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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter Eight Planning for New Products
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Planning for New Products The Innovation Mandate
PLA NNING FOR NEW PRODUC TS
Importance of New Products Customer Driven Process Steps in New Product Planning Idea Generation Screening/Evaluating/and Business Analysis Product and Process Development Marketing Strategy and Market Testing Commercialization Variation in the Generic Planning Process
Import ance of New Products
Innovation at top of potential value drivers (Ernst & Young)
Innovation initiatives extend beyond new goods and services to include ideas, processes, and business practices
Organizations must build a culture of innovation
New Pr oduct Pl anning as a Cu stom er Dr iven Pro ce New product ss
Newness to market Newness to company
New product types:
Transformational innovations New product category Product line extensions Incremental improvements
– – –
New product lines 20%
New-to-world products 10%
Newness to company
Improvements/ revisions to existing products 26%
Additions to existing product lines 26%
Cost reduction s 11%
Newness to market
Size of circle denotes number of introductions relative to total.
Source: New Product Management for the 1980s, Booz Allen & Hamilton Inc. 1982.
Finding Cus tomer Value Opport unit ies
Customer value analysis Objective is to identify needs for:
New products Improvements to existing products Improvements in production processes Improvements in supporting services
Matching Capabilities to Customer Value Opportunities
Fit between capabilities and product offering
“new-to-the-world” ideas Customers not always the best guides
Customer Expectations Customer Satisfaction Gap Actual Product Performance
(1) New Products (2) Improvements (3) New and Improved Processes
Characteri sti cs of Suc cessf ul Innovati ons
Creating an Innovative Culture
Selecting the Right Innovation Strategy
Making Resource Commitments
Developing and Implementing Effective New Product Processes
Innovation Workshop for top executives to develop an innovation plan. Innovation Statement highlighting objectives and senior management’s role and responsibilities. Training programs for employees and managers. Communicate the priority of innovation. Speakers to expose employees to innovation authorities.
Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.
Developing an Innovation Culture
Th e Innovat ion Strat egy Spells Out Management’ s Priorit ies for New 1. Set specific New tunit Product OpporProducties
Objectives. 2. Communicate the role of New Products throughout the organization. 3. Define the areas of strategic focus: Product Scope Markets Technologies 7. Include longer term discontinuous projects in the portfolio along with incremental projects.
Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.
NEW PRODUCT PLANNING PROCESS
Customer Needs Analysis Screening and Evaluation
Marketing Strategy Development
Achieving CrossFunctional Interaction and Coordination
Responsibility for New Product Planning
Coordination of new product activities by a high-level general manager Inter-functional coordination by a team of new product planning representatives Creation of a project task force responsible for new product planning Designation of a new products manager to coordinate planning between departments Formation of matrix structure for integration new product planning with business functions Creation of a permanent design center
Idea search: targeted or openended? How extensive and aggressive? What specific sources are best for generating a regular flow of new product ideas? How can new ideas be obtained from customers? Where will responsibility for the new product ideas search be placed? What are potential threats from alternative (or disruptive) technologies?
BENETTON’S STRATEGY TO REVIVE APPAREL IDEA GENERATION
“We didn’t take advantage of the [industry’s] quick transformation,” says Silvana Cassano, the ex-Fiat manager who assumed the post of chief executive of Benetton Group on May 5. The transformation saw the best retailers turn into cutting-edge users of digital technology. Benetton’s competitors-notably Spain’s Zara and Sweden’s H&M Hennes & Mauritz-have raised the bar for the entire industry. These retailers can beam new styles from the catwalk to the shop floor in less than a month-and at bargain prices. Both deploy sophisticated technology to track which items are selling and which aren’t, so winners can be speedily restocked and slow movers yanked down from the racks. They’ve got the look down, too-cool and minimal for the working women who love Zara, and over-the-top trendy for H&M’s teen fans. And Benetton’s look? Blan. “The Benetton brand is out of fashion,” says Sagra Maceira de Rosen, retail analyst at J.P. Morgan Chase & Co. in London.
Cassano is out to change that. The message he delivered in his first encounter with shareholders was short and powerful: Benetton is going to refocus on the apparel business, which encompasses the Sisley and Benetton brands. It’s no secret that Benetton’s core casual wear business has suffered neglect. In 1994, founder Luciano Benetton launched an ill-fated diversification into sports equipment, snapping up trophy brands such as Prince (tennis rackets), Rollerblade (in-line skates), and Killer Loop (snowboards). But the strategy foundered and last year, Benetton sold the entire equipment division, booking $190 million in write-offs. The company posted its first annual loss-$10.5 million, on revenues of $2.3 million.
Source: “Has Benetton Stopped Unraveling?” Business Week, June 30, 2003, 76.
Alliances/ Acquisition/ Licensing
Direct Search Technological Innovation
METHODS OF GENERATING IDEAS
Exploratory Customer Studies
Creative Methods Linking Marketing and Technology
Facilitating Lead User Analysis
SCREENING, EVALUATING, AND BUSINESS ANALYSIS
Busi ness Anal ysi s
Revenue Forecasts Preliminary Marketing Plan Cost Estimation Profit Projections Other Considerations
PRODUCT AND PROCESS DEVELOPMENT
NEW PRODUCT CONCEPT
PRODUCT DEVELOPMENT AND USE TESTING MARKET TESTING
MARKETING STRATEGY DEVELOPMENT
Prod uct a nd Proce ss Devel opment
Development of the new product includes:
– Product design – Packaging design – Decisions to make or purchase product components
Product Development Process:
– – – – – Product Specifications Industrial Design Prototype Use Tests Process Development
Does it have the required attributes?
PURPOSE OF USE TESTS Identify use situations
Ideas for improvements
MAR KETI NG STRA TEG Y AN D MAR KET T ESTING
Marketing Strategy Decisions – Market Targeting – Positioning Strategy
Market Testing Options – Simulated Test Marketing – Scanner – Based Test Marketing – Conventional Test Marketing – Testing Industrial Products – Selecting Test Sites – Length of the Test – External Influences
Scanner-based Test Marketing
Less artificial than simulated testing Costs less than full-scale market test Test is controlled by using IRI’s 2300 panel members in each test city
Cable TV enables use of controlled ad testing Tests take about 12 months Costs are $250,000+
The Marketing Plan
COMM ERC IA LIZATI ON
– Complete marketing strategy – Responsibilities for execution – Cross – functional approach
Monitoring and Control
– Real – time tracking – Role of the Internet – Include product performance metrics with performance targets
Marketing Program(s )
VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING
Technology Push Processes Platform Products Process – Intensive Products Customized Products
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