NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH
New Product Development — The development of original products, product improvement, product modifications, and new brands through the firm’s own R&D effort NEW PRODUCT DEVELOPMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNG-ANG UNIVERSITY PROF HYUNSUK SUH What is “New Product Development ”? New Product Development New Product Development: The development of original products, product improvements, product modifications, and new brands through the firm’s R&D efforts Kotler and Armstrong, 2010, 2013 중앙대학교 경영 Objectives The objectives of the current chapter are described below Objectives Explain the how companies find new products and its categories List and define the steps in the new product development process Explain the concept of product life cycles 중앙대학교 경영 New Product Development The product can be new to the world, to the market, to the producer or seller, or to some combination of these Definition: New Product (really-new) products (10% of new products): Inventions that create New to the World a whole new market e.g.: Polaroid camera, Sony Walkman, Palm Pilot, Product Rollerblade skates New Product Lines (20%): Products that take a firm into a category new to it e.g.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer Additions to Existing Product Line (26%): Line extensions and flankers in current markets e.g.: Tide Liquid, Bud Light, Apple’s iMac, HP LaserJet Improvements or (26%): Current products made better e.g.: P&G’s continuing improvements to Tide detergent, Ivory soap (e.g Packaging improvement – Heinz EZ Squirt Revisions of Existing Products Ketchup) Repositioned Products (7%): Products that are retargeted for a new use or application e.g.: Arm & Hammer baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks Lower Priced Products (11%):This category refers to the products that provide performance similar to competing brands at a lower price 중앙대학교 경영 New Product Development The new product can be differentiated according to the level of different types of innovations New Product : Types of Innovations Continuous Innovations Modification of existing product The consumer does not have to learn anything new to use a continuous innovation It is easier to convince consumers to adopt this kind of new product (e.g ergonomically designed computer keyboards, KNOCK-OFF) Dynamically Continuous Innovations A change in an existing product that requires a moderate amount of learning or behavior change (e.g cassette player – CD player – MP3 player, CONVERGENCE) Discontinuous Innovation Totally new product that creates major changes in the way we live To use discontinuous innovation, consumers must engage in a great amount of learning because no similar product ever been on the market (e.g Airplane, Automobile, etc.) 중앙대학교 경영 New Product Development Both marketing and non-marketing factors contribute to new product failures Marketing Reasons for New Product Failures Insignificant Point of Difference Incomplete market and product definition Too little market Attractiveness Poor execution of the marketing mix A distinctive point of difference is essential for a new product to defeat competitive ones New product needs a precise protocol Every new product manager looks for: a large target market with high growth and real buyer need Name, package, price, promotion, distribution all matters Poor synergy or fit with The company has to achieve excellent synergies using its R&D Company’s manufacturing capabilities and/or marketing ability Bad timing The product is introduced too soon, too late or at a time when customer’s taste shifted dramatically 중앙대학교 경영 New Product Development A new product strategy links the new product development process with the objectives of the marketing department, the business unit, and the corporation It must be comparable with these objectives New Product Development Process A new product strategy is part of the organization’s overall marketing strategy It sharpens and focus and provides general guidelines for generating, screening, and evaluating new product idea IDEA GENERATION IDEA SCREENING CONCEPT TEST BUSINESS ANALYSIS DEVELOPMENT TEST MARKETING COMMERCIALIZATION NEW PRODUCT 중앙대학교 경영 New Product Development New product ideas come from many resources, including customers, employees, distributors, competitors, research and development, and consultants The next stage is called ‘screening’ which eliminates ideas that are inconsistent with organizations new product strategy Idea Generation and Screening INTERNAL SOURCES EXTERNAL SOURCES - Executives, scientists, engineers, manufacturing staff, sales people - Good new product ideas come from watching and listening to customers (e.g Arm & Hammer Baking Soda) - Competitors are another good source of new-product ideas + 3M Post-it Notes -Product = development costs increase substantially in later stages so poor ideas must be dropped Felt Tip Highlighters 3M Post-it Flag Highlighters -Ideas are evaluated against criteria; most are eliminated 중앙대학교 경영 New Product Development An example of concept development and testing is illustrated below Concept Development and Testing: An example en en os os ch ch 제품개념 제품개념 아침에 시간이 없는 직 아침에 시간이 없는 직 장인들을 위한 아침식 장인들을 위한 아침식 사 대용 사 대용 제품개념 제품개념 점심 또는 저녁 시간전 점심 또는 저녁 시간전 간단하게 먹을 수 있는 간단하게 먹을 수 있는 간식 간식 Example 제품개념 제품개념 건강을 위해 신경 쓰는 건강을 위해 신경 쓰는 사람들을 위한 건강식 사람들을 위한 건강식 제품개념 의 설명 이 제품은 아침에 시간이 없는 직장인들이 출근하기 전에 먹 을 수 있는 아침식사 대용 달걀이다 제품은 한 봉지에 개 가 들어 있고 , 개당 칼로리는 250kcal 이며 , 색깔은 아이 보리색에 가격은 1,000 원 이다 - Concept development creates a detailed version of the idea stated in meaningful consumer terms - Concept testing asks target consumers to evaluate product concepts 중앙대학교 경영 New Product Development The purpose and the examples of the concept test is described below Purpose of Concept Testing To identify very poor concepts so that they can be eliminated To estimate (at least crudely) the sales or trial rate the product would enjoy (buying intentions, early projection of market share) To help develop the idea (e.g make tradeoffs among attributes) Example Concept Testing: An Example Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with a delightful flavor blend of orange, mint, and lime It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal snacks And, best of all, it contains absolutely no calories Comes in 12-ounce cans or bottles and costs 60 cents each How different, if at all, you think this diet soft drink would be from other available products now on the market that might be compared with it? Very different ( ) ( ) ( ) ( ) Not at all different Assuming you tried the product described above and liked it, about how often you think you would buy it? More than once a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy it 10 중앙대학교 경영 New Product Development The concept test example is illustrated below Example 11 중앙대학교 경영 New Product Development Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product Product Development Creation of prototype Packaging, branding, labeling Manufacturing feasibility Types of Prototypes PHYSICAL VS ANALYTICAL COMPREHENSIVE VS FOCUSED Physical prototypes are tangible artifacts created to approximate the product They include models which look and feel like the product Analytical prototypes are intangible and mathematical manner Interesting aspects of the product analyzed instead of built (e.g computer simulation) Comprehensive prototypes most of attributes of the product Full scale and operational version of the product Focused prototypes implement one or few attributes of a product 12 중앙대학교 경영 New Product Development Within a product development project, prototypes are used for following purposes Purpose of Prototypes Learning Communication Prototypes are being served as learning tools to answer following questions, “Will it work?”, “How well does it meet the customer’s needs?” Prototypes enrich communication with top management, vendors, partners, customers, investors, and etc Integration Prototypes are used to ensure that components and subsystems of the product work together as expected Milestone Particularly in the later stages of product development, prototypes are used to demonstrate that the product has achieved a desired level of functionality They provide to ensure goals, progress, and schedules 13 중앙대학교 경영 New Product Development Test marketing is the limited introduction of a product and market program to determine the reactions of potential customers in a market situation Types of Test Market - Company finds small number of representative test cites and conducts full STANDARD TEST MARKETS marketing campaign in these cities The results are used to forecast national sales and profits (Drawbacks: Costly and they may take a long time) - Several research firms keep controlled panels of stores that have agreed to carry CONTROLLED TEST MARKETS new products for a fee (Cost less than standard test market and can be completed much more quickly than standard test market) - Companies test new products in a simulated shopping environment The company SIMULATED TEST MARKETS shows ads and promotions for variety of products to sample consumers It gives consumers small amount of money and invites them into real or laboratory sotre where they may keep the money and use it to buy items (Cost much less and keep the new product out of competitors’ view) 14 중앙대학교 경영 Class Exercise Take a look at 3M’s innovative Greptile Grip golf glove below (1-4) In Class Exercise 3M’s Greptile Grip: A New Product? 3M Greptile Gloves Grip Tightly – Even If You Don’t -Max Gripping Power with Min Gripping Pressure -Exceptional Grip and Dexterity – in Wet or Dry Conditions -100% Caburetta leather for the balance of the glove gives a natural, comfortable fit -Greatest innovations in golf design in the last 25 years 15 중앙대학교 경영 Class Exercise Take a look at 3M’s innovative Greptile Grip golf glove below (2-4) In Class Exercise 3M’s Greptile Grip Technology 3M Greptile Gripping Material at key contact points for the ultimate grip 16 중앙대학교 경영 Class Exercise Take a look at 3M’s innovative Greptile Grip golf glove below (3-4) 3M’s Greptile Grip Golf Gloves Sold in Two Versions In Class Exercise Increase club head speed and distance 17 중앙대학교 경영 Class Exercise Take a look at 3M’s innovative Greptile Grip golf glove below (4-4) In Class Exercise Discussions “We look around the company for underutilized technologies that can result in exciting new products for niche markets,” says Dr Dierberger The benefits: To help golfers wearing the glove to hit longer drives and more accurate shots, thus getting lower scores through improved control of the golf club swing under both wet and dry conditions Now, 3M Golf launched a premium golf glove consisting of highest quality Carbretta leather and selling for a suggested retail price of $16.95 to $19.95 DISCUSSIONS Describe 3M’s Greptile Grip golf glove in terms of a product attributes Does 3M’s innovative Greptile Grip golf glove a success or a failure as a new product? Justify your answer Describe target markets for 3M’s Greptile Grip golf glove and Greptile technology 18 중앙대학교 경영 ...What is ? ?New Product Development ”? New Product Development New Product Development: The development of original products, product improvements, product modifications, and new brands through... companies find new products and its categories List and define the steps in the new product development process Explain the concept of product life cycles 중앙대학교 경영 New Product Development The product. .. evaluating new product idea IDEA GENERATION IDEA SCREENING CONCEPT TEST BUSINESS ANALYSIS DEVELOPMENT TEST MARKETING COMMERCIALIZATION NEW PRODUCT 중앙대학교 경영 New Product Development New product ideas