Product Development and Product Life-Cycle Strategies

Topic: BusinessMarketing
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Last updated: June 13, 2019

New-Product Development and Product Life-Cycle Strategies Based on: Philip Kotler et al.

, Principles of Marketing International Marketing Prof. Dr. Thomas Laukamm Objectives – Understand how companies find and develop newproduct ideas. – Learn the steps in the new-product development process. – Know the stages of the product life cycle. – Understand how marketing strategies change during the product’s life cycle. Fach, Dozent, Semester International Marketing Prof. Dr.

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Thomas Laukamm 1 Definition – New Product Development Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts. Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 2 New Product Development Strategy – New products can be obtained via acquisition or development. – New products suffer from high failure rates. – Several reasons account for failure. Fach, Dozent, Semester International Marketing Prof. Dr.

Thomas Laukamm 3 New Product Development Strategy – New Product Development Process: + Stage 1: Idea Generation • Internal idea sources: R&D • External idea sources:Customers, competitors, distributors, suppliers Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 4 New Product Development Strategy – New Product Development Process: + Stage 2: Idea Screening • Product development costs increase substantially in later stages. • Ideas are evaluated against criteria; most are eliminated. Fach, Dozent, Semester International Marketing Prof.

Dr. Thomas Laukamm 5 New Product Development Strategy – New Product Development Process: + Stage 3: Concept Development and Testing • Product concepts provide detailed versions of new product ideas. Concept tests ask target consumers to evaluate product concepts. Fach, Dozent, Semester International Marketing Prof. Dr.

Thomas Laukamm 6 New Product Development Strategy – New Product Development Process: + Stage 4: Marketing Strategy Development • Strategy statements describe: The target market, product positioning, and sales, share, and profit goals for the first few years. Product price, distribution, and marketing budget for the first year. Long-run sales and profit goals and the marketing mix strategy.

Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm New Product Development Strategy – New Product Development Process: + Stage 5: Business Analysis• Sales, cost, and profit projections + Stage 6: Product Development • Prototype development and testing Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 8 New Product Development Strategy – New Product Development Process: + Stage 7: Test Marketing • Standard test markets • Controlled test markets • Simulated test markets + Stage 8: Commercialization Fach, Dozent, Semester International Marketing Prof. Dr.

Thomas Laukamm 9 Product Life-Cycle Strategies The Typical Product Life Cycle (PLC) Has Five Stages + Product Development, Introduction, Growth, Maturity, Decline + Not all products follow this cycle: • Fads • Styles • Fashions Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 10 Product Life-Cycle Strategies – The product life cycle concept can be applied to a: + Product class (soft drinks) + Product form (diet colas) + Brand (Diet Dr. Pepper) • Using the PLC to forecast brand performance or to develop marketing strategies is problematic Fach, Dozent, Semester International Marketing Prof. Dr.Thomas Laukamm 11 Product Life-Cycle Strategies PLC Stages Product development Introduction Growth Maturity Decline – Begins when the company develops a new-product idea – Sales are zero – Investment costs are high – Profits are negative Fach, Dozent, Semester International Marketing Prof. Dr.

Thomas Laukamm 12 Product Life-Cycle Strategies PLC Stages Product development Introduction Growth Maturity Decline – Low sales – High cost per customer acquired – Negative profits – Innovators are targeted – Little competition Fach, Dozent, Semester International Marketing Prof. Dr.Thomas Laukamm 13 Marketing Strategies: Introduction Stage – Product – Offer a basic product Price – Use cost-plus basis to set Distribution – Build selective distribution Advertising – Build awareness among early adopters and dealers/resellers – Sales Promotion – Heavy expenditures to create trial Fach, Dozent, Semester International Marketing Prof.

Dr. Thomas Laukamm 14 Product Life-Cycle Strategies PLC Stages Product development Introduction Growth Maturity Decline – Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted – Growing competitionFach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 15 Marketing Strategies: Growth Stage – Product – Offer product extensions, service, warranty Price – Penetration pricing Distribution – Build intensive distribution Advertising – Build awareness and interest in the mass market Sales Promotion – Reduce expenditures to take advantage of consumer demand Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 16 Product Life-Cycle Strategies PLC Stages Product development Introduction Growth Maturity Decline -Sales peak Low cost per customer High profits Middle majority are targeted – Competition begins to decline Fach, Dozent, Semester International Marketing Prof.

Dr. Thomas Laukamm 17 Marketing Strategies: Maturity Stage – Product – Diversify brand and models Price – Set to match or beat competition Distribution – Build more intensive distribution Advertising – Stress brand differences and benefits Sales Promotion – Increase to encourage brand switching Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 18 Product Life-Cycle Strategies PLC StagesProduct development Introduction Growth Maturity Decline – Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition Fach, Dozent, Semester International Marketing Prof. Dr. Thomas Laukamm 19 Marketing Strategies: Decline Stage – Product – Phase out weak items Price – Cut price Distribution – Use selective distribution: phase out unprofitable outlets Advertising – Reduce to level needed to retain hard-core loyalists Sales Promotion – Reduce to minimal level Fach, Dozent, Semester International Marketing Prof. Dr.

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