MT450 DB6

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New Product Development

Chapter Eight

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

Figure 8.1 Percentage of Current Sales by New Products Developed in Last 5 Years by the Company’s

Industry Rank

Table 8.1 Top 10 Global Companies in R&D

Spending (2007)

Table 8.2 Top 10 R&D Spending Countries

(as a % of GDP)

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.

Overview

New products can be classified into three categories. Minor product changes can also result in new products.

Figure 8.2 New Product Idea Mortality Curve for PDMA

Member Firms, 1990 and 1995

Table 8.3 New Product Success Factors

Figure 8.3 New Product and

Service Development Process

New Product Development

The Rugby Approach: New products result from constant interaction among interdisciplinary team members. Firms using this method have six characteristics.

Figure 8.4 The Target Costing Process

Figure 8.5 Sources of Ready-Made New-Product

Concepts

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

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.

Table 8.4 Conjoint Analysis Illustration

Table 8.5 Conjoint Analysis Illustration Results

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

http://elabresearch.ucr.edu/conjoint/conjoint_movie/conjoint_movie.htm

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.

Table 8.6 Hierarchy of Needs

Figure 8.6 Consumers’ Importance Weights of

Competitive Products

Table 8.7 List of Engineering Characteristics

for a Car Door

Figure 8.7 The House of Quality

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

New Product Development

Market Test Design Decisions

Action standards Where to test What to do

How long How much Information gathering

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.

Figure 8.8 Typical Penetration for a New Brand

Over Time

Figure 8.9 Typical Repeat Rate for a New Brand

Over Time

Figure 8.10 Repeat Rates and Product Performance

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

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

Figure 8.11 BASES Estimate of Contadina Year-1

Sales Volume

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.

Illustration

BMW used on-line videos with great success to launch the Z3 roadster in 1996.

- 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.”

Illustration

New technologies are helping to significantly shorten the product development cycles in the auto industry.

Table 8.9 Reported New-Product Introduction

Time Reductions

Topics in New Product Development

Importance of shorter product development cycles

Several factors influence time to market.

Importance of product design IDEO is the best-known firm.

http://www.ideo.com/

Topics in New Product Development

IDEO’s Design Process

Observation Brainstorming Rapid prototyping

Refining Implementation

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

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.

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New Product Development
Key Learning Points
Figure 8.1�Percentage of Current Sales by New Products Developed in Last 5 Years by the Company’s Industry Rank
Table 8.1�Top 10 Global Companies in R&D Spending (2007)
Table 8.2�Top 10 R&D Spending Countries �(as a % of GDP)
Overview
Overview
Figure 8.2�New Product Idea Mortality Curve for PDMA Member Firms, 1990 and 1995
Table 8.3�New Product Success Factors
Figure 8.3�New Product and �Service Development Process
New Product Development
Figure 8.4�The Target Costing Process
Figure 8.5�Sources of Ready-Made New-Product Concepts
Slide Number 14
New Product Development
Table 8.4�Conjoint Analysis Illustration
Table 8.5�Conjoint Analysis Illustration Results
Activity
Discussion Question
Table 8.6�Hierarchy of Needs
Figure 8.6�Consumers’ Importance Weights of Competitive Products
Table 8.7�List of Engineering Characteristics �for a Car Door
Figure 8.7�The House of Quality
New Product Development
Slide Number 25
New Product Development
Figure 8.8�Typical Penetration for a New Brand Over Time
Figure 8.9�Typical Repeat Rate for a New Brand Over Time
Figure 8.10�Repeat Rates and Product Performance
Slide Number 30
New Product Development
Figure 8.11�BASES Estimate of Contadina Year-1 Sales Volume
New Product Development
Illustration
Slide Number 35
Illustration
Table 8.9�Reported New-Product Introduction Time Reductions
Topics in New Product Development
Slide Number 39
Topics in New Product Development
Executive Summary
Slide Number 42