1. New Product Development
Chapter Eight

2. 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
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3. Figure 8.1 Percentage of Current Sales by New Products Developed in Last 5 Years by the Company’s Industry Rank
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4. Table 8.1 Top 10 Global Companies in R&D Spending (2007)
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5. Table 8.2 Top 10 R&D Spending Countries (as a % of GDP)
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6. 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.
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7. Overview New products can be classified into three categories.
Minor product changes can also result in new products.
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8. Figure 8.2 New Product Idea Mortality Curve for PDMA Member Firms, 1990 and 1995
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9. Table 8.3 New Product Success Factors
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10. Figure 8.3 New Product and Service Development Process
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11. New Product Development
The Rugby Approach:
New products result from constant interaction among interdisciplinary team members.
Firms using this method have six characteristics.
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12. Figure 8.4 The Target Costing Process
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13. Figure 8.5 Sources of Ready-Made New-Product Concepts
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14. 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
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15. 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.
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16. Table 8.4 Conjoint Analysis Illustration
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17. Table 8.5 Conjoint Analysis Illustration Results
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18. Activity
Visit the following website to experience conjoint analysis in action as you concept test ideas for a movie theatre:
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19. Discussion Question
Suppose you were responsible for planning a concept test for a {product of your choice} using conjoint analysis.
Identify the key attributes that you would evaluate.
For each attribute, identify the alternatives or levels being evaluated.
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20. Table 8.6 Hierarchy of Needs
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21. Figure 8.6 Consumers’ Importance Weights of Competitive Products
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22. Table 8.7 List of Engineering Characteristics for a Car Door
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23. Figure 8.7 The House of Quality
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24. 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
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25. New Product Development Market Test Design Decisions
Action standards
Where to test
What to do
How long
How much
Information gathering
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26. 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.
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27. Figure 8.8 Typical Penetration for a New Brand Over Time
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28. Figure 8.9 Typical Repeat Rate for a New Brand Over Time
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29. Figure 8.10 Repeat Rates and Product Performance
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30. 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
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31. 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
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32. Figure 8.11 BASES Estimate of Contadina Year-1 Sales Volume
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33. 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.
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34. “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.”
- Russell S. Winer
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35. Table 8.9 Reported New-Product Introduction Time Reductions
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36. 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.
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37. Topics in New Product Development
IDEO’s Design Process
Observation
Brainstorming
Rapid prototyping
Refining
Implementation
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38. 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
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39. 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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