CRAVENS PIERCY

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

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Chapter Eight Planning for New Products

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Planning for New Products The Innovation Mandate

PLANNING FOR NEW PRODUCTS

Importance

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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

Importance of New Products

Innovation

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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

New Product Planning as a Customer Driven Process

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New product classifications:

Newness to market 2. Newness to company
1.

New product types:

Transformational innovations New product category Product line extensions Incremental improvements

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High
New product lines 20% New-to-world products 10%

Improvements/ revisions to existing products 26%

Additions to existing product lines 26%

Cost reductions 11%

Repositionings 7%

Low
Newness to market

High

Size of circle denotes number of introductions relative to total.

Source: New Product Management for the 1980s, Booz Allen & Hamilton Inc. 1982.

Finding Customer Value Opportunities

Customer value analysis Objective is to identify needs for:
1.
2. 3. 4.

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New products Improvements to existing products Improvements in production processes Improvements in supporting services

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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

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Customer Expectations

Customer Satisfaction Gap

Actual Product Performance

OPPORTUNITIES
(1) New Products (2) Improvements (3) New and Improved Processes

Characteristics of Successful Innovations

Creating an Innovative Culture

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Leveraging Capabilities

STRATEGIC INITIATIVES

Selecting the Right Innovation Strategy

Making Resource Commitments

Developing and Implementing Effective New Product Processes

Developing an Innovation Culture

Innovation Workshop for top executives to develop an innovation plan. Innovation Statement highlighting objectives and senior managements role and responsibilities. Training programs for employees and managers.

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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.

The Innovation Strategy Spells Out Managements Priorities for New Product Opportunities
1. Set specific New Product Objectives. 2. Communicate the role of New Products throughout the organization. 3. Define the areas of strategic focus: Product Scope Markets Technologies 4. 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.

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NEW PRODUCT PLANNING PROCESS

Customer Needs Analysis

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Idea Generation

Screening and Evaluation

Business Analysis

Marketing Strategy Development

Product Development

Testing Commercialization

Achieving CrossFunctional Interaction and Coordination

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R&D

Operations

Marketing

Finance

Responsibility for New Product Planning

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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

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IDEA GENERATION

Idea search: targeted or openended? 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?

BENETTONS STRATEGY TO REVIVE APPAREL IDEA GENERATION

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We didnt take advantage of the [industrys] 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. Benettons competitors-notably Spains Zara and Swedens 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 arent, so winners can be speedily restocked and slow movers yanked down from the racks. Theyve got the look down, too-cool and minimal for the working women who love Zara, and over-the-top trendy for H&Ms teen fans. And Benettons look? Blan. The Benetton brand is out of fashion, says Sagra Maceira de Rosen, retail analyst at J.P. Morgan Chase & Co. in London.

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Benettons 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. Its no secret that Benettons 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.

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Alliances/ Acquisition/ Licensing

Direct Search Technological Innovation

National Policy

METHODS OF GENERATING IDEAS

Exploratory Customer Studies

Creative Methods

Linking Marketing and Technology

Facilitating Lead User Analysis

SCREENING, EVALUATING, AND BUSINESS ANALYSIS

IDEA GENERATION

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SCREENING (fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS

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Business Analysis

Revenue Forecasts Preliminary Marketing Plan

Cost Estimation
Profit Projections Other Considerations

PRODUCT AND PROCESS DEVELOPMENT

NEW PRODUCT CONCEPT

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PRODUCT DEVELOPMENT AND USE TESTING

MARKETING STRATEGY DEVELOPMENT

MARKET TESTING

LAUNCH

Product and Process Development

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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

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Does it have the required attributes?

Verify claims

PURPOSE OF USE TESTS

Ideas for improvements

Identify use situations

MARKETING STRATEGY AND MARKET TESTING

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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

Scanner-based Test Marketing

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

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COMMERCIALIZATION
The Marketing Plan
Complete marketing strategy Responsibilities for execution Cross functional approach

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Monitoring and Control

Real time tracking
Role of the Internet Include product performance metrics with performance targets

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Marketing Strategy

Market Target(s)

Objectives

Marketing Program(s)

VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING

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Technology Push Processes

Platform Products Process Intensive Products

Customized Products