Dr Close NEW PRODUCT PLANNING AND DEVELOPMENT New

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Dr. Close NEW PRODUCT PLANNING AND DEVELOPMENT

Dr. Close NEW PRODUCT PLANNING AND DEVELOPMENT

New Product Development (1) New Product: different or new in ANY way (Pentium) Various

New Product Development (1) New Product: different or new in ANY way (Pentium) Various categories of new products - New to world (first introduction of toning shoes) - New to market - New to category - New to seller - New to producer - Product improvements/repositioning

New Product Strategies ù Developed by H. Igor Ansoff in the form of growth

New Product Strategies ù Developed by H. Igor Ansoff in the form of growth vectors ù Market penetration – Growth direction through increase in market share for present markets ù Product development – Creating new products to replace existing ones ù Market development – Finding new customers for existing products ù Diversification – Developing new products and cultivating new markets Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

New Product Strategies Organizational Growth Strategies Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies,

New Product Strategies Organizational Growth Strategies Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

New Product Strategies ù Policy-making criteria on new products should specify ù Working definition

New Product Strategies ù Policy-making criteria on new products should specify ù Working definition of profit concept acceptable to top management ù Minimum level or floor of profits ù Availability and cost of capital to develop a new product ù Specified time period for recuperating operating costs and contributing to profits Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Factors Associated with New Product Success Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies,

Factors Associated with New Product Success Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

The New Product Development Process Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All

The New Product Development Process Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Idea Generation ù Every product starts as an idea ù Most ideas do not

Idea Generation ù Every product starts as an idea ù Most ideas do not become products ù Idea generation – Requires recognizing available idea sources ù Least expensive step in new product development ù Top-management support – New product development must focus on meeting customer needs ù Technology push and market pull research activities play an important role ù Out-rotation – Involves placing employees in positions that require direct contact with customers, competitors, and other key outside groups Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Idea Screening ù Strategic risk – Risk of not matching the role of a

Idea Screening ù Strategic risk – Risk of not matching the role of a new product with a specific strategic need ù Market risk – Risk that a new product won’t meet a market need in a value-added, differentiated way ù Internal risk – Risk that a new product won’t be developed within the desired time and budget Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Idea Screening ù Strategic alliance – A long-term partnership between two organizations designed to

Idea Screening ù Strategic alliance – A long-term partnership between two organizations designed to accomplish strategic goals of both parties ù Potential benefits of strategic alliances include ù Increased access to technology, funding, and information ù Market expansion and greater penetration of current markets ù De-escalated competitive rivalries Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Project Planning ù Analyze the proposal in terms of production, marketing, financial and competitive

Project Planning ù Analyze the proposal in terms of production, marketing, financial and competitive factors ù Establish a development budget with preliminary marketing and technical research ù Create a “rough form” product ù Alternative product features and components specified ù Create a project plan with estimated costs, capital requirement, and manpower needs ù Review the project plan with top management Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Project Planning ù Two better-known methods for creating and managing project teams include ù

Project Planning ù Two better-known methods for creating and managing project teams include ù Skunkworks – A project team can work in relative privacy away from the rest of the organization ù Rugby or relay approach – Groups in different areas of the company are simultaneously working on the project ù A key component contributing to the success relates to the emphasis placed on creating cross-functional teams early in the development process Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Product Development ù Upon evaluation, if all expectations are met, consider further research and

Product Development ù Upon evaluation, if all expectations are met, consider further research and testing ù Produce a finished product and market test it ù Development report must spell out in detail ù Results of the studies by the engineering department ù Required plan design ù Production facilities design ù Tooling requirements ù Marketing test plan ù Financial program survey ù Estimated release date Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Measurements of New Product Performance Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All

Measurements of New Product Performance Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Test Marketing ù The main goal is to evaluate and adjust, if necessary, the

Test Marketing ù The main goal is to evaluate and adjust, if necessary, the marketing strategy to be used in the marketing mix ù Developers can use interaction with buyers as a foundation for future product development ù Throughout the process, findings are being analyzed and forecasts of volume developed ù Upon completion of the test market, prepare a final marketing plan in preparation for launch Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Commercialization ù The firm commits to introducing the product into the marketplace ù Heavy

Commercialization ù The firm commits to introducing the product into the marketplace ù Heavy emphasis is placed on organizational structure and management talent needed to implement the marketing strategy ù Follow-up to eliminate bugs in the design, production costs, quality control, and inventory requirements ù Procedures and responsibility for evaluating the success of the new product by comparison with projections are also finalized Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Time to Market ù Defined as the elapsed time between product definition and marketplace

Time to Market ù Defined as the elapsed time between product definition and marketplace product availability ù Well documented that companies that reach the market first with a new product enjoy both profit and market share advantages ù Increasingly, companies are bypassing timeconsuming regional test markets, when feasible, in favor of national launches Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Quality Level ù Warranty – Producer’s statement of what it will do to compensate

Quality Level ù Warranty – Producer’s statement of what it will do to compensate the buyer if the product is defective or does not work properly ù To emphasize high quality, organizations generally offer customers more than implied warranties enforced by the courts ù Guarantee – An assurance that the product is as represented and will perform properly ù Imply to some buyers that the manufacturer is confident of the new products’ quality Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

Some Criteria for Determining Perceptions of Quality Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill

Some Criteria for Determining Perceptions of Quality Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

New Product Decisions ù Product features ù Fact or particular specification of the product

New Product Decisions ù Product features ù Fact or particular specification of the product ù Determined by what it is that the customer wants offered ù These wants are not created by effective marketers but rather are learned ù Product design ù Can clearly differentiate a new product from competitors ù Good design can add value to the new product ù A well-designed product can please a customer without necessarily costing more Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

New Product Decisions ù Product safety ù Safety is both an ethical and practical

New Product Decisions ù Product safety ù Safety is both an ethical and practical issue ù Ethically, customers should not be harmed by using the product as intended ù When users are harmed by a product, they may stop buying it, tell others about it, or sue the company ù Some products are inherently dangerous and can result in injury to users ù It may be so expensive to make them safer that buyers cannot afford to buy them Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved

How to Have New Product Failure New product failure (70 -80% of brands) How

How to Have New Product Failure New product failure (70 -80% of brands) How to fail: Offer no unique benefit (Pepsi’s clear soda vs. Secret’s clear deodorant) or non-delivery of promised benefits Race to market (Ford Pinto, Ford school bus, Netscape) Give little thought to promotion (Chevy No. Va) Poor positioning (example? ) Give little thought to competition (Wal-mart’s impact) Skip research or conduct sloppy research Try just one new product (top consumer goods companies average trying 75 new products a year)

Historic product failures

Historic product failures