CRAVENS

PIERCY

8/e
McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All

8-2

Chapter Eight
Planning for
New Products

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All

8-3

Planning for New

Products
The Innovation
Mandate

PLANNING FOR
NEW PRODUCTS

8-4

Importance of New Products

Customer Driven Process
Steps in New Product Planning
Idea Generation
Screening/Evaluating/and
Business Analysis
Product and Process
Development
Marketing Strategy and Market
Testing
Commercialization
Variation in the Generic Planning
Process

Importance of
New Products

Innovation at top of potential

value drivers (Ernst & Young)
Innovation initiatives extend
beyond new goods and services
to include ideas, processes, and
business practices

8-5

Organizations must build a

culture of innovation

New Product
Planning as a
Customer Driven
Process
New product
classifications:
1.
2.

Newness to market
Newness to company

New product types:

Transformational
innovations
New product category
Product line extensions
Incremental improvements

8-6

8-7

High

New-to-world
products
10%

Newness to company

New product
lines
20%

Improvements/
revisions to
existing
products
26%

Additions
to existing
product lines
26%

Cost
reduction
s
11%

Repositionings
7%

High

Low
Newness to market

Size of circle denotes number of introductions relative to total.

Source: New Product Management for the 1980s, Booz Allen & Hamilton Inc. 1982.

Finding Customer
Value Opportunities

8-8

Customer value analysis

Objective is to identify
needs for:
1.
2.
3.
4.

New products
Improvements to existing
products
Improvements in
production processes
Improvements in
supporting services

8-9

Matching Capabilities to
Customer Value Opportunities

Fit between capabilities and

product offering

Transformational Innovations

new-to-the-world ideas
Customers not always the
best guides

8-10

Customer
Expectations
Customer
Satisfaction
Gap
Actual
Product
Performance

OPPORTUNITIES

(1) New Products

(2) Improvements
(3) New and Improved
Processes

Characteristics of
Successful
Innovations

8-11

Creating an
Innovative
Culture

Leveraging
Capabilities

STRATEGIC
INITIATIVES

Making
Resource
Commitments

Selecting the
Right
Innovation
Strategy

Developing and
Implementing
Effective New
Product
Processes

8-12

Developing an
Innovation Culture

Innovation Workshop for

top executives to
develop
an innovation plan.

Innovation Statement
highlighting objectives and
senior managements
role and responsibilities.

Training programs for

employees and managers.

Communicate the priority

of innovation.

Speakers to expose
employees to innovation
authorities.

Source: Thomas D. Kuczmarski et al., The Breakthrough Mindset, Marketing Management,

March/April 2003, 43.

8-13

The Innovation Strategy

Spells Out
Managements Priorities
for New Product
1. Set specific
New Product
Opportunities
Objectives.
2. Communicate the role of
New Products throughout
the organization.
3. Define the areas of
strategic focus:
Product Scope
Markets
Technologies
4. Include longer term
discontinuous projects in
the portfolio along with
incremental projects.

Source: Robert Cooper, Benchmarking New Product Performance, European Management Journal, Feb.
1998, 1-7.

8-14

NEW PRODUCT
PLANNING PROCESS
Customer
Needs
Analysis

Idea
Generation

Screening
and
Evaluation

Marketing
Strategy
Development

Business
Analysis

Product
Development

Testing
Commercialization

8-15

Achieving CrossFunctional
Interaction and
Coordination
R&D

Operatio
ns

Marketin
g

Finance

8-16

Responsibility for New

Product Planning

Coordination of new product

activities by a high-level general
manager
Inter-functional coordination by a
team of new product planning
representatives
Creation of a project task force
responsible for new product
planning
Designation of a new products
manager to coordinate planning
between departments
Formation of matrix structure for
integration new product planning
with business functions
Creation of a permanent design
center

8-17

IDEA GENERATION

Idea search: targeted or openended?

How extensive and
aggressive?
What specific sources are
best for generating a regular
flow of new product ideas?
How can new ideas be
obtained from customers?
Where will responsibility for
the new product ideas search
be placed?
What are potential threats
from alternative (or disruptive)
technologies?

8-18

BENETTONS STRATEGY
TO REVIVE APPAREL
IDEA GENERATION

We didnt take advantage of the [industrys]

quick transformation, says Silvana Cassano,
the ex-Fiat manager who assumed the post of
chief executive of Benetton Group on May 5.
The transformation saw the best retailers
turn into cutting-edge users of digital
technology. Benettons competitors-notably
Spains Zara and Swedens H&M Hennes &
Mauritz-have raised the bar for the entire
industry. These retailers can beam new styles
from the catwalk to the shop floor in less than a
month-and at bargain prices. Both deploy
sophisticated technology to track which items
are selling and which arent, so winners can be
speedily restocked and slow movers yanked
down from the racks. Theyve got the look
down, too-cool and minimal for the working
women who love Zara, and over-the-top trendy
for H&Ms teen fans. And Benettons look? Blan.
The Benetton brand is out of fashion, says
Sagra Maceira de Rosen, retail analyst at J.P.
Morgan Chase & Co. in London.

8-19

Benettons Strategy
(continued)
Cassano is out to change that. The
message he delivered in his first encounter with
shareholders was short and powerful: Benetton
is going to refocus on the apparel business,
which encompasses the Sisley and Benetton
brands.
Its no secret that Benettons core casual
wear business has suffered neglect. In 1994,
founder Luciano Benetton launched an ill-fated
diversification into sports equipment, snapping
up trophy brands such as Prince (tennis
rackets), Rollerblade (in-line skates), and Killer
Loop (snowboards). But the strategy foundered
and last year, Benetton sold the entire
equipment division, booking $190 million in
write-offs. The company posted its first annual
loss-$10.5 million, on revenues of $2.3 million.

Source: Has Benetton Stopped Unraveling? Business Week, June 30, 2003, 76.

8-20

Alliances/
Acquisition/
Licensing

National
Policy

Direct
Search
Technological
Innovation

METHODS
OF
GENERATING
IDEAS

Creative
Methods
Linking
Marketing
and Technology

Exploratory
Customer
Studies

Facilitating
Lead User
Analysis

8-21

SCREENING,
EVALUATING, AND
BUSINESS ANALYSIS
IDEA GENERATION

SCREENING
(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS

8-22

Business Analysis

Revenue Forecasts

Preliminary Marketing
Plan

Cost Estimation

Profit Projections

Other Considerations

PRODUCT AND
PROCESS
DEVELOPMENT

8-23

NEW
PRODUCT
CONCEPT

PRODUCT
DEVELOPMENT
AND USE
TESTING
MARKET
TESTING

LAUNCH

MARKETING
STRATEGY
DEVELOPMENT

Product and
Process
Development

Development of the new product

includes:
Product design
Packaging design
Decisions to make or purchase
product components

Product Development Process:

8-24

Product Specifications
Industrial Design
Prototype
Use Tests
Process Development

Collaborative Development

8-25

Does it have the

required attributes?

Verify
claims

PURPOSE
OF
USE TESTS
Identify use
situations

Ideas for
improvements

MARKETING
STRATEGY AND
MARKET TESTING

Marketing Strategy Decisions

Market Targeting
Positioning Strategy

Market Testing Options

Simulated Test Marketing
Scanner Based Test Marketing
Conventional Test Marketing
Testing Industrial Products
Selecting Test Sites
Length of the Test
External Influences

8-26

Scanner-based Test
Marketing
Less artificial than simulated
testing
Costs less than full-scale market
test
Test is controlled by using IRIs
2300 panel members in each test
city
Cable TV enables use of controlled
ad testing
Tests take about 12 months
Costs are $250,000+

8-27

8-28

COMMERCIALIZATIO
N

The Marketing Plan

Complete marketing strategy

Responsibilities for execution
Cross functional approach

Monitoring and Control

Real time tracking
Role of the Internet
Include product performance
metrics with performance
targets

8-29

Marketing Strategy

Market
Target(s)

Objectives

Marketing
Program(s
)

8-30

VARIATIONS IN THE
GENERIC NEW
PRODUCT PLANNING

Technology Push
Processes

Platform Products

Process Intensive
Products

Customized
Products