New Product Devlopment.ppt
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Transcript of New Product Devlopment.ppt
New Product Development
XIME
2
Chapter Questions
What challenges does a company face in developing new products and services?
What organizational structures and processes do managers use to manage new-product development?
What are the main stages in developing new products and services?
3
Chapter Questions (cont.)
What is the best way to manage the new-product development process?
What factors affect the rate of diffusion and consumer adoption of newly launched products and services?
4
Categories of New Products
New-to-the-world
Cost reductions
New product lines
Additions
Improvements
Repositionings
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World’s Most Innovative Companies
Apple
Toyota
General Electric
Microsoft
Procter & Gamble
3M
Walt Disney
IBM
Sony
Wal-Mart
Honda
Starbucks
Target
BMW
Samsung
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New Products
Companies failing to develop new products are at risk. Existing products are vulnerable to consumer needs/tastes, new technology, shortened PLC.However new products development too is risky.
- TI ($500MM) home computer- Ford ($250MM) on Edsel- Dupont ($100MM) on synthetic leather
70-80% failure rate for FMCG and financial products
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New Products
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Finding One Successful New Product
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New Products
Why new products fail?- high level executive’s pet product- market size overestimated- product not well designed- overpriced- competitors fight back harder
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New Products
Effective Organizational Arrangements
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Effective Org Arrangements
Top ManagementEstablish criteria for acceptance
- within 5 years/ market potential of 100cr./ provide 30% return/ achieve market leadership- how to budget given the uncertainty(??)
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Effective Org Arrangements
3M Model
- Encourages all to become product champions (allows 15% time)
- Create a multi disciplinary venture team- Expects some failure- Hands out Golden step award to each
venture meeting new product standards
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Effective Org Arrangements
Product Managers- knowledgeable about current markets- likely to be busy with existing products- might lack knowledge to critique new
products
New Product Managers- report to product managers- like product managers, think more about
line extensions/ modifications
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Effective Org Arrangements
New Product Departments- Large companies- covers R&D, testing & commercialization- access to top management
New Product Venture Teams- dynamic (‘intrapreneurs’)- setup for a specific product, relieved of
normal duties, given a budget and time frame
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Assessment
Most sophisticated tool is
Stage-Gate System
- divide innovation process into stages- a gate/ check point at the end of each stage- project leader bring a set of deliverables to each
gate- decide go/ kill/ hold/ recycle
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Stage-Gate System
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Managing New Product Development Process
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New Product Development
1. Idea Generation- source could be customers, scientists, employees,
competitors, channel, top mgmt
- customers for most of the industrial products/ also product improvements
- employees (Toyota claims 2MM ideas/yr). Even monetary rewards are provided.
- competitors products and services (reverse engineering?) what customers like and dislike.
- sales representatives. First hand info on market developments and customers.
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New Product Development
Idea Generation TechniquesAttribute listing:- List attributes of a product and find
ways to improve.
Forced Relationship:- several attributes are combined to create a new product.
Morphological Analysis:- identifying structural dimensions and find novel combinations.
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New Product Development
Type Medium Transmission
Cart Land Tyre
Chair Water Chain
Bed Snow Rail
Sand Propeller
Need/Problem Identification:- customers - about level of dissatisfaction about any product/ service
Brainstorming:- 8 to 10 people discuss ideas without criticism
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New Product Development
Lateral MappingGas stations + food
Cafeteria + Internet
Cereal + snacking
Candy + toy
Audio + portable
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New Product Development
2. Idea Screening
- objective is to drop poor ideas as early as possible
- committee evaluate and group ideas into promising/ marginal /rejects
- Drop Error vs. Go Error
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New Product Development
2. Concept Dvlpt and Testing
-who will use the product? benefits?
- develop a product positioning map and brand positioning map
- test the concept with appropriate group of target consumers (product or model as close as possible to final product)
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New Product Development
3. Market Testing
Simulated Test Marketing:-
- 30-40 qualified shoppers
- screen - well known and new product ad
- company note how many buys new and competing brands
- non-buyers are given samples and contacted later
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New Product Development
3. Market Testing
Controlled Test Marketing:-
- panel of stores
- controls shelf positioning, displays etc.
Allows testing of store promotions, ads. Need not use its sales force.
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New Product Development
3. Market Testing
Test Marketing:-
- how many cities, which cities, length of test
- more reliable forecast/ test alternative marketing plans (avg. ad+free sample, heavy ad+ door to door sample etc.)
Many companies skip to save time/ launch in 25% of country
27XIME
Behavior Scan (IRI)
Household panels in five markets
Panelists shop with an ID card presented at check-out (or scan products at
home with hand-held scanner)
Tracks each household’s purchases item by item, over time
Behavior Scan (IRI)
28XIME
Test commercial aired to one group of households
-Evaluate effectiveness of advertising
-Alternatively, test new products, promotions (coupons,etc.), in-store variables
Behavior Scan (IRI)
2929
Only “Split Cable” Advertising Testing System
Invisibly deliver different TV commercials
Broadcast Ad
IRI Cut-In
Ad
To distinct household groupsin the same city
30XIME
Commercialization
Commercialization
31XIME
Will face largest cost- Size of plant (build smaller than forecast –
Quaker oats)
- Marketing – may have to spend $20-$80MM for ads and promo in first year
Commercialization
32XIME
Elements of Cost
- Market Potential
- local reputation
- cost of filling pipeline
- cost of media
- influence of area on other area
- competitive penetration
Commercialization
33XIME
WhenFirst Entry:- enjoys first mover
advantage/ must debugged thoroughly
Parallel Entry:- Entry coincides with competitors
Late entry:- Delay the launch. Educate the market. Reveal fault. Assess size of market
Commercialization
34XIME
WhereSingle locality/ region/ several regions/
national market/ international market
-few companies got confidence or resources to launch national
- planned roll out (impact of internet??)
- most companies design for domestic market
- competitive presence influence regional choice
Commercialization
35XIME
WhomTarget distn and promotion to best prospect
- Early adopters
- Heavy users
- Opinion leaders
Aim is to generate strong sales as soon as possible
Who really use the product?
-microwave oven (popcorn)
- PC (cd rom)
Commercialization
36XIME
How (market strategy)Develop an action plan
Sequence and coordinate
Commercialization
37XIME
FLAW 1 The company can’t support fast growth.THE LESSON Have a plan to ramp up quickly if the product takes off
MOSQUITO MAGNET:- In 2000 American Biophysics launched Mosquito Magnet, which uses carbon dioxide to lure mosquitoes into a trap.
Expanded manufacturing from its low volume Rhode Island facility to a mass production plant in China, quality dropped.
Commercialization
38XIME
FLAW 2 The product falls short of claims and gets bashed.THE LESSON Delay your launch until the product is really ready.
MICROSOFT WINDOWS VISTA:- In 2007 Microsoft launched Windows Vista. Allotted $500 million for marketing and predicted that 50% of users would run the premium edition within two years.
But the software had so many compatibility and performance problems that even Microsoft’s most loyal customers revolted.
Commercialization
39XIME
FLAW 3 The new item exists in “product limbo.”THE LESSON Test the product to make sure its differences will sway buyers.
COCA-COLA C2 For its biggest launch since Diet Coke, Coca-Cola identified a new market:20- to 40-year-old men who liked the taste of Coke (but not its calories and carbs) and liked the no-calorie aspect of Diet Coke (but not its taste or feminine image). C2, which had half the calories and carbs and all the taste of original Coke, was introduced in 2004 with a $50 million advertising campaign. C2 failed.
A year later it launched Coke Zero, a no-calorie, full-flavor product that can be found on shelves—and in men’s hands—today.
Commercialization
40XIME
FLAW 4 The product defines a new category and requires substantial consumer education—but doesn’t get it.THE LESSON If consumers can’t quickly grasp how to use your product, it’s toast.
FEBREZE SCENTSTORIES In 2004 P&G launched a scent “player” that looked like a CD player and emitted scents (contained on $5.99 discs with names like “Relaxing in the Hammock”) every 30 minutes.
Commercialization
41XIME
FLAW 5 The product is revolutionary, but there’s no market for it.THE LESSON Don’t gloss over the basic questions “Who will buy this and at what price?”
SEGWAY News of a secret new product codenamed Ginger created by the renowned inventor Dean Kamen leaked to the press nearly 12 months before the product’s release. Kamen, it was said, was coming up with nothing less than an alternative to the automobile.
At $5,000, instead of selling 10,000 machines a week,as Kamen had predicted, the Segway sold about 24,000 in its first five years.
Commercialization
42XIME
Case of Sunil – the techie
Idea to rollout- case of a PGDM alumnus
43XIME
Case of Sunil – the techie
Customer feedback
Collate and analyze
automatically
Analysis/ statistical
engine
Reports and insight On
Cloud
Idea
44XIME
Case of Sunil – the techie
Background Worked for 1 year/ started with a mobile store/ switched to market research
Idea Provide a cloud based solution which analyze and provide customer response real time.
Concept development1
Restaurants. Customers will sent an SMS as soon as they pay and replies will be analyzed daily and provide feedback.
Bottlenecks No database. Need loyalty card. Could get some business in providing and tracking loyalty cards.
45XIME
Case of Sunil – the techie
Concept Development2
Airlines. Found traction with an interested senior executive.
Product development&
testing
Signed up with other batchmates and a software consultant. Stress test through telecom company.
Disaster The airline executive was transferred.
46XIME
Case of Sunil – the techie
Concept development3
Relationship with placement firms and found an opportunity. Converted the idea into fast response. Targeted US markets.
Concept testing
Need feedbacks from potential users. Offered $50 redeemable Amazon coupon for response. Many didn’t redeem
Product development
Same team. But got them to talk to potential users
Roll out Rolled out with one user although opportunity existed for few others
47XIME
Thank You