New Product New Product DevelopmentDevelopment

byFazaila Ali Qazi

What is a What is a Product?Product?

Level 1

Level 2

Level 3

NewNew ProductsProducts Defining NewnessDefining Newness

New-to-the-Company New-to-the-Market Place

Categories of New Products:Categories of New Products: New to the World (or Market Place) New Product Line Additions to Existing Product Lines Improvements & Revisions to Existing Products Re-positionings Cost Reductions

1. 1. New to theNew to the WorldWorld

First of their kind---- ‘Inventions’First of their kind---- ‘Inventions’

Create entirely new marketCreate entirely new market

Represent 10% of all new Represent 10% of all new productsproducts

Examples:Examples: Sony Walkman, Sony Walkman, Microwave oven, the first home Microwave oven, the first home CD/DVD player, 3M’s yellow CD/DVD player, 3M’s yellow Post-It Notes, Doodh patti Post-It Notes, Doodh patti Sachet, Sachet,

2.2. New New ProductProduct LineLine

New to the company but not new to the market place Allow a company to enter an established market for the first time Sometimes a firm may simply want to capture part of an existing market with a ‘me-too’ product About 20% of all new products fit into this category

ExamplesExamples:: Petrosin’s Pak Oil, PTC’s Sun Drop cooking oil, PTCL’s

Broadband net service (DSL), Waqt / Dawn News, IBM’s office version of a laser printer (Hewlett Packard’s was the first to offer to the market), AT&T’s universal cards etc.

3.3. Additions to Additions to ExistingExisting Product LinesProduct Lines

Line extensions in the firm’s current Line extensions in the firm’s current marketsmarkets

May also represent a fairly New product to May also represent a fairly New product to the market place, but fit within an existing the market place, but fit within an existing product line the firm makesproduct line the firm makes

One of the largest categories of new One of the largest categories of new products-----about 26%products-----about 26%

Examples: Hewlett Packard’s Office Jet ----novel to the market, but taken as an addition to laser jet printers family), Telenor’s mobile TV, wireless connectivity etc., newer versions of mobile phone sets/Sony Ericsson’s PDA, Other examples include LG Flatron, Robin Neel liquid, addition of Dettoll Extra to Dettoll Family etc.

44. . Improvements & Improvements & Revisions toRevisions to Existing Existing

ProductsProducts Not-So-New---------current Products made betterNot-So-New---------current Products made better Essentially the replacements of existing products in Essentially the replacements of existing products in a firm’s product linea firm’s product line Usually taken in view of product differentiation Usually taken in view of product differentiation strategy, for managing product life cyclestrategy, for managing product life cycle Offer improved performance or greater perceived Offer improved performance or greater perceived value over the ‘old’ productvalue over the ‘old’ product Objective is to make (both cosmetic and technical) Objective is to make (both cosmetic and technical) changes to existing products, that respond to a changes to existing products, that respond to a changing customer requirements or a competitive changing customer requirements or a competitive threatthreat Takes a significant percentage of R&D effortsTakes a significant percentage of R&D efforts ‘‘New & Improved’ products also make up 26% of New & Improved’ products also make up 26% of new product launchesnew product launches

Examples:Examples: Surf Excel (from Surf), Fair & lovely advanced formula, Head n Shoulders Black, Santro club etc

5. 5. RepositioningRepositioning

ss Existing products retargeted for a new use or Existing products retargeted for a new use or applications, in order to appeal to new market applications, in order to appeal to new market segmentssegments Account for about 7% of all new productsAccount for about 7% of all new products

Examples:Examples:

Ufone’s repositioning by targeting the upper segment Ufone’s repositioning by targeting the upper segment Aspirin originally known as standard headache & fever Aspirin originally known as standard headache & fever

reliever. Now, aspirin is positioned, not as a headache pill, reliever. Now, aspirin is positioned, not as a headache pill, but as a blood clot, stroke and heart attack preventer.but as a blood clot, stroke and heart attack preventer.

Arm & Hammer Baking soda is another example, which was Arm & Hammer Baking soda is another example, which was repositioned several times as drain deodorant, refrigerator repositioned several times as drain deodorant, refrigerator deodorant, a new carpet freshener, and more------and all in deodorant, a new carpet freshener, and more------and all in the same package of baking sodathe same package of baking soda

Rin (later, Vim) is a classic example of repositioning, which, Rin (later, Vim) is a classic example of repositioning, which, several years back, was repositioned from laundry soap to a several years back, was repositioned from laundry soap to a dish wash bardish wash bar

6. Cost 6. Cost ReductionsReductions

Products modified to provide similar Products modified to provide similar performance but at a lower costperformance but at a lower cost

Least ‘new’ of all new product categoriesLeast ‘new’ of all new product categories

Could represent a significant change to Could represent a significant change to the firm, from design and production view the firm, from design and production view pointpoint

Represent 11% of all new product Represent 11% of all new product launcheslaunches

Examples: Examples: LG’s energy saving split unit LG’s energy saving split unit Lu’s tiger biscuit in Rs.2Lu’s tiger biscuit in Rs.2

According to a According to a Study:Study:

Most firms feature a Most firms feature a mixed portfoliomixed portfolio of new products of new products The most popular categories, common to all firms are:The most popular categories, common to all firms are:

– Additions to the lineAdditions to the line– Product improvements and revisionsProduct improvements and revisions

The step-out products (new-to-the-world & new-to-the-The step-out products (new-to-the-world & new-to-the-firm’s product line) constitute only 30% of all new product firm’s product line) constitute only 30% of all new product launches, out of which 60% are viewed as ‘most launches, out of which 60% are viewed as ‘most successful’successful’ 50% of firms introduce no new-to the-world products50% of firms introduce no new-to the-world products Another 25% develop no new product linesAnother 25% develop no new product lines High tech industries launch proportionately more High tech industries launch proportionately more ‘innovative’ products‘innovative’ products

The New Product Process begins….

Opportunity Identification & Selection

• Ongoing marketing planningOngoing marketing planning• Ongoing Corporate PlanningOngoing Corporate Planning• Special Opportunity AnalysisSpecial Opportunity Analysis

Sources of NPD opportunities

• Customer needsCustomer needs• Market DemandMarket Demand• Market GrowthMarket Growth• Market GapMarket Gap• Consumer BehaviorConsumer Behavior• Raising the market entry barrierRaising the market entry barrier• Market for existing products is Market for existing products is

saturatedsaturated• Competitive threatCompetitive threat• Serving untapped market / segmentServing untapped market / segment• Entering new segment / Market Entering new segment / Market • New Technology availableNew Technology available

External MandateExternal Mandate

• Corporate ObjectivesCorporate Objectives• Excess Production CapacityExcess Production Capacity• A new resource availableA new resource available• Under utilized resource(s)Under utilized resource(s)• Dependable sales team & Dependable sales team &

infrastructureinfrastructure• Taking first mover advantageTaking first mover advantage• Competitive advantage through Competitive advantage through

innovationinnovation• Brand ExtensionBrand Extension• Brand Re-positioningBrand Re-positioning• Pursuing Cost leadership strategyPursuing Cost leadership strategy• Other (non-corporate sources)Other (non-corporate sources)

Internal MandateInternal Mandate

Organizing for NPDOrganizing for NPD• Acknowledging it as a ProcessAcknowledging it as a Process

Sequential Product Development

(departmentalization)

Simultaneous Product Development(team-based)

The New Product The New Product Process ChallengeProcess Challenge

Value

Time Cost

Quality

The new product process must respond to the three unique inputs-----the right quality product, at the right time and at the right costThe three inputs tend to conflict with each other, though there are synergies too The three inputs contribute to the value of new products, but in different ways and in different amounts from project to projectChallenge: How to optimize the set of relationships in each new product situation?

STeam Leader

New Product Development Team

Team LeaderNew Product Manager

Core Members

manufa

cturi

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marketingFinance

Marke

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arch

Design

R&D

Support Team

Types of NPD OrganizationsTypes of NPD Organizations

• Product Planning Committee

• New Product Department

• Venture Teams

• Product Manager/Brand Manager

• New Product Manager

Product Innovation CharterProduct Innovation Charter((PICPIC))

• A document that gives the conditions A document that gives the conditions under which an organization will operate under which an organization will operate

• An agreed upon scope of activityAn agreed upon scope of activity

• A pre-technical definition of the product:A pre-technical definition of the product:– What benefits to what end-usersWhat benefits to what end-users– CUFs (Critical Utility Factors)CUFs (Critical Utility Factors)

• A strategic document ----a New Product A strategic document ----a New Product guidelineguideline

NPP through PICNPP through PIC

• Helps in New Product planning by Helps in New Product planning by Identifying, evaluating, rating & ranking the Identifying, evaluating, rating & ranking the opportunityopportunity

• Charting the NP group’s direction Charting the NP group’s direction

• Defining the boundaries and setting the Defining the boundaries and setting the directions & parametersdirections & parameters

• Defining the NP goals & Objectives and Defining the NP goals & Objectives and setting the rules of the roadsetting the rules of the road

PIC BenefitsPIC Benefits

• It allows:It allows:– DelegationDelegation– Permits financingPermits financing– Calls for personnel AssignmentsCalls for personnel Assignments

PIC FormatPIC Format

• Background:Background:– Key idea from the situation analysisKey idea from the situation analysis– Reasons for preparing the PICReasons for preparing the PIC

• FOCUS:FOCUS:– At least one clear technology dimension & At least one clear technology dimension &

one clear market dimensionone clear market dimension– They match and have a good potentialThey match and have a good potential(Core competencies: technology driven? Or (Core competencies: technology driven? Or

market driven?)market driven?) (cont…)(cont…)

PIC Format PIC Format (cont…)(cont…)

• Goals-Objectives:Goals-Objectives:– ProfitProfit– GrowthGrowth– Market StatusMarket Status

• GuidelinesGuidelines– Degree of innovativenessDegree of innovativeness– First to marketFirst to market– Adaptive productAdaptive product– Imitation/emulationImitation/emulation– They match and have a good potentialThey match and have a good potential(Core competencies: technology driven? Or market (Core competencies: technology driven? Or market

driven?)driven?)

PIC FormatPIC Format

– TimingTiming• First (pioneers)First (pioneers)• Quick (quick second)Quick (quick second)• Slow (Safer Option)Slow (Safer Option)• Late (usually a price entry keyed to manufacturing skills)Late (usually a price entry keyed to manufacturing skills)

– Misc. GuidelinesMisc. Guidelines• Product which do not require strong marketingProduct which do not require strong marketing• Competition (direct / indirect)Competition (direct / indirect)• Must be patentableMust be patentable

IDEATION(Idea Generation)

IdeationIdeation((every one’s job & no

one’s responsibility ) )• Establishing a focal point• Identifying the sources of ideas

– Internal and external

• Stimulating idea generation from each source – Establishing flow lines or mechanisms to

solicit ideas

Sources of Sources of IdeasIdeas

• Internal Sources•External Sources

Internal Sources• EmployeesEmployees

– Across the Functions• Sales• Design / R&D• Production MethodologiesMethodologies

– Suggestion Schemes• Possible formats of Suggestion Scheme:

– On-going suggestion scheme– ‘Idea of the month’ type contests– Targeted Effort

• Tips for Internal Suggestion Schemes:– Publicize the scheme widely

– Handling ideas promptly and provide timely feedback to the submitter

– Welcome all ideas– Provide guidance & assistance– Offer incentives– Manage the suggestion scheme

– Group Creativity Methods:• Brainstorming

– Invite an eclectic group– Run the session off-site– Have a pre-session mailing– Ensure that the ‘rules’ of brainstorming all well

understood by everyone– Have a moderator who runs the session

• Reverse Brainstorming• Focus Groups• Attribute Listing etc.

– Scouting Time– The Idea Bank

External Sources• Customers

– Group Discussions– Customer Panels– Customer Surveys– Working with Lead Users

• Competitors• Trade Shows• Trade Publications• Patents—the universal clearing house• Idea Brokers—the idea middlemen

• Suppliers

• Trade Partners

• Private Inventors

• Universities—a brain trust in your back yard

Roadblocks to Creativity

• “It simply won’t work.”• “Are you sure of that?”• “You can’t be serious”• “It’s against our policy.”• “Let’s shelve it for the time being.”• “That won’t work in our market.”• “Let’s think about that some more”• “I agree, but……..”• “We’ve done it the other way for a long time.”• “Where are you going to get the money for that?”• “We just can’t do that.”

• “Who thought of that?”• “It’s probably too big for us.”• “ I believe we tried that once before.”• “We don’t usually do things that way.”• “It seems like a gimmick to me.”• “It’s good, but impractical.”• “ That sounds awfully complicated.”• Production won’t accept that.”• “People will think we’re crazy.”• “Engineering can’t do that.”• “You could never sell that downstairs.”• “But who is going to drive that idea?”• “ OK, but let’s slow down a bit.”• “I’m afraid there’s precedent in this.”• “We’ve too many projects now.”• “We’ll need more background on that.”

IDEA SCREENINGIDEA SCREENING

o Once you’ve generated plenty of ideas, you’ll need to evaluate them for viability, score them, and decide which ones you’ll want to further investigate.

o Objective is to eliminate unsound concepts prior to devoting resources to them

o First, you’ll want to establish criteria to judge each idea against.

IDEA SCREENINGIDEA SCREENING

Guidelines for Guidelines for developing Screening developing Screening

CriteriaCriteria

Guidelines for Guidelines for developing Screening developing Screening

CriteriaCriteria• Alignment with your Product Innovation Strategy• Degree of compatibility with the company’s

values & principles (ex: moral, health, environmental)

• Market attractiveness / opportunity• Project feasibility• Degree of product advantage over other options• Ability to leverage existing company resources

Guidelines for developingGuidelines for developing Screening CriteriaScreening CriteriaGuidelines for developingGuidelines for developing Screening CriteriaScreening Criteria

• Does the product represent something completely new and different from anything out there in the marketplace? Would it likely appeal to a specialty/niche segment of people?

• Does the idea have a unique design to it, that’ll make it appeal to more people than a comparable product does now?

• Will this idea offer a noticeably superior quality in comparison to competitive offerings? If so, can it remain in the same price range as those competitive products?

• If it’s a popular item (in terms of category volume), would you be able to noticeably lower its price without affecting its quality?

• Is the idea able to offer enough new features to differentiate it from the competition? If so, to what degree would these additional features be of value or seen as advantageous?

Guidelines for developingGuidelines for developing Screening CriteriaScreening CriteriaGuidelines for developingGuidelines for developing Screening CriteriaScreening Criteria

• For popular products, will your idea enable you to produce and distribute it faster than the competition? Importantly, will this matter? Popular competitive products may carry a strong brand appeal which may be too high a hurdle. However, if the product category is a bit more commoditized, then speed to market will definitely be a strong advantage.

• How much longevity does your product idea have? Is it part of an established category of products, a trend, or a fad? Having a grip on this is crucial. I’m not saying some product categories are no-growth, sometimes it depends on the sales channel. But obviously you don’t want to base a lot of business on a me-too product whose lifespan may only last a few years.

• How new is this idea compared to existing products in your portfolio or pipeline? Buyers are likely to be approached next season by similar products with the additional features and attributes you’ll be pitching. If you’re redesigning a SKU to extend its lifespan, that may be fine. But ultimately, you should try and have additional, newer concepts in your development pipeline.

The Idea Review SessionThe Idea Review Session • Allow transparency into the presentations and foster open discussion.

The more people that feel they are a part of the process, the larger the buy in will be. Personnel from Sales, Marketing, R&D, and PDD (Product Design and Development) are the key attendees to these sessions. Communicate to them the decision-making criteria and the primary aspects of the Product Innovation Strategy.

• Create standardized idea forms for presenters to fill-out and distribute. Fields include: product definition, target market, explanation of user benefits, and criteria against which the ideas are judged, and a sketch (if applicable).

• With a large number of ideas and participants, create voting schemes. This could involve having idea cards/boards set up around the presentation room, and giving every participant a number of votes. Voting by raised hands can work, but perhaps it might be best to give people post-its to place on the ideas they like, then tally the votes. Techniques may vary - the idea is that participation is important.

• Once you’ve selected your winning ideas, place them into an idea portfolio.

• Any ideas leftover that had some terrific potential, but for some reason couldn’t make the cut, should be stored in an idea bank for future review.

Screening CriteriaScreening CriteriaScreening CriteriaScreening Criteria

New Idea Screening New Idea Screening Criteria PointsCriteria Points

Weightage(100) C1C1 C2C2 C3C3 C4C4 C5C5

Idea 1Idea 1

Idea 2Idea 2

Idea 3Idea 3

Idea nIdea n

ConceptConcept DevelopmentDevelopment && TestingTesting

ConceptConcept

A Detailed version of the possible / new A Detailed version of the possible / new product idea:product idea:

• stated in meaningful consumer termsstated in meaningful consumer terms• that a company can see itself offering to that a company can see itself offering to

the marketthe market• presentable to the customerspresentable to the customers• can be commercialized can be commercialized • that offers the most quality, performance & that offers the most quality, performance &

featuresfeatures

A Detailed version of the possible / new A Detailed version of the possible / new product idea:product idea:

• stated in meaningful consumer termsstated in meaningful consumer terms• that a company can see itself offering to that a company can see itself offering to

the marketthe market• presentable to the customerspresentable to the customers• can be commercialized can be commercialized • that offers the most quality, performance & that offers the most quality, performance &

featuresfeatures

ConceptConcept

• A printed or filmed representation of a A printed or filmed representation of a product or service. It is a promise a product or service. It is a promise a product makes to resolve an unmet product makes to resolve an unmet consumer need, the reason why it will consumer need, the reason why it will satisfy the need, and a description or satisfy the need, and a description or portrayal of any key element that will affect portrayal of any key element that will affect the perception of the product. the perception of the product.

• A printed or filmed representation of a A printed or filmed representation of a product or service. It is a promise a product or service. It is a promise a product makes to resolve an unmet product makes to resolve an unmet consumer need, the reason why it will consumer need, the reason why it will satisfy the need, and a description or satisfy the need, and a description or portrayal of any key element that will affect portrayal of any key element that will affect the perception of the product. the perception of the product.

What an Effective Product ConceptEffective Product Concept should be:

• A statement of the problem that the A statement of the problem that the product is meant to solve. product is meant to solve.

• A definition of the type of solution that the A definition of the type of solution that the product requires.product requires.

• Supporting attributes (physical and Supporting attributes (physical and communications) that adds credibility to communications) that adds credibility to product’s ability to solve the problem.product’s ability to solve the problem.

GUIDELINESGUIDELINES for writing CONCEPTSCONCEPTS

• Need Driven Need Driven NOTNOT Technology Driven Technology Driven

• Use Consumer Language Use Consumer Language

• Keep Statement Clear and Single-Minded Keep Statement Clear and Single-Minded

• Be Realistic Be Realistic

• Avoid Idle SuperlativesAvoid Idle Superlatives

From IdeaIdea to ConceptConcept

GM’s Electric Car Case

Idea:Idea: An electric car which can go as fast as 80 miles/hr & as far as 90

miles before needing to be re-charged. GM estimates electric car’s operating costs to be about half those of a regular car

The Concept:The Concept: An efficient, fun-to-drive, electric powered subcompact car that

seats 4; great for shopping trips & visits to friends, costs half as much to operate as similar gasoline-driven cars. Goes up to 80 miles per hour and does not need to be recharged for 90 miles. Priced, fully equipped, at $14,000.

CONCEPT for a NEW CEREALCONCEPT for a NEW CEREAL

• Introducing new Nuggets, the high nutrition cereal that combines Introducing new Nuggets, the high nutrition cereal that combines three grains - oat, barley and wheat - with the vitamins , minerals three grains - oat, barley and wheat - with the vitamins , minerals and fiber you need to start your day. Simply top with cream or milk, and fiber you need to start your day. Simply top with cream or milk, and enjoy. Nuggets can also be served warm, simply by heating in and enjoy. Nuggets can also be served warm, simply by heating in your microwave. New Nuggets, the healthy cereal that gives you the your microwave. New Nuggets, the healthy cereal that gives you the total and balanced nutrition you need.total and balanced nutrition you need.

BETTER CONCEPT for a NEW CEREALBETTER CONCEPT for a NEW CEREAL

• Introducing new Nuggets, the Introducing new Nuggets, the delicious and nutty-tastingdelicious and nutty-tasting high high nutrition cereal that combinesnutrition cereal that combines the natural sweetness of crunchy the natural sweetness of crunchy oat, oat, barley and wheat - withbarley and wheat - with all all the vitamins , minerals and fiber you the vitamins , minerals and fiber you need to start your day. Simply top with cream or milk, and enjoy. need to start your day. Simply top with cream or milk, and enjoy. Nuggets can also be served Nuggets can also be served steaming hot,steaming hot, simply by heating in your simply by heating in your microwave. microwave. WithWith Nuggets, Nuggets, you can have both high nutrition and you can have both high nutrition and great taste. New Nuggets. the healthy cereal that really tastes great.great taste. New Nuggets. the healthy cereal that really tastes great.

Concept Development Concept Development & Testing& Testing

TechniquesTechniques

Concept Development & Testing Concept Development & Testing Formats/TechniquesFormats/Techniques

• WrittenWritten• SimulationsSimulations• Virtual RealityVirtual Reality• Computer aided Design & Manufacturing Computer aided Design & Manufacturing

(CAD/CAM)(CAD/CAM)• Rapid Prototyping / Mock-upsRapid Prototyping / Mock-ups• 3-D Animations / Graphics3-D Animations / Graphics• Conjoint/Trade Off AnalysisConjoint/Trade Off Analysis• Perceptual MapsPerceptual Maps

Trade-Off (Conjoint) AnalysisTrade-Off (Conjoint) AnalysisTrade-Off (Conjoint) AnalysisTrade-Off (Conjoint) Analysis

• Put the determinant attributes together in combinations or sets.

• Respondents rank these sets in order of preference.

• Conjoint analysis finds the optimal levels of each attribute.

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Conjoint Analysis

• Measures relative values of attributes Measures relative values of attributes jointly rather than separatelyjointly rather than separately

• Mirrors trade-offs that individuals make in Mirrors trade-offs that individuals make in the market placethe market place

AttributesAttributes

• Attributes can be categorized in 3 elements:Attributes can be categorized in 3 elements:– Features– Functions – Benefits

• Example:Example:

A shampoo may contain pro-v proteins (feature) A shampoo may contain pro-v proteins (feature) that coat the hair during shampooing (function), that coat the hair during shampooing (function), which leads to more shine on the hair (benefit).which leads to more shine on the hair (benefit).

Thickness Spiciness Color ActualRanking*

Ranking asEstimatedby Model

Regular Mild Red 4 4Regular Mild Green 3 3Regular Medium-Hot Red 10 10Regular Medium-Hot Green 6 8Regular Extra-Hot Red 15 16Regular Extra-Hot Green 16 15Thick Mild Red 2 2Thick Mild Green 1 1Thick Medium-Hot Red 8 6Thick Medium-Hot Green 5 5Thick Extra-Hot Red 13 13Thick Extra-Hot Green 11 11Extra-Thick Mild Red 7 7Extra-Thick Mild Green 9 9Extra-Thick Medium-Hot Red 14 14Extra-Thick Medium-Hot Green 12 12Extra-Thick Extra-Hot Red 17 18Extra-Thick Extra-Hot Green 18 17

* 1 = most preferred, 18 = least preferred.

Conjoint Analysis Input: Salsa ExampleConjoint Analysis Input: Salsa Example

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Conjoint Analysis:Conjoint Analysis:Relative Importance of AttributesRelative Importance of Attributes

0 20 40 60 80 100 %

Spiciness

Thickness

Color

59.8%

34.6%

5.6%

7-55

Regular Thick Ex-Thick

UT

ILIT

Y

2

1

0

-1

-2

Mild Medium-Hot Ex-Hot Red Green

Thickness Spiciness Color

0.161 0.913 -1.074 1.667 0.105 -1.774 -0.161 0.161

Conjoint Analysis: Graphical OutputConjoint Analysis: Graphical Output

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Conjoint InputConjoint Input(For A Laptop)(For A Laptop)

Rank the following laptop computer alternatives in order of Rank the following laptop computer alternatives in order of preference.preference.

Rank WeightWeight Battery Time Processor Speed PriceBattery Time Processor Speed Price

• 7 lbs, 3 hours, 550 Mhz, $1400,A ______• 5 lbs, 3 hours, 550 Mhz, $1400,A ______• 7 lbs, 5 hours, 550 Mhz, $1500,A ______• 5 lbs, 5 hours, 550 Mhz, $1500,A ______• 7 lbs, 3 hours, 750 Mhz, $1400,A ______• 5 lbs, 3 hours, 750 Mhz, $1500,A ______• 7 lbs, 5 hours, 750 Mhz, $1500,A ______• 5 lbs, 5 hours, 750 Mhz, $1500,A ______

Conjoint InputConjoint Input(For A Television)(For A Television)

Attributes Levels Profiles Concepts) RankingScreen Size Small, Medium, Large

A Dimensional Attribute List• Weight• Rust resistance• Length• Color• Water resistance• Materials• Style• Durability• Shock resistance• Heat tolerance

• Explosiveness• Flammability• Aroma• Translucence• Buoyancy• Hangability• Rechargeability• Flexibility• Malleability• Compressibility

Figure 7.4

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Concept TestingConcept Testing

• For Product Marketing, a product concept test is For Product Marketing, a product concept test is conducted when the product is in the conceptual conducted when the product is in the conceptual stage, where only the core concept is defined, stage, where only the core concept is defined, through a story board, sketches, graphics, or even through a story board, sketches, graphics, or even a product mock-up. The concept should be a product mock-up. The concept should be developed to the point that it conveys the product developed to the point that it conveys the product attributes, the desired positioning and the attributes, the desired positioning and the intended brand personality.intended brand personality.

• The concept test is pre-design, and differs from a The concept test is pre-design, and differs from a pre-test or test market, which are conducted later pre-test or test market, which are conducted later in the development cycle - based on a finalized in the development cycle - based on a finalized product design. Pre-tests and test-markets are a product design. Pre-tests and test-markets are a final check point at avoiding a major market errorfinal check point at avoiding a major market error.

Basic concept tests focus on such Basic concept tests focus on such dimensions as:dimensions as:

Basic concept tests focus on such Basic concept tests focus on such dimensions as:dimensions as:

Category and brand usage Category and brand usage Brand purchased most often Brand purchased most often Purchase intent Purchase intent Likes and dislikes Likes and dislikes Number of units per purchase Number of units per purchase Frequency of purchase Frequency of purchase Overall liking Overall liking Uniqueness rating Uniqueness rating Fit of brand name Fit of brand name Value rating Value rating

Variety/size substitution Variety/size substitution Believability rating Believability rating Agreement ratings Agreement ratings Stores where expect to find Stores where expect to find product product Expected in store locationExpected in store locationStores shopped Stores shopped Grocery spend % by type Grocery spend % by type store store Concept ratings Concept ratings Demographics Demographics

HealthBoosters Test ConceptsTest Concepts

En

erg

y

Mo

bil

ity

Vit

alit

y

A Concept Test Survey

BUSINESS ANALYSISBUSINESS ANALYSIS

Business AnalysisBusiness AnalysisSales Forecasting / Financial Analysis FactorsSales Forecasting / Financial Analysis Factors

• Ground RealitiesGround Realities

- Sales Potential vs. Infrastructural SupportSales Potential vs. Infrastructural Support

• Recent Experiences / Trend AnalysisRecent Experiences / Trend Analysis

• Summary of the ProblemsSummary of the Problems

Business AnalysisBusiness AnalysisSales Forecasting / Financial Analysis FactorsSales Forecasting / Financial Analysis Factors

• Forecasting sales using purchase intentionsForecasting sales using purchase intentions

- Gathered through a rating scale during the Gathered through a rating scale during the concept testingconcept testing

- For instance likelihood of purchasing a For instance likelihood of purchasing a product could be measured using following product could be measured using following rating scale:rating scale:

11 2 3 4 52 3 4 5Definitely Probably Might or might not Probably Definitely

Would buy would buy buy wouldn’t buy wouldn’t buy

Business AnalysisBusiness AnalysisSales Forecasting / Financial Analysis FactorsSales Forecasting / Financial Analysis Factors

• Forecasting Product DiffusionForecasting Product Diffusion

• Diffusion of InnovationDiffusion of Innovation

• Cost AnalysisCost Analysis

• ROIROI• Demand projections Demand projections • Cost projections Cost projections • Competition Competition • Required investment Required investment • ProfitabilityProfitability

Business AnalysisBusiness AnalysisSales Forecasting / Financial Analysis FactorsSales Forecasting / Financial Analysis Factors

• Diffusion of InnovationDiffusion of Innovation

- - AA TT AA RR Model Model

((AAwareness, wareness, TTrial, rial, AAvailability, vailability, RRepeat)epeat)

ATAR Variables can be calculated quantitatively for sales and ATAR Variables can be calculated quantitatively for sales and profit forecasting, through following formula:profit forecasting, through following formula:

Profits = Units Sold * profit / unitProfits = Units Sold * profit / unit

Units Sold = Number of buying units * % who become aware of product * % who opt to Units Sold = Number of buying units * % who become aware of product * % who opt to try the product if they can get it * % of intended triers who can get the product (it’s try the product if they can get it * % of intended triers who can get the product (it’s available to them) * % of triers who liked the product enough to repeat their available to them) * % of triers who liked the product enough to repeat their

purchase * number of units that repeaters will buy in a yearpurchase * number of units that repeaters will buy in a year

Profit / unit = revenue per unit (unit list price less trade margins, promotional Profit / unit = revenue per unit (unit list price less trade margins, promotional allowances, freight etc.) – Costs per unit (usually COGS plus direct marketing cost)allowances, freight etc.) – Costs per unit (usually COGS plus direct marketing cost)

Business AnalysisBusiness AnalysisSales Forecasting / Financial Analysis FactorsSales Forecasting / Financial Analysis Factors

Therefore, Therefore,

Profits = Buying units * %age aware * %age trial * %age availability * %age repeat * Profits = Buying units * %age aware * %age trial * %age availability * %age repeat * annual Units bought * (revenue / unit – costs / unit)annual Units bought * (revenue / unit – costs / unit)

Example: Example:

For a car alarm system/security device:For a car alarm system/security device:

Projected Profits using above (ATAR) formula:Projected Profits using above (ATAR) formula:

Profits = $3M * 0.4 * 0.2 * 0.4 * 0.5 * 1.5 ($25 - $2.5) = $1,800,000Profits = $3M * 0.4 * 0.2 * 0.4 * 0.5 * 1.5 ($25 - $2.5) = $1,800,000

• Each factor is subject to estimationEach factor is subject to estimation

• An inadequate profit forecast can be improved only by changing one of the factorsAn inadequate profit forecast can be improved only by changing one of the factors

DevelopmentDevelopment

Technical Development

Vs.

Marketing Plan development

New Product Development New Product Development ProcessProcess • Strategic Marketing Planning

• Opportunity Identification & Analysis• Corporate Decision of NPD

Technical (product) DevelopmentTechnical (product) Development Marketing (plan) DevelopmentMarketing (plan) Development

Idea Generation

Idea Screening

Concept development & Testing

Market Strategy Development

Business Analysis

Product development

Product Testing

Commercialization

Market Scanning

Target Market Selection

Positioning Strategy

Early Marketing Mix Variables

Branding & Packaging

Augmentation Continues

Full Marketing Plan

Revised Marketing Plan

Quality Function Deployment Quality Function Deployment ((QFD - House of Quality))

Voice of the Customer into Development PhaseVoice of the Customer into Development Phase

Customer Attributes

Engineering Characteristics

Parts Characteristics

Process Operations

Engineering Characteristics

Parts Characteristics

Process Operations

Production Requirements

House of Quality

Parts Deployment

Process Planning

Production Planning

Converted to:

Converted to:

Converted to:

Converted to:

QFD QFD @@ CCFIFI

Defining the CustomersDefining the Customers

• External CustomersExternal Customers• Direct Customers (Trade)• Consumers

• Internal CustomersInternal Customers• Departments• Business functions• Support Functions

Quality Products of Internal CustomersSection /

Department(Supplier)

Out put/Deliverable

(Product/Service)

Quality Product/Service Parameters to Follow

Customer(Internal)

1 Purchasing Raw & Packing material Good Quality material (as per specifications) in right quantity, at right time

Store(R&P)

2 Store(R&P) Raw & Packing material Good Quality material (as per specifications) in right quantity, at right time

Mixing

3 Mixing Dough Properly weighed, scaled & mixed for Dough consistency and as per specifications

Mixing Parameters.doc Cutting/Mould

4 Cutting/Mould Molded Unbaked Biscuit Properly shaped & embossed molded unbaked biscuit with uniform weight

Cutting Parameters.doc

Baking

5 Baking Baked Biscuits Uniformly Baked homogeneous biscuits Baking Parameters.doc Stacking

6 Stacking Stacked Biscuits Trays Homogeneous biscuits uniformly arranged in properly cleaned stacking trays

Creaming

7 Creaming Cream Sandwiched Biscuits

Neatly & properly filled, good flavored cream sandwiched in homogeneous biscuits

Packing

8 Packing Packed, Stamped & Taped Master Cartons

Properly shaped cartons with neatly packed boxes inside, containing Quality biscuits

FGS

9 FGS Order Dispatches Meeting customer orders’ specifications, making on-time delivery preceding with order follow ups

Sales

10

Maintenance Repaired/maintained plant / machinery / equipment

Technically / Operationally fit plant / machines / equipment

Production

Production department

The Quality PlanThe Quality Plan

Parameters(CT01): 1. Follow recipe blindly(that must include fixed quantity of crumb & water also )2. Report any change in recipe suggested by anybody to QC first3. Add ingredients in order(stepwise)4. Monitor mixing timing as per standards5. Weigh & measure chemicals very carefully

Parameters (CT04):1. Controlling Oven temperature as per variety2. Follow optimum baking time as per variety3. Keep a strict eye on the biscuit color coming out of oven in order to take any quick corrective/preventive action.

Parameters CT02:1. Ensure weighing & scaling of ingredients2. Ensure mixing timings & mixing order as per standards

Plan(CT03):1. Daily cross check of one recipie at least by A. matching mixing report with printed recipe with accountsB. watching mixing operation of any batch physically2. conducting Blind Tests on weekly basis

Action to take (CT05):Prevent any de-shaped or abnormal biscuit entering into the oven through QC people standing in cutting section

Preventive Action (CT06):People: a. filling in stacking trays b. feeders at creaming and packing machinescan remove/prevent any abnormal product (deshaped/broken/ burnt)from going into further processing, realizing their quality responsibility(refer to Quality Policy)

Parameters( CT07):1. Controlling sheet thickness2. Controlling before baking weight through QC at cutting(weight samples reviewed by Khalida)3. Adjusting the mould according to

variety

Actions to take (CT08): 1. Weighing Finished product randomly(choosing one dispenser of each variety of previous day's production)2. In an effort to help mixing staff adding up right quantity of water in dough, intimating our flour suppliers to attach a datasheet along with each consignment showing a. Moisture % b. Gluten level c. Ash %age

Parameters (CT09): Educating packing staff to1. handle the packed stuff very carefully/tenderly2. use freshly baked biscuits for packing/creaming3. not to let any broken biscuit packed on the first hand, but once packed or biscuits got broken during packing process, do segregate such packets as waste

CT12Instantaneous Action: Inform shift Incharge, Shift Incharge to production Incharge & production Incharge to QC

CT13:Dispenser fillers, People at collection table and Cellophane tables and carton fillers

Actions to take(CT14):1. Investigating dispenser behavior/quality from packing staff, randomly2. Monitoring moving conveyor closely3. Monitoring Quality of Packing at the time of carton filling

Preventive Action (CT15): Invoice should be generated soon after the order is received & FGS should be releasing / dispatching the order on the basis of invoice

Tactical Plans

Special Issues in DevelopmentSpecial Issues in Development

• Speed to Market (Accelerated Product Development--APD)

–Do the job right the first time–Look at every step, every action, every meeting–Training of everyone involved–Communication–Flexibility–Fast Decisions–Cutting things wisely

• Role of Marketing during Development• Role of Top Management during Development• Functional Interface Management

•Frictions & functional Myopia

Product TestingProduct Testing((Pre-Testing, User Testing, Market TestingPre-Testing, User Testing, Market Testing))

• Product Use TestingProduct Use Testing– Use under normal operating conditionsUse under normal operating conditions

– Pre use Sense ReactionPre use Sense Reaction» Giving a user a chance to react to immediate sensations of color, speed, durability, Giving a user a chance to react to immediate sensations of color, speed, durability,

mechanical suitability, etc.mechanical suitability, etc.– Early Use ExperiencesEarly Use Experiences

» ‘‘Does it work’ knowledge (ease of use, cn they manage it? Are there still bugs? etc)Does it work’ knowledge (ease of use, cn they manage it? Are there still bugs? etc)– Beta TestsBeta Tests

» The ultimate use test of the protocol by trying it out at customer sites (software industry)The ultimate use test of the protocol by trying it out at customer sites (software industry)

» An external test of pre-production products. The purpose is to test An external test of pre-production products. The purpose is to test the product for all functions in a breadth of field situations to find the product for all functions in a breadth of field situations to find those system faults that are more likely to show in actual use than those system faults that are more likely to show in actual use than in the firm’s more controlled in-house tests before sale to the in the firm’s more controlled in-house tests before sale to the general marketgeneral market..

– Gamma TestsGamma Tests» Ideal Product Use Test, thorough evaluation by end user (pharmaceutical industry)Ideal Product Use Test, thorough evaluation by end user (pharmaceutical industry)

– Blind TestsBlind Tests» To make competitive comparisonsTo make competitive comparisons

– Market Testing/Test Marketing» Testing product as well as marketing planTesting product as well as marketing plan

Topics• Idea Screening• Concept development & Testing

• Difference between idea & Concept• Concept Writing• Various Techniques / approaches of concept development & testing • Conjoint Analysis• Perceptual Maps

• NPD Process---Simultaneous Approach (Role of Marketing during NPD Process)• Business Analysis (sales Forecasting & Financial Analysis)

• Ground Realities• Recent Experiences / Summary of the problems• Forecasting sales using purchase intentions• Forecasting product Diffusion• Cost Analysis• ROI• Sales Forecasting using A-T-A-R Model

• Product Protocol• Protocol Concept, its function & benefits• Elements of product protocol

• Development • Technical development vs. Marketing Plan Development• Using QFD (Quality Function Deployment) concept for translating customer’s requirements into

technical specifications / Production requirements of the product• Work Environment of New Product Manager / NPD Team Leader• Special Issues in Development

• Product Use Testing • Commercialization & Launch

Launch

• Pre-Launch Period– Tactical & Execution Plans – Essentials of the Launch Plans– Launch Management System

• Spot potential problems• Select those to control• Develop contingency plans

– Launch period as the Introductory stage of the PLC

Sequential (Stage Gate) Approaches

• The basic concept is that stage gates (or checkpoints) are built in through the product development process

• The process is evaluated rigorously before it is allowed to pass to the next stage

• This approach is generally conservative – it minimizes financial exposure

• This process is also slow relative to other approaches - many companies don’t have the time luxury of working through this process

Forces Driving NPD

-Intense Competition-Changing Customer

Expectations-Accelerating Technological

Change

Fast & Responsive

Driving ForcesDevelopment

ImperativeImplications

- Shorter Development Cycles-Better Targeted Products

Key Success Factors Key Success Factors in New Product in New Product

DevelopmentDevelopment

An investigation of new product practices in 700 firms by Booz-Allen & Hamilton identified the existence the existence

of common characteristicsof common characteristics in companies that were successful at product innovation

Successful companies are more committed to growth through new products developed internally.

1. Operating Philosophy

They are more likely to have had a formal

new product process in place for a longer

period of time than unsuccessful companies.

They are more likely to have a strategic plan

that includes a certain portion of company

growth from new products.

Successful companies are more likely to house the new product

organization in R&D or engineering and are more likely to allow the marketing and R&D functions to

have greater influence on the new product process.

2. Organizational Structure

Experience in

introducing new

products enables

companies to

improve new

product

performance.

3. The Experience Effect

New product development costs conform to the

experience curve: The more you do something, the more

efficient you become at doing it. This experience

advantage stems from the acquisition of a knowledge

of the market and of the steps required to develop a

new product.

Successful companies appear not

only to select a management

style appropriate to immediate

new product development needs

but also to revise and tailor that

approach to changing new

product opportunities

4. Management Style4. Management Style

An empirical research by Robert CooperRobert Cooper found three key factors that distinguish

winning projects from the losers

Factor 1: A High-Quality New Product Process

Factor 2: A Clear and Well-Communicated New Product Strategy for the Business

Factor 3: Adequate Resources for New Products

three key factorsthree key factors for effective product development:

Factor 1: A High-Quality New Product Process

Some of these success factorssuccess factors that top performers build into their new product processes include:

emphasizing the up-front predevelopment homework;

building in the voice of the customer throughout

Factor 1: A High-Quality New Product Process

demanding sharp, early product definition

having tough Go/Kill decision points where projects really do get killed

and highlighting quality of execution throughout

there are clear goals or objectives for the business's total new product effort; for example, what percentage of sales or profits new products will contribute to the business

Factor 2: A Clear and Well-Communicated New Product Strategy for the Business

there are clearly defined arenas—

specified areas of strategic focus, such

as products, markets, or technologies

—to give direction to the business's

total new product effort

the role of new products in achieving

the business's goals and the new

product strategy for the business are

clearly communicated to all who

need to know

• In top-performing businesses,

senior management has devoted

the necessary resources—people

and money, marketing and

technical—to achieve the

business's new product objectives

Factor 3: Adequate Resources for New Products

• R&D budgets

are adequate—

judged to be

sufficient in

light of the

business's new

product

objectives

• the necessary people are in place and

have their time freed up for new

products.