Chapter 9: Developing new products and managing product life cycle Flashcards
What are the 2 ways through which a firm can obtain new products
- Acquisition
- New product development (by the company).
What does it mean when a company obtain new products by acquisition?
= By buying a whole company, a patent, or a license to produce someone else’s product.
What does it mean when a company obtain new products through the firm’s own new product development ?
= by ‘new products’ we mean original products, product improvements or modifications and new brands that the firm develops through its own product develop.
Why are new products important
They bring new solutions and variety to customers’ lives
+ They are a key source of company growth
What’s an issue with developing new products
- it can be expensive and risky
= new products face tough odds
Why do so many new products fail?
- Company may overestimate market demand (even if idea is good)
- the actual product may be poorly designed
- product might be incorrectly positioned
- might be launched at the wrong time, priced too high or poorly advertised.
- competitors might fight back harder than expected.
What are the major stages in New product development
- idea generation
- Idea screening
- Concept development and testing
- Marketing strategy development
- Business analysis
- Product development
- Test marketing
- Commercialization
What does new product development start with
Idea generation
What are major sources of new product ideas
- Internal sources
- External sources e.g. customers, competitors, distributors, suppliers.
What are some internal idea sources
- R&D Research centers
- Employee creativity
- Hackathons
- Unexpected discoveries
- Using technology
- Repurposing or unbundling products.
what are some external idea sources
- suppliers and distributors
- competitors
- other industries
- customers
- crowdsourcing
What is idea screening and what stage is it in the development of new products
It’s the 2nd stage.
= It helps spot good ideas and drop poor ones.
In the stage of idea screening, what do many companies require their executives to do
write up new products ideas in a standard format the can be reviewed by a new product committee.
Describe the ‘write up’ executives do during idea screening
The write up describes - the product or the service
- the proposed customer value proposition
- the target market
- the competition
+
makes rough estimates of
- market size
- product price
- development time and costs
- manufacturing costs
- rate of return
In line screening, What’s the ‘new’ product screening framework that asks three questions.
The R-W-W (real, win, worth doing)
- is it real? Is there a real need for this product, will customers buy it? Is there a clear product concept, will it satisfy the market?
- Can we win? Does the product offer a sustainable competitive advantage? Does the company have the resources to make such a product a success
- Is it worth doing? Does the product fit the company’s overall growth strategy? Does it offer sufficient profit potential?
company should answer all 3 questions before developing the new product
What’s stage 3 of developing a new product?
Concept development and testing
Distinguish between a (1) product idea (2) a product concept (3) and a product image.
(1) Product idea: Idea for a possible product that the company can see itself offering to the market.
(2) Product concept: A detailed version of the idea stated in terms that are meaningful to the consumer.
(3) Product image: the way consumers perceive an actual or potential product.
What is concept testing (stage 3 of new prod. dev.)
= Testing new product concepts with target consumers .
- by answering questions too reveal which concepts have the strongest appeal
What happens in Marketing strategy development ? (Stage 4)
Designing an initial marketing strategy for introducing the product -> Marketing strategy statement.
What is the fourth stage of new product development
Marketing Strategy Development
What are the 3 parts the marketing strategy statement consist of
- describe target market, planned value proposition, sales, market-share, and profit goals for the 1st few years.
- Outlines the planned price, distribution and marketing budget for 1st year.
- Describes the planned long-run sales, profit goals and marketing mix strategy.
What’s stage 5 of new product development.
Business analysis
What happens in Business Analysis
Once management decided on product concept and marketing strategy. It can evaluate the business attractiveness of the proposal.
= Involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives.
If they do the product moves to the product development stage.
What’s stage 6 of new product development
If the product concept passes the business test, it moves to this stage
=> Product development
What happens in Product development (stage 6)
R&D or engineering develops the product concept into a physical product or a detailed service blueprint.
But the product development step calls for a huge jump in investment. + Will show if the product concept can be turned into a workable product.
