Introducing New Market

Offerings
 Discussion Questions
1. What challenges does a company face in developing
new products and services?
2. What organizational structures and processes do
managers use to oversee new-product development?
3. What are the main stages in developing new products
and services?
4. What is the best way to manage the new-product
development process?
5. What factors affect the rate of diffusion and consumer
adoption of newly launched products and services?
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New Product Options

Make or Buy

Improved
Formula

Types of New Products

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 New-Product Development Challenges
The Innovation Imperative

New Product Success

New Product Failure

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 Organizational Arrangements
Organizing New
Product Development

Customer-driven Engineering

Budgeting for NPD

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 Finding One Successful New Product

Number Pass Cost

Stage of Ideas Ratio per Idea Total Cost
1. Idea Screening 64 1:4 $1,000 $64,000

2. Concept Testing 16 1:2 20,000 320,000

3. Product Development 8 1:2 200,000 1,600,000

4. Test Marketing 4 1:2 500,000 2,000,000

5. National Launch 2 1:2 5,000,000 10,000,000

$13,984,000
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Organizing New Product Development
Cross-functional Teams

“Skunkworks”

Stage-gate Systems

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 New-Product Decision Process

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 Generating Ideas
Employees

Crowd Sourcing

Competitors Lead Users

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Creativity Techniques
Mind Mapping
Forced
Relationships

Morphological
Analysis

Lateral Marketing

Attribute Listing

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Ideas – Screening
Product Success Relative Product Product Rating
Requirements Weight (a) Score (b) (c=a x b)
Unique or superior product .40 .8 .32
High performance-to-cost ratio .30 .6 .18
High marketing dollar support .20 .7 .14
Lack of strong competition .10 .5 .05
Total 1.00 .69

Probability of Probability of
Overall Probability
commercialization economic
probability of technical
given technical success given
of success completion
completion commercialization

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 Forces Fighting New Ideas

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 Concept to Strategy

Concept Development Business Analysis

Marketing Strategy Development

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Concept Development

Concept 2

Concept 1 Concept 3

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 Continuum of Evaluation for Products

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Concept Testing

Product Dimensions
1. Communicability and Believability
2. Need level
3. Gap level
4. Perceived value
5. Purchase intention
6. User targets, purchase occasions,
frequency

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 Conjoint Analysis

Design Elements
• Three package designs (A, B, C)
• Three brand names (K2R, Glory, Bissell)
• Three Prices ($1.19, $1.39, $1.59)
• A possible Good Housekeeping seal (yes, no)
• A possible money-back guarantee (yes, no)

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 Continuum of Evaluation for Products

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Marketing Strategy Development
Target Market’s
• Size
• Structure
• Behavior

Marketing-mix strategy

Marketing Mix

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 Business Analysis

Estimating Costs and Profits

Estimating Total Sales

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 PLC Sales for Three Types of Products

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 Development to Commercialization
Product Development

Market Testing

Commercialization
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Product Development

Physical Prototype

Alpha Testing
(Internal)

Beta Testing
(Customers)
Customer Tests
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 Market Testing
Sales-Wave
Research

Controlled
Test Marketing

Test Markets
Simulated
Test Marketing

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Commercialization
When?

Where?

How?

To Whom?
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 The Consumer-Adoption Process
Stages in the Adoption Process

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The Consumer-Adoption Process

Influencing Factors
• Buyer Readiness
• Personal Influence
• Innovation Characteristics
• Organizations Readiness

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Buyer Readiness

Early Majority
Laggards

Innovators

Late Majority
Early Adopters
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 Continuum of Evaluation for Products

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Innovation Characteristics

Divisibility

Compatibility
Relative Advantage

Complexity Communicability
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