New-Product Development Chapter 10

10- 1 Objectives Understand how companies find and develop new-product ideas. Learn the steps in the new-product development process.

10- 2 Product Development Types  New to World  New to firm  Line extensions  Improved products  Cost reductions

10- 3 New products can be obtained via acquisition or development. New products suffer from high failure rates. Several reasons account for failure. New Product Development Strategy

10- 4 Figure 10-1: Major Stages in New-Product Development

Product Development Process Stage Gate Philosophy: Involves the maintenance of control over the expenditures in new product development by balancing firm’s investment against the value of additional information Involves the maintenance of control over the expenditures in new product development by balancing firm’s investment against the value of additional information 10- 5

Parallel Development Based on a notion that some actions can begin before full information from other activities or tests is available. May begin to develop plans for commercialization during development stage

Multidisciplinary Activity Cross functional team oversee the research & development, marketing research, production planning & financial analysis 10- 7

10- 8 New Product Development Process:  Stage 1: Idea Generation  Internal idea sources: R & DR & D  External idea sources: Customers, competitors, distributors, suppliersCustomers, competitors, distributors, suppliers New Product Development Strategy

M’s corporate culture encourages, supports, and rewards new product ideas and innovation

To see how P&G solicits ideas from customers, visit the Procter and Gamble home page, click on the Resources and Offers button, then select the Share Your Thoughts listing. Procter & Gamble Using the Web to Solicit Product Ideas Procter and Gamble

New Product Development Strategy New Product Development Process:  Stage 2: Idea Screening  Potential demand  Chances of success.  Estimate degree of cannibalization

New Product Development Process:  Stage 3: Concept Development and Testing  Product concepts provide detailed versions of new product ideas.  Consumers evaluate ideas in concept tests. New Product Development Strategy

New Product Development Process:  Stage 4: Marketing Strategy Development  Strategy statements describe: The target market, product positioning,The target market, product positioning, Product price, distribution, and marketing budget for the first year.Product price, distribution, and marketing budget for the first year. New Product Development Strategy

New Product Development Process:  Stage 5: Business Analysis  Sales, cost, and profit projections  Stage 6: Product Development  Prototype development and testing New Product Development Strategy

Daimler is currently road-testing its prototype NECAR 5 (New Electric Car)

Sensable Video Clip Computer modeling is being used to aid in product design BusinessNow

New Product Development Process:  Stage 7: Test Marketing  Standard test markets  Controlled test markets  Simulated test markets  Stage 8: Commercialization New Product Development Strategy