Chapter 15

Product Development

Physical prototypes customer Tests

market testing

occurs after management is satisfied w/ functional and psychological performance; now the product is ready to be branded with a name, logo, and packaging and go into a market test if desired.

product idea vs. product concept

product idea is a possible product the company might offer to the market product concept is an elaborated version of the idea expressed in consume terms consumers don't buy ideas they buy concepts

alpha testing

tests the product within the firm to see how it performs in different application

Generating ideas

- Interacting with employees - Interacting with outsiders - Studying competitors - Adopting creativity techniques

Two ways a company can add new products

1 acquisition 2. development

types of new products

1. <10% are truly innovative and new to the world. these products incur the greatest cost and risk. can hurt the bottom line initially but can improve the corporate image, create a greater sustainable competitive advantage. 2. Most are modifications of established products. 2.

acquisition

1. buy other companies 2. buy patents from other companies 3. buy a license or franchise from another company

after concept testing researchers measure product dimensions by having consumers respond to questions like:

1. communicability/believability-are benefits clear to you and do you believe 2. Need level-does this product solve a problem for you 3. gap level do other products currently meet this need.satisfy you? 4. perceived value-is the price reasonable in relationship to value 5. purchase intention 6. user targets/purchase occasions/purchasing frequency

To pull radical innovation companies must:

1. create a strong R&D and marketing partnership 2. right corporate culture; be prepared to cannibalize existing products, tolerate risk, and maintain a future market orientation 3. a keen understanding of customers

product development

1. create new products in its own labs 2. or contract with independent researchers or new product development firms

three part strategy plan for introducing the new product into the market

1. describes the target market size,structure, and behavior; the planned brand positioning; the sales, market share, and profit goals sought in the first few years 2. planned price, distribution strategy, and marketing budget 3. long-run sales, profit goals and marketing mix strategy over time

New Product launch drawbacks

1. fragmented markets- smaller market segments mean lower sales/profits 2. social/economic/govt constraints 3. cost of development 4. capital shortages 5custom. poor launch timing 6. shorter product lifecycles 7. lack of organizational support

five adopter groups

1. innovators 2. early adopters 3. early mainstream 4. late mainstream 5. lagging adopters

P&Gs three core requirements for a successful connect + develop strategy are

1. never assume that ready to go ideas found outside are truly ready to go. 2. don't underestimate the internal resources required 3. never launch without a mandate from the ceo

business goods market testing

1. normally undergo alpha and beta testing 2. beta testing uncovers safety and servicing problems and alerts the compnahy to customer and training and servicing requirements 3. observe how much value the equipment adds to the customers operation, as a clue to the subsequent pricing

five characteristics influence an innovation's rate of adoption

1. relative advantage 2. compatibility 3. complexity 4. divisibility 5. communicability

success factors for new products

1. superior product 2. well-defined product concept 3. technological and marketing synergy 4. quality of execution in all stages 5. market attractiveness 6. products designed with other countries and a global perspective

Estimating total sales

1. the sum of estimated first time sales, replacement sales, and repeat sales 2. estimates methods depends on on whether the product is purchased once (engagement ring), infrequently (automoile), or often (non durable goods)

managing the development process: ideas

Generating ideas Using idea screening

customer-driven engineering

Incorporating customer preferences in the final design

controlled test marketing

Involves offering a new product to a group of stores and evaluating the market reaction to it, while varying different aspects of the marketing mix. -company can evaluate the iimpact of local advertising/promotions/interview sample customers

managing the development process: development to commercialization

Product Development Market Testing Commercialization

Estimating costs and profits are done by

R&D, manufacturing, marketing, and finance departments

adaptive conjoint analysis

a hybrid data collection technique that combines self-stated or explicated importance ratings of attributes with pair-wise trade-off tasks comparing two options.

funnel (in stage-gate system)

a large number of new product ideas and concept are winnowed down to a few high-potential products that are ultimately launched.

conjoint analysis

a method for deriving the utility values that consumers attach to varying levels of product's attributes. 1. determine number of design attributes 2. using a statistical program derive the consumer utility function for each of the five attributes (range from 0-no utility to 1-highest utility) 3. the greater the difference between the highest attribute option and the lowest attribute option means the more important the attribute

Business analysis

after product concept and marketing strategy is developed it evaluates the business the proposal's business attractiveness; management prepares sales, cost, and profit projections to determine whether they satisfy company objectives. 1. Estimating total sales 2. Estimating costs and profits

innovation

any good, service or idea that someone perceives as new

Product ideas can be turned into several concepts and these concepts are called

category concepts

some marketing experts believe we find the greatest opportunity and highest leverage for new products

by uncovering the best possible set of unmet customer needs or technological innovations

disruptive technologies

cheaper and more likely to alter the competitive space (newer companies)

cross functional teams

collaborate and use concurrent new-product development to push new products to market. this can reduce time to market and ensure that engineers are not driven to create a better mousetrap

the category concept defines the products

competition

Concept Development and Testing

concept development concept testing Conjoint Analasys

Managing the development process: concept to strategy

concept development and testing marketing strategy development business analysis

simulated test marketing

consumer goods marketing 1. 30 to 40 qualified shoppers are asked about brand familiarity and preferences in a specific product category and attend a brief screening of both well-known and new TV or print ads. 2. consumer receives a small amount of money are invited to a store where they may buy items. company notes how man consumers buy the new vs competing brands. consumers are polled for the reason they chose their brand. if they didn't buy new brand they are givenfree samples of; 3. some weeks later they are contacted to ascertain product attitudes, usage, satisfaction, and repurchase intention. -accurate results about advertising effectiveness and trial rates -appealing to marketers of fast moving consumer goods

sales wave research

consumer goods marketing 1. consumer initially tried the product at no cost 2. reoffered original product or a competitor's product at slight reduced product 3. this offer may be made as many as five times -can be implemented quickly, conducted with a fair amount of security and carried out without final packaging or advertising. -does not indicate trial rates the product would achieve with different sales incentives or does it indicate the brand's power to gain distribution and favorable shelf selection

beta testing

consumer testing

the innovation imperative

continuous innovations is a necessity; otherwise companies leave themselves vulnerable to changing customer needs and tastes, shortened product life cycles, increased domestic and foreign competition.

venture teams

cross-functional groups charged with developing a specific product or business

rapid prototyping

design products on a computer and produce rough models to show potential consumers for their reactions

organic growth

development of new products from within

critical path scheduling

develops a master chart showing the simultaneous and sequential activites that must take place

stage-gate system

divides the innovatio process into stages, with a gate or checkpoint at the end of each.

incremental innovation

entering new markets by tweaking products for new customers, using variations on a core product to stay one step ahead of the market, and creating interim solutions for industry-wide problems (most established companies)

physical prototypes

goal of the R&D dept. is to find a prototype that embodies the key attributes in the product-concept statement, performs safely under normal use and conditions, and can be produced within budgeted manufacturing costs.

commercialization

incurs the company's highest cost to date -timing 1. first entry 2. parallel entry 3. late entry -where? geogrpahic strategy -to whom? target market prospects -how? introductory market strategy

skunkworks

informal workplaces, sometimes garages, where intrapreneurial teams attempt to develop new products

adoption

is an individuals decision to become a regular user of a product and is followed by the consumer loyalty process

IDEO's CEO Tim Brown's take on innovation

it is about finding hidden assumptions and ignored processes that can change the way a company does business.

communities of practice

often housed on internal web sites when employees from different departments are encouraged to share knowledge and skills with others

crowdsourcing

paid or unpaid outsiders can offer needed expertise or a different perspective on a task or project that might otherwise be overlooked.

concept testing

presenting the product concept to target consumers, physically or symbolically and getting their reactions

spiral development process (in stage gate system)

recognizes the value of returning to an early stage to make improvements before moving forward

Qualify function deployment (QFD)

takes the lists of desired customer attributes generated by market research and turns them into a list of engineering attributes; leads to improved communication between marketers, engineers, and manufacturing people

consumer-adoption process

the mental steps through which an individual passes from first hearing about an innovation to the final adoption 1. awareness 2. interest 3. evaluation 4. trial 5. adoption

survival age distribution

the number of units that fail in year one, two, three, and so on

innovation diffussion process

the spread of a new idea from its source of invention or creation to its ultimate user or adopters

consumer goods market testing

try to estimate four variable trial first repeat adoption purchase frequency

test market

ultimate way to test new consumer product 1. company chooses a few representative cities and puts on a full marketing communications campaign. also measures the impact of alternative marketing plans by implementing them in different cities