10: Product Management & New Product Development PRODUCT LIFE CYCLEExhibit 10-1 Life Cycle of a Typical Product
Market Introduction
· Sales are low, losses
· Customers aren’t looking for the product, They don’t know about it
· Informative promotion is necessary to tell. (the benefits and uses of new product concept)
· Most companies experience losses during the introduction stage because they spend so much money for Promotion, Place, and product development.
Market Growth
· Industry sales grow fast, and industry profits rise but then start falling.
· The company begins to make big profits as more and more customers buy.
· Profits start to decline at the end of this stage due to competition
Market Maturity
· Industry sales level off and competition gets tougher.
· Industry profits go down throughout the market maturity stage because promotion cost rise, and because some competitors cut prices to attract business.
· Less efficien firms can’t compete with this pressure, and drop out of the market.
Sales Decline
· New products replace old.
· Only firms with strong brands make profits to the end
PRODUCT LIFE CYCLES RELATE TO SPECIFIC MARKETS AND VARY IN LENGTH
Individual Product vs. Industry Sales
individual products don't follow the industry life cycle
It’s commonly accepted and widely used.
Depends on how broadly the market is defined
A frrm with a mature product can sometime find new growth in international markets.
Length may vary from 90 days to 100 years
sales growth is fast when the product is easy to use and communicate
Product life cycles getting shorter
Fast change because of technology changes.
focus on growth stage where profits are highest
Fashion: is the currently accepted or popular style. A "fad" is an idea that is fashionable only to certain groups who are enthusiastic about it.
A "fad" is even more short-lived than a regular fashion because the groups that are enthusiastic about a "fad" are so fickle.
PLANNING FOR DIFFERENT STAGES OF THE PRODUCT LIFE CYCLE
(see exhibit 10-3)
Introduction
· Introduce a new product and (way to) Channels of distribution.
· Low price may develop loyal customers early and keep competition out.
· promote the whole idea not just the product
· low initial penetration price\
Growth
· build brand familiarity
Maturity
· All brand seems same therefoe “battle of the brands”
· Firms may develop the product and build selective demand
NEW PRODUCT DEVELOPMENT PROCESS
(see exhibit 10-5)
Idea Generation
Idea for new product from: companies own sales, production staff, consumer complains, advertising agencies, consumer surveys, etc.
Screening
evaluate with product-market criteria
safety, liability & ROI concerns
Strengths and weaknesses
Idea Evaluation
Concept testing – getting reactions from customers about how well a new product idea fits their needs.
Rough estimates of cost, sales, and profits
Development
still more evaluation and then develop prototypes and test marketing
Research development,
Engineering to design and develop the physical part of the product.
Commercialization
· finally goes to market after ROI estimate approval
· Set channel of distribution, service facilities have to be set.
· Fix the price.
TOTAL COMPANY EFFORT REQUIRED
· Top level support
· committee or person in charge
· Coordinated effort
· R&D, operations and marketing staff must work together
· role for product or brand managers
Product Liability: mean the legal obligation of sellers to pay damages to individuals who are injured by defective (not perfect) unsafe products.
Product Managers/ Brand Managers: have profit responsibilities and much power, but often they are “product champions” who are mainly involved in planning and getting promotion done.
· Their major responsibility is PROMOTION
· They used when a firm has several different kinds of products or brand.
Many firms now have category managers rather than Brand managers.
CHANGED TO
Category Managers: Responsible for demand stimulation, supply, this is involved in the buying function.
· entire product line (not only specific product)
· complete responsibility
Product Liability: the legal obligation of sellers to pay damages to individuals who are injured by defective or unsafe product.
Product Managers: manage specific products, often taking over the jobs formerly handled by an advertising manager. That give a clue to what is often their major responsibility-promotion.
Market Growth: a stage of product life cycle when industry sales grow fast, and industry profits rise, but then start falling.
Concept Testing: getting reactions from customers about how well a new product idea fits their needs.
List the four marketing strategies available to a firm when a product approaches the sales decline stage of its life cycle
a. Improve the product or develop an innovative new product for the same market.
b. Develop a strategy for its product (perhaps with modifications) targeted at a new market.
c. Withdraw the product before it completes the cycle and refocus on better opportunities.
d. Adopt a phase-out strategy.
In Canada, how long can a company call its product "new"?
12 months is the limit according to Industry Canada.
New Product: A "new product" is one that is new in any way for the company concerned.
List six reasons why new products fail.
Companies fail to offer a unique benefit. Companies underestimate the competition.
Sometimes the idea is good but the company has design problems.
The product costs much more to produce than was expected.
Companies rush to get a product on the market without developing a complete marketing plan.
Slow entry to the market and/or being beaten to the market by competitors.
