Copyright©2003Prentice-Hall,Inc.12-1Chapter12DevelopingNewMarketOfferingsbyPowerPointbyMiltonM.PressleyUniversityofNewOrleansCopyright©2003Prentice-Hall,Inc.12-2Whoshouldultimatelydesigntheproduct?Thecustomer,ofcourse.KotleronMarketingCopyright©2003Prentice-Hall,Inc.12-3ChapterObjectivesInthischapter,wefocusonthefollowingquestions:Whatchallengesdoesacompanyfaceindevelopingnewproducts?Whatorganizationalstructuresareusedtomanagenew-productdevelopment?Whatarethemainstagesindevelopingnewproducts,andhowcantheybemanagedbetter?Whatfactorsaffecttherateofdiffusionandconsumeradoptionofnewlylaunchedproducts?Copyright©2003Prentice-Hall,Inc.12-4DevelopingNewMarketOfferingsSixcategoriesofnewproducts1.New-to-the-worldproducts2.Newproductlines3.Additionstoexistingproductlines4.Improvementsandrevisionsofexistingproducts5.Repositioning6.CostreductionsCopyright©2003Prentice-Hall,Inc.12-5ChallengesinNew-ProductDevelopmentIncrementalinnovationDisruptivetechnologiesWhydonewproductsfail?Ahigh-levelexecutivepushesafavoriteideathroughinspiteofnegativeresearchfindings.Theideaisgood,butthemarketsizeisoverestimated.Theproductisnotwelldesigned.Copyright©2003Prentice-Hall,Inc.12-6ChallengesinNew-ProductDevelopmentTheproductisincorrectlypositionedinthemarket,notadvertisedeffectively,oroverpriced.Theproductfailstogainsufficientdistributioncoverageorsupport.Developmentcostsarehigherthanexpected.Competitorsfightbackharderthanexpected.Copyright©2003Prentice-Hall,Inc.12-7ChallengesinNew-ProductDevelopmentFactorsthattendtohindernew-productdevelopmentShortageofimportantideasincertainareasFragmentedmarketsSocialandgovernmentalconstraintsCostofdevelopmentCapitalshortagesFasterrequireddevelopmenttimeShorterproductlifecyclesCopyright©2003Prentice-Hall,Inc.12-8OrganizationalArrangementsNew-productdeploymentrequiresspecificcriteria–onecompanyestablishedthefollowingacceptancecriteriaTheproductcanbeintroducedwithinfiveyearsTheproducthasamarketpotentialofatleast$50millionanda15percentgrowthrate.Theproductwouldprovideatleast30percentreturnonsalesand40percentoninvestment.Theproductwouldachievetechnicalormarketleadership.Copyright©2003Prentice-Hall,Inc.12-9BudgetingForNewProductDevelopment3M’sapproach:15%ruleEachpromisingideagetsan“executivechampion”ExpectsomefailuresGoldenStepawardshandedouteachyearOrganizationalArrangementsCopyright©2003Prentice-Hall,Inc.12-103Monline:The3MInnovationNetworkCopyright©2003Prentice-Hall,Inc.12-11Table12.1FindingOneSuccessfulNewProduct(Startingwith64NewIdeas)StageNumberofIdeasPassRatioCostperProductIdeaTotalCost1.Ideascreening641:4$1,000$64,0002.Concepttesting161:220,000320,0003.Productdevelopment81:2200,0001,600,0004.Testmarketing41:2500,0002,000,0005.Nationallaunch21:25,000,00010,000,000$5,721,000$13,984,000Copyright©2003Prentice-Hall,Inc.12-12OrganizationalArrangementsOrganizingNew-ProductDevelopmentProductmanagersNew-productmanagersHigh-levelmanagementcommitteeNewproductdepartmentVentureteamsCopyright©2003Prentice-Hall,Inc.12-13Stage-gatesystemGatekeepersmakeoneoffourdecisions:GoKillHoldRecycleOrganizationalArrangementsCopyright©2003Prentice-Hall,Inc.12-14IdeaGenerationInteractingwithOthersSalesrepresentativesIntermediariesProductchampionManagingtheDevelopmentProcess:IdeasCopyright©2003Prentice-Hall,Inc.12-15TechniquesforstimulatingcreativityinindividualsandgroupsAttributelistingForcedrelationshipsMorphologicalanalysisReverseassumptionanalysisNewcontextsMind-mappingManagingtheDevelopmentProcess:IdeasCopyright©2003Prentice-Hall,Inc.12-16IdeaScreeningIdeamanagerIdeacommitteeTwotypesoferrorsinscreeningideasDROP-errorGO-errorManagingtheDevelopmentProcess:IdeasCopyright©2003Prentice-Hall,Inc.12-17Someofthemostnotable“drop-errors”havecomefromthemostrecognizablenamesinAmericanbusiness.Xeroxsawthepotentialofthecopymachine,IBMandEastmanKodakdidnot.IBMthoughtthepersonalcomputermarketwouldbeminiscule.Canyouthinkofany“drop-errors”thatthecompanydidn’tsurvive?Copyright©2003Prentice-Hall,Inc.12-18Table12.2Product-IdeaRatingDeviceRelativeWeightProductScoreProductRatingProductSuccessRequirements(a)(b)(c=axb)Uniqueorsuperiorproduct.40.8.32Highperformancetocostratio.30.6.18Highmarketingdollarsupport.20.7.14Lackofstrongcompetition.10.5.05Total1.00.69Ratingscale:.00-.30poor;.31-.60fair;.61-.80good.Minimumacceptancerate:.61Copyright©2003Prentice-Hall,Inc.12-19ManagingtheDevelopmentProcess:ConcepttoStrategyConceptDevelopmentandTestingProductideaProductconceptConceptdevelopmentCategoryconceptProduct–positioningmapBrandconceptCopyright©2003Prentice-Hall,Inc.12-20Figure12.3:ProductandBrandPositioningCopyright©2003Prentice-Hall,Inc.12-21Sometimesanewproductisdeveloped,likethefelt-tippenandthe“walkman”stylepersonalmusicdevice.Consumersweren’tclamoringforeitheroftheseproductsbeforetheycametomarket.Mostpeoplehadn’tevenconceivedofsuchanitem.Carefulplanningdevelopedmarketsforthesenewlines.Canyouthinkofmorerecentexamples?Copyright©2003Prentice-Hall,Inc.12-22ManagingtheDevelopmentP