Chapter 9 Developing New Products and Services

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Chapter 9Developing New Products and Services
Professor Jason C. H. Chen, Ph.D. School of
Business Administration Gonzaga
University Spokane, WA 99223 chen_at_jepson.gonzaga.e
du
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After studying this chapter you should be able to

• Recognize the different types of new products.
• Discuss the different sources of new products.
• Understand the stages in the new-product
  development process.
• Describe the way marketing research is used in
  the new-product development process.
• Appreciate the keys to new-product success.

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OPENING VIGNETTE

• WWW.3M.COM
• In addition to normal information provided on the
  3M Web site, what are the unique features
  displayed?
• After having read the story about 3M and having
  visited their Web site, determine what is the
  companys real distinguishing characteristic that
  sets them apart from most companies.
• What do you think about the direction that new
  leadership is taking? Can you think of other
  companies in which growth in financial
  performance became the primary objective?

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How Quickly a New Product Moves through the Cycle

• Comparative advantageis the new product really
  better?
• The new product is easy for consumers to use
• Product advantages are easy to communicate
• Product is easy to try on a limited basis
• Product is compatible with customers' values and
  experiences

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New-Product Overview
New products drive sales and profit growth.
New Product Failure Rate May Be 80

• New products
• may gain market share
• from competitors.

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New Products

• New products are critical to survival
• markets change
• competition changes
• product life cycles march on
• What is a new product?
• Firm's perspective
• a product that is new in any way
• FTC's perspective
• a product must be entirely new, or changed in a
  functionally significant way
• can only be called new for six months

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Types of New Products

• New to the World Products

• New Category Entries

• Additions to Product Lines

• Product Improvements

• Repositionings

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Sources of New Products

• External
• Sourcing

• Internal
• Development

Collaborative Venture
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New-Product Development

• New-product thinking should be an on-going effort
• Top-level support is vital
• Someone should be in charge of the effort
• Firm should constantly generate new ideas, then
  narrow down to the best opportunities with
  clearly specified screening criteria
• Need a well organized new-product development
  process
• Involvement of cross-functional teams helps in
  the screening process and avoids problems and
  surprises later

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Kellogg and Nabisco international ads
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New-Product Development Process
Idea Generation
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New Product Development Process
Exhibit 9-2
New-product development process
Idea generation
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Post-it and 3M ads
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Tide and Dryel ads
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New-Product Development Approaches
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Idea Generation

• Idea Generation
• The initial stage for the new-product development
  process.

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Idea Screening

• Idea Screening
• Evaluate the idea pool and reduce it to a smaller
  and more attractive set of potential new products.

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Concept Development and Testing

• Concept Development
• The process of shaping and refining the idea into
  a more complete product concept.

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Business Analysis

• Business Analysis
• Stage of the new-development process that calls
  for preparing initial marketing plans for the
  product.

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Prototype Development

• Prototype Development
• Converting the concept into an actual product.

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Test Marketing

• Test Marketing
• Testing the product prototype and marketing
  strategy in simulated or actual market situations.

• Simulated Test Marketing
• Evaluating a new product in situations contrived
  to be similar to how consumers would purchase and
  use it.

• Standard Test Marketing
• Testing a new product and its marketing strategy
  in actual market situations.

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Commercialization

• Commercialization
• The firm introduces the product on a full-scale
  basis, involving
• Understanding Consumer Adoption
• Timing
• Coordination

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Technology Acceptance Model
Perceived Usefulness
N
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The new technology adoption curve
Impact
Readiness
Intensification
Level of Activity
Time
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Keens Six-Stage Competitive Advantage Model
Stimulus for action
Commoditization
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The Consumer Adoption Process
Consumer Marketing Strategy Adoption
Stage Objective
Awareness Communicate Availability Interest C
ommunicate Product Benefits Evaluation Emphasi
ze Advantages Trial Motivate Customers to
Try Adoption Ensure Customer
Satisfaction (Decision Confirmation)
Exhibit 9.7
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AIDA Model Impact of promotional tools on
consumer response
Advertising
Personal Selling
Effectiveness
Public relations and publicity
Sales promotion
Awareness/Attention
Interest
Desire
Action
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The Role of Marketing Communications(Basic
Promotion Objectives)
Ch.16
Persuading
Informing
Reminding
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Relation of Promotion Objectives, Adoption
Process, and AIDA Model

• Promotion Objectives
• Informing
• Persuading
• Reminding
• Adoption Process
• Awareness
• Interest
• Evaluation
• Trial
• Decision
• Confirmation

• AIDA Model
• Attention
• Interest
• Desire
• Action

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Types of New-Product Opportunities
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Keys to New-Product Success
Exhibit 9-8
Keys to new-product success

• Number-one factor unique, superior,
  differentiated product that delivers unique
  benefits and superior value to customer.
• Market-driven and customer-focused new-product
  process.
• More predevelopment work before development gets
  under way.
• Sharp and early product definition.
• Right organizational structure.

• New-product success is predictable Use profile
  of winner to sharpen project-selection decisions.
• New-product success is controllable
• Emphasize completeness, consistency, quality of
  execution.
• Sped is everything! But not at the expense of
  quality of execution.
• Companies that follow multistage, disciplined
  new-product game plans fare much better.

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Organizational Approaches to New Product
Development
Balanced Matrix Organization
Project Team Organization
Project Matrix Organization
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Marketing-Research Support
Prelaunch

• Focus Groups
• Market Definition Studies
• Target Segment Identification
• Concept Tests

• Name Package Evaluation
• Product Tests
• Copy Tests
• Simulated Test Markets
• Test Markets

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Market-Research Support
Rollout

• Awareness Attitude Studies
• Usage Studies
• Tracking Studies
• Product Refinement Tests
• New Advertising Strategy Tests

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The Best Products for 2001

• Harmony low-fat cereal from General Mills
• The Samsung 1300 from Sprint PCS
• Microsofts Xbox
• Credit Watch
• Hitachis DZ-MV100A Camcorder
• Apples I Pod
• Listerines PocketPaks

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Picture of worker at PC station
Courtesy Zenith Electronics Corporationfor use
only with Basic Marketing
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Porsche ad
Courtesy Porsche Cars North Americafor use only
with Basic Marketing
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New Product Development Success Factors
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Picture of shelf packaged goods
Courtesy of Nabisco Brands, Inc.for use only
with Basic Marketing