New Product Decision Process

Chapter IV New Product Decision Process Types of new products Test Marketing of a new product, Packaging Purpose, Types and New Trends in packaging

New Product Decision

Change is the only constant thing in this world

New Product - Definition

A new product is any product which is perceived by the customer as being new.

Factors contributing to New Product Development

Changing customer preferences Technological changes Government Policy

New product options

Make (organic growth) Buy (Inorganic growth)
Buy other companies Buy a license / brand or franchise of other company

New-Product Development New-Product Development Strategies Strategies

Strategies for Obtaining New Products
Acquired Acquired Companies Companies Acquired Acquired Patents Patents Acquired Acquired Licenses Licenses Original Original Products Products Product Product Improvements Improvements Product Product Modifications Modifications New New Brands Brands

Examples
Speed Petrol Probiotic Ice cream from AMUL Moser baer CD/DVD Hippo baked snacks Aliva Low calorie snacks

Type of New Products

New to organization (30%)
New to the world New product lines

Changes within existing products (70%)

Addition to existing product line Revision or improvements Repositioning Cost reductions

Causes of new product Causes of new product Overestimation of Market Size failures failures

Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions

To create successful new products, the company must: understand its customers, markets and competitors develop products that deliver superior value to customers.

Reasons of new product failures

Market / Marketing failure
No clear product differentiation (retail) Small size of potential market Poor positioning Misunderstanding of customer needs

Technical failure
Product did not work Bad design

Organizational failure
Lack of organizational support Poor fit with organization culture

Financial failure
Low return on investments

Environmental failure
Regulations (Pharma products) Macro economic factors

Timing failure
Too early (Kellogg's) Too late

The Worlds Most Innovative Companies

Apple Google Toyota General Electric Microsoft Procter & Gamble 3M Walt Disney IBM Sony Wal-Mart Honda Starbucks Target BMW Samsung

Seven Notions of Innovation

See the future through the eyes of your customer Intellectual property and brand power are key assets Use digital technology to create tools for customers Build a championship team Innovation is a state of mind Speed is critical, so push your organization Partner up if youre not the best

Factors That Limit New Product Development

Shortage of ideas Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles

What is a Venture Team?

A venture team is a cross-functional group charged with developing a specific product or business; intrapreneurs are relieved of other duties and provided a budget and time frame.

Criteria for Staffing Venture Teams

Desired team leadership style Desired level of leader expertise Team member skills and expertise Level of interest in concept Potential for personal reward Diversity of team members

NPD Process
Idea Generation & Screening Concept Development & Testing Marketing strategy Feasibility analysis or business analysis Product Development Test Marketing Commercialization

New Product Development New Product Development Process Process

Marketing Strategy Concept Development and Testing Idea Screening Idea Generation Business Analysis Product Development

Test Marketing Commercialization

NPD Process Step One - Idea generation & screening Top management should clear about mission, objectives & role of the new product. In India NPD process is casual and Ad hoc. Formal and continuous NPD is essential for every organization to succeed in the ever changing environment. (Automobile, Pharmaceutical, IT, IT hardware, engineering Companies are evolving in this regards)

NPD Process Step One - Idea generation & Screening

Sources of new ideas
Changing customer needs and trends in consumer marketing (Customer surveys, feedback through suggestions & complaints, problems) example WIMCO match box carbonized match sticks, Kenstar Automatic Machine Top loading, fully automatic, ultra compact, tumbling mechanism, Kenstar Le Pure Water Purifier Competitors following the leader (After Nano all auto makers realized the need to develop low cost cars, Inspired from Kent RO, Aqua Guard come out with RO offering) R & D Scientists (IIT, UDCT, CSIR) Laboratories Foreign Markets & media Employees especially sales representatives (Ford, Godrej, Thermax) Trade Channels Internet Top Management (Product like Click Smokeless Tobacco, Calvin Care)

Not all sources are productive (Customer needs, problems, expectations, feedback, R & D, competitors, sales executives are most vital)

NPD Process Step One - Idea generation & Screening

Techniques for generating new ideas
Group creativity techniques
Brain storming Synectics Need / Problem identification Attribute listing

(Creativity is the key in generating ideas)

Ways to Find Great New Ideas

Run informal sessions with customers Allow time off for technical people to putter on pet projects Make customer brainstorming a part of plant tours Survey your customers Undertake fly on the wall research to customers

More Ways to Find Great Ideas

Use iterative rounds with customers Set up a keyword search to scan trade publications Treat trade shows as intelligence missions Have employees visit supplier labs Set up an idea vault

Drawing Ideas from Customers

Observe customers using product Ask customers about problems with products Ask customers about their dream products Use a customer advisory board or a brand community of enthusiasts to discuss product

Idea Generation: Creativity Techniques

Attribute listing (list out the attributes and modify each attribute) Forced relationships (list out various ideas & make forced relationship with each other) Morphological analysis (problem solution- break solution into processes various options for each processes) Reverse assumption analysis (reverse the old assumptions and create offering in newer set of assumptions) New contexts (take familiar processes and change their contexts) Mind mapping (put series of thoughts on paper and map them )

Idea Generation: Creativity Techniques

Lateral Thinking
Gas station stores Cyber cafes Sony walkman Nutribars

NPD Process Step One - Idea generation & Screening Most important thing is You should not dismiss good idea Drop error (wedding shows) Company permits a poor idea for further development Go error

NPD Process Step One - Idea generation & Screening

Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Then, the idea is evaluated against a set of general company criteria.

NPD Process Step III - Concept Development & Testing

Product idea Possible product company would offer to the market Product concept elaborated version of product idea which is spelled out in terms of consumer. Brand concept

New Product Development Process New Product Development Process

Step 1. Idea Generation Step 1. Idea Generation

Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:
C C U U S S T T O O M M E E R R S S C C O O M M P P E E T T II T T O O R R S S D D II S S T T R R II B B U U T T O O R R S S S S U U P P P P L L II E E R R S S

New Product Development Process New Product Development Process

Idea Screening Idea Screening

New Product Development Process New Product Development Process

Step 3. Concept Development & Testing Step 3. Concept Development & Testing
1. Develop Product Ideas into 1. Develop Product Ideas into Alternative Alternative Product Concepts Product Concepts

2. Concept Testing --Test the 2. Concept Testing Test the Product Concepts with Groups Product Concepts with Groups of Target Customers of Target Customers

3. Choose the Best One 3. Choose the Best One

New Product Development Process New Product Development Process

Step 4. Marketing Strategy Development Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One Describes Overall: Part One Describes Overall:
Target Market Target Market Planned Product Positioning Planned Product Positioning Sales & Profit Goals Sales & Profit Goals Market Share Market Share Products Planned Price Products Planned Price Distribution Distribution Marketing Budget Marketing Budget

Part Two Describes Short-Term: Part Two Describes Short-Term:

Part Three Describes Long-Term: Part Three Describes Long-Term:

Sales & Profit Goals Sales & Profit Goals Marketing Mix Strategy Marketing Mix Strategy

New Product Development Process New Product Development Process

Step 5. Business Analysis Step 5. Business Analysis Step 6. Product Development Step 6. Product Development

Business Analysis Business Analysis Review of Product Sales, Costs, Review of Product Sales, Costs, and Profits Projections to See if and Profits Projections to See if They Meet Company Objectives They Meet Company Objectives If No, Eliminate If No, Eliminate Product Concept Product Concept If Yes, Move to If Yes, Move to Product Development Product Development

New Product Development Process New Product Development Process

Step 7. Test Marketing Step 7. Test Marketing
Standard Standard Test Market Test Market
Full marketing campaign Full marketing campaign in a small number of in a small number of representative cities. representative cities.

Controlled Controlled Test Market Test Market

A few stores that have A few stores that have agreed to carry new agreed to carry new products for a fee. products for a fee.

Simulated Simulated Test Market Test Market

Test in a simulated Test in a simulated shopping environment shopping environment to a sample of to a sample of consumers. consumers.

New Product Development Process New Product Development Process

Step 8. Commercialization Step 8. Commercialization

Commercialization is the Introduction of the New Product into the Marketplace.

When? When?

Where? Where?

To To Whom? Whom?

How? How?

Step 1 Step 1

Step 1

Speeding Up Speeding UpSimultaneous Sequential Development Development

Step 2
Step 3 Step 4

Step 2 Step 2

Step 3 Step 3

Step 4 Step 4

IMPROVING PRODUCT DEVELOPMENT

How well are we doing? What improvements are needed? Where do we start? Should we benchmark? Requirements definition Product planning Early involvement Design for manufacturability Configuration management CAE Empowerment Solids modeling Design re-use

Integrated product teams

Product data management Resource management Early supplier involvement Analysis & simulation Top-down design QFD

Project planning

Packaging