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Innovation Management New Products & Market Testing Kevin OBrien.

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Presentation on theme: "Innovation Management New Products & Market Testing Kevin OBrien."— Presentation transcript:

1 Innovation Management New Products & Market Testing Kevin OBrien

2 Learning objectives Appreciate the importance of balancing consumer needs, technical feasibility and business viability in new product development (NPD) Be able to describe the main evaluation steps in the NPD process Understand the (classical) role of marketing research in NPD Have an awareness of different approaches to market testing

3 The Challenge (Source: IDEO)

4 How to maximise successes? Improve odds on each individual product market research, segmentation, competitor analysis etc. linear NPD process predictable, incremental new products (the 90%) Introduce many products in quick succession and hope one succeeds probe and learn, market experimentation, expeditionary marketing iterative NPD process highly innovative (discontinuous) new products (the 10%)

5 Conventional NPD Process Title of evaluation set Development phasesEvaluation phases Idea Evaluation Concept/design Prototype Pre-production model Launch model Idea screening Concept testing Business analysis Product testing (functional & market) Test-marketing Post-launch evaluation

6 Sources of Ideas Brainstorming Intuition, associations of ideas Product-centred Features, functions, benefits Analogy, force relationships Market-based Gap analysis, perceptual mapping Scenario-based Activity analysis, problem analysis, scenario analysis

7 Empathic design How to identify latent customer needs? Evident but not yet obvious Problem identification Problems and frustrations with current solutions Story-telling How do you behave? How do you feel? Listen to customers stories Observation Observation in a natural setting Product selection and use (Leonard & Rayport, 1997)

8 Concept Development & Testing Concept development detailed description of the idea stated in terms meaningful to the customer Concept testing present to target consumers as words, pictures, physical mock-up or virtual reality form assessment of benefits, willingness to purchase, acceptable price initial target market profiling Concepts offering potential are progressed

9 Concept Development & Testing Consumer perceptions Concept uniqueness Concept believability Ability to solve problem Inherent interest Value for money Concept presentation Line drawings Photographs Storyboards Mock-ups

10 Business Analysis Development costs R&D capabilities, time to market Market potential target market, positioning, sales, market share & profit forecasts Marketing costs promotion, distribution, sales force etc Business attractiveness return on investment, level of risk forecasts of first time sales, repeat sales, rate of adoption & replacement sales How important is this project to the overall business strategy?

11 Product Development & Testing Concept developed into a workable product Design and development challenges: technical feasibility customer needs ease of manufacture Initial models produced which undergo: Functional testing Consumer testing Channel testing Does the product fulfil the concept statement?

12 Product Development & Testing Product-related decisions Content & form of presentation (number of product variants?) Disclosure of identity (blind or branded?) Explanation/supervision of test Location of test Use of comparator products Consumer panels Representative? Ad hoc surveys Who? When? Where?

13 Lead users Innovators/early-adopters Pioneers in (B2B) markets Cant find processes/materials/equipment to meet novel requirements Already working on innovations/prototypes Early experience with problem Rich and accurate feedback Highly motivated Beta-tests, early market probes, joint development But not easy to identify ….. Start with generic problem, network contacts, workshops (von Hippel, 1988)

14 Market testing Product (and marketing programme) are tested in realistic market conditions prior to full-scale launch product, advertising, positioning, distribution, branding, pricing, packaging, sales budgets Acts as a final screen in the NPD process cancel projects which fare badly Provides real data to test assumptions from market research, analysis and planning improved sales and profit forecasts Costly, time-consuming, highly visible

15 Market testing Standard test markets full marketing campaign in small number of representative cities store audits, consumer & channel surveys Controlled test markets panels of stores in different geographical locations panels of shoppers Simulated test markets simulated shopping environments

16 Probe & learn NPD process Gain market insights by experimentation launch early versions of products into plausible initial markets learn from these small-scale market trials modify the product and marketing approach launch again, and again, and again …… Learning and adaptation rather than analysis A process of successive approximation Important in directing the development effort Appropriate when technologies and markets are uncertain (Lynn et al., 1996)

17 Probe & learn NPD process Notebook market (1986-90) 30+ product launches Hard disks/floppy disks Microprocessor speeds LCD/plasma screens Price points Explored every market niche Withdrew more products than competitors had launched Achieved market leadership

18 References Leonard, D. and Rayport, J.F. (1997) Spark innovation through empathic design, Harvard Business Review, Nov-Dec, 102-113. Lynn, G.S., Morone, J.G. and Paulson, A.S. (1996) Marketing and discontinuous innovation: the probe and learn process, California Management Review, 38(3), 8-37. Von Hippel, E. (1988) The sources of innovation, New York: Oxford University Press.

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