Marketing 7 Lecture 4

7/24/2019 Marketing 7 Lecture 4

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Marketing 7

Lecture 4

The Strategic

Elements of ProductDevelopment

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Why Study e! Products"

# $t is %ig %usiness & %illions of dollars annually on

technical development alone'

# The challenge of creating radical innovation

(totally ne! product categories) is vie!ed %y%usiness consultant *ary +amel as ,the most

important %usiness issue of our time'-

# .ccelerating innovation and %usiness gro!th

through innovation are the top %usiness

challenges according to the $ndustrial /esearch

$nstitute'

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0ut the e! Products Process

is Difficult1

Although you may hear much higher percentages, careful

studies supported by research evidence suggest that about

40% of new products fail somewhat higher for consumer

products, somewhat lower for business-to-business products.

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0est Practices in e! Products

# 2or every 3 ideas5

& 2e!er than 7 make it though initial screening

& 2e!er than 6 pass concept evaluation and testing

&. little more than make it through development&.%out make it through testing

&.%out 86 are commerciali9ed

& 36 of these 86 (a%out :;) are successful'

& Success rate is lo!er in consumer goods (63;) and ashigh as :6; in healthcare'

Source< =omparative Performance .ssessment Study5 PDM.5 8'

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=omparing the 0est e!

Product 2irms vs' the /est

# 2or the top ne! product firms5 a%out 4>;

of company sales and profits come from

products that !ere introduced in the lastfive years'

# 2or other firms5 this average is a%out 83;'

# Lesson< firms that maintain theircommitment to ne! products are re!arded

!ith sales and profits1

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*lo%ali9ation and e! Product

Development# Top firms deploy over 6; of their /?D spending in

foreign countries'

# *lo%al product teams allo! firms to leverage their ne!

product skills across their su%sidiaries'

# Design5 /?D5 and manufacturing may occur in different

su%sidiaries around the !orld'

# Difficulties< coordinating the efforts across multiple

countries to launch a successful ne! product'

# +aving a global innovation culture& %eing a!are of

differences in %usiness and cultural environments and

%eing open to glo%al markets & is important to success'

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2irms With a *lo%al $nnovation

=ulture

# Procter ? *am%le products are developed glo%ally in thefirm@s 88 research centers located in 3 countries'Market research and testing of the S!iffer occurred in theA'S' and 2rance'

# .pple did product design and customer reBuirementdefinition in the A'S' and Capan in developing the iPod'

# $kea identifies unmet customer needs and commissionsinhouse and outsourced designers to compete for thedesign' World!ide manufacturing partners compete forthe manufacturing rights' The firm also has ecellent

glo%al logistics for product delivery to stores andcustomers'

Source< Loida /osario5 ,0orderless $nnovation< The $mpact of *lo%ali9ation on PD Planning inThree $ndustries5- Visions5 Cune 8:'

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The e! Products Process is

.ll .%out Teams# The ne! products team is a cross-functional

team!ith personnel from marketing5 /?D5

engineering5 manufacturing5 production5 design5

and other areas'# .ll mem%ers of the team make a contri%ution to

the ne! products process and the success of

the team depends on ho! !ell they interact'

# Try to avoid narro! functional vie!points and

stereotypes'

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ot .ll e! Products .re Planned

# Micro!ave ovens

# .spartame (utraS!eet)

# Scotch*ard fa%ric protector# Teflon

# Penicillin

# Frays# Dynamite

In each case, an accidental discovery but someone new

they had something when they saw it!1-9


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What $s a e! Product"

# New-to-the-world (really-new) products (10% of new products):

$nventions that create a !hole ne! market' E'< Polaroid camera5 SonyWalkman5 Palm Pilot5 /oller%lade skates5 P?* 2e%re9e and Dryel'

# New-to-the-firm products (0%):Products that take a firm into a categoryne! to it' E'< P?* %rand shampoo or coffee5 +allmark gift items5 .T?TAniversal credit card5 =anon laser printer'

# !dditions to e"isting product lines (#%):Line etensions and flankers

that flesh out the product line in current markets' E'< Tide LiBuid5 0udLight5 .pple@s iMac5 +P LaserCet 7P'

# $mprovements and revisions to e"isting products (#%): =urrent productsmade %etter' E'< P?*@s continuing improvements to Tide detergent5 $vorysoap'

# epositionings (&%): Products that are retargeted for a ne! use or

application' .lso includes retargeting to ne! users or ne! target markets'E'< .rm ? +ammer %aking soda sold as a refrigerator deodorantG aspirinrepositioned as a safeguard against heart attacksG Marl%oro retargeted asa man@s cigarette'

# 'ost reductions (11%): e! products that provide the customer similarperformance %ut at a lo!er cost' May %e more of a ,ne! product- in

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Easier Said Than Done"

# Top innovators such as $ntel and *illette stay focused andcommitted to innovation as a longterm strategic goal'

# Without such focus5 firms can fall %ack to ,t!eaking-eisting products and relying on minor product

improvements5 instead of true product innovation thatresults in ne!tothe!orld products or really ne! productlines'

# The %est ne! product firms do not give in to this temptation5%ut continue to commit to innovative products'

# The %iggest factor contri%uting to success is having auniue superior product that adds value for the customer'

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The Strategic Elements of

Product Development

# *he New +roducts +rocess (This chapter and =hapter 8)

&. phased process that takes the ne! product idea through concept

development5 evaluation5 development5 launch5 and postlaunch'

# *he +roduct $nnovation 'harter (=hapter )

&. strategy for ne! products that ensures that the team develops products inline !ith firm o%Hectives and marketplace opportunities'

# *he +roduct +ortfolio (=hapter )

&. !ay to assess !hich ne! products !ould %e the %est ones to add to the

eisting line5 given financial and strategic o%Hectives'

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The 0asic e! Product Process

Phase 3< Ipportunity $dentificationJSelection

Phase 8< =oncept *eneration

Phase < =onceptJProHect Evaluation

Phase 4< Development

Phase 6< Launch

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So5 Does .ll If This .ctually Work"

# =heck the efforts of the %est product developersin the %usiness< the Iutstanding =orporate$nnovator a!ard !inners as selected %y theProduct Development ? Management

.ssociation# /ecent !inners< +e!lettPackard5 Do!

=hemical5 Maytag5 +arleyDavidson5 =orning5/oyal DSM5 0ausch ? Lom%'

# .ll have had a sustained commitment toinnovation5 !ith remarka%le results in terms ofne! products'

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Marketing 7 Lecture 4