New Product Innovation National Correctional Industries Association Enterprise 2004 March 23, 2004

Agenda Product Development Product Development Market Research Market Research Concept Testing Concept Testing Prototype Development Prototype Development Market Testing Market Testing Product Launch Product Launch Discussion Discussion

Why New Products? New product development is critical to long-term success New product development is critical to long-term success Approximately one-third of the revenue a business generates is coming from products they did not sell five years ago Approximately one-third of the revenue a business generates is coming from products they did not sell five years ago Changing environment creates new demands and needs Changing environment creates new demands and needs

Product Development Must be alert to quickly develop opportunities Must be alert to quickly develop opportunities Focus on markets or product categories consistent with organization’s objectives, resources, capabilities and strengths Focus on markets or product categories consistent with organization’s objectives, resources, capabilities and strengths Securing a competitive advantage Securing a competitive advantage

Industrial New Product Ideas Company sources other than R&D 36.2% Company sources other than R&D 36.2% Analysis of the competition 27.0% Analysis of the competition 27.0% Research & Development 24.3% Research & Development 24.3% Product users 15.8% Product users 15.8% Supplier suggestions 12.5% Supplier suggestions 12.5% Product user research 10.5% Product user research 10.5% Published information 7.9% Published information 7.9%

New Products A way of getting new and keeping old customers A way of getting new and keeping old customers Effective way of obtaining a competitive advantage Effective way of obtaining a competitive advantage Source of growth and excitement Source of growth and excitement

New Product Categories New to the world products New to the world products New product lines New product lines Product line extensions Product line extensions Improvements and revisions to existing products Improvements and revisions to existing products Repositionings Repositionings Cost reductions Cost reductions

Product Development Process Market research and Opportunity scan Concept Testing Prototype Development Test Marketing Product Launch

Marketing Very important to product development success Very important to product development success Key to successful marketing is imaginative, effective, creative communication Key to successful marketing is imaginative, effective, creative communication Find a need and fill it. Find a need and fill it. Mutually beneficial exchange relationships Mutually beneficial exchange relationships Non-profit organizations have sometimes difficult task Non-profit organizations have sometimes difficult task

Marketing Strategies Increase the number of customers Increase the number of customers Increase the average transaction Increase the average transaction Increase the frequency of repurchase Increase the frequency of repurchase

Marketing Concepts Consumer orientation Consumer orientation Customer service orientation Customer service orientation Profit orientation Profit orientation Society Society

Marketing Mix Product Price Promotion Placement

Market Research Who is my target audience? Who is my target audience? Are there enough members of this target group to make the business worthwhile? Are there enough members of this target group to make the business worthwhile? How large is the potential market and how much of that potential market can I capture? How large is the potential market and how much of that potential market can I capture? Who is my competition and what would make someone choose my product over their current? Who is my competition and what would make someone choose my product over their current?

Market Opportunity and Threats Economic Realities GNP Disposable Income Discretionary Income Legal & Regulatory Condition Laws Regulations Societal Focus Population Shifts Values Attitudes Competition Trends Technological Development Advance in technology Market receptiveness to technology

Market Placement Identify target markets Size and growth potential Size and growth potential Ability and ease of reaching segment Ability and ease of reaching segment Good fit with organizational objectives Good fit with organizational objectives Greatest revenue generation with least investment Greatest revenue generation with least investment

Market Placement Determine opportunity Segment size Segment size Annual usage potential Annual usage potential Anticipated annual growth rate Anticipated annual growth rate Margin Margin Value in use Value in use Evaluate competition Strengths/Limitations Strengths/Limitations Implications Implications

Market Research – Pricing Strategies Goal is to achieve a target profit Goal is to achieve a target profit Can you hold a product’s manufacturing costs down to less than 25% of its perceived value? Can you hold a product’s manufacturing costs down to less than 25% of its perceived value? Estimating manufacturing costs Estimating manufacturing costs Obtain price quotes from several suppliers Obtain price quotes from several suppliers

Concept Testing Determine Critical success factors Critical success factors Financial objectives Financial objectives Marketing mix strategies Marketing mix strategies Product, Pricing, Promotion, Placement Product, Pricing, Promotion, Placement Marketing plan initiatives Marketing plan initiatives Activity, Budget, Timing Activity, Budget, Timing

Prototype and Test Marketing Survey end-users Do you prefer this product over your current product? Do you prefer this product over your current product? Does this product meet the need you thought it would? Does this product meet the need you thought it would? Does the way the product works provide an important benefit? Does the way the product works provide an important benefit?

Promotion and Product Launch Publicity Publicity Trade journals Trade journals Conferences Conferences Personal selling Personal selling Word of mouth Word of mouth

Reasons For New Product Failures Poor marketing research Poor marketing research Technical problems Technical problems Insufficient marketing effort Insufficient marketing effort Bad timing Bad timing

Marketing Plan Audit Challenge and refine assumptions from current plan Challenge and refine assumptions from current plan Evaluate success for input into next year’s plan Evaluate success for input into next year’s plan Revise plan for new year incorporating marketplace learnings, marketing insights and current plan successes Revise plan for new year incorporating marketplace learnings, marketing insights and current plan successes

Summary New product development drives growth New product development drives growth Market research is critical to the success of a new product launch Market research is critical to the success of a new product launch Market research is a continuous process as customer needs, your business and the environment changes Market research is a continuous process as customer needs, your business and the environment changes