Product-Development
Programs
Types of Newness to the
Firm
Type of Corporate Strategy Types of New Product
Typical Extent of Newness
•Diversification
Completely new
Brand franchise extension
New Market
Probable new technology
•Market Development
Technical extensionNew use
Change in form
User-related technology
•Product Development
Line extension
Flanker
New segment
Possible new technology
•Market penetration
Product modification
intended to meet or
beat competition
No change in market
Small change in technology
Types of Newness to the
Market
Type of Innovation
Type of Newness
Change required of Buyers
Discontinuous
New-product class
Creates new consumption
pattern (TV, radio)
Dynamically
continuous
New-product form
Changes determinant benefits
(personal computer, portable
radio)
Continuous
New or improved
model
Changes evaluation of brand
but not determinant attributes
(IBM Thinkpad, Sony Walkman)
Noninnovative
New brand
Changes set of alternatives within
a product form (IBM clones, new
brands of toothpaste)
A Phased New Product Development Process
Strategic Direction
Concept Generation
Market Testing
Marketing Plan
Concept Testing
Production Plan
Screening
Technical Feasibility
Product -Use Testing
Financial Evaluation
Launch
A Parallel New-Product Development Process
Strategic Direction
Concept Generation
Preliminary Marketing
Plan
Revised Marketing
Plan
Concept Testing
Screening
Basic/Applied
Research
Product Use Testing
Develop Prototype
Market Testing
Production Planning
Final Financial Evaluation
Launch
Factors Influencing the Success
of New products
Product superiority/quality
Economic advantage to the user
Overall company/project fit
Technological compatibility
Familiarity to the company
Market need, growth and size
Competitive situation
Defined opportunity
Project definition
Frequently Occurring and Most
Bothersome Problems Among Users of
Car Waxes
Problem Occurs Problem is
Bothersome
Frequently
Problems with Car Waxes
Hard to Apply
Messes up the Driveway
Uneven Shine
Gets on Clothes
Too Expensive
Takes Too Much Time
Doesn’t Last
Need Good Weather
Doesn’t Clean Off Tar
Rank
%
87
35
12
14
23
98
18
31
40
2
4
9
8
6
1
7
5
3
Rank
%
57
30
5
12
38
21
8
18
14
1
4
9
7
2
3
8
5
6
Questions and Typical
Methods for Concept Testing
Question
 How desirable is the concept
to target customers?
 What is the probability the
customer will try or use the
product?
 What is the relative utility for
various attribute
combinations?
Method
 Customers rate the concept on
a series of dimensions such as
uniqueness, problem solving
potential, believability, etc.
 Customers are asked to rate
the product on a scale from
“would not try” to “definitely
would try.”
 Customers rank order their
preferences for various
combinations of attributes
(conjoint analysis).
Example of a Conjoint
Analysis Concept Test
Please rank the nine combinations in order of your preference from 1
(most preferred) to 9 (least preferred).
Printer Speed (pages per minute)
Print Quality
2
4
8
Dot Matrix
$100
$200
$300
Inkjet
$300
$100
$200
Lazer
$200
$300
$100
Results of Conjoint Analysis on
One Customer’s Preferences
Attribute
Utility
Print Quality
Dot Matrix
Inkjet
Lazer
10
33
45
Printer Speed
2
4
8
14
18
20
Price
$100
$200
$300
40
32
18
A Scoring Profile for a New
Product
Score
Very Poor Poor Average Good Excellent
Factors
1. Market Size
2. Growth potential
3. Bought by customer we already know
4. Has a competitive advantage
5. Intensity of competition
6. Uses current sales force/channels
7. Uses existing production facilities
8. Financial requirements
9. Within scope of R & D capacity
10. Can use current suppliers
11. Likelihood of new competition
12. Extent of government regulation
13. Marketing expenditures required
14. Fit with corporate marketing strategy
Determinants of First Year Sales volume
Marketing Programs
Sales and
Distribution Budget
Advertising Budget
Consumer Reaction/Response
Awareness and
Distribution Coverage
Trial
Advertising Message
Probability of Trial
Price and Consumer
Promotions
Product Characteristics
Product Satisfaction
Repeat Purchases
Transaction Size
Sales Volume
Purchase Frequency
Typical First Year Sales
Patterns
Sales
Total Sales
Repeat
Trial
Time
To Test or Not to Test
Factors Favoring Test Marketing
 Acceptance of the product concept is very uncertain
 Sales potential is difficult to estimate
 Cost of developing consumer awareness and trial is
difficult to estimate
 A major investment is required to produce at full
scale
 Alternative prices, packages, or promotional appeals
are under consideration
To Test or Not to Test
Reasons for Not Test Marketing
The risk of failure is low relative to testmarketing costs
The product will have a short life cycle
Beating competition to the market is important
because the product is easily imitated
Basic price, package and promotional appeals
are well established
Alternatives to Internal Product
Development
 Acquisition
 Licensing
Advantages
 Save Time
 Improve Chances of Success by
Acquiring Skills
 May be Less Costly