New Product Planning and Development

2. New Product Planning and Development

3. Additional Facts About New Products Many new products are failures, ranging from 33% to 90%, depending on the industry Sales of new products potentially provide a large boost to the company�s growth rate Companies vary widely in the effectiveness of their new product programs A major obstacle to effectively predicting new product demand is limited vision Common elements appear in the management practices that distinguish the relative degree of efficiency and success between companies

4. New Product Strategies New-to-the-world products � Products that are new inventions New category entries � Products that take the firm into a new category Additions to product lines � Products that are line extensions to current markets Product improvements � Current products made better Repositioning � Products targeted for new use or application

5. Product Development - Misconceptions It worked there, it will work here � Not all products transfer easily It worked once, it will work again � Peaks and valleys accompany every product development process The cart can come before the horse � The product improvement process will fail if there are other systemic issues in the company

6. H. Igor Ansoff Strategy

7. Miller Brewing Co. Strategies Building its premium-brand franchises through investment spending Develop value-added products with clear consumer benefits Leveraging local markets to build brands Building businesses globally

8. Elements of New Product Success New products tend to succeed with Product superiority & high quality Economic advantage to user Overall company & development project fit Technological requirements fit the company Customers know and trust the company Identified market need, growth and size Competitive opportunity or niche A well defined opportunity A business acting on a market-driven process Excellence in customer service

9. New Product Development Policy Top management must consider A working definition of the profit concept applied to the product Minimum level or floor of acceptable profits Availability and the cost of capital to develop the new product Specified time within which the new product must recoup costs and begin contributing to profit

10. Development Process

11. Idea Generation How do new products originate? Every product starts as an idea Most ideas do not become products Idea generation, the least expensive step in new product development, requires recognizing available idea sources New product development must focus on meeting customer needs Top management support critical to providing an atmosphere that stimulates new product activity

12. Idea Screening Strategic risk � Does the product meet a genuine need Market risk � Will the product meet a market need in a value-added, differentiated way Internal risk � Can the product be developed on time and within budget Firms should not hastily discount new products because of a lack of resources or expertise, instead they should consider strategic alliances

13. Idea Screening Benefits include Increased access to technology, funding and information Market expansion and deeper penetration into existing markets De-escalated competitive rivalries

14. Development Project Planning Analyze the proposal in terms of production, marketing, financial and competitive factors Establish a development budget with preliminary marketing and technical research Create a �rough form� product Create a project plan with estimated costs Review the project plan with top management

15. Elements of New Product Success Financial Criteria Return on investment (ROI) Various profit margin measures Sales and Sales growth Various profit measures Payback and payback period Internal rate of return (IRR) Return on assets (ROA) Return on equity (ROE) Breakeven and breakeven point Share and market share

16. Elements of New Product Success Nonfinancial Criteria Performance of new products Market share achieved Satisfaction of customer needs Other market-related benefits Strategic issues/fit/synergy Technical aspects of production Uniqueness of the new products

17. Product Development Evaluate the product from the viewpoint of engineering, manufacturing, finance and marketing If all expectations are met, consider further research and testing Produce a finished product and market test it

18. Product Development Prepare a development report for top management that includes Results of the studies Required plan design Production facilities design Tooling requirements Marketing test plan Financial program Estimated release date

19. Test Marketing The main goal is to evaluate and adjust, if necessary, the marketing strategy to be used in the marketing mix Developers can also use interaction with buyers as a foundation for product development Upon completion of the test market, prepare a final marketing plan in preparation for launch

20. Commercialization The firm commits to introducing the product into the marketplace Heavy emphasis is placed on organizational structure and management talent needed to implement the marketing strategy Follow-up to eliminate bugs in the design, production costs, quality control, and inventory requirements

21. Time to Market Time to market - The elapsed time between product definition and marketplace product vailability The time between research and marketplace delivery may be the most critical development process element It is well documented that companies that reach the market first with a new product enjoy both profit and market share advantages

22. Quality Level Performance Features Reliability Conformance Serviceability Aesthetics Overall evaluation

23. Product Features Fact or particular specification of the product Is determined by what is that the customer wants in the product These wants are not created by effective marketers but rather are learned

24. Product Design Designing new products can clearly differentiate a new product from the competitors Good design can add value to the new product A well-designed product can please a customer without necessarily costing more

25. Product Safety Safety is both an ethical and practical issue Ethically, customers should not be harmed by using the product as intended When users are harmed by a product, they may stop buying it Some products are inherently dangerous and can result in injury to users

26. Causes of Product Failure No competitive point of difference, unexpected reactions from competitors, or both Poor positioning Poor quality of product Nondelivery of promised benefits of product Too little marketing support Poor perceived price/quality relationship Faulty estimates of market potential and other marketing research mistakes Improper channels of distribution selected Rapid change in the market or economy after product introduction

27. Research Considerations What is the anticipated market demand over time Can the item be patented Any anti-trust issues Can the product be sold through present channels and sales force If not, what are the new needs At different volume levels, what will be the unit manufacturing costs What is the most appropriate package in terms of color, design, material and so forth What is the estimated return on investment What is the appropriate pricing strategy