Product Management Exam 2

Overall Similarities -

(OS) perceptual map (based on overall similarities ratings by customers)

Sources of Identified Opportunities

- An underutilized resource (a manufacturing process, an operation, a strong franchise) - A new resource (discovery of a new material with many potential uses) - An external mandate (stagnant market combined with competitive threat) - An internal mandate (new products used to close long-term sales gap, senior management desires)

Patterns in Concept Generation -

- customer need, firm develops technology, produces form - firm develops technology, finds match to need in a customer segment, produces form - firm envisions form, develops technology to product form, tests with customer to see what benefits are delivered

Attribute Rating -

AR perceptual gap map (based on attribute ratings by customers)

Opportunity Identification/Selection

Active and passive generation of new product opportunities as spinouts of the ongoing business operation. New product suggestions, changes in marketing plan, resource changes, and new needs/wants in the marketplace. Research, evaluate, validate, and rank them (as opportunities, not specific product concepts). Give major ones a preliminary strategic statement to guide further work on it.

DETERMINANT GAP MAPS are

Advantages: speedy and cost-efficient. Weakness: driven only by managerial judgement. Customer perceptions may be quite different. Manager (or researcher) identifies two dimensions that become the attributes used in axes Attributes used in gap analysis should be differentiating and important Attributes that both differentiate and are important are called determinant attributes, because they help determine what is bought. Purpose in this method is to find a spot on the map where a gap offers potential as a new item that people will find different and interesting

ANALYTICAL ATTRIBUTE TECHNIQUES -

Analytical attribute techniques allow us to create new product concepts by changing one or more of its current attributes or by adding attributes, and to assess the desirability of these concepts

IN WHAT SITUATIONS ARE AR USED?

Analyzes data simplified shows how certain attributes are perceived by CUSTOMERS Shows the Gaps in the market place Used to analyze products that are hard to articulate what customers may want in them "Phantom Attributes" - attributes that consumers don't know how to express, or don't want to express them because the attributes may be considered socially unacceptable Dupont - pillows example. Created many different types of pillows and gave them to consumers 3 at a time, along questions such as "Which two are most similar, or which one is the least like the other two?" Used info to show closeness of products, without knowing which attributes created that closeness

DATA CUBE -

Attribute ratings (AR) perceptual gap mapping asks market participants (buyers and users of the product) to tell what attributes they believe products have Begin with a set of attributes (functions, features, benefits) that describe the product category being considered. We gather customers' perceptions of the available choices on each of these attributes...using Likert scales (1-5 or 1 to 7 scales) where the endpoints are 'strongly disagree' or 'strongly agree' AR is based on customer rating on a set of attributes This procedure results in a formidable data cube (see above) that is Not very helpful to managers The challenge is to then reduce the data cube into something more manageable - a perceptual map. Factor analysis is typically used to reduce the large number of attributes to a small number of underlying dimensions which can then be used as the axes of the perceptual map

4 Strategies For Managing Risk In New Product Evaluation:

Avoidance - Eliminate the risky product project altogether, though an opportunity cost is incurred (what if we had moved forward and it succeeded? Mitigation - Reduce the risk to an acceptable threshold level. Perhaps through redesigning the product to include more backup systems or increasing product reliability Transfer - Move the responsibility to another organization in the form of a joint venture or subcontractor Acceptance - Develop a contingency plan now (active acceptance) or deal with the risks as they come up (passive acceptance)

Content of PIC

Background - Key ideas from the situation analysis; special forces such as managerial dicta; reasons for preparing a new PIC at this time Focus - At least one clear technology dimension and one clear market dimension. They match and have good potential Goals/Objectives - What the project will accomplish, either short-term as objectives or long-term as goals. Evaluation measurements Guidelines - Any "rules of the road" requirements imposed by the situation or by upper management. Innovativeness, order of market entry, time/quality/cost, misc

Principles and Issues in the New Products Process

Between the phases of the process are evaluation tasks or decision points, where hard Go/No Go decisions are taken.

Launch

Commercialize the plans and prototypes from development phase Begin distribution and sale of the new product (maybe on a limited basis) Manage the launch program to achieve the goals and objectives set in the PIC (as modified in the final business plan)

RISKS:

Deal is not structured in a way that captures the financial value of your innovation Proprietary secrets can be lost to a partner Theft of technology, or poaching of top researchers, is a concern

Determinant -

Determinant gap map (produced from managerial input/judgment on products)

A-T-A-R Model - (AWARENESS, TRIAL, AVAILABILITY, REPEAT)

Determines the potential success of a new product or service. For a person (or a firm) to become a regular buyer/user of an innovation, there must first be awareness that it exists. Then, there must be a decision to try that innovation (trial). Then, the person must find the item available to him or her Finally, there must be the type of happiness/contentment with it that leads to adoption or repeat usage

Concept/Project Evaluation

Evaluate new product concepts (as they begin to come in) on technical, marketing, and financial criteria. Rank them and select the best two or three Request project proposal authorization when you have product definition, team, budget, skeleton of development plan, and final PIC

Purposes of the PIC

Focus and integrate team effort Permit delegation Establish the size and range of the "sandbox"

Aware:

Has heard about the new product with some characteristic that differentiates it

Available:

If the buyer wants to try the product, the effort to find it will be successful (expressed as a percentage)

ADVANTAGES:

Importing new ideas multiplies innovation building blocks resulting in more total sales generated from new products Exporting ideas raises cash and improves employee retention

Open Innovation

Increases speed of research and innovation, cuts risks, and generates new innovative ideas. Inputs can come from internal sources (marketing, strategic planning) and external ones (customers, market information, etc) Sources such as inventors, startup companies, or university laboratories are actively sought out Different from Outsourcing! The external sources are viewed as complementary to internal sources so that innovation can be more efficient Under an open innovation policy, firms start with the understanding that much, if not most, of the knowledge they could use resides outside the firm systematically and intentionally set out to acquire knowledge from external resources to complement their own internal resources and accelerate innovation the firms goal is to reach out beyond its familiar research partners and to access R&D carried out globally, so that it will complement the knowhow it develops internally

Product Innovation Charter (PIC) is...

It is the new product team's strategy. It is for Products (not processes). It is for Innovation (think of the definition of new product) It is a Charter (a document specifying the conditions under which a firm will operate) Typically, it is a document prepared by senior management designed to provide guidance to the strategic business units (SBUs) on the role of innovation.

Units Sold

Number of buying units (Target audience) x % aware of product x % who would try product if they can get it (not everyone who is aware will want to try the product) x % to whom product is available x repeat measure (what is the average number of units bought per person per year, including repeats) x Number of units repeaters buy in a year

Activities that Feed Strategic Planning for New Products

Ongoing marketing planning (e.g., need to meet new aggressive competitor) Ongoing corporate planning (e.g., senior management shifts technical resources from basic research to applied product development) Special opportunity analysis (e.g., a firm has been overlooking a skill in manufacturing process engineering)

Development (Marketing Tasks)

Prepare strategy, tactics, and launch details for marketing plan, Prepare proposed business plan and get approval for it, Stipulate product augmentation (service, packaging, branding, etc.) and prepare for it.

"On" decision

Project will still move forward (a conditional GO) but the missing information must be gathered, and the project could still be haltered.

Buying Unit (Buyer)

Purchase point (person or department/buying center

Risks

Scope creep - Product definition keeps changing: who is the customer? Is it a standalone product or a platform? Unstable product specifications - Required performance level keeps changing

Stages of Concept/Project Evaluation

Screening (pre-technical evaluation) Concept Testing Full Screen Project Evaluation (begin preparing product protocol)

Concept Generation

Select a high potential/urgency opportunity, and begin customer involvement Collect available new product concepts that fit the opportunity and generate new ones as well

Development (Technical Tasks)

Specify the full development process, and its deliverables Undertake to design prototypes, test, and validate prototypes against protocol. design and validate production process for the best prototype, slowly scale up production as necessary for product and market testing

Three required inputs to the creation process -

Technology- the source by which the form is to be attained Form - the physical thing created, or, for a service, the set of steps by which the service will be created Benefit/Need - benefit to the customer for which the customer sees a need or desire "Technology permits us to develop a Form that provides the Benefit"

Repeat:

The product is bought at least once more, or (for durables) recommended to others

Profits

Units Sold x Profit Per Unit

Trial:

Usually means a purchase or consumption of the product (SAMPLING does not mean TRIAL!)

Hollow gate

When teams make a "Go" decision but fail to commit resources to the project (no financial support). Gates without teeth, hollow gates and special treatment for executive's pet projects can all hinder new product process effectiveness.

Fuzzy gates

are commonly used: this is a "conditional Go" so as not to slow down the process in analysis. "Fuzzy gates" must still have teeth - meaning that if the information comes back and is negative the project needs to end. OR if the information is positive, that resources will be committed to the project.

WHAT INPUTS ARE REQUIRED FOR AR VS OS METHODS?

based on specific attributes that are specified!

Trial:

can be actual in-home trial, on-site trial, vicarious trial (triers share results with non-triers) - depending on the product type.

Theoretical sequence:

feature permits a function which provides a benefit

Three types of attributes:

features, functions, benefits

GAP MAP

helps determine which attributes are important to consumers, how consumers perceive products, how they are positioned on the market map, also helps create new product concept. Have to be careful with perceptual maps because everyone has a different interpretation about a product.

Product Innovation Charter (PIC)

is a critical strategic document, the heart of any organized effort to commercialize a new product. It contains the reasons the project has been started, the goals, objectives, guidelines, and boundaries of the project.

Awareness

is the buying unit sufficiently informed to stimulate trial (i.e., are they knowledgeable enough?)

Buying unit:

person, home, purchasing manager, family, etc.

Basic idea:

products are made up of attributes -- a future product must involve one or more of these attributes.

Profit Per Unit

revenue per unit - cost per unit Each factor is subject to estimation Estimates improve with each step in the development phase Inadequate profit forecast can be improved by changing factors and doing a "what-if" analysis. If profit forecast is inadequate, look at each factor and see which can be improved, and at what cost In our example, could retail margins be increased to increase distribution? Could more advertising spending lead to more awareness? Consider qualitative issues as well (advertising theme or execution)

OS (OVERALL SIMILARITIES)

techniques DON'T require customers to rate choices on individual attributes. Rather, these techniques run on perceptions of overall similarities between pairs of brands If there are five choices, then there are 10 possible pairs Example above is a 1 to 9 Likert scale where 1 is "very similar" and 9 is 'very dissimilar". This figures shows that customers tend to see Sunflare and Molokai as relatively similar and Aqualine and Sunflare as very dissimilar The next step is to convert the customer data into A PERCEPTUAL MAP

Open Innovation -

the process by which a firm searches for research, innovation, technologies, and products.