New Product Development01-07

“New Product Development”

Year4, Semester 2

Lectured by: Mr. Eng Leaphea,MBATel: 012 722076

Email: [email protected] ID: rikreaymagazine

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Human Resources University

04/07/23

mailto:[email protected]

Self-Introduction

Course: New Product DevelopmentLecturer: Mr.Eng Leaphea, MBA

Tel: 012 722076Email: [email protected]

rikreaymagazine (skype)Facebook.com/eng.leaphea


Instructor’s ProfileName: Eng Leaphea (Mr.)Date of Birth: February 05, 1979Sex: MaleNationality: Cambodian Contact: H/P: 012 722076Email: [email protected]

Educational Background


Working Experiences02-04-2010 to 02-12-2010 10-12-2010 to

Present

• 2005 – Present • Lecturer Human Resources University Course: Basic Marketing; Marketing Management; Public Relation; Strategic Marketing; New Product Development. Human Resource Management

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Working Experiences

Course Learning Objectives:

• Students will learn as follows:– Chapter01: New Product in Global Marketing– Chapter02: New Product Development

Process– Chatper03: Overview in New Product

Development– Chapter04: Design – Chapter05: Special Issues in Development– Chapter06: Product Use Testing– Chapter07: Strategic Launch Planning

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Grading

• Your course grade will be determined as follows:– 20% on your attendance;

– 15% on the quality of your individual assignment solutions

– 15% on the midterm test; and– 50% on the final exam.

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Course OutlineWeek Description Hours

1 Course IntroductionChapter01: New Product in Global Marketing

New Products Why New Product Succeed? Risks of New Product Development NEW PRODUCT LAUNCHES

3 hours

2 Chapter01: New Product in Global MarketingCHALLENGES IN NEW PODUCT DEVELOPMENT Why do new products fail? Several factors tend to hinder new-product development IDENTIFYING NEW PRODUCT IDEAS The following questions are relevant to this task:

3 hours

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3 Chapter02: New Product Development Process ORGANIZATIONAL ARRANGEMENTOrganizing new-product development MANAGING THE DEVELOPMENT PROCESS: IDEAS Ten Ways to Create New-Product Ideas Idea Screening screening ideas, the company must avoid two types of errors MANAGING THE DEVELOPMENT PROCESS Concept Development and Testing

3 hours

4 Chapter02: New Product Development Process Concept Testing Marketing Strategy Business Analysis

3 hours

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5 Chapter03: Overview in New Product Development

Creating New ProductsCORPORATE RESPONSE MARKETING RESPONSE VARIABLES AFFECTING NEW PRODUCT DEVELOP Change and Complexity Invisibility Expense Control Need for Speed “Can Do” PATHS TO SUCCESS

3 hours

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6 Chapter04:Design What is Design? The Role of Design in the New Products Process Contributions of Design to the New Products Process Product Architecture

3 hours

7 Chapter04:Design ( continue)Managing the Interfaces in the Design Process Participants in the Design Process Improving the Interfaces in the Design Process Computer-Aided Design and Design for Manufacturability

3 hours

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8 Chapter05: Special Issues in Development Speed to Market

1- Techniques for Speeding Time to Market 2- Overall Principles and Guidelines

The Role of Top Management during Development

3 hours

9 Chapter05: Special Issues in Development Functional Interface Management

1- Managing the Interfaces2- Overall Principles and Guidelines

Strategies for Global Product Innovation

3 hours

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10 Chapter06: Product Use Testing What Is Product Use TestingIs Product Use Testing Really Necessary?1- Regarding Competitors’ Reactions2- Customer Needs Are Complex Sets3- Can We Deliver A Total Quality Product?

3 hours

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11 Chapter06: Product Use Testing Knowledge Gained from Product Use TestingBeta testsGamma Testing Diagnostic InformationDecisions in Product Use Testing How Should We Reach the User Group?

3 hours

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12 Chapter06: Product Use Testing How Much Explanation Should We Provide? How Much Control over Product Use Should There Be? Special ProblemBe Alert to Strange ConditionsStrategies for Global Product Innovation

3 hours

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13 Chapter07: Strategic Launch Planning I. Setting The Strategic Givens Revisiting the Strategic Goals

3 hours

14 Chapter07: Strategic Launch PlanningStrategic Platform DecisionsThe Target Market Decision

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15 Chapter07: Strategic Launch PlanningVI. Product PositioningVII. Creating Unique Value for the Chosen TargetVIII. Branding and Brand ManagementIX. Packaging

3 hours

Number of weeks 15 weeks

Total hours 45 hours

Credits 3

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Chapter 1New Product in Global

Marketing

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NEW PRODUCTS------------------------------

What Is a New Product ? New products can be new to the

marketplace or new to a company.

A new product for a company may or may not be a part of an existing product line. A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are distributed through the same dealers, or all within certain price ranges.

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By: Eng Leaphea, MBA

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New products can be classified as:

• New-to-the-world products: • New product lines:• Additional to existing product lines:• Improvements in or revision to

existing products: • Repositioning: • Lower cost products:

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Why New Product Succeed?These are:

• Introducing a unique but superior product.

• Having market knowledge and marketing proficiency.

• Having technical and production synergy and proficiency.

• Being in a large, high-need growth market.

• Avoiding introducing a high-priced product with no economic advantage.

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Avoiding a competitive market with satisfied customers.

Avoiding products “new to the firm”.

Having a strong marketing communications and launch effort.

Having a market-derived idea with considerable investment involved.22


Why New Product Succeed?

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Risks of New Product Development

This is due to a variety of factors: Costs will continue to rise. Competition will intensify, particularly from foreign

producers. The life of products is likely to become shorter as

competitors duplicate existing products more quickly. The need for a more rapid pace in new product

development may not be met by the development of new technologies.

Markets will continue to be fragmented, requiring companies to aim new products as smaller target segments.

Investment risks are likely to increase because of high interest rare.

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NEW PRODUCT LAUNCHES

----------------------• Evidence of Market Interest• Accurate Market Evaluation• Good Judgment in

Development• Reasons for Success• Position, Promotion, and

Pricing24


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CHALLENGES IN NEW PODUCT DEVELOPMENT

---------------------- Companies that fail to develop new products are

putting themselves at great risk. Their existing products are vulnerable to changing customer needs and tastes, new technologies, …

New technologies are especially threatening. Most established companies focus on incremental innovation, disruptive technologies .

New products continued to fail at a disturbing rate. Recent studies put the failure rate of new consumer products at 95 percent in the United States and 90 percent in Europe.

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Why do new products fail?

A high-level executive pushes a favorite idea through in spite of negative market research findings.

The idea is good, but the market size is overestimated

The product is not well designed. The product is incorrectly positioned in the

market, not advertised effectively, or overpriced.

The product fails to gain sufficient distribution coverage or support.

Development costs are higher than expected. Competitors fight back harder than expected.

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Several factors tend to hinder new-product development

Shortage of important ideas in certain areas

Fragmented markets

Social and governmental constraints

Cost of development

Capital shortages

Faster required development time 27


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IDENTIFYING NEW PRODUCT IDEAS--------------

Major sources of new-product ideas include internal sources, customers, competitors, distributors and suppliers, and others

• It can pick the brains of its executives, scientists, engineers, manufacturing, and salespeople.

• Some companies have developed successful “entrepreneurial” programs that encourage employees to think up and develop new-product ideas.

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Good new-product ideas also come from watching and listening to customers. The company can analyze customer questions and complaints to find new products that better solve consumer problem.

Competitors are another good source of new-product ideas.

Finally, distributors and suppliers contribute many good new-product ideas

Other idea sources include trade magazines, shows, and seminars; government agencies; new-product consultants; advertising agencies; marketing research firms; university and commercial laboratories; and inventors.

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THE NEW-PRODUCT DEPARTMENT----------------

An organizational design for addressing these requirements is a new-product development. the function of such a department is four fold

To ensure that all relevant information sources are continuously tapped for new-product ideas;

To screen these ideas to identify candidates for investigation;

To investigate and analyze selected new-product ideas;

To ensure that the organization commits resources to the most likely new-product candidates and its continuously involved in an orderly program of new-product introduction and development.

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The following questions are relevant to

this task: How big is the market for this product at various

prices? What are the likely competitive moves in

response to our activity with this product? Can we market the product through our existing

structure? If not, what changes and what costs will be required to make the changes?

Given estimates of potential demand for this product at specified prices with estimated levels of competition, can we source the product at a cost that will yield an adequate profit?

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Assignment

• Find out a company in Cambodia, then do as follows:– List their products they are operating;– Analyze their product Lines

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Chapter 2New Product Development

Process (NPDP)


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ORGANIZATIONAL ARRANGEMENT

New-product development requires seniormanagement to define business domains,product categories, and specific criteria.

Budgeting for new-product development

• Senior management must decide how much to budget for new-product development.

• R&D outcome are so uncertain that it is difficult to use normal investment criteria.


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Organizing new-product development

• Many companies assign responsibility for new-product ideas to product managers, but…

• Large companies often establish a new-product department headed by a manager

• The department’s major responsibilities include generating and screening new ideas, working with the R&D department, and carrying out field testing and commercialization.


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MANAGING THE DEVELOPMENT PROCESS: IDEAS

Idea Generation• The new-product development process starts

with the search of ideas. • New-product ideas can come from

interacting with various groups and from using creativity generating techniques.

Interacting with Others• Ideas for new products can come from

customers, scientists, competitors, employees, channels members, and top management.


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Ten Ways to Create New-Product Ideas

• Run formal session where groups of customers meet with company engineers and designers to discuss problems and need and brainstorm potential solution.

• Allow time-off scouting time- for technical people to putter on their own pet project

• Make a customer-brainstorming session a standard feature of plant tours.

• Survey your customer: Find out what they like and dislike in your and competitors’ products.

• Undertake “fly-on-wall” or “camping out” research with customers.


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• Use iterative rounds: a group of customer in one room focusing on identifying problems, and a group of your technical people in the next room, listening and brainstorming solutions. The proposed solutions are then tested immediately on the group of customers.

• Set up keyword search that routinely scans trade publications in multiple countries for new-product announcements and so on.

• Treat trade shows as intelligence missions, where you view all that is new in your industry under one roof.

• Have your technical and marketing people visit your suppliers’ labs and spend time with their technical people-find out what is new.

• Set up an idea vault, and make it open and easily accessed. Allow employees to review the ideas and add constructively to them.


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Idea Screening• A company should motivate its employees

through rewards to submit their new ideas to an idea manager.

• Idea should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three group: promising ideas, marginal ideas, and rejects.

• Each promising idea is researched by a committer member, who report back to the committee.


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screening ideas, the company must avoid two types of errors

• A DROP-error occurs when the company dismisses an otherwise good idea. It is extremely easy to find fault with other people’s ideas.

• A GO-error occurs when the company permits a poor idea to move into development and commercialization. An absolute product failure loses money; its sales do not cover variable costs. A partial product failure loses money, but its sale cover all its variable costs and some of its fixed costs…


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MANAGING THE DEVELOPMENT PROCESS

CONCEPT

TO

STRATEGY


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Concept Development and Testing

Attractive ideas must be refined into testable product concept.

A product idea is a possible product the company might offer to the market

A product concept is an elaborated version of the idea expressed in meaningful consumer terms.


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Concept Development

A product idea can be turned into several concepts.

• The first question is: Who will use this product? The powder can be aimed at infants, children, teenagers, young or middle-aged adults, or older adults.

• Second, what primary benefit should this product provide? Taste, nutrition, refreshment, energy?

• Third, when will people consume this drink? Breakfast, midmorning, lunch, mid afternoon, dinner, late evening?


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By answering these questions, a company can form several

concept• Concept 1: An instant breakfast drink

for adults who want a quick nutritious breakfast without preparation.

• Concept 2: A tasty snack drink for children to drink as a midday refreshment.

• Concept 3: A health supplement for older adults in the late evening before they go to bed.


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Concept Testing• Concept testing involves presenting the product

concept to appropriate target consumers and getting their reactions. The concept can be presented symbolically and physically.

• However, a more concrete and physical presentation of the concept will increase the reliability of the concept test.

• Today, some marketers are finding innovative ways to make product concepts more real to consumer subject.

• Many companies routinely test new-product concepts with consumers before attempting to turn them into actual new products.


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After receiving information, researchers measure product

dimensions by having consumers respond to the following

questions:• Communicability and believability• Need level• Gap level• Perceived value• Purchase intention• User targets, purchase

occasions, purchasing frequency


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Marketing Strategy

• Marketing strategy development is the designing an initial marketing strategy for a new product based on the product concept


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Following a successful concept test, the new-product manager will develop a preliminary marketing-strategy plan for introducing the new product into the market. The plan consist of three steps:• The first part describe the target market’s size,

structure, and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years.

• The second part outlines the planned price, distribution strategy, and marketing budget for the first year.

• The third part of the marketing strategy plan describes the long-run sales and profits goals and marketing-mix strategy over time

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Business AnalysisBusiness analysis involves a review of thesales, costs, and profits projections for anew product to find out whether they satisfythe company’s objectives.• If they do, the product can move to the

product development stage.

• To estimate sales, the company might look at the sales history of similar products and conduct surveys of market opinion


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• It can then estimate minimum and maximum sales to assess the range of risk.

• After preparing the sale forecast, management can estimate the expected costs and profits for the product, including marketing, R&D, operations, accounting and finance costs.

• The company the sues the sales and costs figures to analyze the new product’s financial attractiveness.


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Chapter 3

Overview in New Product

Development

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Creating New Products

•Customers•Innovation

Peter Drucker: Creative imitation is a strategy aimed at market or industry dominance. But it is much less risk. By the time the creative imitator moves, the market has been established and the new venture has been accepted..

An alternative approach, still based on “imitation,” is to find the major problems associated with existing products in a market and to develop a product that resolves them.


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CORPORATE RESPONSE

• Production Capabilities•Financial Performance•Human Factors• Materials Supply•Time


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MARKETING RESPONSE

•Match with Existing Product Lines

•Price and Quality

•Distribution Patterns

•Seasonality


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VARIABLES AFFECTING NEW PRODUCT DEVELOP

I have observed that the new product development process as follows: Is in place to create change. Is complex and getting more complex. Is attempting to conform to outside

pressures. in many ways, invisible. very expensive. constantly under pressure to make it move

faster. reserved for people with a “can do” attitude.


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Change and Complexity

• The creation of new products is not easy, and yet the management of change is a crucial part of the new product development methodology.

• New product development is a “world” awareness adventure. We must look at markets, customers, distribution channels, marketing techniques, finances, government regulations, forming standards,

• I’ll work with two examples, recorded music and the personal computer, to help explain my thoughts on change and complexity.


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Change and Conformity

• The new product development process is forced to conform to constraints that were developed by different people over a period of time. Because the rules and regulations are man-made,

• Generally, position conformity is more readily accepted in the development environment than the negative type.

• Let’s first explore a few facets associated with negative conformity.


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Negative conformity typically starts with a directive from someone. Second is the “customer is always

right” point of view.Third, there is a tendency in

business to aim for what seems to be the “safe

bet.” The last major conformity issue of

this type is to adapt to “ (MIS).”


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Invisibility• Where do we begin to make visible

such organization quality as communication, teamwork, leadership, force multipliers, roles within the work society, and structural interaction?

• What about the invisible structure associated with technology, markets, economics, and systems that is virtually impossible to model in the development of new products?


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Expense Control • The creation of new high

technology products is very expensive process!

• Most likely there will be a need to network computer and provide for electronic information transfer.


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Need for Speed • New products are the foundation for

continued business success in the high-technology field.

• Time to market (TTM) is the measure of an organization’s ability to convert idea into commercial product reality. It is a competitive requirement; it is a strategy; and , it is an organization capability.


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“Can Do” Experience shows that this attitude will

grow and develop over time if people Think highly of themselves. Perform their work because they are

internally motivated. Strive to realize a driving vision. Establish short-, intermediate-, and

long- range goals. Develop a realistic appraisal of

progress toward achievement of their goals

Take time to have fun. By: Eng Leaphea, MBA

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PATHS TO SUCCESS Winning Ways of Doing New Product

Development• Make new product

development a control process.

• Keep an eye on the world

• Involve all relevant people from the start.

• Assemble and act out information in concert.

• Have a representative object of the end product in view.

• Learn how to make decision quickly.

• Work with competitive tools and methods.

• Entrust execution to competent people.

• In the event of problems, adjust only the effected areas.

• Maintain the “can do” vitality in the organization


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Chapter 4

Design

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5 Chapter04:Design What is Design? The Role of Design in the New Products Process Contributions of Design to the New Products Process Product Architecture

3 hours

4 Chapter04:Design ( continue)Managing the Interfaces in the Design Process Participants in the Design Process Improving the Interfaces in the Design Process Computer-Aided Design and Design for Manufacturability

3 hours

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What Is Design?What is design? One writer define it as “the synthesis

of technology and human needs into manufacturable products.”

In practice, however, design as a term has many uses. To the car companies, it can mean the styling department. To a container company it means their customer’s packaging people. To a manufacturing department it most likely means the engineers who set final product specifications.


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The Role of Design in the New Products

Process

As a proof of the important of design, consider several ways in which design excellence can help firms archive a broad spectrum of new product goals, as show in Figure 2.1.


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Contributions of Design to the New Products Process

Design for the Environment

Design to Build or Support Corporate Identity

Design to Meet Customer Needs

Design for Differentiation

Design for Ease of Manufacture

Design to Speed to Market


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Product Architecture

• Product architecture has been described as the process by which a customer need is developed into a product design. This is a critical step in moving toward a product design as solid architecture improves ultimate product performance, reduces the cost of changing the product once it is in production, and can speed the product to market.

• A process for product architecture development can be applied to make sure the product’s design will be in keeping with customer needs and, ultimately, the product innovation charter


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1- Create the Product Schematic. The schematic shows the components and functional elements of the product and how they are interconnected. Several alternative schematics may be developed and explored at this stage.

2-Cluster the Schematic Elements. Here the chunks (or modules) are defined. In the figure, input, disk, output, and power chunks are identified. Interaction among the chunks should be simple to changes can be easily effected, and one should take advantage of manufacturing capabilities whether possible.


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Indoor Wiring Diagram (Wall Mounted)

Wall Mounted (S-**KA1E5 Series) Wiring Diagram

SW2 (TO ERASE GROUP CONTROL ADDRESS)

SW2

Refrigeration Cycle for 4, 5 & 6HP

Indoor intake air temperature

sensor

Indoor gas pipe sensor

Indoor heat exchanger temperature sensor

Muffler

4-way valve

Schrader valve

High pressure switch

Low pressure switch

Suction pipe temperature

sensor

Indoor expansion

valve

Discharge pipe temperature

sensor

Gas bypass valve

Accumulator

Outdoor expansion

valve

Receiver

Strainer

DC 2-piston rotary

compressor

Strainer

Check valve

Liquid bypass valve

Outdoor air intake temperature sensor

Outdoor heat exchanger temperature sensor

Outdoor defrost temperature sensor

Oil separator

3-Create Geometric Layout. Here, using simulations, computer-aided design, or other techniques, the product arranged in several configurations to determine the best solutions. For example, should the disk load in the front or the side of the CD player?

4-Check Interactions between Chunks. Understand what happens at the interfaces between chunks. In the CD player, sound flows as a digital signal to the disk during recording and also as a digital signal from the disk during playback.


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RC Transmission Channel Address Setting

Wireless remote controller can be set to 3 difference individual channel or 1 master transmission channel.The 3 individual transmission channel will be display at screen as Address 1 , 2 , 3.The 1 master transmission channel will be display at screen as Group. (this is not group Control)

All indoor units which are set to difference transmission channel also will only respond to the remote control which using master transmission channel.

Press any button of remote controller. Ensure the Press any button of remote controller. Ensure the indoor is acknowledged by a beep sound. indoor is acknowledged by a beep sound.

Press Address button to scroll the transmission channel Press Address button to scroll the transmission channel address.address. 1 1 2 2 3 3 Group Group

Press and hold Auto Switch button at the Press and hold Auto Switch button at the indoor unit until 3 beeps sound is heard indoor unit until 3 beeps sound is heard (~11secs).(~11secs).

3

2

1ADDRESS

1

ADDRESS

2

ADDRESS

3

GROUP

Managing the Interfaces in the Design

Process• New product managers have to keep in

mind that product design should not be the responsibility of only the designer! Today, they have to share this traditional role with several other functions.

• There are several participants in the product design task, some in a more direct role than other. One model of how these people participate is shown in


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Participants in the Design Process

Direct Participants • Research &

Development • Industrial Designers and

Stylists • Engineering

Designers/Product Designers

• Manufacturing Engineers and System Designers

• Manufacturing Operations

Supportive Participants

• Design consultants • Marketing Personnel • Resellers • Vendors/ Suppliers • Governments• Customers• Company Attorneys• Technical Service


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Improving the Interfaces in the Design Process

• Several techniques are currently being used to make sure that design is integrated correctly with other functions during the development phase, and that the products being designed can be manufactured in a cost-efficient way.

• Important among these is collocation ( putting the various individuals or functional areas in close proximity). When the different groups are not in regular contacts and cooperating there is a tendency for information to be lost (or hidden). This causes wasted work and slows the whole operation down. Many firms have tried collocation to shorten communication lines and increase team cohesion.By: Eng Leaphea,

MBA

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• Colocation helps integrate departments and improve information flow and also allows the team members to identify and resolve product development problems more quickly. It must, be carefully planned and handled.

• In many firms, the effects of collocation are achieved without actual physical proximity of team members, using the resources of communications technology. This is sometimes known as digital colocation. As a final note, there is a recent increase in the use of global teams (that is, teams comprising individuals from at least two different countries).


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• Improved information technologies such as e-mail, and company databases combine with phone calls and regular mail to make global teams an increasingly feasible option.

• In addition, partnering upstream with vendors is a possibility. Most companies tell us they are doing it, by using reverse marketing, technology searches, demands that suppliers value engineer their product, and by putting supplier people on the new product teams.


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Computer-Aided Design and Design for Manufacturability

• That is the technology of the acronyms: CAD (computer-aided design), CAM (computer-aided manufacturing), CAE (computer-aided engineering), DFM (design for manufacturing), and variations.

• These technologies offer lots of advantages-people have to work together to understand and use them, they force the integration of all needs into one analytical set, they are fast, and they do more than the human can do alone even if there were ample time.


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Chapter 5Special Issues

in Development

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6 Chapter05: Special Issues in Development Speed to Market

1- Techniques for Speeding Time to Market 2- Overall Principles and Guidelines

The Role of Top Management during Development

3 hours

7 Chapter05: Special Issues in Development Functional Interface Management

1- Managing the Interfaces2- Overall Principles and Guidelines


3 hours

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Speed to Market Many different industry settings that

cross-functional teams contribute greatly to increasing speed to market.

Far better is to use such devices as benchmarking, where a firm studies other firms

The way management measures speed to market (or, frequently, time to market), is often getting the idea to the shopping dock faster.”.


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Hearing about the value of being first to mindshare rather than being first to market.

The firm with mindshare in a given product category is the one that the target market associates with the product category, and that is seen as the standard for competitors to match.

Firms that strive for mindshare think not about the speed of an individual product’s development and launch, but rather about creating a dominant position in the mind of the customer.04/07/23 84

1- Techniques for Speeding Time to Market Accelerating time to market has

been an important objective of innovating firms in recent years.

Some observers have noted that the use of parallel processing by the Japanese automakers was a big factor in their emergence on the world market.

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Key Characteristics of Short-Cycle-Time Firms

• Extensive user involvement early in the new products process, capturing the “voice of the customer.”

• Cross-functional teams are dedicated to the new product.

• Suppliers are extensively involved.• The firms adopt effective design

philosophies and practices. • The most adapt firms are effective at

organizational learning. 04/07/23 86

2- Overall Principles and Guidelines

Some other considerations in cycle time acceleration may be summarized succinctly

-Do the job right the firs time. - Training of everyone involved. - Communication. - Flexibility. - Fast decision.

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The Role of Marketing during Development

1- Marketing is Involved from the Beginning of the Process

• Marketing people are now involved from the very beginning of the new product process, and have a very important role. Throughout the process, they advise the new products team about how the product development underway fits in with the firm’s marketing capabilities

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• It is too easy to say that marketing’s role is to gather information from the marketplace. Too often, that means that marketing plays a gatekeeper role, funneling information from the marketplace to the new products team

• Marketing eventually found out that there was a bigger market out there that was very interested in, but not for the attributes originally thought to be most important. Clearly, the original technology-push innovation had done and market needs were now driving further technical development.04/07/23 89

2- Marketing Ramp-Up, or the “I Think We’ve Got It” Phase

Contributions to the process throughout, the roles of both marketing and manufacturing changes as the process move along. Often, an important turning point occurs when the early prototypes are made and are passing performance tests.

We might call this point the “I think we have got it” phase and it is here that the team’s whole attitude toward the projects changes. They have to begin planning field sales and service availability for the product, investigate packaging and branding options, bring in the advertising agency representatives.

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• In new product development, we often hear of “manufacturing ramp-up”- the stage at which manufacturing personnel plan the full-scale production of the product.

• Just like manufacturing ramps up from prototypes to full production, marketing can be said to ramp up for product launch- and marketing ramp-up begins here.

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The Role of Top Management during

Development• New product people claim that only top managements have the power to make decisions essential to their projects. But, in all fairness, top management support is needed for the overall new product program – they don not have time to be champions for individual projects except rare, crucial ones.

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Specifically, how can top management help? They should be smart, experienced general managers, for starters. They should know how to make timely decisions, and realize the unique and extraordinary need of the new product staff for strategy direction.

The top manager should support (in fact, demand) a product innovation charter. Add, too, a longer-term financial view and a managerial style that supports risk-taking and good communication.

Top management’s interest and support should be clearly signaled by open statements of confidence, by appointments of people who clearly are “comers” in a firm.04/07/23 93

Functional Interface Management

• As we have seen, product innovation involves people from many different functional areas and backgrounds: sales and marketing, R&D, design, engineering, manufacturing, operations, and so on.

• Part of challenge of new products is managing the interfaces across the functional areas, as the key functions must co-operated often and effectively to improve product development performance.04/07/23 94

1- Managing the Interfaces• The essence lies in three statements:

• - Top managers get the interfaces they deserve, because they can eliminate most of the problems anytime they choose to do so.

• - Interface management primarily takes time, not skills. One new product manager said he solved his team’s problems by giving at least 40 % of his time to seeing that all key players spent a lot of time with each other, on and off job.04/07/23 95

•- Participants who continue to be a problem should be taken out of new products team situations; they get some perverse satisfaction out of reactions to their behaviors.

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2- Overcoming Barriers to Market Orientation

Market information is not used if it does not conform to specifications. It is critical for management to create an environment of mutual trust among employees of all functional areas; higher levels of trust mean that managers will be more open to suggestions that might cause in the way things are done.

Clearly, while we have seen great improvements in recent years on these issues, the problems remain, and more improvement still needs to be made.04/07/23 97


Structurally, global product innovation can be handled in several ways:

1-Make no special arrangements. Export what is developed for the home market. On the one hand this is called the export approach, yet when market conditions around the world are substantially the same, then this approach of one product for all countries is called global strategy.

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2- Keep structure the same, but develop versions of the new item to meet the needs of viable foreign markets. This approach is usually thought of as a variation of the export approach or called international strategy.

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3- Use the facilities of the home firm, but have separate projects directed by managers in each viable foreign area. These foreign managers learn of available technologies in the home firm, study their local markets to see how each might apply, and then set up projects to develop what is needed there. This is often called a multinational strategy. 10004/07/23

4- Assign the basic responsibility for product innovation to each foreign business larger enough to have the resources for it. This usually means some local R&D, local manufacturing, and almost totally local marketing.

Operational cultures and policies will vary greatly from country to country. This strategy ha no common name, but local drive would fit.

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5- The last alternative is a mix of the above, variously called matrix, country of excellence. Essentially, the firm wants to be a major player in all viable markets of the world, but wants to develop strategies appropriate to each of those markets. It is often done by world region, continent, or other larger geographical division.

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Chapter 6Product

Use Testing04/07/23 103

What Is Product Use Testing

• Use testing means use under normal operating conditions. A bank installs a new check cashing services at three branch points. The product will probably not be perfect at this time, for more reasons than poor design.

• Testing should continue until the team us satisfied that the new product does indeed solve the problem or fill the need that was expressed in the original protocol.

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Is Product Use Testing Really Necessary?

In one case, excellent product use testing resulted in the development of a successful launch strategy, in the other product use testing was probably never done, with predictably poor results.

But even in consumer packaged-goods industries, there should be more serious consideration of the counter arguments for use testing. Here they are.

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1- Regarding Competitors’ Reactions

A firm developing new items is well advised to build its innovation on a technology base where it has some insulation from competitive copying.

Second, competitors today are finding that copying someone else has small gains-others will copies the innovator’s mistakes too, and the competitors were must worry about most are themselves involved in technology-based developments that cannot be thrown over on short notice.

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2- Customer Needs Are Complex Sets• End-user is indeed complex and there is no

way it can be simulated in laboratories, where use is isolated from user mistakes, competitive trashing of the concept, and objections by those in the user firm or family whose work or life is disrupted by the change.

• In addition, for new-to-world products, several product use tests may be needed for a company to “get it right” – what is important is that the company learns from its errors.

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3- Can We Deliver A Total Quality Product?

• Recall the idea of the augmented product-where there is a core benefit, then a formal product, and then the many augmentations of service, warranty, image, financing, and so on.

• The new product process tends to focus on the core benefit and the formal product, and even that may have implementation problems. But firms often just assume they will be able to deliver outer ring of augmented product quality04/07/23 108

the sales force will be able to explain the new item well, early product breakdowns will not chase other potential buyers away, the finance division will approve generous financing arrangements, the advertising effectively answers competitors’ claims, and warehouse personnel won’t make a simple mistake and destroy half the product.

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Figure 6-1 Set of New Knowledge from Product Use Tests

Pre-use sense reactionsPre-use sense reactions

Early use experiencesEarly use experiences

Major benefit results and problem solvingMajor benefit results and problem solving

Diagnostic informationDiagnostic information Diagnostic informationDiagnostic information

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Knowledge Gained from Product Use Testing

Pre-Use Sense Reactions

Almost every product gives the user a change to react to immediate sensations of color, seed, durability, mechanical suitability, and so on. Initial reactions are important especially on service product.

Early Use Experiences

This is “does it work” knowledge. Key specifics are such things as ease of use, surface variables, can they manage it, are there still bugs, and is there any evidence of what the item will eventually do.04/07/23 111

Beta tests The ultimate use test of the protocol is to try it

out at customers sites, to evaluate whether the product solves whatever problems led to development of the product in the first place.

These are short-term use tests at selected customers sites (external customers or, sometimes, employees serving as internal customers). In fact, some have their people competing to see who can find the most bugs in a new item-better now than later.

The tests are not designed to tell them about meeting customer needs and solving problems-such testing takes longer than the few weeks usually allowed on computer products.

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Gamma Testing Beta testing may not meet all of the developer’s

needs. In a beta test, users may not have had time to judge whether the new product met their needs or was cost-effective for them.

As a result, a third is becoming popular, gamma testing (gamma being the third Greek letter after alpha and bets). It designates the ideal product use test, where the item is put through its paces and thoroughly evaluated by the end-user.

To pass this test, the new item must solve whatever problem the customer had, no matter how long it takes. Gamma testing is so critical on new medicines and medical equipment that the United States demands it; such testing can take up to 10 years.

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• Diagnostic Information– New products managers are looking for how items

are used, what mistakes are made. Use tests often suggest ways to improve performance or to reduce cost. New product developers also seek specific pieces if information needed to back up their claims. Marketers want confirmation of target markets and product positioning.

– Product integrity is also on trial during a use test, since only the user’s perceptions tell us whether the parts tie together into a meaningful whole, and whether product fist application. Last, developers are watching for many other red flag, a signal that users had some problems understanding the new item or where show to accept the results they got, and so on.

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Decisions in Product Use Testing

• Who Should Be in the User Group?– Some use testing is down with lab

personnel at the plans where the products are first produced.

– Experts are the second testing group (for example, the cooking staff in a test kitchen). Experts will give mare careful consideration than will typical users and probably will express more accurate reactions. They will not be interested in the same things that interest customers, however.

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– The third test group option, employees, is widely

utilized thought often criticized. Company loyalties and pressures and employees’ lifestyles and customer may distort opinions and attitudes. Obvious problems of possible bias can be overcome to some extent by concealing product identities and by carefully training and motivating the employee panel.

– Stakeholder are the next choice, and the set includes customers and non-customers, users and nonusers, resellers. End-user advisers (such as architects), users of competitive products, repair organization, and technical support specialists whose reactions to new products have been sought.

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How Should We Reach the User Group?

There are several options here. • First we must decide on mode of contract:

Mail and personal are most common. The mail method is more limited than personal contact in type of product and depth of questioning, but it is more flexible, faster, and cheaper.

• Burlington Industries used the telephone to ask people to serve on special one-time mail panels that evaluated mew fabrics. Business-to- business firm often insist on personal contact, since they need closeness far beyond that on most consumer product. 04/07/23 117

Second, there is a choice between individual contact and group contact. Most firms prefer individual contact, especially at this critical point in the development cycle, but it may be cheaper to deal with groups. (traditional focus group is not a place for use testing.)

Third, the individual mode of contact brings up the question of location. Should the test be conducted at the point of use (home, office, or factory), or should it be conducted at a central location (test kitchen, shopping center, theater, or van)? The point-of use location is more realistic and permits more variables to operate. But it offers poor experimental control and permits easy misuse.

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Should We Disclose Our Identity?

• A key issue, identity disclosure, concerns how much the user should be told about the brand or maker identity of the product. Some testers prefer often disclosure, while other (the majority) prefer to keep it secret.

• It may be that the band cannot be hidden-as with many cars, some shoes, and many business products. Persons have perceptions about various firms and brands.

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How Much Explanation Should We Provide?

Some people conduct use tests with virtually no comment other than the obvious “Try this.” But such tests run the risk of missing some of the specific testing needs.

A second degree of explanation, called commercial, includes just the information the customer will get when actually buying the product later.

The third level is full explanation. It may be necessary to include a great deal of information just to ensure the product gets used properly

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How Much Control over Product Use Should There Be?

• Most new medicines can be tested legally only under the control of physicians. This total control is essential when accurate data are required and when patient safety is concern.

• Many industrial products also require total control to avoid dangerous misuse. But most testers want users to experiment, to be free to make some mistakes, and to engage in behavior representative of what will happen later when the product is marketed.

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Over What Time Period Should the Test Be Conducted?

Some use tests require a single product experience; some require use over short periods of up to a week; and some require use over extended periods of up to six months. The initial, quick test predicts the early reactions of those people we call innovators. Failure here, even if perceptions are unjustified, will often doom a good product.

Tests over a month long are rare on consumer product and difficult to defend to management. But if a new piece of business equipment will be positioned on its cost-cutting advantage, the use test had better run long enough for the user to see a significant cost reduction.

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What Should Be the From of the Product Being Tested?

The opposing view favors building variants into the test situation-colors speeds, sizes, and so on. The latter approach is more education but also much more costly. Services are almost always tested in multiple variations, give that it is usually easy to make the changes.

The decision rests on several factors, the first being how likely the lead variant is to fail. No one wants to elaborately test one form of the product and then have that form fail.

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How should We Record Respondents Rejections?

Essentially, three options are available. First, a five-or seven-point verbal rating scale is generally used to record basic like/dislike data.

Second, the respondent is usually asked to compare the new product with an other product, say, the leader or the one currently being used, or both; this is a preference score; which can be obtained several ways. Third, for diagnostic reasons, testers usually want descriptive information about the product that covers any and all important attributes.

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A research firm was involved in studying opportunities for a new sausage and had previously asked consumers to rate the sausage products then available on a variety of attributes, including greasiness.

The results showed strong aversions to both of those attributes, which were associated with low overall scores for product quality.

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Who Should Do the Product Use Test?

• The first choice here is between personal within the company and personnel outside the company. The firm may or may not have the necessary personnel skilled in information in technology with analytical capability.

• Second, the functions (marketing, technical) historically have jockeyed for control. But today we have the development team be responsible–the sane team that handle the prototype concept testing. If vendor personal are members of such teams, then they too participate. 04/07/23 126

Special Problem Don’t Change the Data Just Because

They Came Out Wrong • One firm discovered a user in a use, but the

president said, “They’re just going to have to have to live with it.” Unfortunately, the use test did not ask whether users were willing to live with it. They weren’t, and the product failed.

• In some tests technical and marketing people warn of user problems only to be told that they are being negative-a real-life case of “kill the messenger.”04/07/23 127

Be Alert to Strange Conditions

• One industrial firm noticed that several electrical measuring instruments showed sings of tampering after a field test.

• On examination, they found users were making a particular change to aid the product’s function; after a few telephone calls, they had an improved product design ready to go out for more testing.

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What If We Have to Go Ahead without Good Use Testing? – Try to work some use testing into the early

marketing stages, and try to have some alternatives ready to switch to as a hedge against negative outcomes.

– There are also surrogate tests available if time or money limitations prevent a full product use tests.

– Quick results are possible, for example, through constructive evaluation (the respondent uses the item, describing activities and explaining problems encountered) or retrospective testing (the user reviews videos of conventional product use testing previously done). 04/07/23 129

Chapter 7

Strategic Launch

Planning 04/07/23 130

I. Setting At this point in the new products

process, the team is ready to build the actual marketing plan. The task should be easy if the new item is an improvement to items already in the line.

Weak strategic planning then shows up when the product reaches the market, and tactical error (such as insufficient resource allocation) can compound the problem.04/07/23 131

Strategic launch decision include both strategic platform decisions that set overall tones and directions, and strategic action decisions that define to whom we are going to sell and how.

Tactical launch decisions are marketing mix decisions such as communication and promotion, distribution, and pricing that are typically made after the strategic launch decisions, and define how the strategic decisions will be implemented.04/07/23 132

The Strategic Givens In fact, they are such a problem that top

managements often set up venture groups or skunk works, organizational form supposedly immune from whatever restrictions are endemic to the firm.

Sometimes the givens is an individual a strong member of upper management whose personal “druthers” become corporate law. A firm in the ethical drug products field had a sales manager totally committed to an indirect channel of outlet distribution.

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• The point is, they need to be identified and studied. If the launch team wants to challenge such restrictions, fine, but it should do so early and should be prepared to lose.

• Ultimately, as company organizations are now changing, most of these restrictions will yield. They are silo or chimney holdings, and the horizontal management philosophy of today is designed to bypass just such restrictions.

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Revisiting the Strategic Goals

Usually much has been learned in the new

products process, competitive conditions may have changed, and customer or management needs may have changed.

Therefore, at this early stage in the launch planning process, the goals should be revisited and updated.

Unfortunately, business firm use a complex set of measures as goals and of measures for individual products is as follows:

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Customer Acceptance Measures Customer acceptance (use) Customer satisfaction Revenue (dollar sales) Market share Unit volumeFinancial Performance Margins Profitability

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Product Level Performance• Product cost• Time to launch• Product performance• Quality guidelinesOther• Nonfinancial measures peculiar to

the new product being launchedExample: competitive effect, image change, and morale change.

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Strategic Platform Decisions1. Type of Demand Sought Different levels of product

newness require different kinds of impact the launch activities must have on demand: For a new-to-the-world product: For a product improvement or

upgrade to existing product For a new entry or line addition in

an established market (such as Pepsi One): 04/07/23 138

2. Permanence 3. Aggressiveness4. Competitive Advantage5. Product Line Replacement6. Competitive Relationship7. Scope of Market Entry8. Image

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The Target Market Decision 1/ Alternative Ways to Segment a MarketEnd-Use Geographic and DemographicBehavioral and Psychographic Benefit Segmentation

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2/ Micromarketing and Mass Customization

A current twist in target market selection is the trend toward smallness. These clusters have been labeled micro-markets.

Direct marketers have always used tiger segments than have mass media marketers, stemming from their databases.

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• The ultimate smallness, and the ultimate in building in customer value, is mass customization Great advances in information technology and changes in work processes make mass customization feasible for many products; the challenge is for managers to decide how best to proceed.

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3/ Targeting May Also Use Diffusion of Innovation

New products are innovations, and we call the spreading of their usage the diffusion of innovation.

Let’s look closer now at the factors that affect this speed of the product adoption process: the characteristic of the innovation product, and the extent to which early users encourage other to follow

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Product characteristic

There are at least five factors that measure how soon a new product will receive trial.

1. The relative advantage of the new product.

2. Compatibility. 3. Complexity. 4. Divisibility (also called trial ability). 5.Communicability (also called

observability). 04/07/23 144

VI. Product Positioning A product positioning statement is

created by completing this sentence: Buyers in the target market should buy our product rather than others being offered and used because:

New products managers have a big advantage on positioning—the end-user’s memory slate is clean; potential buyers have no previous positioning in mind for a new item. Now is the best chance ever to effect a particular positioning for their item.

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Positioning alternatives fall into two broad

categories•The first is to position to an attribute (a feature, a function, or a benefit). Attributes are the traditional positioning devices and are most popular.

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The second alternative in positioning is to use surrogates (or metaphors). This says the product is better are not given; the listener or viewer has to provide those. If the surrogate is good, the listener will bring favorable attributes to the product.

The market research techniques we encountered early on can be profitably put to use in developing a positioning strategy.

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VII. Creating Unique Value for the Chosen TargetOnce a market segment has been targeted and a positioning statement created for it, we have a chance to cycle back to the product itself and see if we can enhance its value to the chosen market.

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As the first product is coming down the pike, the first couple of line extensions should be in development. Then, after launch, when competitors are casting around for ways to come out with catch-up versions, we market them first.

In the remainder of this section, we will focus our attention on two of the ways in which we can increase unique value to the targeted customer—branding and packaging. 14904/07/23

VIII. Branding and Brand Management• Technically speaking, services have

service marks, not trademarks, and businesses have trade names, not trademarks.

• Another definition is very important: registration. Historically, and still today in most countries, the first use of a trademark had exclusive rights. But in the United States you can ask that your trademark be registered.

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IX. Packaging 1. What Is Packaging?

Three “containers” are usually included in the term

packaging, •Primary packaging •Secondary packaging •Tertiary packaging

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2. The Various Roles of Packaging

These are easy to see. • The major ones are containment (hold for

transporting), • protection (from the elements and the

careless),• safety (from causing injury), • display (to attack attention), and to inform and

persuade. • All are important to a new product manager,

sometimes enough so that there are legal problems; packaging design is a part of logo and trademark, where rights can be valuable.

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3. The Packaging Decision

Packaging is part of the new products manager’s network. But it is so multifunctional it tends to have its own sub network (see Figure 17.13).

It centers on a person most often called the director of packaging. The packaging decision may take months; it is a key target in most accelerated development programs.

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MANY THANKS FOR YOUR

PARTICIPATION

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