Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control

CHAPTER 8
Innovation and New Product
Strategy

The Innovation Mandate

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies,

INNOVATION AND NEW PRODUCT STRATEGY

* Innovation as a Customer Driven Process

* New Product Planning
* Idea Generation
* Screening, Evaluating, and Business Analysis
* Product and Process Development
* Marketing Strategy and Market Testing
* Commercialization
* Variation in the Generic New Product
Planning Process

8-3

INNOVATION FEATURE

Managing Googles Idea Factory

As director of consumer Web products Marissa Mayer is a
champion of innovation. She favors new product launches that
are early and often.
She joined Google in early 1999 as a programmer when the
workforce totaled 20. By 2007 Google had 5,700 employees
with expected sales of $16 billion.

How Google Innovates

The search leader has earned a reputation as one of the most
innovative companies in the world of technology. A few of the
ways
FREE
Google
hatches new
ideas:
(THINKING)
TIME
Google gives all engineers one day a week to develop their
own pet projects, no matter how far from the companys
central mission. If work gets in the way of free days for a
few weeks, they accumulate. Google News came out of this
process.

8-4

 THE IDEAS LIST

Anyone at Google can post thoughts for new technologies of
businesses on an ideas mailing list, available companywide for
input and vetting. But beware: Newbies who suggest familiar or
poorly thought-out ideas can face an intellectual pummeling.

OPEN OFFICE HOURS

Think back to your professors office hours in college. Thats pretty

much what key managers, including Mayer, do two or three times a
week, to discuss new ideas. One success born of this approach was
Googles personalized home page.

BIG BRAINSTORMS

As it has grown, Google has cut back on brainstorming sessions.

Mayer still has them eight times a year, but limits hers to 100
engineers. Six concepts are pitched and discussed for 10 minutes
each. The goal: to build on the initial idea with at least one
ACQUIRE
GOOD IDEAS
complementary
idea per minute.
Although Google strongly prefers to develop technology in-house, it
has also been willing to snap up small companies with interesting
initiatives. In 2004 it bought Keyhole, including the technology that
let Google offer sophisticated maps with satellite imagery.
Source: Managing Googles Idea Factory, BusinessWeek, October 3, 2005, 88-90.

8-5

FINDING CUSTOMER VALUE OPPORTUNITIES

Customer value analysis
Objective is to identify needs
for:
1. New products
2. Improvements to existing
products
3. Improvements in
production processes
4. Improvements in
8-6

Customer
Expectations
Customer
Satisfaction Gap
Actual
Product
Performance

OPPORTUNITIES
(1) New Products
(2) Improvements
(3) New and Improved
Processes

8-7

TRANSFORMATIONAL
Break-through innovation
Digital photography
NEW PRODUCT CATEGORY
Dell

Printers

Nike

Apparel
Golf clubs

LINE EXTENSION
New color/package/style
INCREMENTAL IMPROVEMENTS
Software updates
8-8

The Evolution of the Creative Company

STEP 1
Technology and information become commoditized and
globalized. Suddenly, the advantage of making things faster, cheaper,
better diminishes, and profit margins decline.
STEP 2
With commoditization, core advantages can be shipped abroad.
Outsourcing to India, China, and Eastern Europe sends a growing share
of manufacturing and even the Knowledge Economy overseas.
STEP 3
Design Strategy begins to replace Six Sigma as a key
organizing principle. Design plays a key role in product
differentiation, decision-making, and understanding the consumer
experience.
Source: Bruce Nussbaum, How to Build Innovation Companies, BusinessWeek, August 1, 2005, 62-63.

8-9

STEP 4
Creative innovation becomes the key driver of growth.
Companies master new design thinking and metrics and
create products that address consumers unmet, and often
unarticulated, desires.
STEP 5
The successful Creative Corporation emerges, with
new Innovation DNA. Winners build a fast-moving
culture that routinely beats competitors because of a high
success rate for innovation.

8-10

Characteristics of Successful Innovators

Creating an
Innovative Culture

Leveragin
g
Capabiliti
es
Making Resource
Commitments

STRATEGIC
INITIATIVES

Selecting
the Right
Innovation
Strategy

Developing and
Implementing
Effective New
Product Processes
8-11

Creating 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.

8-12

The Innovation Strategy Spells Out Managements

Priorities for New Product Opportunities

1. Set specific New Product 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.

8-13

NEW PRODUCT PLANNING PROCESS

Customer
Needs
Analysis
Idea
Generation

Screening
and
Evaluation

Business
Analysis

Marketing
Strategy
Development

Product
Development

Testing
Commercialization
8-14

Achieving Cross-Functional
Interaction and Coordination

R&D
Operations

Marketing

Finance

8-15

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
8-16

IDEA GENERATION
*
*
*
*
*
*

Idea search: targeted or open-ended?

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?
8-17

Alliances/
Acquisition/
Licensing
National
Policy

Creative
Methods

Direct
Search

METHODS
OF
GENERATING
IDEAS

Linking
Marketing
and Technology

Technological
Innovation

Exploratory
Customer
Studies
Facilitating
Lead User
Analysis

8-18

An Innovation Champion
in Action at GE

Beth Comstock calls herself a little bit of the crazy, wacky one at corporate
headquarters. And its an apt description when you realize she works at
General Electric Co. Comstock, 44, is charged with transforming GEs culture,
famously devoted to process, engineering, and financial controls, to one thats
more agile and creative. Chairman and CEO Jeffrey R. Immelt tapped the
former communications chief to become GEs first-ever chief marketing officer
almost three years ago. The job came with a critical twist: the goal of driving
innovation through the companys 300,000 plus ranks.
Creativity is still a word were wrestling with, Comstock concedes. It seems
a bit undisciplined, a bit chaotic for a place like GE. More comfortable
territory is the term imaginative problem-solving encouraging people to
think what if yet always with the aim of driving growth. One of Comstocks
first moves was to bring in anthropologists to audit GEs culture. They came
back with praise for GEs famous work ethic but noted that employees wanted
more wow more discoveries from the company founded by Thomas Edison.
8-19

Comstock has a role whose importance is spreading throughout Big Business

that of innovation champion. She began by studying the best practices at
companies such as Procter & Gamble, FedEx, and 3M. She brought in a raft of
creativity consultants, futurists, and design gurus to lead sessions with
different operations. Their names were jolting for GE types: Play, a Richmond
(VA.) group that helps execs think differently, and Jump, based in San Mateo,
CA., which researches how people use things. GE is expanding its army of
designers to bring businesses closer to customers. And Comstock is staging
dreaming sessions where Immelt, senior execs, and customers debate
future market trends. Comstock concedes some managers view the
workshops as a waste of time. We have a long way to go, she says. But for
GE, theres no turning back.

Source: Bruce Hussbaum, How to Build Creative Companies, BusinessWeek, August, 2005, 77.

8-20

SCREENING, EVALUATING, AND

BUSINESS ANALYSIS
IDEA GENERATION
SCREENING
(fit/feasibility)
CONCEPT EVALUATION
BUSINESS ANALYSIS
8-21

Business Analysis

Revenue Forecasts

Preliminary Marketing Plan

Cost Estimation

Profit Projections

Other Considerations
8-22

PRODUCT AND PROCESS

DEVELOPMENT
NEW
PRODUCT
CONCEPT
PRODUCT
DEVELOPMENT
AND USE
TESTING

MARKETING
STRATEGY
DEVELOPMENT
MARKET
TESTING
LAUNCH
8-23

Product and Process Development

Development of the new product includes:

* Product design
* Packaging design
* Decisions to make or purchase product components
Product Development Process:
* Product Specifications
* Industrial Design
* Prototype
* Use Tests
* Process Development
Collaborative Development
8-24

Does it have the

required attributes?
Verify
claims

PURPOSE OF
USE TESTS

Ideas for
improvements

Identify use
situations

8-25

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
8-27

COMMERCIALIZATION
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

8-28

Marketing Strategy

Market
Target(s)
Objectives

Marketing
Program(s)

8-29

VARIATIONS IN THE GENERIC NEW

PRODUCT PLANNING

*
*
*
*

Technology Push Processes

Platform Products
Process Intensive Products
Customized Products

8-30