New product development and the product life cycle

1. What is a new product

A new product may be an original product, an improved or modified product, or a new brand developed through the firm’s own research. Booz, Allen and Hamilton (1982) classified new products as: new-to-the-world products; new product lines; additions to existing lines; improvements and revisions of existing products; repositionings (existing products aimed at new markets); and cost reductions. Firms need new products because existing products decline, technology and tastes change, competitors innovate, and growth requires new sources of revenue.

2. Stages of new product development

1. Idea generation. The systematic search for new product ideas. Sources: customers (complaints, suggestions), employees, R&D, salesmen, dealers, competitors, consultants, trade fairs. Techniques: brainstorming, attribute listing, customer surveys.
2. Idea screening. Dropping poor ideas early, because each later stage costs more. Ideas are checked against company objectives, resources, market size and likely profit. Two errors are possible: the drop error (rejecting a good idea) and the go error (accepting a poor one).
3. Concept development and testing. The surviving idea is turned into a product concept (a detailed description in consumer terms) and tested on a group of target consumers to learn their reaction and intention to buy.
4. Marketing strategy development. A plan describing the target market, positioning, sales, market share and profit goals for the first years; the planned price, distribution and promotion budget; and long-run sales and profit goals.
5. Business analysis. Estimating demand, costs and profits to see whether the product meets the firm’s objectives (break-even and payback analysis).
6. Product development. R&D and engineering turn the concept into a physical prototype; functional tests (safety, performance) and consumer tests are carried out.
7. Test marketing. The product and its marketing programme are introduced in a limited, realistic market (a few cities) to test the product and the mix before full launch. It reveals defects and estimates sales, but costs money and alerts competitors.
8. Commercialisation. Full-scale launch. The firm decides when (timing), where (one region, national or international), to whom (early adopters and heavy users) and how (launch plan, promotion, distribution).

3. Why new products fail

(June 2019, April 2023.)

• inadequate market research: the product meets no real need;
• overestimate of market size by a senior executive pushing a favourite idea;
• poor product design or quality;
• wrong positioning, price or timing (too early or too late);
• insufficient advertising and weak distribution;
• development costs higher than expected;
• strong reaction by competitors;
• technological change making the product obsolete;
• legal or regulatory hurdles.

4. The product life cycle (PLC)

The PLC describes the course of a product’s sales and profits over its life, like the life of a living being. Theodore Levitt popularised it (“Exploit the Product Life Cycle”, Harvard Business Review, 1965). Plotted on a graph with time on the horizontal axis and sales on the vertical, sales trace an S-shaped curve rising slowly, then sharply, flattening at the top, and falling; the profit curve starts below zero, peaks during late growth, and falls earlier than sales.

Introduction. The product is launched. Costs of production and promotion are high, distribution is limited and buyers are innovators. Strategy: informative advertising, free samples, either skimming (high price) or penetration (low price) pricing, and gaining dealer acceptance.

Growth. Early adopters buy and others follow; sales rise fast; competitors enter with improved versions. Strategy: improve quality and add features, enter new segments and channels, shift advertising from awareness to preference, and reduce price to attract price-sensitive buyers.

Maturity. The longest stage. Sales growth slows and then levels; overcapacity leads to price competition. Strategy: market modification (new users, new segments, increased usage), product modification (quality, features, style — “new improved”), and marketing-mix modification (price cuts, offers, new channels).

Decline. Sales fall because of technology, changing tastes or competition. Strategy: cut costs and promotion, drop weak items and outlets, harvest the remaining loyal market, or withdraw. Some firms revive a product by repositioning.

Example (as November 2022 asks). Film cameras: introduction in the early twentieth century, long growth and maturity through the 1980s, decline from about 2000 as digital cameras arrived, and digital cameras themselves now declining as smartphone cameras replace them. In India, landline telephones followed the same curve after mobile phones.

Uses of the PLC: it helps forecast sales, plan the marketing mix for each stage, plan new products before the old ones decline, and allocate the budget among products. Limitations: the length of each stage cannot be predicted, the shape varies, and the firm’s own actions affect the cycle, so it is a guide and not a law.

How this is examined

“Explain the stages in new product development and give reasons for the failure of new products” (16 marks, June 2019) wants all eight stages and section 3. “The phases of product life cycle — Comment” (January 2026, 6 marks) or “What is PLC? Explain the various stages” (October 2023) wants the S-curve described, the table, and one line of strategy per stage. In a 10-mark PLC answer, describe the graph in words, then each stage under sales, profit, competition and strategy, and close with an Indian example and the limitations.