New Product Innovation National Correctional Industries Association Enterprise 2004 March 23, 2004
Agenda Product Development Market Research Concept Testing Prototype Development Market Testing Product Launch Discussion
Why New Products? New product development is critical to long-term success Approximately one-third of the revenue a business generates is coming from products they did not sell five years ago Changing environment creates new demands and needs
Product Development Must be alert to quickly develop opportunities Focus on markets or product categories consistent with organization’s objectives, resources, capabilities and strengths Securing a competitive advantage
Industrial New Product Ideas Company sources other than R&D 36.2% Analysis of the competition 27.0% Research & Development 24.3% Product users 15.8% Supplier suggestions 12.5% Product user research 10.5% Published information 7.9%
New Products A way of getting new and keeping old customers Effective way of obtaining a competitive advantage Source of growth and excitement
New Product Categories New to the world products New product lines Product line extensions Improvements and revisions to existing products Repositionings Cost reductions
Product Development Process Launch Test Marketing Prototype Development Concept Testing Market research and Opportunity scan
Marketing Very important to product development success Key to successful marketing is imaginative, effective, creative communication Find a need and fill it. Mutually beneficial exchange relationships Non-profit organizations have sometimes difficult task
Marketing Strategies Increase the number of customers Increase the average transaction Increase the frequency of repurchase
Marketing Concepts Consumer orientation Customer service orientation Profit orientation Society
Marketing Mix Price Placement Product Promotion
Market Research Who is my target audience? Are there enough members of this target group to make the business worthwhile? How large is the potential market and how much of that potential market can I capture? Who is my competition and what would make someone choose my product over their current?
Market Opportunity and Threats Economic Realities GNP Disposable Income Discretionary Income Societal Focus Population Shifts Values Attitudes Competition Trends Technological Development Advance in technology Market receptiveness to technology Legal & Regulatory Condition Laws Regulations
Market Placement Identify target markets Size and growth potential Ability and ease of reaching segment Good fit with organizational objectives Greatest revenue generation with least investment
Market Placement Determine opportunity Evaluate competition Segment size Annual usage potential Anticipated annual growth rate Margin Value in use Evaluate competition Strengths/Limitations Implications
Market Research – Pricing Strategies Goal is to achieve a target profit Can you hold a product’s manufacturing costs down to less than 25% of its perceived value? Estimating manufacturing costs Obtain price quotes from several suppliers
Concept Testing Determine Critical success factors Financial objectives Marketing mix strategies Product, Pricing, Promotion, Placement Marketing plan initiatives Activity, Budget, Timing
Prototype and Test Marketing Survey end-users Do you prefer this product over your current product? Does this product meet the need you thought it would? Does the way the product works provide an important benefit?
Promotion and Product Launch Publicity Trade journals Conferences Personal selling Word of mouth
Reasons For New Product Failures Poor marketing research Technical problems Insufficient marketing effort Bad timing
Marketing Plan Audit Challenge and refine assumptions from current plan Evaluate success for input into next year’s plan Revise plan for new year incorporating marketplace learnings, marketing insights and current plan successes
Summary New product development drives growth Market research is critical to the success of a new product launch Market research is a continuous process as customer needs, your business and the environment changes