The Importance of New Products

Explain the importance

of developing new
products and describe
the six categories of
new products
 Invention vs Innovation
• Invention – to managers, invention refers to the
dimension of uniqueness – form, formulation, function
of something. Usually patentable. Invention may take
a few moments to pursue. We have far more
inventions than innovations.
• Innovation – refers to the overall process whereby an
invention is transformed into a commercial product
that can be sold profitably. This may include all
strategies pertaining to the product’s development
and strategies associated in making it a source of
profit for the firm.
 The New-Product
Development Process

Explain the steps in

the new-product
development
process
 New-Product Development
Process (Exhibit 9-4)
1. Idea
generation

2. Screening

3. Idea
evaluation

4.Development

5. Commercial-
ization
 Step 1: Idea Generation
1. Idea
1. Idea generation
generation

Ideas from: 2. Screening

• customers and users
• marketing research
3. Idea
• competitors evaluation
• other markets
• company people,
4.Development
intermediaries, etc.

5. Commercial-
ization
 Step 2: Screening
1. Idea
generation

2. Screening
2. Screening

• Strengths and 3. Idea

weaknesses evaluation
• Fit with mission and
objectives
4.Development
• Market trends
• Business
5. Commercial-
Opportunities
ization
What is a Product Concept?
• A product concept is a verbal or
prototype statement of what is going to
be changed or develop and how the
customer stands to gain or lose.
• Rule: You need at least two of the three
inputs to have a feasible new product
concept, and all three to have a new
product.

4-17
 Required Inputs to the Creation
Process
• Form (the physical thing created, or, for a service, the
set of steps by which the service will be created)
• Technology (the source by which the form is to be
attained)
• Benefit/Need (benefit to the customer for which the
customer sees a need or desire)
Technology permits us to develop a form that
provides the benefit.

4-18
 New Product Concepts and the
New Product

C
Need Form

C
C

“C”= Technology New

Concepts Product
 The Designer Decaf Example
• Benefit: “Consumers want decaffeinated espresso that
tastes identical to regular.” (An advantage gained from
something)
• Form: “We should make a darker, thicker, Turkish-
coffee-like espresso.” (the visible shape or configuration
of something.)
• Technology: “There’s a new chemical extraction process
that isolates and separates chemicals from foods; maybe
we can use that for decaffeinating espresso
coffee.”(application of scientific knowledge for practical
purpose)
 Dat Cookie Doe
Dat cookie doe is a brand that sells caffeinated cookies.
The primary purpose of its products is to give its
consumers the level of activation they need to reach in
order for them to enhance their daily performances -
through properly making the mind and the body function
with the use of activators, specifically caffeine (Smith et al.,
2007).
 Other Methods for Generating
Product Concepts
Two Broad Categories of Methods:
• Gathering Ready-Made Product Concepts
(replicate similar concept with added twist)
• Using a Managed Process Run by the
New Products Team (starting from
scratch)
 Step 3: Idea evaluation
1. Idea
generation

3. Idea Evaluation
2. Screening

• Concept testing
3. Idea
• Reactions from
evaluation
customers
• Rough estimates4.Development
of
costs, sales, and
profits 5. Commercial-
ization
A Concept Test is…

a test to evaluate a new-product idea,

usually before any prototype has been
created. Often successful for line
extensions.
 Purposes of Concept Testing
• To identify very poor concepts so that
they can be eliminated.
• To estimate (at least crudely) the sales
or trial rate the product would enjoy
(buying intentions, early projection of
market share).
• To help develop the idea (e.g. make
tradeoffs among attributes).

9-25
 Business Analysis

Demand

Considerations Cost
in
Business
Analysis Stage
Sales

Profitability
 Business Analysis

27
Business Analysis
 Step 4: Development
1. Idea
generation

2. Screening
4. Development
3. Idea
evaluation
• R&D
• Develop model or
4.Development
service
• Test marketing mix
• Revise plans as5. Commercial-
needed ization
• ROI estimate
Simultaneous Product Development

A new team-oriented approach to new-

product development where all relevant
functional areas and outside suppliers
participate in the development process.
(Process of developing the proto-type)
 Prototype Development
• Comprehensive Prototype: complete, fully-
functioning, full-size product ready to be
examined by customers.

• Focused Prototype: not fully functioning or

developed, but designed to examine a limited
number of performance attributes or features.

13-31
 Simultaneous Marketing
Mix Development
Prepare strategy, tactics, and launch details
for marketing plan, prepare proposed
business plan and get approval for it,
stipulate product augmentation (service,
packaging, branding, etc.) and prepare for it.

2-32
 Test Marketing

Test
Marketing The limited introduction
of a product and a
marketing program to
determine the reactions
of potential customers
in a market situation.

2
 Step 5: Commercialization
1. Idea
generation

2. Screening
5. Commercialization
3. Idea
evaluation • Finalize product and
marketing plan
• Start production and
4.Development
marketing
• “Roll out” in select
5. Commercial-
ization
markets
• Final ROI estimate
Commercialization
Ordering Materials

Production

Inventory Buildup

Distribution Shipments

Sales Force Training

Trade Announcements

Customer Advertising
 The Product Development Life
Cycle

36 © 2010 Pearson Education, Inc.

Publishing as Prentice Hall
 Marketing Decisions Affect
a Product’s Life Cycle
Marketing Decision Example

Extend life of an Automobile discounts, rebates, and low-interest

existing product loans

Create new uses Arm & Hammer baking soda as a refrigerator

deodorizer

Create new markets Home Depot and Lowe’s do-it-yourself training

Extend technology Jell-O gelatin to puddings and other snacks
Repackage Coca-Cola 6-oz bottles to 8-oz cans
Reposition “This isn’t your father’s Oldsmobile” campaign

37
© 2010 Pearson Education, Inc.
Product Life Cycles Vary in Length

Comparative
Easy to Use
Advantage

Products
that move
quickly through
early life
cycle stages Easy to
Compatibility
Communicate

Trialability
Other Issues in Product
Life Cycle Length
Product Life Cycles Are
Getting Shorter

Pioneer or follower? Which

strategy works best?

Fashions and Fads

 Variations of The Life Cycle
• Fashion: Accepted and popular
products that go through a repetitive
cycle of popularity, lost popularity, and
regained popularity
• Fads: Product that experiences an
intense but often very brief period of
popularity