MKT3418 Mid-Term Revision

Chapter 1: Strategic Elements of Product Development 1) What is a New Product?New to the world products, really new products

Create a whole new market e.g. iPod

New to the firm products, new product lines

Not new to the world, but new to the firm e.g. P&G’s firm shampoo

Additions to existing product lines

‘Flanker’ brands, line extensions

Improvements and revisions to existing products

Current products made better

Repositioning Retargeted for a new use or application Cost reductions Replacing other similar products offering

similar performance but at a lower cost

Invention: Dimension of uniqueness – the form, formulation, function of something. It is usually patentable. Innovation: Overall process wherebyan innovation is transformed into a

commercial product that can be soldprofitably

Chapter 2: New Product Process1) Basic New Product ProcessPhase 1-3: Fuzzy front endPhase 1: Opportunity identificationand selectionA company skill or resource, or acustomer problem e.g. skim milkdrinkers don’t like watered look ofskim milk

Firms using new products approach like that have reported improvements in teamwork, less rework, greater success rate with new products etc.

Parallel processing: Activities are not sequential but overlapping

Strategic in nature 3 main streams of activity feed strategic planning:

o Ongoing marketing planningo Ongoing corporate planning o Special opportunities analysis

Four categories of opportunitieso Underutilized resource o New resourceo External mandate e.g. react to competitiono Internal mandate e.g. product innovation gap, upper

management desires Opportunities carefully described analysed to confirm sales

potential Each phase is always followed by a Go/No Go/’On’ decision

“On” decision: Conditional “Go”, but the missing info must be gathered and the project could be halted at a later phase

o Fuzzy gate: Evaluative tasks for conditional “Go”s, speeds up process because time is not wasted in obtaining complete info before decision is made

Third generation new product process: Overlapping phases, fuzzy gates, flexibility

Phase 2: Concept generalization Idea concept: First appearance of an idea e.g. change the colour of skim milk?Stated concept: A form or technology, plus a clear statement of benefit e.g. firm’s patented method… might make the milk more cloudy…

Select a high potential/urgency opportunity and begin customer involvement

Collect available new product concepts that fit the opportunity and generate new ones as well

Phase 3: Concept evaluation (Screening/pre-technical evaluation)Tested concept: Has passed end-user concept, need is confirmedFully screened concept: Passes test of fit with company’s situationProtocol concept: Product definition that includes intended market user, perceived problem, benefits, mandatory features e.g. new productmust taste as good than current skim milk, must yield exactly same nutritional value

Evaluate based on technical/marketing/financial criteria: Quick looks, discounted cash flow, end-user screening, technical screening

Rank them and select best 2-3

Product protocol: Agreement between the various groups before extensive technical work gets under way – benefits the new item is to yield (not the features the new item is to have)

Phase 4: DevelopmentPrototype concept: Tentative physical product including features and benefitsBatch concept: First full test-of-fit with manufacturing; it can be made. Specifications are written, exactly what the product is to be, including features, characteristics, standardsProcess concept: Full manufacturing process is completePilot concept: Supply of the new product, produced in quantity from a pilot production line, enough for the field testing with end users

Item acquires finite formTechnical Tasks Marketing Tasks

Specify full development process and its deliverables

Undertake to design prototypes,test and validate prototypes against protocol, design and validate production process forthe best prototype

Slowly scale up production as necessary for market testing

Prepare strategy, tactics and launch details for marketing plan

Prepare proposed biz plan and get approval etc.

Phase 5: Launch (Commercialisation)Marketed concept: Output of the scale-up process from pilot is actually marketed Successful concept: Meets the goals set for it at the start of project

Gradual scale-up, market test Launch management

2) Speeding the Product to Market (Accelerated product development, APD)

Cycle time metric: Post-shipping technical speed, premarket speed(pretesting marketing plan more quickly), postannouncement speed (getting sales repts into field more quickly)

First to mindshare

Extensive user involvement early in the new products process, capturing ‘voice of the customer’

Contact between firm and user is frequent Much better definition of user needs

Time to market is shortenedCross-functional teams dedicated to new productSuppliers extensively involvedFirms adopt effective design philosophies and practices

Recognize that decisions made at the design stage are easier tochange than when at final production stage

Firms are effective at organizational learning Employees are constantly sharing experiences and transferring

knowledge from one project to another

3) New to the World Products Voice of customer should be brought in as early as possible to

find out if market will ultimately value the offering Probe-and-learn/lickety-stick: Through interaction with

customers, designers are inspired to probe, experiment, improviseand come up with new to the world products

Chapter 3: Opportunities Identification & Selection: Strategic Planning for New Products1) New Product Strategy InputsProduct platform planning

Think in terms of product families that share similarities in design, development, or production process

Brand platform Category platform

Opportunity identification

Look for emerging trends Find fringe markets that are becoming mainstream

e.g. gourmet coffee, extreme sports Find bottlenecks in flow of trade and try to

eliminate them Look for ‘ripple effects’ on biz opportunities

Noncorporate strategic planning

Silos of the firm: Marketing, technical, manufacturing, finance etc,

2) The Product Innovation Charter (PIC)Prepared by senior management designed to provide guidance to the biz units on the role of innovation. 1 Background Why did we develop this strategy anyway?2 Focus Core competencies

Technology

Product experience Customer franchise End-use experience

3 Goals-Objectives

LT and ST Profit Growth Market status

4 Guidelines Managerially imposed, consensus thinking of team members etc.

Degree of innovativenessFirst to marketo Leveraged creativity: Find special

properties and think up creative applications to arrive at new products

o Applications engineering: Tech need not be new, but use is new

Timing: First, quick-second, slower

Chapter 4: Creativity and the Product Concept Obstacles to idea generationGroupthink Thinking in a group may result in only ideas that groups

will find acceptableTargeting error

Keep going back to the same simple demographic targets, great new product opportunities may be missed as a result

Poor customer knowledgeComplexity Complex ideas are the worst and is a major barrier to

new product adoptionLack of empathy

May not understand the ‘typical’ customers they are trying to sell to

Too many cooks

Large companies are prone to internal competition for power and influence

Activities to encourage creativity Special rewards: Creative people do not like group rewards Removal of roadblocks

o Itemized response: When an idea comes up, listeners must firstcite its advantages, then they can address the negatives in a positive mode

1) The Product ConceptProduct innovation must consist of 1) form, 2) technology/feature, 3) need/benefit

A concept: Verbal and/or prototype expression that tells what is goingon to be changed and how the customer stands to gain/lose

2) Important Sources of Ready-Made New Product Ideas

User toolkits/mass customization: Allow customers to customize a product best suited to them which can then be directly translatedto manufacturing/production e.g. “build” your own car

Crowdsourcing: Obtaining product ideas from customers Lead users: At the front-edge of the trend, have best

understanding of the problems faced, expect to gain significantlyfrom solutions to those problems - ask for product outcomes rather than product features e.g. athletes

Open innovation: The process a company employs to externally search for research, innovation, new technologies and products e.g. outsourcing

Chapter 5: Finding & Solving Customers’ Problems1) Gathering the Problems

Internal recordso Sale call records, tips from resellers, warranty fileso Formal marketing research

Direct inputs from technical and marketing departmentso Opinions of people who spend a lot of time with customers

(marketing/technical departments) Problem analysis/reverse brain-storming

o 1. Determine the appropriate product/activity category for exploration

o 2. Identify a group of heavy product users or activity participants within that category

o 3. From them, gather a set of problems associated with the category – rate the benefits they want to see vs the benefit they get

o 4. Sort and rank problem according to their severity or importance

Methodologies to UseExperts

Published sourcesStakeholder contacts/ voice of the customer

Interviewing, focus groups, observation, role playing

Scenario analysis o Extending the present vs leaping into the future vs wild cardso 1. Paint a (future) scenarioo 2. Study it for problems and needso 3. Evaluate those problems and begin trying to solve the most

important ones

2) Solving the Problems Group creativity Brainstorming Electronic brainstorming and computer-assisted creativity

techniqueso All can answer simultaneously and anonymously

Disciplines panel Online communities/virtual communities: Allow firms to obtain new

ideas from customers and gather feedback for new concepts

Chapter 6: Analytical Attribute Approaches: Introduction & Perceptual Mapping1) Understanding why Customers buy a Product

Products are groups of attributes: Features, functions, benefits Analyzing product attributes for concept generation and

evaluation: What needs to be improved/ perceptual gap analysis

2) Gap AnalysisDeterminant gap map

Managerial expertise and judgment is used

Speedy and cost-efficient Weakness of being driven only by

managerial judgment

Attribute ratings (AR) gap map

Market participants

Data cube: Impressive in size but not useful to managers

Factor analysis: Reduces large no. of attributes to a small no.

Cluster analysis Snake plot

Users sometimes make purchase decisions using attributes they cannot identify, hard to verbalize (phantom attributes)

Overall similarities(OS) gap map

Perceptions ofoverall similarities between brand pairs

Multi-dimensional scaling to find relative positions of brands

Axes not defined: Follow-up analysis required to define axes

Chapter 7: Analytical Attribute Approaches: Trade-Off Analysis and Qualitative Techniques1) Trade-Off AnalysisProcess by which customers compare and evaluate brands based on their attributes or features. Conjoint analysis assumes we can represent a product as a set or bundle of attributes – CA puts all of the determinant attributes together in new sets, and identifies which setsof attributes would be most liked or preferred by customers.

Using trade-off analysis to generate concepts

A conjoint analysis applicationo Full profile CA: One for which we obtain info on all possible

levels of all product’s attributesPractical guidelines Limitations

Must be able to specify the product as a bundle of attributes

Need to know what the determinant attributes are first e.g. AR gap mapping

Respondents should be familiar with theproduct category

Firm should be able to act on the results

Decision problemhas too many attributes

Does not measureinteraction among attributes

Alternatives to full-profile conjoint analysis o Adaptive conjoint analysis: Shows only a few attributes at a

time and adapts to the respondent as the conjoint exercise goes on – respondents are first asked which attributes are important to them, after a few questions ‘calibration concepts’

o Choice based conjoint analysis: Shown several products and asked which they prefer

Recent modifications in conjoint analysis Virtual prototypes in concept testing: Information acceleration

(virtual buying environment)

2) Qualitative Techniques Dimensional analysis: Uses any and ALL features e.g. aroma, sound

of a spoon Checklists: Can it be…

o Adapted? Modified? Reversed? Combined with anything? Substituted? Magnified? Minified? Rearranged in some way?

Relationship analysisDimensions used include other aspects besides features, benefits and functions e.g. different places of use, occupations of users etc. o Utility lever: How the product will affect the customers’ life

e.g. fun/image, environmental friendliness etc. e.g. Starbucksis not just a food outlet but a place to have fun

o Buyers’ experience cycle: The stage when/where the product will affect the customer (purchase, delivery, use etc.)

o Two-dimensional matrix

o Morphological matrix

Chapter 8: Concept Evaluation System1) What’s Going On in the New Products Process?

The evaluation system for the basic new products process Product line considerations in concept evaluation

2) The Cumulative Expenditures Curve The risk/payoff matrix

o ‘Drop error’ more costly than ‘Go error’o Generic risk strategies

Avoidance

Eliminates risky product project altogether, thoughan opportunity cost is incurred

Mitigation

Reduce the risk to an acceptable, threshold level e.g. including more backup systems

Transfer

Move the responsibility to another organization e.g. JV

Acceptance

Develop a contingency plan now or deal with the risks as they come up

Decay curve: % of any firm’s new product concepts that survive through the development period

3) Planning the Evaluation System Everything is tentative Potholes: Ability to anticipate major difficulties People dimension Surrogate/substitute questions at different stages of the new

product process

4) A-T-A-R ModelAwareness-trial-availability-repeat

Profit = Potential buyers x % aware x % trial x % available x % repeatx annual units bought x profit per unit

Chapter 9: Concept Testing 1) Initial Reaction

The idea source does not usually participate in the initial reaction

Two or more persons are involved in any rejection decision Based on more than a pure intuitive sense: Evaluators are trained

and experienced, records are kept and reviewed Rough early screens:

o Market worth: What is the attractiveness of the new product tothe targeted customer population?

o Firm worth: Is the new product project viewed positively by management?

o Competitive insulation: Can the products’ advantage be maintained against competitive retaliation?

2) Concept Testing and Development What is a new product concept? The purpose of concept testing

3) Considerations in Concept Testing Research Prepare the concept statement:

o Narrative format: States a differenced and how that differencebenefits the customer/end-user

o Commercialized concept statement (promotional style) Define respondent group Select response situation Prepare interviewing sequence Variations

Purchase intentionUniqueness/differentiation from other productsBelievability Importance in solving a consumer’s problemInherent interestValue for money

4) Analysing Research Results Identifying benefit segments Joint space maps Preference regression

5) Conjoint Analysis in Concept Testing