New Product Development and Product Life-Cycle Strategies

NEW PRODUCT
DEVELOPMENT AND
PRODUCT LIFE-CYCLE
STRATEGIES
MICROSO
FT
PRODUCTS
Do you think
Microsoft is an
innovator?
WINDOWS
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2014
O Satya Nadella named chief executive
officer for Microsoft

O Microsoft launches Office for iPad
O Microsoft completes acquisition of
Nokia Devices and Services business
O Microsoft launches Surface Pro 3
O Minecraft to join Microsoft
announcement
2015
O Microsoft announces Office
apps for Android tablets

O Microsoft releases Surface 3
O Microsoft launches Windows 10
2015-2016
O Microsoft launches Office 2016
O Microsoft announces Surface Book,
Surface Pro 4, Microsoft Band 2,

Lumia 950 and Lumia 95 XL
O Microsoft Launches SQL Server 2016

O June 13, 2016
O Microsoft announces agreement to
acquire LinkedIn
Do you think
Microsoft is an
innovator?
INNOVATION
-An innovation is a new idea
-Innovation just means creating new
things, concepts, processes, ideas,
brands, products
-An innovation is not simply combining multiple functions
into a single product - thats integration and usually
doesnt require any innovation (just hard work). In
particular, integrating functions into a single product to
prevent customers from using a competitors product (a
documented Microsoft practice) is predation, not
innovation.
-All major Microsoft products

are essentially reimplementations of previous
products; none are
fundamentally innovative.
-Microsofts key products are
essentially copies of previous
products
Microsoft is just developing their product(New

Product Development) but are not into INNOVATING
products.
Objectives
O Innovation and New Product
development distinguished
O Learn the ways of obtaining new
products
O Reasons why new product fail
O Major Stages in new-product
development
O Product life cycle concepts
NEW PRODUCT
DEVELOPMENT
O New product development is a
subset of product development (you

can innovate on older products)
which is a subset of innovation in
general. You could innovate a brand
new supply chain concept which isn't
technically a product, but could still
be really valuable to the company.
Ways of obtaining New

Products
O Acquisition by buying a whole
company, a patent, or a license to

produce someone elses product
O New-product development in the
companys own R&D department.
O New product means original
products, product improvement,

product modification, and new
brands that the firm develops
through its own R & D efforts.
Reasons why new product fail

O Although an idea may be good, the
market size may have been

overestimated.
O The actual product was not designed
as well as it should be.
O Incorrectly positioned in the market.
O The price is too high.
O Poorly advertised.
8 Major stages in new-product

development
1. Idea generation
2. Idea screening
3. Concept Development and Testing
4. Marketing Strategy Development
5. Business Analysis
6. Product Development
7. Test Marketing
8. Commercialization
1. Idea generation
the systematic search for new-
product ideas.
The ideas may come from:
1. Internal idea sources
2. External idea sources
3. Competitors
OIdea management
system
is the systematic
gathering of new ideas to a central
point where they can be collected,
reviewed, and evaluated.
How to set up a
system?
O Appoint a respected senior person to be the
companys idea manager.

O Create a cross-functional idea management
committee to meet regularly and evaluate
proposed new product and service ideas.
O Set up a toll-free number or website for anyone
who wants to send a new idea to the idea manager.
O Encourage all company stakeholders to send their
ideas to the idea manager.
O Set up formal recognition programs to
reward
those who contribute the best new ideas.
Favorable outcomes of Idea manager

Approach
O It helps create an innovation-
oriented company culture.

O It will yield a larger number of ideas
where good ones exist.
2. Idea screening
reducing the number of ideas
gathered by spotting good ones and

dropping the poor ones.
3. Concept Development
and Testing
an attractive idea must be
developed into a product concept.
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Definition of terms:
O Product idea- is an idea for a possible
product that the company can see itself
offering to the market
O Product Concept- is a detailed version of the
idea stated in a meaningful consumer terms

O Product image- the way consumers perceive
an actual or potential product

O Concept testing- is testing new-product
concepts with a group of target consumers to

find out if the concepts have strong consumer
appeal
4. Marketing Strategy
Development designing an initial marketing
strategy for a new product based on

the product concept.
The marketing strategy must be written in a

statement that has three parts:
PART 1: the description of the target market,
the planned product positioning, the sales,
market share and profit goals for the first year.
PART 2: outlines the products features,
variant, planned rice, distribution and
marketing budget for the first year.
PART 3: describes the planned long-run sales,
profit goals and marketing mix strategy.
5. Business analysis
is a review of the sales, costs and
profit projections for a new product

to find out whether these factors
satisfy the companys objectives.
6. Product
development
developing the product concept into
a physical product in order to ensure

that the product idea can be turned
into a workable product.
7. Test Marketing
is the stage of new-product
development in which the product

and marketing program are tested in
more realistic market settings.
Test Marketing
Approaches
Standard Test market- findings a small
number of representative test cities,
conducts a full marketing campaign in
these cities and uses store audits,
consumer and distributor surveys, and
other measure to gauge product
performance.
b. Controlled Test Markets- using several
stores that will carry the new products
for a fee controlled panel of stores.
a.
c. Simulated test markets- A sample

group of consumers will be given
money to buy or not to spend it to
items presented to them in a
laboratory store showing variety of
products including the new product
being tested.
8. Commercialization
Introducing a new product into the
market.
Two steps:
1. Determination of the right
introduction timing
2. Decide where to launch the new
product based on the companys
confidence, capital, and capacity.
O Sequential Product Development
- a new product development approach in which

one company
department works to complete its stage if the
process before passing the new product along
to the next department and stage.
O Simultaneous or team based product
development
- an approach to developing
new products in which various company
departments work closely together, overlapping
the steps in product development process to save
time and increase effectiveness.
O Product Life Cycle(PLC) - the course of a
product's sales and profits over its life time.

two major challenges.
- First, because all products eventually
decline, a firm must be good at developing
new products to replace aging ones.
- Second, the firm must be good at adapting
its marketing strategies in the face of
changing tastes, technologies, and
competition as products pass through life
cycle stages
O Product Life Concept that can be applied to:
a) The PLC concept can describe a product class(gas

or diesel powered card), a
product form (SUV's), a brand (Toyota Avanza)
b) The PLC concept also can be applied to what are
known as styles, fashions, and fads.
Style - a basic and distinctive mode of expression.
Fashion - a currently accepted or popular style in a
given field
Fad - a fashion that enters quickly, is adopted with
great zeal, peaks early, and decline very quickly.
c) The PLC concept can be applied by marketers as a
useful framework for describing how products and
markets work.
PLC stages
1. Development Stage - begins when the company finds and develops
a new product idea.
a) design and develop the product
b) majority of the product cost is "locked in" during this period
c) Target costing can most easily be done during this stage.
d) Reverse engineering (Ford used in designing Taurus)
2. Introduction stage - stage where the new product is first
distributed and made available for purchase. It is a period of slow
sales growth as the product is introduced in the market.
a) product is produced, price is set, and available for sale
b) Penetration pricing and price skimming strategy is used under this
stage.
Penetration pricing is the pricing of a new product at a low initial
price, perhaps even lower than cost.
Price Skimming uses higher introductory price.
3. Growth Stage - rapid increases in sales and production

4. Maturity Stage - a stage where sales growth slows or
levels off.
a) Prices may decrease due to : the learning curve take
effect ; technology improved, the
market expanded tremendously
b) Models proliferate helping keep the product fresh.
5. Decline Stage - stage where product's sales decline.
Decline may be brought by.
- technological advance
- shifts in consumer tastes
- increased competition

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NEW PRODUCT

O Satya Nadella named chief executive

officer for Microsoft

apps for Android tablets

Surface Pro 4, Microsoft Band 2,

O Microsoft Launches SQL Server 2016

-All major Microsoft products

Microsoft is just developing their product(New

subset of product development (you

Ways of obtaining New

company, a patent, or a license to

O New product means original

products, product improvement,

Reasons why new product fail

market size may have been

8 Major stages in new-product

companys idea manager.

those who contribute the best new ideas.

Favorable outcomes of Idea manager

oriented company culture.

gathered by spotting good ones and

developed into a product concept.

3-in-1 Breakfast Maker

idea stated in a meaningful consumer terms

an actual or potential product

concepts with a group of target consumers to

strategy for a new product based on

The marketing strategy must be written in a

profit projections for a new product

a physical product in order to ensure

development in which the product

c. Simulated test markets- A sample

O Sequential Product Development

- a new product development approach in which

O Product Life Cycle(PLC) - the course of a

product's sales and profits over its life time.

O Product Life Concept that can be applied to:

a) The PLC concept can describe a product class(gas

3. Growth Stage - rapid increases in sales and production

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