What is involved in new product development? Companies introduce new products to avoid losing market share or potential extinction. “Innovate or die” is a phrase often associated with new product development. As outlined in Figure 13.1, the process of developing new, high-quality products involves several steps:

1. Idea generation. New products or offerings start with an idea, like Jessica’s idea to open a yoga studio. Ideas for entirely new products or improved versions of existing products are often obtained by listening closely to customers through social media and other means. In Jessica’s case, customer complaints signaled a need for a new service. SC Johnson, the maker of cleaning products, found that consumers were using a competing product, Lysol Disinfectant Spray, because they thought the spray killed airborne bacteria. However, because the spray kills only surface bacteria, SC Johnson created a new product, Oust Air Sanitizer. They differentiated it from Lysol and other similar products by emphasizing that Oust Air Sanitizer kills airborne bacteria.1

   Some companies foster internal innovation and brainstorming sessions to spur new ideas. Still other companies search externally for innovations and product ideas and purchase them from other firms, or they acquire the firms outright. Purchasing firms outright for new product development is done quite a bit in the technology industry. For example, Apple Inc. bought Beats Music to improve their own music streaming service.

2. Idea screening. The objective of idea screening is to identify the best ideas and eliminate unsound concepts before devoting costly resources to development. Screening involves estimating the level of consumer demand for a product, its profitability, and its production feasibility given the company’s current capabilities. Acceptable ideas move on for further analysis.

3. Product analysis. Viable ideas are then analyzed to determine the demand for the product and its financial feasibility. As part of this step, production or outsourcing costs are estimated. The costs of production depend on the features of the product deemed necessary to meet the targeted customers’ needs. Potential sales volume and profitability are also estimated.

4. Concept development and testing. If there seems to be enough financial incentive to continue with the idea, then the concept is tested by soliciting consumer feedback. Focus groups, which are groups of customers brought together for this purpose, are asked to evaluate different features, prices, packages, and a host of other factors surrounding a product as well as to compare it to the competition. Often storyboards or a virtual mock-up of the product are used to present the concept. Sometimes advertising ideas are presented. Ultimately, the goal of the focus group process is to determine what the participants liked and disliked about the concept and whether they would purchase the product and at what price. The goal is to come up with the best, most profitable total product offering.

5. Product and marketing mix development. Next, an initial design or prototype is developed. Previously, the design and prototype were in conceptual or virtual format. At this stage, a physical product is developed and introduced for additional consumer feedback. Adjustments are made to the marketing mix, such as pricing, promotional techniques, and how and where the product should be distributed or sold.

6. Market testing. Sometimes this step is skipped if enough information and feedback has been obtained in the previous steps. But often a product is placed in trial phases to test its acceptance even further. Market testing is usually done by introducing the product in a specific geographic area, aimed at a select target market. Because of the unknown nature of the product, sometimes marketers must convince distributors or store managers to make shelf space available to test a new product. To avoid some of these complications and to reduce the expense with market testing, some companies and marketers have begun to use virtual worlds to conduct market testing. Simulation tools and virtual stores help to reduce development costs and the time required to bring a new product to market.

7. Commercialization. If a product concept makes it this far in the process, it is ready to be launched. Commercialization is the decision to market a product. Introducing a new product can be costly as a result of the research and manufacturing investments required to develop it and the advertising, personal selling, and other promotional activities needed to launch it. Generating returns from such investments can take time. This may explain why companies introduce new products in one region at a time, which is referred to as rolling out the product.

Figure 13.1

The New Product Development Process

Despite the rigors of new product development, a large proportion of new products still fail. One of the most interesting cases of a new product failure was Coca-Cola’s New Coke, launched in 1985. In an attempt to revitalize its brand, the company modified the formula of its popular soda. People did not want their favorite soft drink modified, and New Coke was pulled from the shelves only three months after being introduced.2 Coca-Cola returned to its original formula and renamed it Coca-Cola Classic.

What is a product life cycle? A product life cycle is a theoretical model describing a product’s sales and profits over the course of its lifetime. The product life cycle begins with the product launch. During this cycle, a product typically goes through an introductory stage, a growth stage, a maturity stage, and a declining stage. The product life cycle can be applied to a specific product or an entire product category. Figure 13.2 summarizes the characteristics, marketing objectives, and strategies for each stage of the product life cycle.

Figure 13.2

The Product Life Cycle Model

You can see how the theory works by considering the life cycle of vinyl musical records. Vinyl records were first introduced in 1930 by RCA Victor but became popular in the 1950s as a replacement for the brittle and easily broken 78-rpm records. This was the introductory stage. Sales grew rapidly in the 1950s and 1960s, representing the product’s growth stage. In the early 1970s, vinyl records hit their maturity stage with the introduction of cassette tapes. By the late 1970s and early 1980s, cassette tapes gained wide acceptance, the sales of vinyl records fell drastically, into the declining stage. compact discs (CDs) and digital music were introduced, the decline continued. Vinyl records are now sold mostly as collectors’ items, though there has been a recent renewed interest in vinyl records. Perhaps the life cycle will begin again for vinyls.

The product life of fad items such as Beanie Babies can be as short as a few months; for other products, such as automobiles, the product’s life can be as long as a century or more. In addition, not all products strictly follow these stages. Some products are introduced but never grow in sales, whereas others never seem to decline. Also, companies often make adjustments to products, causing them to go back and forth between stages before continuing through the cycle. Like all models, the product life cycle model presents a simplified version of reality. Consequently, it should be used with caution when forecasting the future sales and profits of an actual product.

Does a product’s life cycle affect marketing decisions? Knowing which stage of the product life cycle a particular product is in helps determine the appropriate marketing mix strategy for that stage. In fact, marketing decisions can affect each phase of a product’s life cycle.

How can a product’s life be extended? Companies work hard to extend the lives of existing products to derive as much profit from them as possible. Some tactics used to extend the growth stage of a product include the following:

• Lowering the price. Some auto manufacturers have used discounted prices, rebates, and low-interest loans to extend the life of their models.

• Creating a new use for the product. Arm & Hammer, a company that produces baking soda, extended its product’s life by advertising it as a refrigerator deodorizer.

• Finding a new market for the product. Crocs, the distinct footwear company, initially marketed their unusual clog-like shoe for its lightweight, odor-resistant, water-resistant qualities to recreational boaters. Several years later, the company came out with “CrocsRx,” a line of shoes designed for special medical conditions. Now, the company produces more than 300 styles for all types of users.

• Relabeling or repackaging the product. Repackaging is another popular method to extend a product’s life. Sally Hansen, the nail care company, put nail polish in a pen-like applicator that is portable and spill-proof.

• Create a new vision. A company can also reposition its product as Oldsmobile attempted to do with its “This isn’t your father’s Oldsmobile” campaign. These strategies are not always effective. The Oldsmobile brand, despite the revised campaign, was discontinued.3 Buick has also attempted to bring awareness back to its brand by showing moments in which people cannot find the Buick despite it being right in front of them.