INTRODUCING NEW MARKET OFFERINGS

AGNES C. CONTRERAS

NEW PRODUCT DEVELOPMENT SHAPES THE COMPANY’S FUTURE

Improved or replacement products and services can maintain or build sales; new-to-the-world products and services can transform industries and companies and change lives. But the low success rate of new products and services points to the many challenges they face.

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NEW PRODUCT OPTIONSThere are a variety of types of new products and ways to create them.

MAKE OR BUY

A company can add new products through acquisition or development. When acquiring , the company can buy other companies, patents from other companies, or a license or franchise from another company.

NEW PRODUCT OPTIONS…But firms can successfully make only so many acquisitions. At some point, they need organic growth – the development of new products from within. Praxair, worldwide provider of industrial gases, achieved an ambitious goal of $200 million per year of double-digit new annual sales growth only through a healthy dose of organic growth and a large number of smaller but significant $5 million projects.

TYPES OF NEW PRODUCTSNew products range from new-to-the-world products that create an entirely new market to minor improvements or revisions of existing products. Most new-product activity is devoted to improving existing products.

Some of the most successful recent new consumer products have been brand extensions.

Examples: Tide Total Care, Gillette Venus Embrace, Always Infinity, and Secret Flawless Deodorant.

It is increasingly difficult to identify blockbuster products that will transform a market, but continuous innovation can force competitors to play catch-up and also broaden the brand meaning. Once a running-shoe-manufacturer, Nike now competes with makers of all types of athletic shoes, clothing and equipment.

Categories of New Products

THE INNOVATION IMPERATIVE

In an economy of rapid change, continuous innovation is a necessity. Highly innovative firms are able to identify and quickly seize new market opportunities. They create a positive attitude toward innovation and risk taking, routinize the innovation process, practice teamwork, and allow their people to experiment and even fail.

One such firm is W.L.Gore.

W.L.Gore

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Companies that fail to develop new products leave their existing offerings vulnerable to changing customer needs and tastes, new technologies, shortened product life cycles, increased domestic and foreign competition, and especially new technologies.

Innovation is about “creating new choices” the competition doesn’t have access to, says IDEO’s CEO Tim Brown . It isn’t about brilliant people spontaneously generating new ideas, he argues, but about finding hidden assumptions and ignored processes that can change the way a company does business.

NEW-PRODUCT SUCCESS

Most established companies focus on 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.

NEW-PRODUCT FAILURE

New products continue to fail at estimated rates as high as 50% or even 95% in the United States and 90% in Europe. They fail for many reasons: ignored or misinterpreted market research; overestimates of market size; high development costs; poor design or ineffectual performance; incorrect positioning, advertising or price; insufficient distribution support; competitors who fight back hard; inadequate ROI or payback.

Factors that hinder new-product development:Shortage of important ideas in certain areas. Fragmented markets. Social, economic and governmental constraints. Cost of development. Capital shortages. Shorter required development time. Poor launch timing. Shorter product life cycles. Organizational support.

BUDGETING FOR A NEW-PRODUCT DEVELOPMENT:Financing as many projects as possibleConventional percentage-of-sales figureSpend what the competition spendsWorking backwards

ORGANIZING NEW PRODUCT DEVELOPMENT Use of new product managers (cross-functional teams) Use of stage gate system

Managing New Product Development ProcessEight stages are involved in the new product development process:

1. idea generation

2. screening

3. concept development and testing

4. market strategy development

5. business analysis

6. product development

7. market testing

8. commercialization.

Generating Ideas

Idea Screening

Concept Development and Testing

Marketing strategy development

Business Analysis

Prototype Development

Market Tests

Commercialization

The New Product Development Decision Process

The Consumer-Adoption Process

STAGES IN THE CONSUMER-ADOPTION PROCESS

Influencing Factors

• Buyer Readiness

• Personal Influence

• Innovation Characteristics

• Organizations Readiness

Buyer Readiness

InnovatorsEarly Majority

Laggards

Early Adopters Late Majority

Personal Influence It is the effect one person has on another’s attitude

or purchase probability. It has greater significance in some situations and

for some individuals than others and it is more important in evaluation than the other stages.

It has more power over late than early adopters and in risky situations.

Characteristics of the Innovation:1. Relative advantage

2. Compatibility

3. Complexity

4. Divisibility

5. Communicability

ORGANIZATIONS’ READINESS TO ADOPT INNOVATIONS

The creator of a new teaching method would want to identify innovative schools. The producer of a new piece of medical equipment would want to identify innovative hospitals. Adoption is associated with variables in the organization’s environment (community progressiveness, community income), the organization itself (size, profits, pressure to change), and the administrators (education level, age, sophistication). Other forces come into play in trying to get a product adopted into organizations that receive the bulk of their funding from the government, such as public schools. A controversial or innovative product can be squelched by negative public opinion.

SUMMARY:1.Once a company has segmented the market, chosen its target customer groups and identified their needs, and determined its desired positioning, it is ready to develop and launch appropriate new products and services. Marketing should participate with other departments in every stage of new-product development.

2.Successful new-product development requires the company to establish an effective organization for managing the development process. Companies can choose to use product managers, new-product managers, new-product committees, new-product departments, or new-product venture teams. Increasingly, companies are adopting cross-functional teams, connecting to individuals and organizations outside the company, and developing multiple product concepts.

3.Eight stages take place in the new-product development process: idea generation, screening, concept development and testing, marketing strategy development, business analysis, product development, market testing, and commercialization. At each stage, the company must determine whether the idea should be dropped or moved to the next stage.

4.The consumer-adoption process is the process by which customers learn about new products, try them, and adopt or reject them. Today, many marketers are targeting heavy users and early adopters of new products, because both groups can be reached by specific media and tend to be opinion leaders. The consumer-adoption process is influenced by many factors beyond the marketer’s control, including consumers’ and organizations’ willingness to try new products, personal influences, and the characteristics of the new product or innovation.

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