New Product Development

Why New Products?

Innovation and Value

New
products
add value
to the firm

Satisfy the
changing
needs of
consumers

Benefits
Benefits of
of
new
new products
products
Diversify
firms risk

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Categories of New Products

New to the World
Additions
Improvements
Repositionings
Cost reductions

The Innovation of Chotukool

GE portable EKG
machine
machine for rural India

Factors That Limit

New Product Development
Shortage of ideas
Fragmented markets
Social and governmental
constraints
Cost of development
Capital shortages
Faster required development time
Shorter product life cycles

Finding One Successful Product

Implication of the launches?

Pre 1920
Refrigerator
VC
Washer
Dryer
34 years
from
Introduction
to max.
sales

1920-39
Radio
Toaster
Electronic
water heater
Automatic
washer
22 years to
achieve
maximum
sales

1939-59
Humidifier
Tv
Washer
dryer
combo
8 years for
the same
growth.

What is a Venture Team?

A venture team is a crossfunctional group charged with
developing a specific product or
business.

How Firms Develop New

Products
1

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Idea Generation

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Demand-First Innovation and Growth

(DIG) Framework
Demand
Landscape
Opportunity
Space
Strategic
Blueprint

Idea Generation:
Creativity Techniques

Attribute listing
Forced relationships
Reverse assumption analysis
New contexts

Lateral Mapping

Gas stations + food

Cafeteria + Internet
Cereal + snacking
Candy + toy
Audio + portable

Concept Testing

Concept is a brief
written description of
the product
Customers reactions
determine whether or
not it goes forward
Triggers the marketing
research process

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Conjoint Analysis

Prototype Testing
Alpha testing
Beta testing
Market testing

Consumer Goods Market

Testing
Sales-Wave Research
Simulated Test Marketing
Test Markets

Test Market Decisions

How many test cities?

Which cities?
Length of test?
What information to collect?
What action to take?

Timing of Market Entry

First entry
Parallel entry
Late entry

What is Adoption?
Adoption is an individuals
decision to become a regular
user of a product.

Stages in the Adoption Process

Awareness
Interest
Evaluation
Trial
Adoption

Adopter Categorization on the

Basis of Relative time of Adoption

Source: Tungsten, http://en.wikipedia.ord/wiki/Everett_Rogers. Based on Rogers, E. (1962)

Diffusion of Innovations. Free Press, London, NY, USA.

Using the Diffusion of Innovation

Theory

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin