Introducing New Market Offerings

The extent to which companys will go in introducing new products will depend on their growth ambition (Strategic planning gap)

Johnson & Johnson Emphasizes on New Product Development

Categories of New Products

New-to-the-world New product lines Additions Improvements

New Products

Fewer than 10 to 15 percent of all new products are truly innovative and new to the world. These products involve the greatest cost and risk because they are new to both the company and the marketplace. Most new-product activity is devoted to improving existing products. Many high-tech firms strive for radical innovation (3 M)

Moser Baer has moved from making optical storage media to selling home entertainment

The Worlds Most Innovative Companies

Apple Google Toyota General Electric Microsoft Procter & Gamble 3M Walt Disney

IBM Sony Wal-Mart Honda Starbucks BMW Samsung

Innovations - basics

See the future through the eyes of your customer Build a championship team. Speed is critical, so push your organization Incremental innovation Inorganic growth or organic growth Innovation is a state of mind Recognizing that 90% of experimental drugs fail, Eli lilly has developed a corporate culture that looks at failure as an inevitable part of innovation and its scientists are encouraged to look for new uses for compounds that failed at any stage. Strattera was unsuccessful as an antidepressant, but became a top seller for Hyperactivity disorder Evista was a failed contraceptive drug which became a wonder drug for osteoporosis

Factors That Limit New Product Development

Shortage of ideas (in case of basic products like steel) Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles (Sony used to enjoy a 3-year lead on its new products, now competitors copy the product in less than 6 months barely giving time for Sony to recoup its investments)

How Global firms view product Innovations

Google Gives guidelines to Engineers to spend 70% of their time on core products (search and advertisement engines), 20% of time on tangential products and 10% on fun that may or may not lead to a new product The result is lot of tiny teams are working on a lot of projects all the time. Most promising ones ends getting the Top managements attention. Most projects have something to do with Google's mission to organise the worlds information

How Global firms view product Innovations

P&G has over a lakh scientists affiliated to various universities and a independent research labs working on the next big challenge in fabric care, home care and skin care. Samsung The CEO of Samsung says that, The desire for innovative products is universal. Everything that we create should have the WOW! - response from customers

What is a Venture Team?

A venture team is a cross-functional group charged with developing a specific product or business; These intrapreneurs are relieved of other duties and provided a budget and time frame. Cross-functional teams can collaborate and use concurrent new-product development to push new products to market. Cross-functional teams help to ensure that engineers are not just driven to create a better mousetrap when potential customers do not really need or want one.

Some companies use the stage-gate system to manage the innovation process. The gatekeepers make one of four decisions at each stage of the process: 1. Go 2. Kill 3. Hold 4. Recycle The process can be depicted as a funnel. Many firms use a spiral development process that recognizes the value of returning to an earlier stage to make improvements before moving forward.

Criteria for Staffing Venture Teams

Desired team leadership style Desired level of leader expertise Team member skills and expertise Level of interest in concept Potential for personal reward Diversity of team members

The New Product Development Decision Process

The New Product Development Decision Process

Eight stages take place in the new-product development process: idea generation, screening, concept development and testing, marketingstrategy development, business analysis, product development, market testing, and commercialization. At each stage, the company must determine whether the idea should be dropped or moved to the next stage.

Ways to Find Great New Ideas

Run informal sessions with customers Allow time off for technical people to putter on pet projects

Drawing Ideas from Customers

Observe customers using product (Medtronic, a medical device company sends researchers to observe spine surgeons while at work) Ask customers about problems with products (P&G made Pringles after asking customers) Ask customers about their dream products (Minolta made a camera with 2 lenses, one to render softer images which makes the subjects look better) Use a customer advisory board or a brand community of enthusiasts to discuss product (Levis uses youth panels to discuss brand engagements)

Idea Generation: Creativity Techniques

Attribute listing Example for a tooth brush, list and modify each attribute. Forced relationships list several ideas and consider one in relation to the other. Example a desk with attached book shelf Morphological analysis start with the problem and think of every possible combinations example a mobile phone Reverse assumption analysis List all the assumptions about a product/ service and then reverse them. Example a hotel that does not have fixed dishes New contexts take familiar processes and put them in new contexts. Example- a salon for pets Mind mapping start with a product and then think of the next word that comes to your mind. While new associations come up, new ideas may also come up. Example - noodles

Lateral Mapping combining two product ideas to create a new offering

Gas stations + food Cafeteria + Internet Cereal + snacking Candy + toy

Idea Screening

A Drop Error A Go Error

Concept Development

Product idea A possible product that a company may offer to the market example A food processing company gets the idea of preparing a nutritious powder that can be added to milk Product concept It is an elaborated version of the idea expressed in consumers terms example An instant breakfast or A health supplement for the elderly etc Category concept shows where the product would stand in relation to other products in its category example positioning with respect to bread, cornflakes, dosa etc Brand concept It is a brand positioning map which shows how nutritive it is and how it is priced

Concept Testing
Concept Our product is a powdered mixture which when added to milk makes an instant breakfast that gives a person all days nutrition along with ease of preparation. The product comes in 3 flavors (chocolate, vanilla and strawberry). A box of 10 packets costs Rs.110
After giving the above information, researchers measures the following dimensions by having consumers respond to question: Communicability and believability of the concept Need level Gap level (need gap score) Perceived value (is the price reasonable) Purchase intention User targets, purchase occasions, purchasing frequency

Conjoint Analysis for concept testing and development Consumer preferences for alternative product concepts are measured using conjoint analysis. Utility values that customers attach to varying levels of product attributes can be thus measured Marriott used conjoint analysis to design its courtyard chain RPG group used conjoint analysis to understand relative importance of attributes such as location, price, quality, door delivery, etc for its Spencer's supermarket chain

Marketing Strategy

Target markets size, structure, and behavior, product positioning. Planned price, distribution, and promotion for year one Long-run sales and profit goals and marketing-mix strategy over time

Business Analysis

Proposals business attractiveness. Business needs to prepare sales, cost and profit projections whether they satisfy companys objectives

Product Life Cycle Sales for Three Product Types

Product Development and testing

The job of translating target customer requirement into a working prototype is helped by a set of methods known as quality function deployment. Physical prototypes are developed which embodies the key aspects of the product concept Alpha testing is testing the product with in the firm, while beta testing is done with customers Example: P&G conducts beta testing for baby diapers

Consumer Goods Market Testing

Sales-Wave Research - The consumers who initially try the product at no cost are reoffered the product at a reduced cost. The company notes how many customers selected it again Simulated Test Marketing Company select 30-40 customers. The customers are shown the advertisement of the new product along with other products. Then the customers are given some money to shop. Company gets to know of the advertising effectiveness. Controlled Test Marketing - Allows the company to test instore functions like shelf position, point of purchase promotion etc. Test Markets ultimate way to test a new product is do a large test marketing

Market testing and Test Market Decisions

After the initial tests, the product is given a brand name and put into a market test to see how customers react to the product. Test market decisions:

How many test cities? Which cities? Length of test? What information to collect? What action to take?

Timing of Market Entry

First entry Parallel entry Late entry

Criteria for Choosing Rollout Markets

Market potential Companys local reputation Cost of filling pipeline Cost of communication media

What is Adoption?

Adoption is an individuals decision to become a regular user of a product.

Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

Adopter Categorization

Characteristics of an Innovation

Relative advantage The degree of superiority Compatibility The extent to which the innovation matches the values and experiences of the individuals Complexity the degree to which it is easy to use Divisibility the extent to which the innovation can be tried on limited basis Communicability the degree to which the benefits can be communicated

A new product success story

Goodknight At the root of the success lies the knack of picking up an innovative product idea and converting it into a marketable product

New product failure due to faulty product idea

Cibaca lime toothpaste Cool cats Polar industries launched cool cats decorated ceiling fans mainly for children Spredit and Merrigold margarine HULs Walls frozen ice cream

Mismatch between the firms current profile and new product

Ayush ayurvedic business by HUL The 2,200 crore herbal healthcare market had been registering a double digit growth. Yet Ayush failed. The initial thinking of HUL was that a retail model that it followed for soaps and detergents would also work for an ayurvedic offering. The point HUL missed was that it had no credibility in the Ayurvedic business.

Distribution problems causing new product failure

Nestle Chocolates
Pepsis Ruffles chips

Marketing Debate
Who should you target with new products? Take a position: 1. Consumer research is critical to new-product development. or 2. Consumer research may not be all that helpful in new-product development.

Marketing Discussion
Think about the last new product you bought. How do you think its success will be affected by the five characteristics of an innovation?