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Chapter 9 New Product Development
Idil Yaveroglu Lecture Notes
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NEW PRODUCT DEVELOPMENT
Over 80% of new product launches end up failing. Here are some examples of products that failed… Why do you think they failed?
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Crystal Pepsi Pepsi AM Page #3
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Kimberly Clark - Avert Virucidal Tissues
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RJ Reynolds – Premier Cigarettes
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Clairol – Buttermilk shampoo
1974 They also tried “touch of yoghurt shampoo” 1979
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Hey! There's A Monster In My Room-Spray 1993
Page #7
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Wheaties Dunk-A-Balls Cereal
General Mills
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Dr. Care - Dairimetics, Ltd.
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Garlic Cake Gunderson & Rosario, Inc
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Gerber's Singles 1974
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Wine & Dine Dinners Heublein - mid-1970's
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Ford Edsel
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Reasons for New Product Failure
Insignificant point of difference Incomplete market and product definition before the product development starts Too little market attractiveness Overestimating demand Poor execution of marketing mix Poor product quality or sensitivity to customer needs on critical factors Bad timing No economical access to buyers
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New-Product Development Process
New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product
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Idea Generation - Brainstorming
The process of getting a group to think of unlimited ways to vary a product or solve a problem.
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How are new-product ideas generated?
Volvo’s YCC How are new-product ideas generated?
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Idea Screening and Evaluation
Internal Idea Sources 3M 15% rule pics/ External Idea Sources
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+ = 3M Post-it Flag Highlighter
How are new-product ideas screened & evaluated? + = 3M Post-it Flag Highlighters 3M Post-it Notes Felt Tip Highlighters
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Concept Test A test to evaluate a new-product idea, usually before any prototype has been created.
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Considerations in Business Analysis Stage
Preliminary Demand Cost Sales Profitability
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Development Creation of prototype Marketing strategy
Technical production feasibility Final government approvals if needed
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Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.
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Six important U.S. test markets and the “demographics winner”: Wichita Falls, Texas, metropolitan statistical area
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Choosing a Test Market Similar to planned distribution
Relative isolation and free of influences Advertising availability; multiple media Diversified cross section No atypical purchase habits Representative population/income Not overly used or easily “jammed” Year-round sales stability Available research/audit and retailers
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Commercialization Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales. Burger King french fries New Coke
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FIGURE 10-6 Marketing information and methods used in the new-product process
Slide 10-50
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Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Page #30
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Product Life Cycle Introduction Growth Maturity Decline Product mode
Price policy Place Promotion Profits new use skimming or penetration strategies rapidly building distribution network build general demand expected loses Introduction Growth Maturity Decline Page #31
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Product Life Cycle Introduction Growth Maturity Decline Product mode
Price policy Place Promotion Profits differentiated products maintain stable pricing policy solidify distribution channels and network generate secondary demand start of profits Introduction Growth Maturity Decline Page #32
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Product Life Cycle Introduction Growth Maturity Decline Product mode
Price policy Place Promotion Profits modify product or product usage price reduction increase distribution efforts concentrate on product positioning highest profits (peak) Introduction Growth Maturity Decline Page #33
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Product Life Cycle Introduction Growth Maturity Decline Product mode
Price policy Place Promotion Profits maintain a basic product maintain pricing or rise prices limit distribution efforts cut-back on advertising and sales promotions reduced profits Introduction Growth Maturity Decline Page #34
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Alternative product life cycles
Page #35 Slide 11-13
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DVD player product life cycle
Page #36 Slide 11-56
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Video game console and software life cycles by product class and product form
Page #37 Slide 11-15
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Extending the PLC Modifying the product Modify the market
Find new users Increasing use Create new usage situations Change product positioning Modifying the marketing mix
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Increasing Use Slide 11-23
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Diffusion The process by which the adoption of an innovation spreads.
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Five categories and profiles of product adopters
Page #42 Slide 11-17
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Product Characteristics and Diffusion
A product will diffuse faster when product has a relative advantage, is compatible with consumer values and experiences is not complex, Is divisible – degree to which it can be tried Is communicable.
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Diffusion Process and PLC Curve
Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusion Introduction Growth Maturity Decline Sales Page #44
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