20 Introducing New Market Offerings

1. 1 20Introducing New Market Offerings

2. Chapter Questions • What challenges does a company face in developing new products? • What organizational structures are used to manage new-product development? • What are the main stages in developing new products? • What is the best way to set up the new-product development process? • What factors affect the rate of diffusion and consumer adoption of newly launched products?

3. The World’s Most Innovative Companies(@ Business Week & BCG)

4. Having New Products • Acquisition - Buy other companies - Acquire patents from other companies • Development - Develop new products in its own laboratories - Contact with independent researchers or new-product development firms to develop specific new products.

5. Categories of New Products • New-to-the-world • New product lines • Additions to product lines • Improvements to products • Repositionings • Cost reductions

6. The early mobile phones

10. Principles to guide new-product • development • Work with potential customers • Let employees choose projects • Give employees “dabble” time • Know when to let go

11. Continuous Innovation • Brand extensions: broadening brand meaning into related product categories • Positive attitude towards continuous innovation • Established companies – incremental innovation • Newer companies – disruptive technologies

12. Demand Media’s Value Proposition: Identifying and Filling a big lack in human being’s collective knowledge Bryon Reese from Demand Media

13. New Product Development

14. Demand Media’s New Product

15. Factors That Limit New Product Development • Shortage of ideas • Fragmented markets • Social and governmental constraints • Cost of development • Capital shortages • Faster required development time • Shorter product life cycles

16. Table 20.4 Finding One Successful New Product

17. New-product Failure (-+ 95%) • Ignoring or misinterpreting market research • Overestimating market size • High development costs • Poor design • Incorrect positioning • Ineffective advertising • Wrong price • Insufficient distribution support • Competitors who fight back hard

19. New-product Success Factors • Unique, superior product • Well-defined product concept • Technological & marketing synergy, quality execution in all stages, & market attractiveness.

20. Venture Team • Organizing New-Product Development • Product managers • New product managers • High-level management committee • New product department • Venture team Cross-functional group charged with developing a specific product or business; Intrapreneurs are relieved of other duties and provided a budget and time frame.

21. Criteria for Staffing Venture Teams • Desired team leadership style • Desired level of leader expertise • Team member skills and expertise • Level of interest in concept • Potential for personal reward • Diversity of team members

22. Managing the Development Process • Idea generation: - from interacting with various groups. - from using creativity-generating techniques. • Idea screening

23. Figure 20.2 The New Product Development Decision Process

24. Ways to Find Great New Ideas • Run informal sessions with customers • Allow time off for technical people to putter on pet projects • Make customer brainstorming a part of plant tours • Survey your customers • Undertake “fly on the wall” research to customers

25. Idea Generation: Creativity Techniques • Attribute listing • Forced relationships • Morphological analysis • Reverse assumption analysis • New contexts • Mind mapping

26. More Ways to Find Great Ideas • Use iterative rounds with customers • Set up a keyword search to scan trade publications • Treat trade shows as intelligence missions • Have employees visit supplier labs • Set up an idea vault

27. Drawing Ideas from Customers • Observe customers using product • Ask customers about problems with products • Ask customers about their dream products • Use a customer advisory board or a brand community of enthusiasts to discuss product

28. Idea Generation: Creativity Techniques • Attribute listing • Forced relationships • Morphological analysis • Reverse assumption analysis • New contexts • Mind mapping

29. Lateral Marketing for new product ideas: Combining two product concepts Gas station stores = gas station + food Cyber cafés = cafetaria + internet Cereal bars = cereal + snacking Kinder surprise = candy + toy Sony walkman = audio + portable

30. Figure 20.2 The New Product Development Decision Process

31. Variations on Failure • Absolute product failure • Partial product failure • Relative product failure

32. Concepts in Concept Development • Product idea • Product concept • Category concept • Brand concept • Concept testing

33. Concept Testing • Communicability and believability • Need level • Gap level • Perceived value • Purchase intention • User targets, purchase occasions, purchasing frequency.

34. Marketing Strategy • Target market’s size, structure, and behavior, product positioning, the sales, market share, and profit goals sought in the first ten years. • Planned price, distribution, and promotion for Year 1 • Long-run sales and profit goals and marketing-mix strategy over time

35. Business Analysis • Estimating total sales • Estimating Costs & Profits

36. Product Development • Quality function deployment (QFD) • Customer attributes • Engineering attributes

37. Prototype Testing • Alpha testing • Best testing • Rank-order method • Paired-comparison method • Monadic-rating method • Market testing

38. Consumer Goods Market Testing • Sales-Wave Research • Simulated Test Marketing • Controlled Test Marketing • Test Markets

39. Test Market Decisions • How many test cities? • Which cities? • Length of test? • What information? • What action to take?

40. Timing of Market Entry • First entry • Parallel entry • Late entry

41. Criteria for Choosing Rollout Markets • Market potential • Company’s local reputation • Cost of filling pipeline • Cost of communication media • The influence of the area on other areas • Competitive penetration

42. Consumer-Adoption Process Adoption is an individual’s decision to become a regular user of a product.

43. Innovation & Diffusion: Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

44. Adopter Categorization • Innovators • Early adopters • Early majority • Late majority • Laggards

45. Characteristics of an Innovation • Relative advantage • Compatibility • Complexity • Divisibility • Communicability

46. Marketing Debate • Who should you target with new products? Take a position: • Consumer research is critical to new-product development. or 2. Consumer research may not be all that helpful in new-product development.

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