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CRAVENS

PIERCY

8/e
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Chapter Eight

Planning for
New Products

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.


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Planning for New


Products

The Innovation
Mandate
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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
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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
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New Pr oduct
Pl anning as a
Cu stom er Dr iven
Pro ce ss
 New product
classifications:

1. Newness to market
2. Newness to company

 New product types:


– Transformational
innovations
– New product category
– Product line extensions
– Incremental improvements
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High
New-to-world
products
10%
New product
lines
20%
Newness to company

Improvements/ Additions
revisions to to existing
existing product lines
products 26%
26%

Cost
reduction Repositionings
s 7%
11%

Low High

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 8-8

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
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Matching Capabilities to
Customer Value Opportunities

– Fit between capabilities and


product offering

Transformational Innovations

– “new-to-the-world” ideas
– Customers not always the
best guides
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Customer
Expectations

Customer
Satisfaction
Gap OPPORTUNITIES
Actual (1) New Products
Product (2) Improvements
Performance (3) New and Improved
Processes
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Characteri sti cs of
Suc cessf ul
Innovati ons
Creating an
Innovative
Culture

Selecting the
Leveraging Right
Capabilities Innovation
STRATEGIC Strategy
INITIATIVES

Making Developing and


Resource Implementing
Commitments Effective New
Product
Processes
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Developing an
Innovation Culture
 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.
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Th e Innovat ion
Strat egy Spells Out
Management’ s
Priorit ies for New
Product Oppor
1. Set specific tunit ies
New Product
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.
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NEW PRODUCT
PLANNING PROCESS

Customer
Needs
Analysis

Screening
Idea Business
and
Generation Analysis
Evaluation

Marketing Product
Strategy Development
Development

Testing

Commercialization
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Achieving Cross-
Functional
Interaction and
Coordination

R&D

Operatio Marketin
ns g

Finance
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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
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IDEA GENERATION

 Idea search: targeted or open-


ended?
 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?
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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.
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Benetton’s Strategy
(continued)

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.
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Direct
Search
Alliances/
Acquisition/ Technological
Licensing Innovation

METHODS
OF
National Exploratory
GENERATING
Policy Customer
IDEAS
Studies

Creative Facilitating
Methods Lead User
Linking Analysis
Marketing
and Technology
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SCREENING,
EVALUATING, AND
BUSINESS ANALYSIS
IDEA GENERATION

SCREENING
(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS
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Busi ness
Anal ysi s
 Revenue Forecasts

 Preliminary Marketing
Plan

 Cost Estimation

 Profit Projections

 Other Considerations
PRODUCT AND 8-23

PROCESS
DEVELOPMENT

NEW
PRODUCT
CONCEPT

PRODUCT
DEVELOPMENT MARKETING
AND USE STRATEGY
TESTING DEVELOPMENT

MARKET
TESTING

LAUNCH
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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

 Collaborative Development
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Does it have the


required attributes?

Verify PURPOSE Ideas for


claims OF improvements
USE TESTS

Identify use
situations
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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
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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+


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COMM ERC IA LIZATI


ON
The Marketing Plan
– 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
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Marketing Strategy

Market
Target(s)

Marketing
Objectives Program(s
)
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VARIATIONS IN THE
GENERIC NEW
PRODUCT PLANNING

 Technology Push
Processes
 Platform Products
 Process – Intensive
Products
 Customized
Products