The Process of Developing New Products

1. The MAANZ MXpress Program
New Product Development
Dr Brian Monger
Copyright May 2013.
This Power Point program and the associated documents remain the intellectual property and the
copyright of the author and of The Marketing Association of Australia and New Zealand Inc. These
notes may be used only for personal study associated with in the above referenced course and not in any
education or training program. Persons and/or corporations wishing to use these notes for any other purpose
should contact MAANZ for written permission.

2. MAANZ International
• MAANZ International, is a Not for Profit,
internet based professional and educational
institute which has operated for over 25 years.
• MAANZ International offers Professional
Memberships;
• Marketing Courses (Formal and Short)
• And Marketing Publications
• www.marketing.org.au
2

3. Dr. Brian Monger
• Brian Monger is the CEO of MAANZ International and a
Professional marketer and consultant with over 40 years
experience.
Marketing In Black and White 3

4. 4
New Product Development
Given changes in consumer tastes,
technology and competition, organisations
must develop new products if they are to
remain competitive.

5. 5
The Need for New Offers
• The Value Offer Cycle Model (or more commonly
known as the Product Life Cycle) shows that all
products have a finite life in their market.
• New offer development is risky. Many new
products don’t succeed.
• This presentation looks at the management of
new value offer development.

6. 6
What Is A ‘New’ Offer?
•There are typically four ways to classify a new
offer:
•New to the world;
•New to a specific market;
•New to the organisation
•A new application of an existing offer.

7. New to the
Organisation
New to the
World
New to a
Specific Market
New
Application/
Product
Extension
Newness to Market
Low High
Newness to
Organisation
High
Low
Figure 1 Offer Types

8. 8
What Drives New Offer Development?
• There are basically three distinct but
interacting factors that drive an organisation
to develop new offerings:
• The culture of the organisation .
• Stakeholder pressure.
• Market pressure.

9. 9
Sources Of Ideas For New Offerings
• Externally
• customers’ needs
• competitors
• technology advances
• Internally
• employees
• market research
• consultants.

10. 10
The Offer Life Cycle
• The Offer Value Life Cycle Curve is shown in
Figure 2.
• Its stages are outlined below.
• Stage one: Development
• Stage two: Launch and introduction
• Stage three: Growth
• Stage four: Maturity

11. The Offer Life Cycle
• Stage five: Saturation
• Stage six: Decline ‐ introduction of alternative
value offers
• Stage seven: Elimination

12. Figure 2 Offer Life
Cycle/Adoption Curve

13. 13
Why New Product Offers Fail
• Some of the reasons new products fail are:
• overestimated demand
• lack of real organisation support
• poor design/technology
• lack of effective research
• poor marketing execution
• lack of distribution
• high development costs
• strong competitive reaction

14. 14
Some of the reasons new products fail
are:
•fragmented markets
•social and governmental constraints
•cost
•capital shortage
•need for speed
•shorter product life cycles.

15. 15
Managing the Development Process
• Because so many new product offerings fail,
organisations are anxious to learn how to
improve their odds of new product success.
• There are many elements involved in
developing successful new products.
• However, to create them, an organisation
must understand its consumers, markets and
competitors, and develop products that
deliver superior value to customers.

16. 16
Predictors of New Offering Success
• For an offer to succeed it must:
• meet the needs of the market better than
competitive offerings (perceptually)
• be technically superior
• offer better perceived value
• be interesting ‐ provide a perception of
change/newness
• provide strategic synergy ‐ fit well with the
organisation’s directions (vision, goals and objectives)
• provide cultural synergy ‐ fit well with the
organisation’s current culture

17. 17
For an offer to succeed it must:
• have a better‐managed development process
• have a better marketing synergy ‐ fit into the
existing marketing experience and skills of the
organisation
• have good technical synergy ‐ fit into the existing
technological experience and skills of the
organisation
• be introduced to the market at the right time
• have better new product launch management
• survive better competitive responsiveness.

18. 18
New Concept Development Model
• This model consists of three parts:
• 1. Identifying the uncontrollable influencing factors
• 2. Identifying the controllable activities
• 3. Proceeding through five activity elements:
• opportunity identification
• opportunity analysis
• idea generation and enrichment
• idea selection
• concept definition.

19. 19
New Product Development or New
Market?
•Igor Ansoff developed a Product–Market matrix to
show the options available in deciding on either a
new product, a new market or some combination of
both.

20. Market
Penetration
Product
Development
Diversification
Market
Development
Existing Product New Product
Existing
Market
New
Market
Figure 3 Ansoff’s Product-Market
Matrix

21. 21
Market Evolution
• Market evolution is a process that parallels the
Offer Life Cycle. As a product category matures,
the industry goes through stages that mirror the
stages of a Offer Life Cycle:
• Market crystallisation.
• Market expansion
• Market fragmentation
• Market consolidation
• Market termination .

22. 22
The Technology Life Cycle
• Another approach to the process of product
development is the technology life cycle (TLC),
which can be broken down into five stages.
• Bleeding‐edge
• Leading‐edge
• State‐of‐the‐art
• Dated
• Obsolete

23. Differences
worth
Establishing
Distinctive
Pre-emptive Superior
Important
Affordable
Meets Objectives
Figure 4 Key differentiating
factors in New Product
Development

24. 24
Models Of Innovation/Product
Diffusion
• There are several theories that try to explain
the mechanics of new product offer diffusion
into the marketplace:
• 1. The Two‐step Hypothesis
• 2. The Trickle‐down Theory

25. 25
Diffusion of Innovations Theory
• 3. The Everett Roger’s Diffusion of
Innovations Theory ‐ there are five
categories of product adopters:
• Innovators
• Early adopters.
• Early majority .
• Late majority .
• Laggards
• 4. Technology‐driven models

26. 26
Rate of Product Diffusion
• The rate of diffusion is influenced by:
• the product’s perceived advantage or benefit to the
buyer
• perceived riskiness of purchase
• ease or complexity of product use; simplicity or
complexity of the product
• immediacy of benefits to the buyer; how quickly
benefits will be obtained
• observability of the value offered by the product
• trialability of the value offer

27. 27
Rate of Product Diffusion
• perceived value (buyer investment compared
with perceived value)
• extent of changes required to purchase and
use (including behavioural changes)
• return on investment in the case of
organisational (B2B) products.

28. 28
The Product Development Process
• Developing strong new products relies on
planning and on setting up a systematic product
development process for finding and growing
new products.
• 1. Organisation goals and objectives
• 2. Situation (need or opportunity)
• 3. Idea generation
• 4. Idea screening
• 5. Concept development and testing

29. 29
The Product Development Process
• 6. Strategy development: (see also Chapter 5,
‘Planning: Strategy’).
• 7. Business analysis:
• 8. Product development:
• 9. Test marketing:
• 10. Commercialisation:

30. Idea
Generation
Idea
Screening
Concept
Development
and testing
Marketing
Strategy and
Business
analysis
Product
Development
Testing the
Market
Commercialisation
GUIDING STRATEGY
PROCESS STAGES
Commercial
analysis
Situational Factors
Organisational
Factors
Figure 5: Steps in the Product
Development Process

31. 31
Things That Drive Successful and Innovative
Organisations
• Desire to be the best.
• Effective values are practised and demonstrated
by all.
• The organisational culture fosters employee
empowerment and involvement.
• Excellence is viewed not as a destination, but
rather as a continuous journey.
• The organisation is solution‐focused.
• There is a high level of employee engagement.

32. 32
Things That Drive Successful and Innovative
Organisations
• Perpetual innovation in products.
• Perpetual innovation in the way you think.
• Perpetual innovation in the way you lead.
• Goals are set for both leaders and staff that measure
adherence to employee satisfaction, customer service
and effective leadership.
• There is ongoing learning from the ‘Best Practices’ of
top‐performing companies but you discover your own
best practices and build on them.
• Dynamic leadership is displayed and continuously
reinforced.

33. 33
Things That Drive Successful and Innovative
Organisations
• Individuals in all roles look for every opportunity
to help the sales force/business development
group.
• All individuals are committed to exhibiting
behaviours that help to retain customers and
breed customer loyalty.
• All individuals recognise they are ‘ambassadors’
who must project a positive image of their
company.
• Every effort to exceed expectations is made.

34. 34
Things That Drive Successful and Innovative
Organisations
• People work together as a team with a
shared vision for a common goal for the
betterment of their company.
• People take ownership of their role, and
strive to find new ways to be better
contributors.
• Individuals answer not only to management
but also to each other for their attitudes and
performance.

35. 35
Commercial Development of New
Products
• New products need to appeal to both consumer
and channel customers. In a new product the
supplier needs to consider the following:
• clear objectives
• a simple, effective message
• a big idea
• ability to achieve the objectives and benefits of
consumer and channel customer.
• a compelling idea

36. 36
What Does The Customer Want?
• Choice
• Convenience
• Customisation
• Health and wellbeing
• Value for investment
• Indulgence

37. 37
What Does The Distributor Want?
• Differentiation
• Increased traffic
• Increased sales
• Category objectives
• Thought/category leadership
• Rewards for store team
• Promotional assistance

38. 38
In assessing the product, the supplier needs to
consider:
• Maintaining brand identity ‐ ensure the new
product is in line with existing brand(s) focus:
• Will the new product maintain consistency
across all existing brand touch‐points? Will the
new product leverage and/or reinforce the
brand?
• Cannibalisation ‐ How will the new product
affect the existing product line ?
• Category growth ‐ Will the new product create
additional growth in its category ?

39. 39
Things That Drive Successful and Innovative
Organisations
• Store space availability ‐ there is only so much shelf or floor space
available in retail stores. Will something need to be removed?
• Wear‐out factor ‐ At what point will a campaign lose its
effectiveness due to overplay ?
• Production/supply timelines ‐ How quickly can we come to
market? Can we meet demand, or more demand than expected?
• Training ‐ What is required to train salespeople and retail
salespeople ?
• Relationship building: segment needs/channel needs ‐ Will this
product aid in building better relationships with distributors and
end users ?

40. • For more information about MAANZ International and articles
about Marketing, visit:
• www.marketing.org.au
• http://smartamarketing.wordpress.com
• http://smartamarketing2.wordpress.com
• . http://www.linkedin.com/groups/MAANZ‐
SmartaMarketing‐Group‐2650856/about
• Email: info@marketing.org.au
• Link to this site ‐ ‐ http://www.slideshare.net/bmonger for
further presentations
Marketing In Black and White 40

41. 41
END

42. MAANZ International
• MAANZ International, is a Not for Profit,
internet based professional and educational
institute which has operated for over 25 years.
• MAANZ International offers Professional
Memberships;
• Marketing Courses (Formal and Short)
• And Marketing Publications
• www.marketing.org.au
Marketing In Black and White 42

43. Dr. Brian Monger
• Brian Monger is the CEO of MAANZ International and a
Professional marketer and consultant with over 40 years
experience.
Marketing In Black and White 43

44. • For more information about MAANZ International and articles
about Marketing, visit:
• www.marketing.org.au
• http://smartamarketing.wordpress.com
• http://smartamarketing2.wordpress.com
• . http://www.linkedin.com/groups/MAANZ‐
SmartaMarketing‐Group‐2650856/about
• Email: info@marketing.org.au
• Link to this site ‐ ‐ http://www.slideshare.net/bmonger for
further presentations
Marketing In Black and White 44

45. 45
END
MAANZ MXPress Program