1. New Product Development

2. New Product Development
The Federal Trade Commission says:
Entirely new or changed significantly
May be called “new” for 6 months
New Product (innovation)
In marketplace: customers perceive it to be new and different from existing products
Entirely new or with additional features to make existing product better
Ongoing process; success is more difficult
Huge R&D costs
Increased speed of obsolescence
High slotting fees
TARGETED Day 1 STOP

3. New Product Success

4. Name That Product/Skeptic
“I think there is a world market for maybe 5 computers.”
Tom Watson, IBM Chairman,1943
“The telephone has too many shortcomings to be seriously considered as a means of communications. The device is inherently of no use to us.”
Western Union memo, 1876
“Who the hell wants to hear actors talk?”
H.M. Warner, Warner Bros., 1927
“The concept is interesting and well-formed, but in order to earn better than a “C”, the idea must be feasible.”
Yale University mgt. professor in response to Fred Smith’s paper proposing a reliable overnight delivery service
“We don’t like their sound, and guitar music is on the way out.”
Decca Recording Company in rejecting the Beatles, 1962

5. Innovation & New Products
Degree of “newness” affects the amount of learning effort required to use the product

6. Continuous Innovations
Most common form of innovation
Change is minimal
Mostly in the form of:
Line Extensions
Product Modifications

7. Line Extensions
Line Extension: a product closely related to existing products in the line but meets different customer needs
Less expensive, low risk way to increase sales
May focus on the same or a new segment
Can be used to counter competing products
Many “new products” are really line extensions.

8. Product Modification
A change in one or more characteristics of the product and the elimination of the original product from the product line
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9. Quality Modifications
Changes related to a product’s dependability, durability, etc.
Done by altering materials, production processes, etc.
Why do it?
Reduce quality (and COGS) to offer a lower price to customers
Increase quality to gain a competitive advantage
Charge more or provide more for same price
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10. Functional Modifications
Changes affecting a product’s versatility, effectiveness, convenience, or safety;
Usually requiring redesign of the product
Why do it?
Stronger competitive position within your market
Increase appeal and grow the market
Achieve/maintain progressive image
Reduce possibility of product liability lawsuits

11. Aesthetic Modifications
Changes to the sensory appeal of a product: as taste, texture, sound, smell, or appearance
“Improved” aesthetics is subjective
Why do it?
Increase appeal to current target
Generate appeal to a new target
Risk: previous buyers may not like the new

12. Discontinuous Innovation
Creates major changes in the way we live
Consumers must engage in a great deal of new learning
Far more difficult to market than most imagine

13. Discontinuous Innovation
What are the best discontinuous innovations brought to market in since 1910?
How did they change the way we live?