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Lamb, Hair, McDaniel
CHAPTER 11
Chapter 11
Copyright ©2012 by Cengage Learning Inc. All rights reserved
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Developing and Managing
Products
Categories of
New Products
New-to-the-World
New Product Lines
Product Line Additions
Improvements or Revisions
Repositioned Products
LO1
Chapter 11
Lower-Priced Products
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The New-Product Development
Process
New Product Success Factors
Long-term commitment
Company-specific approach
Capitalize on experience
LO2
Chapter 11
Establish an environment
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Exhibit 11.1
New-Product
Development
Process
LO2
Chapter 11
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New-Product Strategy
New-Product Strategy is…
a plan that links the new-product
development process with the
objectives of the marketing
department, the business unit, and
the corporation.
LO2
Chapter 11
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Idea Generation
Customers
Employees
Distributors
Vendors
Sources of
New-Product
Ideas
Competitors
R&D
Consultants
LO2
Chapter 11
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Approaches for New Product
Development
Brainstorming
The process of getting a group to think of
umlimited ways to vary a product or solve a
problem.
Focus Group
The objective of focus group interviews is to
stimulate insightful comments through group
interaction.
LO2
Chapter 11
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Idea Screening
Screening is…
the first filter in the product development
process, which eliminates ideas that are
inconsistent with the organization’s
new-product strategy or are
inappropriate for some other reason.
A Concept Test is…
LO2
Chapter 11
a test to evaluate a new-product idea,
usually before any prototype has been
created. Often successful for line
extensions.
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Business Analysis
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
LO2
Chapter 11
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Development
 Creation of prototype
 Sketch marketing strategy
 Packaging, branding, labeling
 Promotion, price, and distribution
strategy
 Manufacturing feasibility
LO2
Chapter 11
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Simultaneous Product
Development
A new team-oriented approach to newproduct development where all relevant
functional areas and outside suppliers
participate in the development process.
LO2
Chapter 11
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Test Marketing
Test
Marketing
The limited introduction
of a product and a
marketing program to
determine the reactions
of potential customers
in a market situation.
LO2
Chapter 11
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Costs of Test Marketing
• Often take 1 year or more
• Can cost over $1 million
• Exposes new product to
competitors
• Competitors can “jam” testing
programs with their own
promotions
LO2
Chapter 11
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Alternatives to
Test Marketing
 Single-source research using
supermarket scanner data
 Simulated (laboratory) market testing
 Online test marketing
LO2
Chapter 11
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Commercialization
Ordering Materials
Production
Inventory Buildup
Distribution Shipments
Sales Force Training
Trade Announcements
LO2
Chapter 11
Customer Advertising
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New-Product
Success Factors
Listening to customers
Strong leadership
Producing the best
product
Commitment to newproduct development
Vision of future market
Project-based team
approach
Getting every aspect right
LO2
Chapter 11
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Beyond the Book
Why New Products Fail
•
•
•
•
•
•
•
•
No discernible benefits
Poor match between features and customer
desires
Overestimation of market size
Incorrect positioning
Price too high or too low
Inadequate distribution
Poor promotion
Inferior product
NOTE: Supplemental content – not in book.
Chapter 11
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Diffusion
Diffusion
The process by which the
adoption of an innovation
spreads.
LO4
Chapter 11
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Categories of Adopters
Innovators
Early Adopters
Early Majority
Late Majority
LO4
Chapter 11
Laggards
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Product Characteristics and
the Rate of Adoption
Complexity
Compatibility
Relative Advantage
Observability
Trialability
LO4
Chapter 11
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Marketing Implications of the
Adoption Process
Word of Mouth
Communication
Aids the
Diffusion Process
Direct from
Marketer
LO4
Chapter 11
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Product Life Cycle
Product
Life Cycle (PLC)
A concept that provides a way
to trace the stages of a
product’s acceptance, from its
introduction (birth) to its
decline (death).
LO5
Chapter 11
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Exhibit 11.2
Four Stages of the
Product Life Cycle
LO5
Chapter 11
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Introductory Stage







High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits with slow sales increases
Promotion focuses on awareness and
information
 Communication challenge is to stimulate
primary demand
LO5
Chapter 11
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Growth Stage





Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the
differences between brands
 Wider distribution
LO5
Chapter 11
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Maturity Stage








Sales increase at a decreasing rate
Saturated markets
Annual models appear
Lengthened product lines
Service and repair assume important roles
Heavy promotions to consumers and dealers
Marginal competitors drop out
Niche marketers emerge
LO5
Chapter 11
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Decline Stage
 Long-run drop in sales
 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
 “Organized abandonment”
LO5
Chapter 11
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Exhibit 11.4
Relationships between the Diffusion Process
and the Product Life Cycle
Product
life cycle
curve
Diffusion
curve
LO5
Chapter 11
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