9 NEW PRODUCT DEVELOPMENT

NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH

9 NEW PRODUCT DEVELOPMENT

product improvement, product modifications, and new brands through the firm’s own R&D effort.

COLLEGE OF BUSINESS ADMINISTRATION

CHUNG-ANG UNIVERSITY PROF HYUNSUK SUH

New Product Development

 New Product Development:

The development of original products, product improvements, product

modifications, and new brands through the firm’s R&D efforts.

Kotler and Armstrong, 2010, 2013

The objectives of the current chapter are described below.

Objectives

Explain the how companies find new products and its categories

List and define the steps in the new product development process

Explain the concept of product life cycles

Definition: New Product

The product can be new to the world, to the market, to the producer or seller, or to

some combination of these.

(really-new) products (10% of new products): Inventions that create

a whole new market e.g.: Polaroid camera, Sony Walkman, Palm Pilot, Rollerblade skates

New to the World

Product

(20%): Products that take a firm into a category new to it

e.g.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer

New Product

Lines

(26%): Line extensions and flankers in current markets e.g.: Tide Liquid, Bud Light, Apple’s iMac, HP LaserJet

Additions to

Existing

Product Line

(26%): Current products made better e.g.: P&G’s continuing improvements

to Tide detergent, Ivory soap (e.g Packaging improvement – Heinz EZ Squirt Ketchup)

Improvements or

Revisions of

Existing Products

(7%): Products that are retargeted for a new use or application

e.g.: Arm & Hammer baking soda sold as a refrigerator deodorant;

aspirin repositioned as a safeguard against heart attacks

Repositioned

Products

(11%):This category refers to the products that provide performance similar to competing brands at a lower price.

Lower Priced

Products

New Product : Types of Innovations

The new product can be differentiated according to the level of different types of

innovations.

Modification of existing product The consumer does not have to learn anything new to use a continuous innovation It is easier to convince consumers to adopt this kind of new product (e.g ergonomically designed computer keyboards, KNOCK-OFF)

Continuous

Innovations

A change in an existing product that requires a moderate amount of learning

or behavior change (e.g cassette player – CD player – MP3 player, CONVERGENCE)

Dynamically

Continuous

Innovations

Totally new product that creates major changes in the way we live To use discontinuous innovation, consumers must engage in a great amount of learning because no similar product ever been on the market.

(e.g Airplane, Automobile, etc.)

Discontinuous

Innovation

Marketing Reasons for New Product Failures

Both marketing and non-marketing factors contribute to new product failures.

A distinctive point of difference is essential for a new product to defeat competitive ones

Insignificant Point

of Difference

New product needs a precise protocol

Incomplete market

and product definition

Every new product manager looks for: a large target market with high growth and real buyer need

Too little market

Attractiveness

Name, package, price, promotion, distribution all matters

Poor execution of

the marketing mix

The company has to achieve excellent synergies using its R&D capabilities

Poor synergy or fit with

Company’s manufacturing

and/or marketing ability

The product is introduced too soon, too late or at a time when customer’s taste shifted dramatically.

Bad timing

IDEA GENERATION IDEA SCREENING CONCEPT TEST BUSINESS ANALYSIS DEVELOPMENT

TEST MARKETING COMMERCIALIZATION NEW PRODUCT

New Product Development Process

A new product strategy is part of the organization’s overall marketing strategy It sharpens and focus and provides general guidelines for generating, screening, and evaluating new product idea

A new product strategy links the new product development process with the objectives

of the marketing department, the business unit, and the corporation It must be

comparable with these objectives.

New product ideas come from many resources, including customers, employees,

distributors, competitors, research and development, and consultants The next stage

is called ‘screening’ which eliminates ideas that are inconsistent with organizations new product strategy

Idea Generation and Screening

- Executives, scientists, engineers, manufacturing staff, sales people

INTERNAL

SOURCES

- Good new product ideas come from watching and listening to customers (e.g Arm & Hammer Baking Soda)

- Competitors are another good source of new-product ideas

EXTERNAL

SOURCES

3M Post-it Flag Highlighters 3M Post-it Notes Felt Tip Highlighters

-Product development costs increase substantially in later stages so poor ideas must

be dropped -Ideas are evaluated against criteria; most are eliminated

An example of concept development and testing is illustrated below.

Concept Development and Testing: An example

제제제제 2

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제 제제제 제 제제제 3 제제 제제 제제 , 제제 제제제제 250kcal kcal 제제 , 제제제

제제제제제제 제제 가 1,0kcal 0kcal 0kcal 제 제제

- Concept development creates a detailed version of the idea stated in meaningful

consumer terms.

Example

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).

The purpose and the examples of the concept test is described below.

Purpose of Concept Testing

Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with

a delightful flavor blend of orange, mint, and lime.

It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal snacks And, best of all, it contains absolutely no calories.

Comes in 12-ounce cans or bottles and costs 60 cents each.

1 How different, if at all, do you think this diet soft drink would be from other available products now on the market that might be compared with it?

Very different ( ) ( ) ( ) ( ) Not at all different

2 Assuming you tried the product described above and liked it, about how often do you think you would buy it?

More than once a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy it

The concept test example is illustrated below.

Example

Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product.

Product Development

 Creation of prototype

 Packaging, branding, labeling

 Manufacturing feasibility

Types of Prototypes

Physical prototypes are tangible artifacts created to approximate the product They include models which look and feel like the product.

Analytical prototypes are intangible and mathematical manner Interesting aspects of the product analyzed instead of built (e.g computer simulation)

PHYSICAL

VS.

ANALYTICAL

Comprehensive prototypes most of attributes of the product Full scale and operational version of the product.

Focused prototypes implement one or few attributes of a product.

COMPREHENSIVE

VS.

FOCUSED

Within a product development project, prototypes are used for following purposes.

Purpose of Prototypes

Prototypes are being served as learning tools to answer following questions, “Will it work?”, “How well does it meet the customer’s needs?”

Learning

Prototypes enrich communication with top management, vendors, partners, customers, investors, and etc

Communication

Prototypes are used to ensure that components and subsystems of the product work together as expected.

Integration

Particularly in the later stages of product development, prototypes are used

to demonstrate that the product has achieved a desired level of functionality They provide to ensure goals, progress, and schedules.

Milestone

Test marketing is the limited introduction of a product and market program to

determine the reactions of potential customers in a market situation.

Types of Test Market

- Company finds small number of representative test cites and conducts full marketing campaign in these cities The results are used to forecast national sales and profits.

(Drawbacks: Costly and they may take a long time)

STANDARD

TEST

MARKETS

- Several research firms keep controlled panels of stores that have agreed to carry new products for a fee

(Cost less than standard test market and can be completed much more quickly than standard test market)

CONTROLLED

TEST

MARKETS

- Companies test new products in a simulated shopping environment The company

shows ads and promotions for variety of products to sample consumers It gives consumers small amount of money and invites them into real or laboratory sotre where they may keep the money and use it to buy items

(Cost much less and keep the new product out of competitors’ view)

SIMULATED

TEST

MARKETS

3M’s Greptile Grip: A New Product?

3M Greptile Gloves Grip Tightly –

Even If You Don’t

-Max Gripping Power with Min Gripping

Pressure

-Exceptional Grip and Dexterity – in Wet

or Dry Conditions

-100% Caburetta leather for the

balance of the glove gives a natural, comfortable fit

-Greatest innovations in golf design in the

last 25 years.

Take a look at 3M’s innovative Greptile Grip golf glove below (1-4)

In Class Exercise

3M Greptile Gripping Material at key contact points for the ultimate grip

Take a look at 3M’s innovative Greptile Grip golf glove below (2-4)

Increase club head speed and distance

Take a look at 3M’s innovative Greptile Grip golf glove below (3-4)

3M’s Greptile Grip Golf Gloves Sold in Two Versions In Class Exercise

“We look around the company for underutilized technologies that can result in exciting new

products for niche markets,” says Dr Dierberger The benefits: To help golfers wearing the glove

to hit longer drives and more accurate shots, thus getting lower scores through improved control

of the golf club swing under both wet and dry conditions Now, 3M Golf launched a premium golf glove consisting of highest quality Carbretta leather and selling for a suggested retail price of

$16.95 to $19.95

DISCUSSIONS

1 Describe 3M’s Greptile Grip golf glove in terms of a product attributes.

2 Does 3M’s innovative Greptile Grip golf glove a success or a failure as a new

product? Justify your answer.

3 Describe target markets for 3M’s Greptile Grip golf glove and Greptile technology.

Take a look at 3M’s innovative Greptile Grip golf glove below (4-4)