Introducing New Market Offerings

Learning Objectives
1. How can new products be categorized?
2. What challenges does a company face in developing new products and
services?
3. What are the main stages in developing new products and services?
4. What is the best way to manage the generation of new ideas?
6. What is the best way to manage concept and strategy development?
7. What is the best way to manage the commercialization of new products?
8. What factors affect the rate of diffusion and consumer adoption of newly
launched products and services?
Product Levels: The Customer-Value Hierarchy

PRODUCT

SERVICE
The Product Hierarchy
6. Item

5. Product
type

4. Product
line

3. Product
class

2. Product
family

1. Need
family
Product Systems and Mixes
• Width
• Length
• Depth
New-Product Options
• Improvise existing products
• Buy other companies
• Buy patents from other companies
• Buy a license or franchise from another company
• New-to-the-world items
Challenges in New-Product Development

• The innovation imperative

• Continuous innovation is a necessity
• New-product success
• Incremental innovation vs. disruptive
technologies

Value
Proposition
New Product Development
Approaches
Basic technology research
Applied technology research
Market-focused development
Marketing tinkering
New-Product Failure

• Fragmented markets • Shorter development time

• Social, economic, and • Poor launch timing
government constraints • Shorter PLCs
• Development costs • Lack of organizational
• Capital shortages support
Budgeting for New-Product Development
Organizing New-Product Development
• New-product development concepts

New-product Venture
department teams

Stage-gate Skunkworks
systems

Communities
Crowdsourcing
of practice
Error types
 Type I
 Type II
Cost of Failure/Financial Commitment – Type I
New-Product Development Process
New-Product Development Process
1. Generating Ideas

• Interacting with employees

• Interacting with outsiders
• Studying competitors
• Adopting creativity techniques
Ways to Find New-Product Ideas
• Informal customer sessions
• Time off for employees
• Customer brainstorming
• Survey your customers
• “Fly on the wall” research (To mitigate “Hawthorne Effect”)
• Iterative rounds with customers
• Keyword search to scan trade publications
• Treat trade shows as intelligence missions
• Have employees visit supplier labs
• Set up an idea vault
Ways to draw new ideas from customers

 Observe customers using product

 Ask customers about product problems
 Ask customers about dream products
 Use customer advisory board
 Use Web sites
 Form brand community of enthusiasts
 Challenge customers to improve product
Adopting creativity techniques

Attribute Forced
listing relationships

Mind Morphological
mapping analysis

Reverse-
New contexts assumption
analysis
Forces Fighting New Ideas
Idea Screening Consistent Fit with
with business
environmental unit strategy
goals

Likely to meet Complements

profitability existing
targets products

Likely to meet Meets needs

revenue growth of existing
targets customers

Uses firm’s Meets needs of

core potential
competencies customers
Using Idea Screening
Using Idea Screening

• The company can monitor and revise its estimate of the product’s
overall probability of success, using the following formula:
Concept Development

• Product-positioning map

• Brand-positioning map
Concept Testing

• Concept testing responses

Communicability &
Perceived value
believability

Need level Purchase intention

User targets, purchase

Gap level
occasions & frequency
Concept to Strategy
• Conjoint analysis
• Deriving the utility values that consumers
attach to varying levels of a product’s
attributes

Cost
vs
Market Share
Utility Functions in Conjoint Analysis
Marketing Strategy Development
1. Target market’s size, structure, & behavior; the planned brand
positioning; the sales, market share & profit goals in first few
years

2. Planned price, distribution strategy, and marketing budget for

the first year

3. Long-run sales & profit goals and marketing-mix strategy over

time
Business Analysis

• Estimating total sales

• Product Life-Cycle Sales for

Three Types of Products
Business Analysis
Development to Commercialization

• Product development

• Physical prototypes

• Customer tests: alpha & beta testing

Development to Commercialization
• Market testing

• Consumer-goods market testing

Methods of Consumer-Goods Market Testing

Sales-wave research

Simulated test marketing

Controlled test marketing

Test markets
Development to Commercialization
• Commercialization: When (Timing)

First entry

Parallel entry

Late entry
Development to Commercialization
• Commercialization
• Where (Geographic Strategy)

• To Whom (Target-Market Prospects)

• How (Introductory Market Strategy)

The Consumer-Adoption Process
• Adoption
• An individual’s decision to become a regular user of a product
Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption
Factors Influencing the Adoption Process
Crossing the Chasm
Factors Influencing the Adoption Process

Characteristics of the innovation

 Relative advantage
 Compatibility
 Complexity
 Divisibility
 Communicability