Essentials of Marketing

Chapter 9
Product Management
and NewProduct
Development
McGraw-Hill/I rwin
Copyright 2012 by The McGraw-Hill Companies, I nc. All rights reserved.
At the end of this presentation, you should
be able to:
1. Understand how product life cycles affect strategy
planning.
2. Know what is involved in designing new products and
what new products really are.
3. Understand the new-product development process.
4. See why product liability must be considered in
screening new products.
5. Understand the need for product or brand managers.
6. Understand how total quality management can
improve goods and services.
7. Understand important new terms.


92
Product Decisions for Marketing Strategy
Planning (Exhibit 9-1)
93
New Product
Development
5 Step Process
Success factors
The Role of Product Management and New-Product
Development in Marketing Strategy (Exhibit 9-1)
Chapter 8: Elements
of Product Planning
for Goods & Services
Managing brands
Product
managers
Managing product
quality
The Product Life
Cycle
Development
Stages
Strategy planning
for stages
Chapter 9: Product
Management & New-
Product
Development
94
Typical Life Cycle of a New Product
Concept (Exhibit 9-2)
Total industry
profit (initially loss)
Total industry
sales
95
Market
Introduction
Investing in
the Future
96
Market Growth StageProfits Go Up and
Down
Monopolistic Competition
Develops
Innovation Attracts
Competition
Profits Peak and Then
Decline
Dont Ignore Long-Term Competitive Trends!
97
Market Maturity StageSales Level Off,
Profits Continue Down
Persuasive, More Costly
Promotion
Brands Are More Similar
Greater Price
Competition/Price Sensitivity
Maturity May Last a Long
Time
98
Sales
Decline A
Time of
Replacement
99
Which Stage of PLC?
910
Checking Your Knowledge
Kodak announced that it would no longer produce 35
millimeter film cameras, but would manufacture digital
cameras exclusively. Sales of digital cameras have grown
steadily and have far outpaced the sale of 35 mm cameras in
recent years, even among professional photographers. Kodaks
decision indicates that 35 mm cameras are probably in the
________ stage of the product life cycle.

A. Market introduction
B. Market growth
C. Sales decline
D. Market maturity
911
Product Life Cycles Should Be Related to
Specific Markets
AND
Individual
Brands
May not follow the
classic pattern
May be introduced
in market growth or
maturity
Not all brands are
equally strong
Market
Definitions
Should be carefully
developed
Different markets,
different stages
Contribute to the
length of the cycle
912
Product Life Cycles Vary in Length
Can Be Tried
Easy to
Communicate
Compatible
Some Products
Move Fast
Comparative
Advantage
Easy to Use
913
Interactive Exercise: Adoption
914
Other Issues in Product Life Cycle Length
The Early Bird Usually Makes
Profits
Product Life Cycles Are
Getting Shorter
Fashions and Fads
915
Planning for Different Stages of the Product
Life Cycle
Competitors
May Help
Adoption
Anticipate
Speed of
Movement
Consider all
Four Ps
Allocate
Sufficient
Money
Market
Introduction
& Growth
Be Flexible
916
Managing Mature Products
917
Are Product
Modifications
Really New
Products?
Courtesy of The Procter & Gamble Company.
918
Phasing Out Dying Products
Dont Pull the
Plug So Quickly
Phase-out May
Be Necessary
Profitability
Product Line
Customer
Support
Sales Decline
Can Be Profitable
919
New Product Planning
What Is a New Product?
FTC Rule: 6 Months
Ethical Dilemmas Exist
920
New Product
921
New-Product Development Process
(Exhibit 9-4)
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization
1. Idea
generation
922
Step 1: Idea Generation
1. Idea
generation
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization


Ideas from:
Customers and users
Marketing research
Competitors
Other markets
Company people,
intermediaries, etc.
1. Idea generation
923
Step 2: Screening
1. Idea
generation
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization


Strengths and
weaknesses
Fit with objectives
Market trends
Rough ROI estimate
2. Screening
924
Step 3: Idea evaluation
1. Idea
generation
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization


Concept testing
Reactions from
customers
Rough estimates of
costs, sales, and profits
3. Idea Evaluation
925
Step 4: Development
1. Idea
generation
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization


R&D
Develop model or
service
Test marketing mix
Revise plans as needed
ROI estimate
4. Development
926
Step 5: Commercialization
1. Idea
generation
2. Screening
3. Idea
evaluation
4.Development
5. Commercial-
ization


Finalize product and
marketing plan
Start production and
marketing
Roll out in select
markets
Final ROI estimate
5. Commercialization
927
Checking Your Knowledge
Top management of a large company recently approached the
dean of a major business school about starting a specialized
MBA program for the companys employees. After further
discussions, the dean decided that the program did not fit
well with the objectives and resources of the school, so the
program was put on the back burner until conditions
changed. The proposed MBA program was at what stage of the
new-product development process when it was shelved?

A. Idea generation
B. Screening
C. Idea evaluation
D. Development
E. Commercialization
928
New Product Development: A Total
Company Effort (Exhibit 9-5)
A basis for
superior
customer
value
New-product
success
Effective
transition to
regular
operations
Complete
marketing plan
Effective
design
Organized new-
product
development
process
929
New Product Development: A Total
Company Effort (Exhibit 9-5)
Organized new-product development process
Top
management
support
Culture of
innovation
Product
champion with
authority
Cross-functional
team
Clear
understanding of
customer needs
Cost
management
(costs add
value)
Timely
development
cycle
930
Checking Your Knowledge
Which of the following statements about new-product
development are true?

A. The process should be informal to encourage innovation.
B. The greatest number of product ideas is in the idea
evaluation stage.
C. The best criteria for evaluating new product ideas in the
early stages is return on investment (ROI).
D. The process should have top management support.
E. All of the above statements are true.
931
Need for Product Managers
Common in Large
Companies
Product/Brand Managers
Some Are Product
Champions
932
Managing
Product
Quality
933
Building Quality into Services
Training Is Crucial
Server Is Linked
To the Service
Empowerment Works
934
Other Issues in Quality Implementation
Efforts
Specify Jobs and Measure
Performance
Get a Return on Quality
Managers Lead the Effort
935
You should now be able to:
1. Understand how product life cycles affect strategy
planning.
2. Know what is involved in designing new products and
what new products really are.
3. Understand the new-product development process.
4. See why product liability must be considered in
screening new products.
5. Understand the need for product or brand managers.
6. Understand how total quality management can
improve goods and services.
7. Understand important new terms.

936
Key Terms
Product life cycle
Market introduction
Market growth
Market maturity
Sales decline
Fashion
Fad
New product
Federal Trade Commission
(FTC)
Consumer Product Safety
Act
Product liability
Concept testing
Product managers
Brand managers
Total quality management
(TQM)
Continuous improvement
Empowerment


937