Chapter 07 NEW PRODUCT DEVELOPMENT PROCESS
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Chapter 07
NEW PRODUCT DEVELOPMENT PROCESS
Chapter Objectives In this chapter, we focus on the following questions: What challenges does a company face in developing
new products? What organizational structures are used to manage
new-product development? What are the main stages in developing new
products, and how can they be managed better? What factors affect the rate of diffusion and
consumer adoption of newly launched products?
New Product Options MAKE or BUY
1. Company can buy other company2. Acquire patent from another
company3. Buy a license or franchise from
other company
Types of new productSix categories of new products1. New-to-the-world products2. New product lines3. Additions to existing product lines4. Improvements and revisions of existing
products5. Repositioning6. Cost reductions
Automobiles
Icecreams
Petroleum High Performance
petrol by Bharat Petroleum
1. Improves engine performance
2. fuel efficiency
Why do new products fail? A high-level executive pushes a
favorite idea through in spite of negative
research findings. The idea is good, but the market
size is overestimated. The product is not well designed.
The product is incorrectly positioned in the market, not advertised effectively, or overpriced.
The product fails to gain sufficient distribution coverage or support.
Development costs are higher than expected. Competitors fight back harder than expected.
Factors that tend to hinder new-productdevelopment
Shortage of important ideas in certain areas Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles
Organizing New-Product Development
Product managers New-product managers High-level management committee New product department Venture teams
New Product Development decision Process
Managing the Development Process: Ideas
Idea Generation Interacting with Others1. Sales representatives2. Intermediaries3. Product champion
Managing the Development Process: Ideas
Techniques for stimulating creativity in individuals and groups
Attribute listing Forced relationships Morphological analysis Reverse assumption analysis New contexts Mind-mapping
Idea Screening1. Idea manager2. Idea committee Two types of errors in screening ideas1. DROP-error2. GO-error
Some of the most notable “drop-errors” have come from the most recognizable names in American business. Xerox saw the potential of the copy machine, IBM and Eastman Kodak did not. IBM thought the personal computer market would be miniscule.Can you think of any“drop-errors” that the company didn’t survive?
Managing the Development Process: Concept to Strategy
Concept Development and TestingA. Product ideaB. Product concept Concept developmentA. Category conceptB. Product–positioning mapC. Brand concept
Concept Testing1. Rapid prototyping2. Virtual reality3. Customer-driven engineering Questions to measure product dimensions Communicability and believability1. Need level2. Gap level
Need-gap score
Perceived value Purchase intention User targets, purchase occasions, purchasing Frequency Conjoint Analysis- Example: five design elements Three package designs Three brand names Three prices Possible Good Housekeeping seal Possible money-back guarantee
Marketing Strategy Business Analysis Estimating Total Sales Estimating Cost and Profits1. Break-even analysis2. Risk analysis
Managing the Development Process: Development to Commercialization
Product Development Quality Function Deployment (QFD) Customer attributes (CAs) Engineering attributes (EAs)
Market Testing Consumer-Goods Market Testing Seeks to estimate four variables1. Trial2. First repeat3. Adoption4. Purchase frequency Sales wave research
funnel based model
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