MMPC-06: Marketing Management
Unit 7: New Product Development and Product Life Cycle
7.1 Introduction
The development of new products is essential for a company's growth and competitiveness. Companies must continually innovate and offer new products to keep up with changing consumer demands and technological advancements. However, product development is a complex and risky process, as most new products fail. Along with product development, understanding the product life cycle (PLC) is crucial for managing products over time and making strategic decisions during different stages of the product’s lifespan.
7.2 New Product Development (NPD)
New Product Development (NPD) refers to the complete process of bringing a new product to market. This process typically involves several key stages:
7.2.1 Idea Generation
The first stage of NPD is idea generation, where companies gather new product ideas from internal and external sources. Internal sources include R&D teams, employees, and executives, while external sources include customers, competitors, distributors, and market research.
- Internal Sources: Brainstorming sessions, innovation teams, and employee suggestions.
- External Sources: Customer feedback, competitor analysis, and technological advancements.
7.2.2 Idea Screening
Once ideas are generated, companies screen them to filter out unfeasible or irrelevant ideas. This process ensures that only the most promising ideas move forward. The criteria for screening include market potential, technical feasibility, and alignment with company strategy.
7.2.3 Concept Development and Testing
In this stage, product ideas are developed into product concepts. These concepts are then tested with potential consumers to gauge their interest and gather feedback. Companies use this feedback to refine the product and ensure that it meets consumer needs.
- Concept Development: Defining the product idea and its features.
- Concept Testing: Presenting the concept to target consumers for their feedback.
7.2.4 Business Analysis
The business analysis stage involves estimating the potential sales, costs, and profitability of the new product. Companies assess whether the product can achieve its financial goals and whether it fits within their overall portfolio.
7.2.5 Product Development
Once the concept is approved, the company proceeds to product development. This involves creating prototypes, testing the product for safety and usability, and finalizing the design.
- Prototype Development: Creating models or samples of the product for testing.
- Product Testing: Ensuring the product functions as intended and meets quality standards.
7.2.6 Market Testing
Market testing involves introducing the product to a limited market to gather real-world feedback. This stage helps companies evaluate the product’s performance, adjust marketing strategies, and identify any issues before a full launch.
7.2.7 Commercialization
Commercialization is the final stage of NPD, where the product is launched in the market. Companies must decide on the timing, pricing, distribution channels, and promotional strategies for the launch.
7.3 Reasons for New Product Failures
While companies invest significant resources in developing new products, many new products fail. Common reasons for product failure include:
- Poor Market Research: Inadequate understanding of consumer needs and preferences.
- Technical Issues: Product malfunctions or poor quality.
- High Development Costs: Overestimating the product’s potential profitability.
- Poor Timing: Launching the product at an inappropriate time, either too early or too late.
- Inadequate Marketing: Lack of effective promotional strategies or failure to create customer awareness.
7.4 Product Life Cycle (PLC)
The Product Life Cycle (PLC) refers to the stages that a product goes through from its introduction to its eventual decline. Understanding the PLC helps companies manage their products and make strategic decisions at each stage. The four stages of the PLC are:
7.4.1 Introduction Stage
In the introduction stage, the product is launched in the market. Sales are typically slow, and companies invest heavily in promotion and distribution to build awareness. Key challenges include:
- Low Sales: Initial demand is often low as consumers become familiar with the product.
- High Costs: Marketing and production costs are high, and profitability is low.
- Customer Education: Companies must educate customers about the product's benefits.
7.4.2 Growth Stage
During the growth stage, sales increase rapidly as more consumers become aware of the product. Companies focus on expanding distribution and improving product features.
- Increasing Sales: Demand grows, and the product gains market acceptance.
- Economies of Scale: Production costs decrease as output increases.
- Profitability: The product becomes profitable as sales increase and costs decrease.
7.4.3 Maturity Stage
In the maturity stage, sales growth slows, and the market becomes saturated. Companies must focus on differentiation and find ways to maintain market share.
- Market Saturation: Competition increases, and sales growth plateaus.
- Price Competition: Companies may lower prices to attract customers.
- Product Differentiation: Companies introduce new features or variants to differentiate their products.
7.4.4 Decline Stage
In the decline stage, sales begin to decrease as the product loses relevance or faces competition from newer alternatives. Companies must decide whether to discontinue the product or revitalize it.
- Decreasing Sales: Demand declines as consumers shift to newer products.
- Product Phase-Out: Companies may discontinue the product or reduce marketing efforts.
- Divesting: Selling or phasing out the product line to focus on more profitable areas.
7.5 Strategies During the Product Life Cycle
Each stage of the PLC requires different marketing strategies to maximize the product’s success:
7.5.1 Introduction Stage Strategies
- Product: Focus on innovation and quality.
- Pricing: Use penetration pricing (low prices to attract customers) or skimming pricing (high prices to recover costs).
- Promotion: Heavy investment in advertising to build awareness.
- Distribution: Limited distribution to control quality and reach target customers.
7.5.2 Growth Stage Strategies
- Product: Improve features and expand product lines.
- Pricing: Maintain or slightly reduce prices as competition increases.
- Promotion: Shift focus to brand building and customer loyalty.
- Distribution: Expand distribution to reach a wider market.
7.5.3 Maturity Stage Strategies
- Product: Add new features or variants to keep the product competitive.
- Pricing: Use competitive pricing strategies to maintain market share.
- Promotion: Focus on reinforcing brand loyalty and reminding customers of the product’s value.
- Distribution: Maximize distribution channels and target new market segments.
7.5.4 Decline Stage Strategies
- Product: Reduce investment in the product or discontinue it.
- Pricing: Lower prices to clear inventory.
- Promotion: Minimize promotional efforts.
- Distribution: Limit distribution to high-performing channels.
7.6 Case Study: Apple’s Product Development and PLC Strategies
Apple is known for its successful product development and lifecycle management. For example, the iPhone has undergone numerous iterations since its introduction in 2007. Each new model reflects Apple’s focus on innovation and improving user experience. Apple also carefully manages the product life cycle by introducing new features during the growth and maturity stages and discontinuing older models during the decline stage. Apple's branding and marketing strategies at each PLC stage have helped it maintain a competitive edge in the smartphone market.
Assignments for Unit 7
- Analyze the reasons for new product failures using real-world examples. Suggest ways to mitigate these risks.
- Discuss the importance of market testing in new product development. Provide examples from the automobile industry.
- How can companies extend the maturity stage of a product? Provide recommendations based on the FMCG sector.
Self-Study Questions
- Explain the stages of the New Product Development (NPD) process with examples from the electronics industry.
- Describe the product life cycle stages and the marketing strategies associated with each stage.
- What are the key challenges companies face during the introduction stage of the product life cycle?
Possible Exam Questions
- Discuss the significance of New Product Development (NPD) in marketing management. How can companies increase the chances of NPD success?
- Explain the concept of the Product Life Cycle (PLC). How do companies manage their products during each stage of the PLC?
- Analyze the marketing strategies for products in the growth and maturity stages of the product life cycle. Provide real-world examples.
This unit provides insights into the process of new product development and the stages of the product life cycle. By understanding these concepts, students can appreciate the importance of innovation, market testing, and strategic decision-making throughout a product’s life.
