Chapter 10

New Product Development and

Product Life-Cycle Strategies

OSHADI RUPASINGHE
BBA (SEUSL), PGDIP (SLIM)
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Learning Outcomes

After studying this chapter, you will be

able to:

• Define New Product

• New Product development Process

• Explain Product Life Cycle stages

• Analyze strategies of Product Life

Cycle (PLC) stages
 What is New Product?
New-to-the –World Products:

New-to-the –World Products are innovative products that create an entirely new market, like water purifiers.

New product lines:

New products that allow a company to enter an established market like LCD television.

Additions to existing Product Lines:

New products that supplement a company’s established product lines like Fair and Lovely for men.

Improvement and Revisions of existing products:

New products that provide improved performance or greater perceived value and replace existing products, examples are the books and
software.

Repositioning:

Existing products that are targeted to new markets or market segments, this is beneficial in expansion of market.

Price differentiation:

Sometimes due to increasing competition in the market, the manufacturers have to offer the product with same features and functions but at
lower price.
New Product Development Strategy
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Major Stages in New Product Development

1.Idea generation :

The new product development process starts with idea generation. Idea
generation refers to the systematic search for new product ideas.

• Internal sources : The company finds new ideas internally. Eg:

brainstorming

• External sources : The company finds new ideas externally. Eg: customers,
competitors, distributors and suppliers
2. Idea screening :
Idea screening means filtering the ideas to pick out good ones. Identify good ideas and drop poor ones.

• Criteria:

Market Size

Product Price

Development Time and Cost

Manufacturing Cost

Rate Of Returns
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3. Concept development and concept testing :

An attractive idea must then be developed into a product concept. It is important to distinguish between a product idea, a
product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering
to the market. There must be answers for three questions at this stage:

1. Who will use this product ?

2. What is the primary benefit should this product provide?

3. When will people consume?

• Concept development : detailed version of the product concept in meaningful consumer terms

• Concept testing : testing new-product concepts for consumer appeal

4. Marketing strategy :

Designing an initial marketing strategy for a new product based on the product concept.

The marketing strategy statement consists of three parts.

• Target market, positioning, and sales, market share, and profit goals

• Price, distribution, and marketing budget

• Strategy statement, long-run sales, profit goals, and marketing mix

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5. Business analysis :

Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the
proposal. Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether they
satisfy the company’s objectives.

6. Product development :

Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market
offering. Here, R&D or engineering develops the product concept into a physical product.

• Large investment

• Building a prototype

• Testing for safety, durability, and acceptability

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7. Test marketing : The stage of new product development in which the product and its proposed marketing

program are tested in realistic market settings. Marketing testing is important because it can yield valuable
information about buyers, dealers, marketing program effectiveness and market potential.

• Determine the target market profile

• Assess consumer acceptability, trial, repeat purchase rate

• Evaluate trade reception and distribution penetration

• Design effective media plans

 Standard test markets- full marketing campaign in a small number of representative cities

 Controlled test markets- A few stores that have agreed to carry new products for a fee.

 Simulated test market- Test in a simulated shopping environment to a sample of consumers.

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8. Commercialization :

Test marketing gives management the information needed to make a final decision about whether to
launch the new product. If the company goes ahead with commercialization introducing the new product
into the market it will face high costs. For example, the company may need to build or rent a
manufacturing facility.

The company can also make decisions where to launch the new product in a single location, a region, the
national market, or the international market.
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Introduction to Product Life Cycle Concepts
Importance of product life cycle :

 Helpful in sales forecasting.

 Helpful as a predictive tool.

 Helpful as a planning tool.

 Helpful as a control tool.

 Helpful in framing marketing programme.

 Helpful in price determination.

 Development of new product.

 Comparison of different products.

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Product Life - Cycle Template Gragh
It involves four distinct stages :

Introduction, Growth, Maturity, and Decline.

 Introduction stage : The product life-cycle stage in

which the new product is first distributed and made
available for purchase.

 Growth stage : The product life-cycle stage in which

a product’s sales start climbing quickly. Profit
increases during this stage.

 Maturity stage : The stage in the product life cycle in

which sales growth slows or levels off.

Modify the market, the product, and the marketing mix.

 Decline Stage : The product life cycle stage in which

a product’s sales decline. Sales declining due to
technological advances, shift in consumer tastes, and
increased domestic and foreign competition.
 Relationship Between Sales and Profit in 10 of 12
Product Life - Cycle
Product Life Cycle (PLC) : The course of a product’s sales and profits over its life
Introduction Stage Characteristics of the PLC

Sales Low sales

Costs High cost per customer

Profits Negative

Create product awareness

Marketing Objectives
and trial
Product Offer a basic product

Price Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early

adopters and dealers
 Growth Stage Characteristics of the PLC

Sales Rapidly rising sales

Costs Average cost per customer

Profits Rising profits

Marketing Objectives Maximize market share

Product Offer product extensions, service,

warranty
Price Price to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the

mass market
 Maturity Stage Characteristics of the PLC

Sales Peak sales

Costs Low cost per customer

Profits High profits

Marketing Objectives Maximize profit while defending

market share
Product Diversify brand and models

Price Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

 Decline Stage Characteristics of the PLC

Sales Declining sales

Costs Low cost per customer

Profits Declining profits

Marketing Objectives Reduce expenditure and milk the brand

Product Phase out weak items

Price Cut price

Distribution Go selective: phase out unprofitable

outlets
Advertising Reduce to level needed to retain
hard-core loyal customers
Analyze strategies of Product Life Cycle (PLC) stages
 Summary of PLC 11 of 12

Characteristics: Introduction Growth Maturity Decline

Sales Low Rapidly rising sales Peak Declining sales
Costs High cost Average cost Low cost Low cost
per customer per customer per customer per customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable number Declining number

Marketing objectives:
Create product Maximize market Maximize profit & Reduce expenditure
awareness and trial share defend market share & milk brand

Strategies:
Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models items
Price Use cost-plus Price to penetrate Price to match or Cut price
market best competitors
Distribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outlets
Advertising Build awareness Build awareness & Stress brand differences Reduce to level needed
early adopters/dealers interest mass market and benefits to retain hard-core loyals
Sales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal
to entice trial to heavy demand brand switching level
Thank You