8.2: The New Product Development Process

Question 1

Rather than leaving new products to chance, what must a company carry out for finding and growing new products?

Answer 1

Rather than leaving new products to chance, a company must carry out strong new product planning and set up a systematic, customer-driven new product development process for finding and growing new products.

Question 2

8.1: Major Stages in New Product Development

Answer 2

Question 3

What is idea generation?

Answer 3

Idea generation is the systematic search for new product ideas.

Question 4

What are some major sources of new product ideas?

Answer 4

Some major sources of new product ideas include internal sources such as R&D and the company’s own people, and external sources such as customers, competitors, distributors, and suppliers.

Question 5

What are some examples of successful internal social networks and intrapreneurial programs?

Answer 5

Examples of successful internal social networks and intrapreneurial programs include AT&T’s internal online innovation community called The Innovation Pipeline (TIP) and periodic internal “hackathons” sponsored by many companies.

Question 6

What is the purpose of a hackathon?

Answer 6

The purpose of a hackathon is to provide employees with an opportunity to develop new ideas.

Beyond idea generation, a hackathon can boost employee morale and engagement.

Question 7

Who are some external sources of new product ideas?

Answer 7

External sources of new product ideas include distributors, suppliers, competitors, trade magazines, shows, websites, seminars, government agencies, advertising agencies, marketing research firms, university and commercial laboratories, and inventors.

Question 8

Why are customers perhaps the most important sources of new product ideas?

Answer 8

Customers are perhaps the most important sources of new product ideas because they can provide valuable insights into consumer problems and suggest new product features and enhancements.

A company can analyze customer questions and complaints to find new products that better solve consumer problems.

Question 9

How can a company benefit from collaborating with customers for new product ideas?

Answer 9

A company can benefit from collaborating with customers for new product ideas by gaining valuable insights into consumer problems and preferences, building stronger relationships with customers, and improving the overall customer experience.

Question 10

What is crowdsourcing in marketing?

Answer 10

Crowdsourcing is a process in which a company invites a broad community of people, including customers, employees, independent scientists and researchers, and the public at large, to participate in the innovation process by submitting new product ideas.

Question 11

Why are companies crowdsourcing product innovation ideas rather than relying solely on their own R&D labs?

Answer 11

Companies are crowdsourcing product innovation ideas because it can produce unexpected and powerful new ideas that may not have been discovered otherwise.

Question 12

What is the Future Show Innovation Challenge?

Answer 12

The Future Show Innovation Challenge is an annual crowdsourcing competition sponsored by Under Armour, in which entrepreneurs and inventors from around the U.S. can submit new product ideas.

The goal of the Future Show Challenge is to invite top innovators to come to Under Armour with new product ideas that the company’s internal R&D team may not have thought of.

Question 13

What is the importance of crowdsourcing?

Answer 13

Crowdsourcing allows companies to develop extensive innovation networks that capture ideas and inspiration from every possible source, from employees and customers to outside innovators and multiple points beyond.

Question 14

What does R-W-W stand for

Answer 14

Real? Win? Worth doing?

Question 15

What is the purpose of idea screening in marketing?

Answer 15

The purpose of idea screening is to help spot good ideas and drop poor ones as soon as possible, in order to go ahead only with those product ideas that will turn into profitable products.

Question 16

Why do companies require their executives to write up new product ideas in a standard format?

Answer 16

Companies require their executives to write up new product ideas in a standard format that can be reviewed by a new product committee, as this helps to evaluate the idea against a set of general criteria.

Question 17

What does the first question in the R-W-W new product screening framework ask?

Answer 17

The first question in the R-W-W new product screening framework asks whether there is a real need and desire for the product, whether customers will buy it, whether there is a clear product concept, and whether such a product will satisfy the market.

Question 18

What does the second question in the R-W-W new product screening framework ask?

Answer 18

The second question in the R-W-W new product screening framework asks whether the product offers a sustainable competitive advantage and whether the company has the resources to make the product a success.

Question 19

What does the third question in the R-W-W new product screening framework ask?

Answer 19

The third question in the R-W-W new product screening framework asks whether the product fits the company’s overall growth strategy and offers sufficient profit potential.

Question 20

What is the importance of the R-W-W new product screening framework?

Answer 20

The R-W-W new product screening framework helps companies to evaluate new product ideas against a set of general criteria and to determine whether a new product idea is worth developing further.

Question 21

What is the difference between a product idea, a product concept, and a product image?

Answer 21

A product idea is a possible product that a company can offer to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Question 22

What is the purpose of concept development in marketing?

Answer 22

The purpose of concept development in marketing is to develop an attractive idea into a product concept that is stated in meaningful consumer terms.

Question 23

What is an example of a product concept for an all-electric car?

Answer 23

An example of a product concept for an all-electric car could be a 100% plug-in electric car that accelerates from 0 to 100 kilometers per hour in five seconds, travels up to 500 kilometers on a single charge, recharges in two hours from a normal 120-volt electrical outlet, and costs about two cents per kilometer to power.

The four alternative product concepts created for the all-electric car example are:

(1) an affordably priced compact car designed as a second family car,
(2) a mid-priced sporty compact appealing to young singles and couples,
(3) a “green” everyday car appealing to environmentally conscious people, and
(4) a compact crossover SUV appealing to those who love the space SUVs provide but lament the poor gas mileage.

Question 24

What is the marketer’s task in developing a new product into alternative product concepts?

Answer 24

The marketer’s task is to develop the new product into alternative product concepts, find out how attractive each concept is to customers, and choose the best one.

Question 25

How can a company create alternative product concepts for a new product?

Answer 25

A company can create alternative product concepts for a new product by brainstorming different ideas, refining and testing the ideas with potential customers, and choosing the most promising concepts to develop further.

Question 26

What is the importance of developing an attractive product concept in marketing?

Answer 26

Developing an attractive product concept is important in marketing because it helps the company to create a product that meets the needs and desires of customers and is more likely to be successful in the market.

Question 27

What is the importance of finding out how attractive each product concept is to customers?

Answer 27

Finding out how attractive each product concept is to customers is important because it helps the company to choose the most promising concept to develop further, and ensure that the product will be successful in the market.

Question 28

What factors should a company consider when developing alternative product concepts?

Answer 28

A company should consider factors such as customer needs and desires, market trends, competition, pricing, and marketing strategy when developing alternative product concepts.

Question 29

What is the benefit of creating alternative product concepts?

Answer 29

The benefit of creating alternative product concepts is that it allows the company to explore different options and find the most attractive concept that meets the needs and desires of customers, which can lead to a more successful product launch in the market.

Question 30

What are some ways in which new product concepts can be presented to consumers during concept testing?

Answer 30

New product concepts can be presented to consumers symbolically or physically during concept testing. A more concrete and physical presentation of the concept can increase the reliability of the concept test.

Question 31

What questions might be asked during a concept test for an all-electric car?

Answer 31

Questions that might be asked during a concept test for an all-electric car could include: whether the consumer understands the concept of a battery-powered electric car, whether they believe the claims about the car’s performance, the major benefits of an all-electric car compared with a conventional car, improvements in the car’s features that they would suggest, and for what uses they would prefer an all-electric car to a conventional car.

Question 32

What is the purpose of asking questions during a concept test for a new product?

Answer 32

The purpose of asking questions during a concept test for a new product is to determine the consumer’s reaction and interest in the product, and to gather feedback that can be used to improve the product concept and marketing strategy.

Question 33

How can a company use concept test results to estimate sales volume for a new product?

Answer 33

A company can use concept test results to estimate sales volume for a new product by projecting the test figures to the full population in the target group. However, this estimate is uncertain because people do not always carry out their stated intentions.

Question 34

What is the purpose of marketing strategy development in the new product development process?

Answer 34

The purpose of marketing strategy development is to design an initial marketing strategy for introducing the new product to the market, including identifying the target market, value proposition, sales goals, and marketing mix.

Question 35

What are the three parts of the marketing strategy statement?

Answer 35

The three parts of the marketing strategy statement are:
(1) describing the target market, value proposition, and sales goals.
(2) outlining the product’s planned price, distribution, and marketing budget for the first year.
(3) describing the planned long-run sales, profit goals, and marketing mix strategy.

Question 36

What is the target market for the battery-powered all-electric car in the example?

Answer 36

The target market for the battery-powered all-electric car in the example is younger, well-educated, moderate- to high-income individuals, couples, or small families seeking stylish but practical and environmentally responsible transportation.

Question 37

What is the planned marketing budget for the battery-powered all-electric car in the first year?

Answer 37

The planned marketing budget for the battery-powered all-electric car in the first year is $50 million, split 30-40-30 among a national media campaign, online and social media marketing, and local event marketing.

Question 38

How does the marketing strategy statement address long-run sales and profit goals for the battery-powered all-electric car?

Answer 38

The marketing strategy statement addresses long-run sales and profit goals for the battery-powered all-electric car by outlining a plan to capture a 3 percent long-run share of the total auto market and realize an after-tax return on investment of 15 percent. The marketing mix strategy will be adjusted over time to achieve these goals, including improving product quality and raising prices if competition and the economy permit.

Question 39

What is business analysis in the new product development process?

Answer 39

Business analysis involves a review of the sales, costs, and profit projections for a new product to determine whether they satisfy the company’s objectives and to assess the financial attractiveness of the proposal.

Question 40

What are some factors that might be considered in estimating sales for a new product?

Answer 40

Factors that might be considered in estimating sales for a new product include the sales history of similar products, market surveys, and market trends and projections.

Question 41

How might a company estimate the expected costs and profits for a new product?

Answer 41

A company might estimate the expected costs and profits for a new product by considering various cost factors, such as marketing, R&D, operations, accounting, and finance costs. The estimated sales and cost figures are then used to analyze the new product’s financial attractiveness.

Question 42

Why is it important for a company to assess the financial attractiveness of a new product before moving forward with product development?

Answer 42

It is important for a company to assess the financial attractiveness of a new product before moving forward with product development to ensure that the product is viable and aligned with the company’s overall objectives. By analyzing the sales and cost projections, the company can identify potential risks and make informed decisions about whether to move forward with the product or adjust the marketing strategy or product concept.

Question 43

What is product development?

Answer 43

Product development is the step where R&D or engineering develops the product concept into a physical product. The objective is to design a prototype that satisfies and excites consumers and can be produced quickly and at budgeted costs.

Question 44

What are some methods used in product testing?

Answer 44

Companies can do their own product testing or outsource testing to other firms that specialize in testing. Marketers often involve actual customers in product development and testing.

Question 45

What is test marketing and why is it important?

Answer 45

Test marketing is the stage where a product and its proposed marketing program are tested in realistic market settings.

It gives the marketer experience with marketing a product before going to the great expense of full introduction, and lets the company test the product and its entire marketing program.

It helps to assess the product’s targeting and positioning strategy, advertising, distribution, pricing, branding and packaging, and budget levels.

Question 46

Why do companies often do little or no test marketing?

Answer 46

Companies may do little or no test marketing when the costs of developing and introducing a new product are low or when management is already confident about the new product.

For example, companies often do not test-market simple line extensions or copies of competitors’ successful products.

Question 47

What are the benefits of using controlled test markets or simulated test markets?

Answer 47

Controlled test markets and simulated test markets reduce the costs of test marketing and speed up the process.

In controlled test markets, new products and tactics are tested among controlled panels of shoppers and stores. By combining information on each test consumer’s purchases with consumer demographic and media viewing information, the company can assess the impact of in-store and in-home marketing efforts.

Using simulated test markets, researchers measure consumer responses to new products and marketing tactics in laboratory stores or simulated online shopping environments.

Question 48

What is commercialization?

Answer 48

Commercialization is the process of introducing a new product into the market.

Question 49

What are the costs associated with commercialization?

Answer 49

The costs associated with commercialization include building or renting a manufacturing facility, and spending on advertising, sales promotion, and other marketing efforts.

Question 50

What are the factors that influence the timing of a product launch?

Answer 50

The timing of a product launch is influenced by factors such as whether the product will eat into the sales of other company products, whether the product can be improved further, and whether competitors are ready to introduce their own competing products.

Question 51

How do companies decide where to launch a new product?

Answer 51

Companies can decide where to launch a new product based on factors such as the size of the market, the distribution system in place, and the competition in the market.

Question 52

What is the new product development process?

Answer 52

The new product development process involves finding, developing, and introducing new products. It typically consists of seven steps: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, and test marketing.

Question 53

Is going through a set of steps enough for successful new product development?

Answer 53

No, successful new product development requires a holistic approach that involves a customer-centred, team-based, and systematic effort.

Question 54

What does a customer-centred approach to new product development involve?

Answer 54

A customer-centred approach involves understanding customer needs and preferences and developing products that meet or exceed their expectations.

Question 55

What does a team-based approach to new product development involve?

Answer 55

A team-based approach involves bringing together individuals from different functional areas of the company to work on the new product development process.

Question 56

What does a systematic approach to new product development involve?

Answer 56

A systematic approach involves following a structured process for new product development, such as the seven-step process shown in Figure 8.1.

Question 57

What is customer-centred new product development?

Answer 57

Customer-centred new product development is a process that focuses on finding new ways to solve customer problems and create more customer-satisfying experiences by understanding consumer needs and values.

Question 58

What are the characteristics of successful new products?

Answer 58

The most successful new products are differentiated, solve major customer problems, and offer a compelling customer value proposition.

Question 59

What is the impact of customer involvement on the new product development process and product success?

Answer 59

Companies that directly engage their customers in the new product innovation process had twice the return on assets and triple the growth in operating income of firms that did not.

Therefore, customer involvement has a positive effect on the new product development process and product success.

Question 60

What is team-based new product development?

Answer 60

Team-based new product development is an approach where company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness.

Instead of passing the new product from department to department, the company assembles a team of people from various departments that stays with the new product from start to finish.

Question 61

What are the advantages of team-based new product development?

Answer 61

The advantages of team-based new product development include faster time to market, increased effectiveness, and the ability to resolve bottlenecks more quickly. It also allows for a total-company, cross-functional effort and ensures that the right new products are brought to market faster.

Question 62

What are the limitations of team-based new product development?

Answer 62

The limitations of team-based new product development include more organizational tension and confusion compared to the more orderly sequential approach. It can also be more difficult to manage and may require more resources than a sequential approach.

Question 63

What should the new product development process be in order to prevent new ideas from sputtering and dieing?

Answer 63

The new product development process should be holistic and systematic rather than compartmentalized and haphazard. Otherwise, few new ideas will surface, and many good ideas will sputter and die.

Question 64

What can companies do to make sure that new product development is holistic and systematic?

Answer 64

To avoid these problems, a company can install an innovation management system to collect, review, evaluate, and manage new product ideas.

Question 65

What can a company do in order to install an innovation managment system?

Answer 65

The company can appoint a respected senior person to be its innovation manager. It can set up web-based idea management software and encourage all company stakeholders—employees, suppliers, distributors, dealers—to become involved in finding and developing new products. It can assign a cross-functional innovation management committee to evaluate proposed new product ideas and help bring good ideas to market. It can also create recognition programs to reward those who contribute the best ideas.

Question 66

The innovation management system approach yields two favourable outcomes. What are they?

Answer 66

First, it helps create an innovation-oriented company culture. It shows that top management supports, encourages, and rewards innovation.

Second, it will yield a larger number of new product ideas, among which will be found some especially good ones. The good new ideas will be more systematically developed, producing more new product successes.

No longer will good ideas wither for the lack of a sounding board or a senior product advocate.