SEM 6 › Marketing › Week 09
Marketing · Week 09

New Product Development & Product Life Cycle Strategies

Six types of new products, why new products are needed and why they fail, the 8-stage NPD process, sequential vs simultaneous development, the product life cycle (shapes, stages, characteristics) and 4P strategies for each stage.

ITE36421 video · 32 min📄 Reading Assignment 09.pdf📄 Week_9.pdf

1Why new products matter

Product is the first P of the marketing mix. New product development (NPD) is the life-blood of a firm in intense competition, and managing the PLC keeps products competitive and profitable over the long term.

Six types of new products (Booz, Allen & Hamilton)

Classified by newness to the company and to the market:

Type Meaning Example
1. Original (new-to-the-world) Creates an entirely new market The first smartphone
2. Product improvements Improved performance or perceived value; replaces the existing product A faster new model
3. Product modifications Changes to an existing product (also called additions to existing lines) A new flavour or size
4. New brands A new brand in an existing category A new soap brand by an existing maker
5. Repositioning Existing products aimed at new markets or segments Baby shampoo marketed to adults
6. Cost reductions Similar performance at lower cost A cheaper reformulation
A new product is not necessarily new to the world

Any modification of an existing product counts as a new product.

2Why develop new products, and why they fail

Mishra (1996): a newer production process means more failures. Developing alone is risky, yet firms must develop new products because of:

  • changing customer needs and tastes (existing products are vulnerable)
  • new technologies
  • shortening product life cycles
  • more domestic and foreign competition
Failure rates
  • About 80% of new packaged goods fail.
  • Cooper & Kleinschmidt: about 70% of new products fail at launch (USA).

Why new products fail:

  • negative market research findings ignored
  • market size over-estimated
  • wrong target market
  • product poorly designed
  • incorrectly positioned
  • over-priced
  • not advertised effectively
  • development costs higher than expected
  • competitors fight back harder than expected

What hinders NPD:

  • shortage of good new ideas in some areas
  • capital shortages
  • social and government constraints
  • costly development process
  • fragmented markets
  • pressure for faster development
  • shorter life cycles

3The 8-stage new product development process

  1. Idea generation
  1. Idea screening
  1. Concept development & testing
  1. Marketing strategy development
  1. Business analysis
  1. Product development
  1. Market testing
  1. Commercialisation
Stage What happens
1. Idea generation Create a large number of ideas. Top management defines product and market areas and NPD objectives (breakthroughs, modifications, copying competitors). Sources: customers, scientists, competitors, employees, channel members, top management
2. Idea screening Reduce ideas to a few attractive, practicable ones. Drop poor ideas. Criteria: consistency with the firm's objectives, internal strengths and weaknesses, external opportunities and threats. Most ideas are dropped here
3. Concept development & testing Refine ideas into testable product concepts. Distinguish: idea (a possible product), concept (the idea in meaningful consumer terms), image (the picture consumers form of the product)
4. Marketing strategy development A preliminary plan in three parts: (1) target market size, structure and behaviour, positioning, and sales, share and profit goals for the first years; (2) planned price, distribution and first-year marketing budget; (3) long-run sales and profit goals and the marketing-mix strategy over time
5. Business analysis Sales, cost and profit projections: does it meet company objectives?
6. Product development R&D or engineering turns the concept (so far only words or drawings) into physical prototypes that embody the key attributes, are safe in normal use, and fit budgeted manufacturing costs
7. Market testing Test the product with a preliminary marketing programme in realistic settings: see how consumers and dealers handle, use and repurchase it, and how big the market is
8. Commercialisation Launch. Decide when (timing), where (geography), to whom (target prospects), how (introductory strategy). The product enters the PLC's introduction stage

Sequential product development

Departments work one stage at a time and pass the product on when their stage is finished. Orderly, but slow.

Simultaneous product development

Departments work closely together, overlapping steps to save time and increase effectiveness.

4The product life cycle (PLC)

After launch, sales pass through introduction → growth → maturity → decline. Profits go from negative to positive, peak in growth or maturity, then decline. Product development, before launch, is a period of losses.

Saying a product has a life cycle means four things:

  1. Products have a limited life.
  2. Sales pass through distinct stages, each with different challenges.
  3. Profits rise and fall at different stages.
  4. Each stage needs different marketing, financial, manufacturing, purchasing and personnel strategies.
It's a conceptual framework

Not every product fits the theoretical curve. Use the PLC as a planning tool, not a precise prediction. In a turbulent environment, stage lengths are unpredictable, so use it with caution.

Other PLC shapes:

  • Style: a basic, distinctive mode of expression that comes and goes in cycles over generations (e.g. formal or casual clothing styles).
  • Fashion: the currently accepted style. Grows slowly, stays popular for a while, then declines slowly.
  • Fad: rapid rise and very fast fall: intense, short-lived (fidget spinners).
🧪 Try it — Product life cycle explorer

5Characteristics of each PLC stage

Introduction Growth Maturity Decline
Sales Low Rapidly rising Peak Declining
Costs High per customer Average per customer Low per customer Low per customer
Profits Negative Rising High Declining
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable, beginning to decline Declining number
Marketing objective Create awareness and trial Maximise market share Maximise profit while defending share Reduce expenditure and milk the brand

6Marketing-mix strategies across the PLC

Strategy Introduction Growth Maturity Decline
Product Offer a basic product Product extensions, service, warranty Diversify brands and models Phase out weak items
Price Cost-plus Price to penetrate Price to match or beat competitors Cut price
Distribution Build selective Build intensive Build more intensive Go selective; drop unprofitable outlets
Advertising Awareness among early adopters and dealers Awareness and interest in the mass market Stress brand differences and benefits Reduce to retain hard-core loyals
Sales promotion Heavy, to entice trial Reduce (demand is high anyway) Increase, to encourage brand switching Reduce to a minimum
How to remember the pattern
  • Distribution: selective → intensive → more intensive → selective
  • Promotion: heavy → less → more → minimal
  • Objective: Awareness → Share → Profit → Milk ("A Smart Product Matures")
Exam focus

Expect:

  • The 6 types of new products
  • Reasons to develop new products and why they fail
  • Sources of new product ideas
  • The 8 NPD stages (explain each)
  • Sequential vs simultaneous development
  • Define the PLC: the four assertions, its shapes, and its importance to managers
  • Objectives and strategies per stage (the two tables are gold)
  • "Can the PLC be used in a turbulent environment?" Yes, as a framework, but stages and durations become unpredictable, so combine it with market data.

7Quick revision sheet

Concept Remember it as
6 new product types Original · improvement · modification · new brand · repositioning · cost reduction
Why new products Changing tastes, new technology, shorter PLCs, competition
Failure rates 80% of packaged goods; 70% fail at launch
Why they fail Research ignored, market over-estimated, wrong target, bad design, positioning, price, ads, costs, competitors
8 NPD stages Ideas → screen → concept → strategy → business analysis → develop → test market → commercialise
Idea vs concept vs image Possible product / consumer-terms version / consumer's picture
Commercialisation When, where, to whom, how
Sequential vs simultaneous Step-by-step vs overlapping teams
PLC Intro → growth → maturity → decline; profit peaks in growth/maturity
Shapes Style (cyclic), fashion (slow up and down), fad (fast up, fast down)
Customers by stage Innovators → early adopters → middle majority → laggards

?Self-check quiz

11 questions on this week. Answer them all, then press Check my answers. Your best and latest scores are saved and shown on the subject page.

← PreviousFundamentals of Digital MarketingNext →Product & Branding Strategies