W11 New product development Flashcards
How is newness of innovated defined?
Newness is defined by consumption effects
Continuous innovation — requires no new learning, modification of existing product to set it apart from competitors, relatively easy/quick adoption — simply gives added benefits (e.g. new iteration of a smartphone)
- A knockoff is a product that copies an original product with slight modifications, it is difficult to protect a design
Dynamically continuous innovation — disrupts routine but not entirely new learning, modest level of learning or change in behaviour (e.g. gramophones → cassettes → CD)
Discontinuous innovation — requires new learning and consumption patterns; competence enhancing (builds on competencies) and competence destroying (disrupts firm’s capabilities and market), e.g. airplane, personal computers
- One type of discontinuous innovation is convergence where multiple technologies merge to create new systems that provider greater benefits - It is difficult to plan for the next big discontinuous innovation
What are the steps to new product development process?
Idea generation
Product development and concept
Marketing strategy
Business analysis
Technical development
Test marketing
Commercialisation
What is idea generation?
Idea generation
- There are many sources for new product ideas: research and development, direct/indirect competitors, potential competitors, suggestions from employees, licensing, agencies and consultants, trade magazines and exhibitions, research into customer needs and problems, lead users (enthusiasts, experts, influencers etc.)
- Trend of value co-creation where organisations involve stakeholders in the product development process, contrast to traditional approaches where firms develop products and send them to market
What is the new business-model innovation approach and slow hunch?
New business-model innovation approach
1. Outline the dominant business model 2. Dissect the most important long-head belief into its supporting notions 3. Subvert the belief 4. Sanity-test the reframed beliefs 5. Translate the reframed beliefs into the industry's new business model
Slow hunch — breakthrough ideas do not come suddenly, it takes a long time dormant in the background, over years to be successful and useful, this is because great ideas come from collisions of smaller good half-ideas. It is about creating systems that allow hunches to come together.
Product concept development and screening
- Starts with hypotheticals, description, image of new product
- Technical values, whether the new product is technologically possible, estimated by technical success
- Commercial success estimates whether anyone is likely to buy the product
- Idea screening is the process of identifying good ideas and discarding poor ones — essentially tests actuality of idea, profit potential, ability to provide an SCA, company’s resources, whether it fills customer needs
- One way to do this is to give consumers the hypotheticals and ask series of questions
- Exploratory and descriptive research methods (surveys, questionnaires, interviews) to rate elements of the idea
Marketing strategy development
- Developing a plan for the target market
- Identify target market, estimate its size, determine how to effectively position the product
- Deciding the marketing mix and its costs
Business analysis — review of sales, costs, and profit projections for a new product to determine appropriateness for company’s objectives
- Looks at sales, costs, and profit projections
- Estimates of demand (minimum and maximum sales)
- Scenarios for alternative product development
- Alternate growth possibilities (sell product through licensing, give it to another firm?)
- Consider competition
- Assess how new product fit into existing product mix — increase sales, cannibalise products, synergetic with old products?
- Projecting demand and review of sales for similar products
These aspects can be measured through business analytics tools, e.g. market research reports, keynotes, Mintel reports, Euromonitor, Google Trends
Technical development
Prototyping
- Work w/ engineers to refine design and production
- Use 3D printers to test specs and logistics of new product
- Determine what parts the company will make, which will buy from suppliers
- Apply for patents to reduce competition
- Homemade mockups to make it more tangible for customers
- Creating crude prototypes limits the amount of resources used and allows consumers to feel more comfortable when critiquing the product
- Create multiple simple versions so poorly-received prototypes can easily be discarded
- Be specific about which exact components is working and which ones aren’t
- Show consumers alternative options
Test marketing
- Uses fully-developed prototypes
- Amount of test marketing varies according to product — radical, R&D-heavy products require more test marketing, while simple line extensions and ‘me-too’ products (I.e. products that are similar to a competitor’s product) may not
- Involves small regions
- Simulated, virtual marketing testing is increasingly used
What are the 3 types of test marketing?
Simulated test market
Controlled test market
Standard test market
Simulated test market
- Simulated test market — setting up mock shops within an office or consumer area environment, debrief and gauge sample of consumers
- This could be done virtually which has the benefits of easily changing store layouts, price points, product lines, and ability to sample global consumers
+ Quick, less expensive, restrict access to competitors
– Not reliable due to controlled setting
Controlled test market
Controlled test market — put products in a few, select stores
+ Highly realistic environment, ability to price variation, in-store variation, store promotions etc., hidden from competitors to an extent
– Paying fees to stores, competitors have chance to sabotage if they find out (e.g. decreasing their prices or increasing promotion in the test stores → making test results unreliable), results depend on locations chosen
Standard test market
Full marketing campaign in select cities
City market suitability criteria:
- Distribution structure: choose cities that have necessary distribution channels
- Media availability: choose cities with appropriate advertising infrastructure for planned campaign
- Competitor activity: choose cities with competitor activity that is representative of the entire market, I.e. not too many and not too few
- Target market profile: choose areas with target segments representation
- Self-contained economically: choose areas with localised economies where consumers who live in the area, buy within that area — I.e. avoid stores that have traffic of irregular consumers travelling in from somewhere else (who inflate sales)
+ Provides much more reliable information
Allows company to fine tune marketing mix
Ability to test in representative markets to target demographics and segments
– Easily recognised by competitors, more costly, could take a while to implement
Commercialisation
- Full-scale production, distribution, advertising, sales promotion etc.
- It is expensive but the Internet has lowered costs significantly (social media campaigns, crowdfunding)
- Social media campaign → insider buzz → sales manager training salespeople → salespeople educate customers in distribution channel → media announces benefits and availability
- The overwhelming majority of new product development does not end up with a successful product
- Failure is expensive, drains resources, and causes brand reputation damage
Product development funnel
3000 unwritten ideas -> 300 submitted ideas -> 125 small projects -> 4 major developments -> 2 launches -> 1 success
