New Product Development and Innovation | Schemes and Mind Maps Marketing Theory

Table of Contents

1. What must companies do to pull off a radical innovation? Pg 1

2. In an economy of rapid change, continuous innovation is a necessity. Why is this so?(Pg1)

3. What is incremental innovation? What does it mean to have a well defined product

concept? Pg(1)

4. At what rate do new products fail? What are the causes for these failures?(Pg1)

5. R & D: How do companies decide what to budget for new product development? (Pg2)

6. Compare and contrast cross-functional teams, crowdsourcing, and stage-gate systems.(Pg 2)

What are the pros and cons of each new product development process?

7. What are the steps in the new-product development decision process?(Pg3)

8. Why is it important to interact with both employees and outsiders when generating new

product ideas?(Pg 3-4)

9. What are the 7 ways that companies can draw new ideas from their customers?(Pg 4)

10. How can studying competitors help organizations to generate new product ideas?(Pg 4)

11. Screening Ideas: What process do companies use to screen ideas? (Pg 4-5)

12. Concept development: What’s the difference between a product idea and a concept? What

role do brand-positioning maps play in the concept development process? (Pg5)

13. Concept testing: What is concept testing? What methods do companies use to test

concepts? What does it mean to measure product dimensions and what questions do

researchers ask of consumers to determine them? (Pg 5-6)

14. Conjoint analysis: What is conjoint analysis and how is it used for concept testing?(Pg 6)

15. Marketing strategy development: Following a successful concept test, the new-product

manager will develop a preliminary three-part strategy plan for introducing the new product

into the market. Briefly describe this three part process.(Pg 7)

16. Business Analysis: What factors must managers take into consideration when estimating

total sales and costs and profits in evaluating a proposal’s business attractiveness? (Pg 7)

17. Product Development: What role do physical prototypes and customers tests play in the

product development process? (Pg 8)

18. Market Testing: Do all companies undertake market testing? Why or why not? Consumer-

products tests seek to estimate four variables. What are they? There are four major

methods of consumer-goods market testing. Briefly describe each. (Pg 8-10)

19. Commercialization: Briefly describe the when, where, to whom and how of the

commercialization process. (10-11)

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Table of Contents

What must companies do to pull off a radical innovation? Pg 1
1. In an economy of rapid change, continuous innovation is a necessity. Why is this so?(Pg1)
2. What is incremental innovation? What does it mean to have a well defined product concept? Pg(1)
3. At what rate do new products fail? What are the causes for these failures?(Pg1)
4. R & D: How do companies decide what to budget for new product development? (Pg2)
5. Compare and contrast cross-functional teams, crowdsourcing, and stage-gate systems.(Pg 2) What are the pros and cons of each new product development process?
6. What are the steps in the new-product development decision process?(Pg3)
7. Why is it important to interact with both employees and outsiders when generating new product ideas?(Pg 3-4)
8. What are the 7 ways that companies can draw new ideas from their customers?(Pg 4)
9. How can studying competitors help organizations to generate new product ideas?(Pg 4)
10. Screening Ideas: What process do companies use to screen ideas? (Pg 4-5)
11. Concept development: What’s the difference between a product idea and a concept? What role do brand-positioning maps play in the concept development process? (Pg5)
12. Concept testing: What is concept testing? What methods do companies use to test concepts? What does it mean to measure product dimensions and what questions do researchers ask of consumers to determine them? (Pg 5-6)
13. Conjoint analysis: What is conjoint analysis and how is it used for concept testing?(Pg 6)
14. Marketing strategy development: Following a successful concept test, the new-product manager will develop a preliminary three-part strategy plan for introducing the new product into the market. Briefly describe this three part process.(Pg 7)
15. Business Analysis: What factors must managers take into consideration when estimating total sales and costs and profits in evaluating a proposal’s business attractiveness? (Pg 7)
16. Product Development: What role do physical prototypes and customers tests play in the product development process? (Pg 8)
17. Market Testing: Do all companies undertake market testing? Why or why not? Consumer- products tests seek to estimate four variables. What are they? There are four major methods of consumer-goods market testing. Briefly describe each. (Pg 8-10)
18. Commercialization: Briefly describe the when, where, to whom and how of the commercialization process. (10-11)

 What must companies do to pull off a radical innovation?  Radical innovations can hurt the company’s bottom line in the short run, if they succeed they can improve the corporate image, create a greater sustainable competitive advantage than ordinary products, and produce significant financial rewards  Must create a strong R&D and marketing partnership to pull off a radical innovation. The right corporate culture is another crucial determinant; the firm must prepare to cannibalize existing products, tolerate risk, and maintain a future market orientation. A keen understanding of customers is also paramount  In an economy of rapid change, continuous innovation is a necessity. Why is this so? a. Fail to develop new products leave themselves vulnerable to changing customer needs and tastes, shortened product life cycles, increased domestic and foreign competition. b. Highly innovative firms can repeatedly: identify and quickly seize new market opportunities. i. Focus on toward innovation and risk taking, routinize the innovation process, practice teamwork, and allow their people to experiment and even fail.  What is incremental innovation? What does it mean to have a well defined product concept? a. Incremental innovation: Enter new markets by tweaking products for new customers, using variations on a core product to stay one step ahead of the market and creating interim solutions for industry-wide problems. b. Disruptive technologies: Cheaper and more likely to alter the competitive space, can threaten investments c. Well-defined product concept: For firms to avoid facing formidable new competitors, well-defined product concept can be formed. The company defines and assess the target market, product requirements and benefits before proceeding.  4. At what rate do new products fail? What are the causes for these failures? a. we found out that products fail at rates estimated as high as 50 percent and about 95 percent in the United States. What causes these failures? b. Failure to do market research, or analyzing the market wrong c. high costs for producing the product d. poor design or ineffectual performance of the product e. too pricy f. lack of distribution support g. Many competitors who fight back hard h. Inadequate ROI or payback i. Fragmented markets: Companies must aim their new products at smaller market. j. Social, economic, and governmental constraints: New products must satisfy consumer safety and environmental concerns and stringent production constraints k. Cost of development: A company typically must generate many ideas to find just one worthy of development and thus often faces high R&D, manufacturing, and marketing costs. l. Capital shortages

What are the steps in the new-product development decision process?

Why is it important to interact with both employees and outsiders when generating new product ideas?  Encouraged by the open innovation movement , many firms are going outside their bounds to tap external sources of new ideas, including customers, scientists, engineers, patent attorneys, university and commercial laboratories, industrial consultants and publications, channel members, marketing and advertising agencies, and even competitors.  This is important because it’s easy to uncover most customers needs and you can draw new ideas from your customers. Such as using a online community to help create content or software

 Employees can be a source of ideas for improving production, products, and services. Some employee in the organization can take the role of product champions as well.  Customers feel closer to the company and create favorable word of mouth. Getting the right customers engaged in the right ways.  Lead users can be a good source of input, even when they innovate products without the consent or knowledge of the companies that produce them

What are the 7 ways that companies can draw new ideas from their customers?
Observe how customers are using your product: Have like salespeople and market researchers who use the company products and competitive products to learn how theirs can be improved.
Ask customers about their problems with your products. To learn how to make products better.
Ask customers about their dream products. Ask your customers what they want your product to do, even if the ideal sounds impossible.
Use a customer advisory board to comment on your company’s. Youth panels, Customer Forums to improve its offerings
Use Web sites for new ideas. Companies can use specialized search engines such as Technorati to find blogs and postings relevant to their businesses. Get feedback from customers.
Form a brand community of enthusiasts who discuss your product. Harley-Davidson and Apple have strong brand enthusiasts and advocates; Sony engaged in collaborative dialogues with consumers to on new-product concepts in early stages of development.
Encourage or challenge your customers to change or improve your product. Salesforce.com wants its users to develop and share new software applications using simple programming tools.
How can studying competitors help organizations to generate new product ideas?  They can research the products and services of competitors and other companies  Find out customers like and dislike about competitors products  Buy their competitors product, take the apart and build better ones  Ask sale representatives and intermediaries for ideas as they have firsthand exposure to customers and are often the first to learn about competitive development  Can help establish optimal brand positioning for the new product and the right points-of- parity and points-of-differences, marketers need a thorough understanding of the competition.
Screening Ideas: What process do companies use to screen ideas?  When screening idea the company must avoid two types of errors: A Drop-error when the company dismisses a good idea, because it’s easy to find fault with other people’s idea. Companies shudder when they look at back ideas they let go or breathe sighs of relief when they realize how close they came to dropping what eventually become a huge success.

o Visualization techniques can help respondents match their mental state with what might occur when they are evaluating or choosing the new product. There is also rapid prototyping, big-ticket items, and virtual reality to test product concepts.  What does it mean to measure product dimensions: Determine how product variants are defined and how consumers respond to the product itself.  What questions do researchers ask of consumers to determine them?

Communicability and believability —“Are the benefits clear to you and believable?” If the scores are low, the concept must be refined or revised. 2. Need level —“Do you see this product solving a problem or filling a need for you?” The stronger the need, the higher the expected consumer interest.
1. Gap level —“Do other products currently meet this need and satisfy you?” The greater the gap, the higher the expected consumer interest. Marketers can multiply the need level by the gap level to produce a need-gap score. A high score means the consumer sees the product as filling a strong need not satisfied by available alternatives.
Perceived value —“Is the price reasonable in relationship to value?” The higher the perceived value, the higher is expected consumer interest.
1. Purchase intention —“Would you (definitely, probably, probably not, definitely not) buy the product?” Consumers who answered the first three questions positively should answer “Definitely” here.
2. User targets, purchase occasions, purchasing frequency —“Who would use this product, when, and how often?”
Conjoint analysis: What is conjoint analysis and how is it used for concept testing?  Conjoint analysis: Consumer preferences for alternative product concepts can be measured with conjoint analysis, a method for deriving the utility values that consumers attach to varying levels of a product’s attributes  How it’s used for concept testing: With conjoint analysis, respondents see different hypothetical offers formed by combining varying levels of the attributes and rank them. Management can then identify the most appealing offer and its estimated market share and profit. Helps determine the relative importance to this consumer of each attribute—the difference between the highest and lowest utility level for that attribute

Marketing strategy development: Following a successful concept test, the new-product manager will develop a preliminary three-part strategy plan for introducing the new product into the market. Briefly describe this three part process.  The first part describes the target market’s size, structure, and behavior; the planned brand positioning; and profit goals sought in the first few years  The second part outlines the planned price, distribution strategy, and marketing budget for the first year:  The third part of the marketing strategy plan describes the long-run sales and profit goals and marketing-mix strategy over time
Business Analysis: What factors must managers take into consideration when estimating total sales and costs and profits in evaluating a proposal’s business attractiveness?  The factors that mangers must take into consideration when estimating total sales and costs and profits in evaluating a proposal’s business attractiveness such as preparing sales, cost, profit projections to determine whether they satisfy company objectives. Thus the concept can move to the development stage. And as new information comes in, the business analysis will undergo revision and expansion.  Estimating total sales : Total estimated sales are the sum of estimated first-time sales, replacement sales, and repeat sales. Sales-estimation methods depend on whether the product is purchased once as an engagement ring or retirement home), infrequently, or ofte.  In estimating sales, the manager’s first task is to estimate first-time purchases of the new product in each period. To estimate replacement sales, management researches the product’s survival-age distribution—that is, the number of units that fail in year one, two, three, and so on. The low end of the distribution indicates when the first replacement sales will take place. Estimating Costs and Profits: Costs are estimated by the R&D, manufacturing, marketing, and finance departments.

Commercialization: Briefly describe the when, where, to whom and how of the commercialization process.  Commercialization incurs the company’s highest costs to date. Too often companies are so focused on developing a new product that they neglect to spend adequate time developing a winning marketing launch program. The firm will need to contract for manufacture, or it may build or rent a full-scale manufacturing facility When (Timing) Suppose a company has almost completed the development work on its new product and learns a competitor is nearing the end of its development work. The company faces three choices:
1. First entry—The first firm entering a market usually enjoys the “first mover advantages” of locking up key distributors and customers and gaining leadership. But if rushed to market before it has been thoroughly debugged, the first entry can backfire.
2. Parallel entry—The firm might time its entry to coincide with the competitor’s entry. The market may pay more attention when two companies are advertising the new product.
3. Late entry—The firm might delay its launch until after the competitor has borne the cost of educating the market, and its product may reveal flaws the late entrant can avoid. The late entrant can also learn the size of the market. Where (Geographic Strategy) Most companies will develop a planned market rollout over time. In choosing rollout markets, the major criteria are market potential, the company’s local reputation, the cost of filling the pipeline, the cost of communication media, the influence of the area on other areas, and competitive penetration. Small companies select an attractive city and put on a blitz campaign, entering other cities one at a time. Large companies introduce their product into a whole region and

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