1. McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

2. Chapter Eight Planning for New Products
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

3. Planning for New Products
The Innovation Mandate

4. PLANNING FOR NEW PRODUCTS
Importance of New Products
Customer Driven Process
Steps in New Product Planning
Idea Generation
Screening/Evaluating/and Business Analysis
Product and Process Development
Marketing Strategy and Market Testing
Commercialization
Variation in the Generic Planning Process

5. Importance of New Products
Innovation at top of potential value drivers (Ernst & Young)
Innovation initiatives extend beyond new goods and services to include ideas, processes, and business practices
Organizations must build a culture of innovation

6. New Product Planning as a Customer Driven Process
New product classifications:
Newness to market
Newness to company
New product types:
Transformational innovations
New product category
Product line extensions
Incremental improvements

7. High High Low Newness to company Newness to market New-to-world
products
10%
New product
lines
20%
Newness to company
Improvements/
revisions to
existing
products
26%
Additions
to existing
product lines
26%
Cost
reductions
11%
Repositionings 7%
High
Low
Newness to market
Size of circle denotes number of introductions relative to total.
Source: New Product Management for the 1980s, Booz Allen & Hamilton Inc

8. Finding Customer Value Opportunities
Customer value analysis
Objective is to identify needs for:
New products
Improvements to existing products
Improvements in production processes
Improvements in supporting services
TM 5-1

9. Matching Capabilities to Customer Value Opportunities
Fit between capabilities and product offering
Transformational Innovations
“new-to-the-world” ideas
Customers not always the best guides
TM 5-1

10. OPPORTUNITIES Customer Expectations Customer Satisfaction Gap Actual
(1) New Products
(2) Improvements
(3) New and Improved
Processes
Actual
Product
Performance

11. Characteristics of Successful Innovations
Creating an Innovative Culture
Selecting the Right Innovation Strategy
Leveraging Capabilities
STRATEGIC INITIATIVES
Making Resource Commitments
Developing and Implementing Effective New Product Processes

12. Developing an Innovation Culture
Innovation Workshop for top executives to develop
an innovation plan.
Innovation Statement highlighting objectives and senior management’s role and responsibilities.
Training programs for employees and managers.
Communicate the priority of innovation.
Speakers to expose employees to innovation authorities.
Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.

13. The Innovation Strategy Spells Out Management’s Priorities for New Product Opportunities
Set specific New Product Objectives.
Communicate the role of New Products throughout the organization.
Define the areas of strategic focus:
Product Scope
Markets
Technologies
Include longer term discontinuous projects in the portfolio along with incremental projects.
Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.

14. NEW PRODUCT PLANNING PROCESS
Customer
Needs
Analysis
Idea
Generation
Screening
and
Evaluation
Business
Analysis
Marketing
Strategy
Development
Product
Development
Testing
Commercialization

15. Achieving Cross-Functional Interaction and Coordination
Operations
Marketing
Finance

16. Responsibility for New Product Planning
Coordination of new product activities by a high-level general manager
Inter-functional coordination by a team of new product planning representatives
Creation of a project task force responsible for new product planning
Designation of a new products manager to coordinate planning between departments
Formation of matrix structure for integration new product planning with business functions
Creation of a permanent design center

17. IDEA GENERATION Idea search: targeted or open-ended?
How extensive and aggressive?
What specific sources are best for generating a regular flow of new product ideas?
How can new ideas be obtained from customers?
Where will responsibility for the new product ideas search be placed?
What are potential threats from alternative (or disruptive) technologies?

18. BENETTON’S STRATEGY TO REVIVE APPAREL IDEA GENERATION
“We didn’t take advantage of the [industry’s] quick transformation,” says Silvana Cassano, the ex-Fiat manager who assumed the post of chief executive of Benetton Group on May 5.
The transformation saw the best retailers turn into cutting-edge users of digital technology. Benetton’s competitors-notably Spain’s Zara and Sweden’s H&M Hennes & Mauritz-have raised the bar for the entire industry. These retailers can beam new styles from the catwalk to the shop floor in less than a month-and at bargain prices. Both deploy sophisticated technology to track which items are selling and which aren’t, so winners can be speedily restocked and slow movers yanked down from the racks. They’ve got the look down, too-cool and minimal for the working women who love Zara, and over-the-top trendy for H&M’s teen fans. And Benetton’s look? Blan. “The Benetton brand is out of fashion,” says Sagra Maceira de Rosen, retail analyst at J.P. Morgan Chase & Co. in London.

19. Benetton’s Strategy (continued)
Cassano is out to change that. The message he delivered in his first encounter with shareholders was short and powerful: Benetton is going to refocus on the apparel business, which encompasses the Sisley and Benetton brands.
It’s no secret that Benetton’s core casual wear business has suffered neglect. In 1994, founder Luciano Benetton launched an ill-fated diversification into sports equipment, snapping up trophy brands such as Prince (tennis rackets), Rollerblade (in-line skates), and Killer Loop (snowboards). But the strategy foundered and last year, Benetton sold the entire equipment division, booking $190 million in write-offs. The company posted its first annual loss-$10.5 million, on revenues of $2.3 million.
Source: “Has Benetton Stopped Unraveling?” Business Week, June 30, 2003, 76.

20. METHODS OF
GENERATING
IDEAS
Direct
Search
Linking
Marketing
and Technology
Facilitating
Lead User
Analysis
Creative
Methods
National
Policy
Exploratory
Customer
Studies
Alliances/
Acquisition/
Licensing
Technological
Innovation

21. SCREENING, EVALUATING, AND BUSINESS ANALYSIS
IDEA GENERATION
SCREENING
(fit/feasibility)
CONCEPT EVALUATION
BUSINESS ANALYSIS

22. Business Analysis Revenue Forecasts Preliminary Marketing Plan
Cost Estimation
Profit Projections
Other Considerations

23. PRODUCT AND PROCESS DEVELOPMENT
NEW
PRODUCT
CONCEPT
PRODUCT
DEVELOPMENT
AND USE
TESTING
MARKETING
STRATEGY
DEVELOPMENT
MARKET
TESTING
LAUNCH

24. Product and Process Development
Development of the new product includes:
Product design
Packaging design
Decisions to make or purchase product components
Product Development Process:
Product Specifications
Industrial Design
Prototype
Use Tests
Process Development
Collaborative Development

25. Does it have the
required attributes?
Verify
claims
PURPOSE OF
USE TESTS
Ideas for
improvements
Identify use
situations

26. MARKETING STRATEGY AND MARKET TESTING
Marketing Strategy Decisions
Market Targeting
Positioning Strategy
Market Testing Options
Simulated Test Marketing
Scanner – Based Test Marketing
Conventional Test Marketing
Testing Industrial Products
Selecting Test Sites
Length of the Test
External Influences

27. Scanner-based Test Marketing
Less artificial than simulated testing
Costs less than full-scale market test
Test is controlled by using IRI’s 2300 panel members in each test city
Cable TV enables use of controlled ad testing
Tests take about 12 months
Costs are $250,000+

28. COMMERCIALIZATION The Marketing Plan Monitoring and Control
Complete marketing strategy
Responsibilities for execution
Cross – functional approach
Monitoring and Control
Real – time tracking
Role of the Internet
Include product performance metrics with performance targets

29. Marketing Strategy
Market Target(s)
Marketing Program(s)
Objectives

30. VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING
Technology Push Processes
Platform Products
Process – Intensive Products
Customized Products