1. New Product Development Chapter Eight

2. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-2 Key Learning Points Why new products are important Factors affecting new product success Three major approaches to new product development Steps in bringing a new product to market Impact of the Internet on new product development Special topics in new product development

3. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-3 Figure 8.1 Percentage of Current Sales by New Products Developed in Last 5 Years by the Company’s Industry Rank

4. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-4 Table 8.1 Top 10 Global Companies in R&D Spending (2007)

5. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-5 Table 8.2 Top 10 R&D Spending Countries (as a % of GDP)

6. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-6 Overview Innovation is life in high-tech industries. 30,000+ new supermarket products are introduced annually. Firms are constantly pressured to find the next big thing. New products offer many benefits. Most new products fail.

7. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-7 Overview New products can be classified into three categories. Minor product changes can also result in new products.

8. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-8 Figure 8.2 New Product Idea Mortality Curve for PDMA Member Firms, 1990 and 1995

9. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-9 Table 8.3 New Product Success Factors

10. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-10 Figure 8.3 New Product and Service Development Process

11. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-11 New Product Development The Rugby Approach: New products result from constant interaction among interdisciplinary team members. Firms using this method have six characteristics.

12. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-12 Figure 8.4 The Target Costing Process

13. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-13 Figure 8.5 Sources of Ready-Made New-Product Concepts

14. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-14 New Product Development Elements of Brainstorming Openness and participation Problem orientation Leaders guide the discussion Building on each other’s ideas Encouraging many diverse ideas

15. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-15 New Product Development Screening new product concepts Concept testing gets customer reactions to the product concept. Data collection Purpose may vary Conjoint analysis can also be used to test concepts.

16. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-16 Table 8.4 Conjoint Analysis Illustration

17. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-17 Table 8.5 Conjoint Analysis Illustration Results

18. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-18 Activity Visit the following website to experience conjoint analysis in action as you concept test ideas for a movie theatre: http://elabresearch.ucr.edu/conjoint /conjoint_movie/conjoint_movie.htm Visit the following website to experience conjoint analysis in action as you concept test ideas for a movie theatre: http://elabresearch.ucr.edu/conjoint /conjoint_movie/conjoint_movie.htm http://elabresearch.ucr.edu/conjoint /conjoint_movie/conjoint_movie.htm http://elabresearch.ucr.edu/conjoint /conjoint_movie/conjoint_movie.htm

19. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-19 Discussion Question 1.Identify the key attributes that you would evaluate. 2.For each attribute, identify the alternatives or levels being evaluated. Suppose you were responsible for planning a concept test for a {product of your choice} using conjoint analysis.

20. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-20 Table 8.6 Hierarchy of Needs

21. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-21 Figure 8.6 Consumers’ Importance Weights of Competitive Products

22. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-22 Table 8.7 List of Engineering Characteristics for a Car Door

23. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-23 Figure 8.7 The House of Quality

24. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-24 New Product Development Business analysis: forecasting demand Product use tests involve getting potential customers to try prototypes. Diagnostic small sample tests Limited time horizon consumer test Market tests

25. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-25 New Product Development Market Test Design Decisions Action standards Where to test What to do How long How much Information gathering

26. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-26 New Product Development Sales forecasting for new products Forecasting often relies on purchase intention data or other qualitative data. Many approaches have been developed for frequently purchased items.

27. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-27 Figure 8.8 Typical Penetration for a New Brand Over Time

28. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-28 Figure 8.9 Typical Repeat Rate for a New Brand Over Time

29. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-29 Figure 8.10 Repeat Rates and Product Performance

30. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-30 New Product Development New Product Development Simple Market Share Forecasting Using the Parfitt-Collins Model (P) = An estimate of eventual penetration rate (R) = An estimate of the ultimate repeat rate (U) = An estimate of the relative product category usage rate by buyers of the new brand Eventual Market Share = P x R x U

31. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-31 New Product Development Sales forecasting for new products Pretest market data from laboratory experiments can be used to forecast sales. ASSESSOR Forecasting the success of radical innovations is more difficult. Information acceleration

32. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-32 Figure 8.11 BASES Estimate of Contadina Year-1 Sales Volume

33. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-33 New Product Development Launching the new product Launching requires that objectives be set, the strategy be developed, and that the implementation be planned and executed. Implementation is often a key factor in product failure.

34. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-34 - Russell S. Winer “Because of shorter product life cycles and faster technological obsolescence, companies are finding that quicker time-to-market with new products has become a competitive advantage.”

35. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-35 Table 8.9 Reported New-Product Introduction Time Reductions

36. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-36 Topics in New Product Development Importance of shorter product development cycles Several factors influence time to market. Importance of product design IDEO IDEO is the best-known firm. IDEO

37. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-37 Topics in New Product Development IDEO ’ s Design Process ObservationBrainstorming Rapid prototyping RefiningImplementation

38. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-38 Topics in New Product Development New product development over the product life cycle PLC can serve as a guide to the types of innovation sought by the firm. Improving the integration of marketing and R&D

39. Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 8-39 Executive Summary New products are necessary for a firm’s long- term survival. Several factors correlate with successful new products. Several new product development approaches exist. New product concepts are either ready-made or result from a creative process. Product definition must use consumer input. Many methods exist to forecast demand.