marketing principles

BUS106 Marketing

Principles Developing and Managing Products

Lecture 5

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This Topic’s Big Idea

“Every Product in the Market has its

own life span”

Learning Objectives

1. Explain the concept of product life cycles.

2. Explain the importance of developing new products.

3. Describe the six categories of new products.

4. Explain the steps in the new-product development process.

5. Discuss the global issues in new-product development.

6. Explain the diffusion process through which new products are adopted.

What is a product life cycle?

Product Life Cycle (PLC) – a concept

that provides a way to trace the stages

of a product’s acceptance, from it’s

introduction (birth) to its decline (death)

Product Category – all brands that

satisfy a particular type of need

Product Life Cycle

I. Introductory Stage

Full-scale launch of new products

• High-failure rates

• Little competition

• Frequent product modification

• Limited distribution

• High marketing and production costs

• Negative profits

• Promotion focuses on awareness and information

• Intensive personal selling to channels

Product life cycles for styles,

fashion, and fads

The importance of

new products

New products are important to sustain growth, increase

revenues and profits and replace obsolete items

For example, Procter and Gamble (P & G) spend a considerable amount of money each year developing new products. They have:

• 8000 employees,

• 1000 holders of PhDs

• 26 innovation facilities around the world

• 2012 – spent $2 billion on R & D

• Ultimately in a Fast Moving

Consumer Goods (FMCG)

market, nine out of 10 new

listed products fail

• Product death occurs due to

market changes and the

decline in quality, quantity

and viability of consumer

research

Categories of new products

Improvements/revisions

Repositioned products

Product line additions

Lower-priced products

New product lines

New-to-the-world

New Product

Development Process

Successful New Product

Development Process

New product strategy

• Linking the new-

product development

process with the

objectives of the

marketing

department, the

business unit and the

firm

New-product success

factors:

• Long-term

commitment

• New-product strategy

• Capitalise on

experience

• Establish an

environment

Idea Generation

Sources of new-product

ideas:

• Customers

• Employees

• Distributors

• Competitors

• Consultants

Watch Me: https://www.youtube.com/watch?v

=NugRZGDbPFU

Idea Generation

Sources of new-product ideas:

Research and development (R&D)

• Product development - Marketing strategy that entails the creation of marketable new products; process of converting applications for new technologies into marketable products

Creative thinking

• Brainstorming - Getting a group to think of unlimited ways to vary a product or solve a problem

Idea Screening

The first filter in the product development

process, which eliminates ideas that are

inconsistent with the organisation’s new-

product strategy, or are inappropriate for

some other reason

• Concept test: Test to evaluate a new-

product idea, usually before any prototype

has been created

Business Analysis and

Development

Business analysis

• Stage where preliminary figures for demand,

cost, sales and profitability are calculated

Development

• Stage in which a prototype is developed and

a marketing strategy is outlined

• Technical production feasibility

• Final government approvals, if required

Test Marketing

The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation

Alternatives to test-marketing:

• Simulated (laboratory) market testing

– Presentation of advertising and other promotional materials for several products, including a test product, to members of the product’s target market

Commercialisation

Steps in marketing a new product:

– Production

– Inventory build-up

– Distribution shipments

– Sales training

– Trade announcements

– Customer advertising

II. Growth Stage

Second stage

• Increasing rate of sales

• Entrance of competitors

• Market consolidation

• Initial healthy profits

• Promotion emphasises brand ads

• Goal is wider distribution

• Prices normally fall

• Development costs are recovered

III. Maturity Stage

A period during which sales increase at a decreasing rate

• Declining sales growth

• Saturated markets

• Extending product line

• Stylistic product changes

• Heavy promotions to dealers and consumers

• Marginal competitors drop out

• Prices and profits fall

• Niche marketers emerge

IV. Decline Stage

Where sales keep declining over a relatively

long period of time

• Long-term drop in sales

• Large inventories of unsold items

• Elimination of all non-essential marketing

expenses

The Spread of

New Products

Adopter - A consumer who was happy

enough with their trial experience with a

product to use it again

Innovation - A product perceived as new by

a potential adopter

Diffusion - The process by which the

adoption of an innovation spreads

Categories of adopters

Diffusion Curve

Product Characteristics and the

rate of adoption

Product characteristics predict rate of

adoption:

• Complexity

• Compatibility

• Relative advantage

• Observability

• Trialability

Marketing Implications of the

Adoption Process

Marketing communication

– Information passed on from markets to the public, including consumers, via a range of promotional activities

Communication aids the diffusion process

– Word-of-mouth

– Direct from marketer

Next Week

Study Week

Attendance is compulsory.