New-Product Development and Product Life-Cycle Strategies

marketing fundamentals -- part 8 -- summary

A company's current products face limited lifespans and must be replaced by newer products. But new products can fail -- the risks of innovation are as great as the rewards. The key to successful innovation lies in total company effort, strong planning, and a systematic new product development process.

Companies find and develop new product ideas from a variety of sources. Many new product ideas stem from internal sources. Companies conduct formal research and development, pick the brains of their employees, and brainstorm at executive meetings. By conducting surveys and focus groups and analyzing customer questions in complaints, companies can generate new product ideas that will meet specific consumer needs. Companies track competitors offerings and inspect new products, dismantling them, analyzing their performance, in deciding whether to introduce a similar or improved product. Distributors and suppliers are close to the market and can pass along information about consumer problems and new product possibilities.

New product development process

The new product development process consists of eight sequential stages. The process starts with idea generation. Next comes ideas screening, which reduces the number of ideas based on the companies own criteria. Ideas that pass the screening stage continue through product concept development, in which a detailed version of the new product idea is stated in meaningful consumer terms. In the next stage, concept testing, new product concepts are tested with a group of target consumers to determine whether the concept has strong consumer appeal. Strong concepts proceed to marketing strategy development, in which an initial marketing strategy for the new product is development from the product concept. In the business analysis stage, a review of the sales, costs, and profit projections for a new product is conducted to determine whether the new product is likely to satisfy the company's objectives. With positive results here, the ideas then become concrete through product development and test marketing and finally are launched during commercialization.

Product life cycle

Each product has a lifecycle marked by a changing set of problems and opportunities. The sales of the typical product follow an S-shaped curve made up of five stages. The cycle begins with the product development stage when the company finds and develops a new product idea. The introduction stage is marked by slow growth and low profits as the product is distributed to the market. If successful, the product enters a growth stage, which offers rapid sales growth in increasing profits. Next comes a maturity stage, when sales growth slows down and profits stabilize. Finally, the product enters a decline stage, in which sales of profits dwindle. The company's task during the stage is to recognize the decline in to decide whether it should maintain, harvest, or drop the product.

Marketing strategies change during product lifecycle

In the introduction stage, the company must choose a launch strategy consistent with its intended product positioning. Much money is needed to attract distributors and build their inventories and to inform consumers of the new product and achieve trial. In the growth stage, companies continue to educate potential customers and distributors. In addition, the company works to stay ahead of the competition and sustain rapid market growth by improving product quality, adding new product features and models, entering new market segments and distribution channels, shifting advertising from building product awareness to building product convention in purchase, and lowering prices at the right time to attract new buyers. In the maturity stage, companies continue to invest in maturing products and consider modifying the market, the product, and the marketing mix. When modifying the market, the company attempts to increase the consumption of the current product. When modifying the product, the company changes some of the products characteristics -- such as quality, features, or style -- to attract new users or inspire more usage. When modifying the marketing mix, the company works to improve sales by changing one or more of the marketing mix elements. Once the company recognizes that a product has entered the decline stage, management must decide whether to maintain the brand without change, hoping that competitors will drop out of the market; harvest the product, reducing costs and trying to maintain sales; or drop the product, selling it to another firm or liquidating it at salvage value.