the Ford Escape).
Product classes have the longest life cycles; the sales
of many product classes stay in the mature stage for a long
time.-

Product forms, in contrast, tend to have the

standard PLC shape. Product forms such as “dial telephones”
and “VHS tapes” passed through a regular history of
introduction, rapid growth, maturity, and decline
Product class: Laundry Detergent

Product form : powder Detergent

Brand: Laundry Detergent

 Table 9.2 | Summary of Product Life-Cycle Characteristics, Objectives, and
Strat
Introduction Growth Maturity Decline
Characteristics

Sales Low sales Rapidly rising Peak sales Declining sales

sales
Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer

Profits Negative Rising profits High profits Declining profits

Customers Innovators Early adopters Mainstream Lagging adopters
adopters
Competitors Few Growing number Stable number Declining number
beginning to
decline
Marketing objectives

Introduction Growth Maturity Decline

Create product Maximize Maximize Reduce
engagement market share profit while expenditure
and trial defending and milk the
market share brand
Table 9.2 | Summary of Product Life-Cycle Characteristics, Objectives, and
Strat
Introduction Growth Maturity Decline
Strategies
Product Offer a basic product Offer product Diversify brand and Phase out weak
extensions, models items
service, and warranty

Price Use cost-plus Price to penetrate Price to match or beat Cut price
market competitors

Distribution Build selective Build intensive Build more intensive Go selective: phase
distribution distribution distribution out unprofitable
outlets

Advertising Build product Build engagement and Stress brand differences Reduce to level
awareness interest and benefits needed to retain
among early in the mass market hard-core loyals
adopters and dealers

Sales promotion Use heavy sales Reduce to take Increase to encourage Reduce to minimal
promotion to advantage of heavy brand switching level
entice trial consumer demand