Chapter Objectives In this chapter, we focus on the followingquestions: What challenges does a company face indeveloping new products? What organizational structures are used tomanage new-product development? What are the main stages in developing newproducts, and how can they be managed better? What factors affect the rate of diffusion andconsumer adoption of newly launched products?
New Product Options MAKE or BUY1. Company can buy other company2. Acquire patent from another company3. Buy a license or franchise from othercompany
Types of new productSix categories of new products1. New-to-the-world products2. New product lines3. Additions to existing product lines4. Improvements and revisions of existingproducts5. Repositioning6. Cost reductions
Petroleum High Performancepetrol by BharatPetroleum1. Improves engineperformance2. fuel efficiency
Why do new products fail? A high-level executive pushes a favoriteideathrough in spite of negative researchfindings. The idea is good, but the market size isoverestimated. The product is not well designed.
The product is incorrectly positioned in themarket, not advertised effectively, oroverpriced. The product fails to gain sufficientdistribution coverage or support. Development costs are higher thanexpected. Competitors fight back harder than
productdevelopment Shortage of important ideas in certain areas Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles
Organizing New-ProductDevelopment Product managers New-product managers High-level management committee New product department Venture teams
Managing the Development Process:IdeasIdea Generation Interacting with Others1. Sales representatives2. Intermediaries3. Product champion
Managing the Development Process:IdeasTechniques for stimulating creativity inindividuals and groups Attribute listing Forced relationships Morphological analysis Reverse assumption analysis New contexts Mind-mapping
Idea Screening1. Idea manager2. Idea committee Two types of errors in screening ideas1. DROP-error2. GO-error
Some of the most notable “drop-errors”have come from the most recognizablenames in American business. Xerox sawthe potential of the copy machine, IBM andEastman Kodak did not. IBM thought thepersonal computer market would beminiscule.Can you think of any“drop-errors” that the company didn’t survive?
Managing the Development Process:Concept to Strategy Concept Development and TestingA. Product ideaB. Product concept Concept developmentA. Category conceptB. Product–positioning mapC. Brand concept
Concept Testing1. Rapid prototyping2. Virtual reality3. Customer-driven engineering Questions to measure product dimensions Communicability and believability1. Need level2. Gap level Need-gap score
Perceived value Purchase intention User targets, purchase occasions, purchasingFrequency Conjoint Analysis- Example: five design elements Three package designs Three brand names Three prices Possible Good Housekeeping seal Possible money-back guarantee
Marketing Strategy Business Analysis Estimating Total Sales Estimating Cost and Profits1. Break-even analysis2. Risk analysis
Managing the Development Process:Development to Commercialization Product Development Quality Function Deployment (QFD) Customer attributes (CAs) Engineering attributes (EAs)
Market Testing Consumer-Goods Market Testing Seeks to estimate four variables1. Trial2. First repeat3. Adoption4. Purchase frequency Sales wave research