Strategies for New Product Innovation: From Idea Generation to Commercialization

1. Strategies for Obtaining New Product Ideas Strategies for Obtaining New Product Ideas Acquisition Development Acquired Companies Development in Own laboratory Acquired Patents Contract with Independent Researcher Acquired Licenses

2. Categories of New Product New-to-the-world New product lines Additions to existing Product lines Improvements and revisions of existing products Repositioning Cost reductions Strategies for Obtaining New Product Ideas Original Products Original Products Acquired Companies Acquired Companies Product Improvements Product Improvements Acquired Patents Acquired Patents Product Modifications Product Modifications Acquired Licenses Acquired Licenses New Brands New Brands

3. Challenges in New Product Development • Why do new products fail? • A high-level executive pushes a favorite idea through in spite of negative research findings. • The idea is good, but the market size is overestimated. • The product is not well designed • The product is incorrectly positioned in the market, not advertised effectively, or overpriced. • The product fails to gain sufficient distribution coverage or support. • Development costs are higher than expected. • Competitors fight back harder than expected.

4. Challenges in New Product Development • Factors that tend to hinder new-product development: • Shortage of important ideas in certain areas • Fragmented markets • Social and governmental constraints • Cost of development • Capital shortages • Faster required development time • Shorter product life cycles Fragmented Market

5. Marketing Strategy Development Business Analysis Concept Development and Testing Product Development Idea Screening Market Testing Commercialization New Product Development Process Idea Generation

6. Organizational Arrangements Budgeting for New Product Development

7. Organizational Arrangements • Organizing New-Product Development • Product managers • New-product managers • High-level management committee • New product department • Venture teams

8. 1. Managing Development Process: Ideas (i) Idea Generation: It is the Systematic Search for New Product Ideas Obtained Internally and from: D I S T R I B U T O R S S U P P L I E R S C U S T O M E R S C O M P E T I T O R S

9. 1. Managing Development Process: Ideas (ii) Idea Screening: Idea Manager Idea Committee Ideas Screening Promising Idea Marginal Idea Rejected Idea

10. 2. Managing Development Process: Concept to Strategy • Concept Development and Testing: • 1. Concept Development Product Idea Product Concept Example: Product Idea:Producing a powder to add to milk to increase its nutritional value and taste. Product Concepts: Concept 1: Instant breakfast drink for adults who want a quick nutritious breakfast without preparing a breakfast. Concept 2: Tasty snack drink for children to drink as a midday refreshment Concept 3: A health supplement for older adults to drink in the late evening before they go to bed. Contd………

11. 2. Managing Development Process: Concept to Strategy Suppose the instant breakfast drink concept looks best. Next task is to find out: • Product Positioning Map • Brand Positioning Map

12. 2. Managing Development Process: Concept to Strategy • Concept Development and Testing: • 2. Concept Testing: Presenting the product concept to appropriate target consumers and getting their reaction. Questions to measure product dimensions • Communicability and believability • Need level • Gap level • Perceived value • Purchase Intention • User targets, purchase occasions and purchasingfrequency

13. 2. Managing Development Process: Concept to Strategy Brand name Retail Price -- -- -- -- -- -- -- -- -- -- 1.0 1.0 Utility Utility | | | K2R Glory Bissell | | | $1.19 $1.39 $1.59 0 0 Money-Back Guarantee? Good Housekeeping Seal? -- -- -- -- -- -- -- -- -- -- 1.0 1.0 Utility Utility 0 | | No Yes | | No Yes 0 • Concept Development and Testing: • 3.Conjoint Analysis: Respondents are shown different hypothetical offers formed by combining varying levels of the attributes, then asked to rank the various offers.

14. 2. Managing Development Process: Concept to Strategy • (ii) Marketing Strategy Development Part One Describes Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two Describes Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Term: Sales & Profit Goals Marketing Mix Strategy

15. Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives 2. Managing Development Process: Concept to Strategy If No, Eliminate Product Concept If Yes, Move to Product Development • (iii) Business Analysis

16. 2. Managing Development Process: Development to Commercialization • Product Development • Quality Function Deployment (QFD): Translating target customer requirements into a working prototype. • Customer attributes (CAs): Generated by market research • Engineering attributes (EAs) • When prototypes are ready, they must be put through rigorous tests: • Functional Tests (Alpha Testing): Within the organization • Customer Tests (Beta Testing): Set of customers use the prototype and give feedback on their experience. • Rank Order Method • Paired Comparison Method • Monadic Rating Method

17. 2. Managing Development Process: Development to Commercialization (ii) Market Testing Controlled Test Market A few stores that have agreed to carry new products for a fee. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Sales- Wave Research Test offering trail to a sample of consumers in successive periods. Standard Test Market Full marketing campaign in a small number of representative cities.

18. 2. Managing Development Process: Development to Commercialization Product Price Place Promotion (iii) Commercialization: It is the introduction of the new product into the market place. To Whom? How? When? Where?

19. Consumer Adoption Process Adoption: It is an individual’s decision to become a regular user of a product. Consumer adoption process is later followed by consumer loyalty process. Stages in Adoption Process Evaluation Awareness Interest Trial Adoption

20. Factors Influencing Adoption Process 34% Late majority 34% Early majority 13 1/2% Early adopters 16% Laggards 2 1/2% Innovators (i) People Differ in Readiness to Try new Products Time of adoption innovations (ii) Personal Influence Plays a Large Role Contd……

21. Factors Influencing Adoption Process (iii) Characteristics of Innovation Affect Rate of Adoption Relative advantage Compatibility Complexity Divisibility Communicability (iv) Organization also vary in Readiness to adopt Innovation Relative Advantage Compatibility Comunicability

22. Summary • Once a company has segmented the market, chosen its target customers, identified their needs and desired positioning, it is ready to develop and launch appropriate new products. • New product development requires the company to establish an effective organization for managing the development process. • Eight stages are involved in the new product development process: Idea generation, Idea Screening, Concept Development and Testing, Marketing Strategy Development, Business Analysis, Product Development, Market Testing and Commercialization. • Consumer Adoption process is the process by which customers learn about new product, try them and adopt or reject them. • Consumer Adoption process is influenced by many factors beyond the marketer’s control, as, consumer’s and organization’s willingness to try new products, personal influences and the characteristics of new product or innovation.

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