Principles of Marketing
by Jeff Tanner and Mary Anne Raymond
Chapter 7 Developing and Managing Offerings
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The New Offering Development Process Developing new products for most companies is a constant process.
Some “new” offerings may be only improved versions of existing offerings.
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The New Offering Development Process Learning Objectives 1. Identify an effective process for creating offerings and bringing them to market. 2. Understand the relative importance of each step in the new-offering development process and the functions within each step. 3. Distinguish between the various forms of testing and analysis that take place before a new offering is brought to the market
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Offering Development—7 Steps Most offerings go through a seven step process: Idea
Monitor progress
Evaluation
Market Introduction
Limited and market tests
Screening
It all starts with an idea and, ideas come from everywhere.
Tests
Alpha & Beta
Features
Development
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Does it fit? Is it profitable?
What features do customers want?
Make prototypes Define manufacturing 5
Key Takeaways • Most companies follow a seven step process in developing new products. • Ideas for new products can come from employees, customers, competitors, and suppliers. • Follow-on steps include: idea screening, feature specification, development, testing, and launching. • Evaluation and monitoring of new products is the last step in the process. • Companies face risks in investment of time and money when new products fail. • There is also the risk of missing opportunity if products are not introduced. ©2010 Flat World Knowledge, Inc.
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Managing New Products Learning Objectives
1.Explain how organizations manage offerings after they are introduced to the marketplace. 2.Explain how managing an offering may be different in international markets. 3.Explain the product lifecycle and the objectives and strategies for each stage. 4.Explain why during the introduction stage the marketing costs related to a product are typically higher and why companies must generate awareness of it and encourage consumers to try it. 5.Explain why and when penetration and skimming pricing are used in the introduction stage. 6.Describe the characteristics of the growth stage and why competitors are likely to enter the market during this stage. 7.Understand how companies develop different strategies to extend the life cycle of products in the maturity stage. 8.Differentiate between product modifications, market modifications, and marketing-mix modifications. 9.Understand the difference between harvesting and divesting when a product is in the decline stage. ©2010 Flat World Knowledge, Inc.
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The Product Life Cycle (PLC)
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Product Life Cycle Factors • Life Cycles vary for different categories of products. • Some products never experience success.
• Some products remain in phases longer. • Computer products have limited cycles. • Jewelry and kitchen products often have longer cycles. • How products are marketed can vary within or between the cycles. • Global differences may also affect phases in the life cycle.
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Product Introduction Phase This is the 6th step in the product development cycle. Marketing costs are higher in this stage. Profits are low or non-existent due to R&D and other costs. Distribution channels are limited to early adopters. Pricing strategies can vary, and may be based on skimming or penetration objectives. ©2010 Flat World Knowledge, Inc.
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The Growth Stage Acceptance Markets must accept products before entering the growth phase.
Acceptance Attracts Competitors Increasing sales and attractive profits encourage competition.
Growth Requires Sufficient Inventories Insufficient supply of the product enables competitors to meet the need. ©2010 Flat World Knowledge, Inc.
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Growth and Distribution • Effective marketing during the growth phase in the life cycle requires expanding distribution channels. • Having the product in the right place at the right time means expanded presence in order to serve the increasing demand. • This distribution attention continues the higher costs during the growth phase. ©2010 Flat World Knowledge, Inc.
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Growth Phase Pricing
Pricing typically remains constant
Some competitors may reduce prices in order to gain share
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Companies look to increase profits during this phase from the increased sales
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The Maturity Phase • Products like people reach a stage of maturity, or leveling off of growth. • Sales level off as demand erodes and sales are largely replacement or repeat users as opposed to new customers. • This phase can last longer, and only the strongest suppliers will survive.
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Extending Life Cycles Maturity Phase
Entering New Markets
Extending the Life Cycle
Avoiding Decline
Adding New Features ©2010 Flat World Knowledge, Inc.
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Modifying Products to Extend Maturity Packaging • Redesign and repackage
Quality • Adding new features that extend use
Quantity • Increasing amount purchased for same price ©2010 Flat World Knowledge, Inc.
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Extending Life Through New Markets
Global
Substitute Products
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On-Line
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The Decline Stage • • • • •
Product sales decrease at an increasing rate. Technology obsoletes products. Fads generally have short lives. Fashions change life cycles! Harvesting of products is accomplished through reducing costs to maintain profits. • Modifying products during maturity may avoid a decline phase. ©2010 Flat World Knowledge, Inc.
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Key Takeaways • Understanding life cycles necessary for successful product marketing. • Consumer awareness of new products is critical. • Product benefits and value must be addressed during the growth phase. • Sales level off and competition intensifies during the maturity phase. • Marketing efforts are needed to extend the maturity phase. • Harvesting decisions are needed in the decline phase. ©2010 Flat World Knowledge, Inc.
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