new product development

The MAANZ MXpress Program

New Product DevelopmentDr Brian Monger

Copyright May 2013. This Power Point program and the associated documents remain the intellectual property and the copyright of the author and of The Marketing Association of Australia and New Zealand Inc. These notes may be used only for personal study associated with in the above referenced course and not in any

education or training program. Persons and/or corporations wishing to use these notes for any other purpose should contact MAANZ for written permission.

MAANZ International

• MAANZ International, is a Not for Profit, internet based professional and educational

institute which has operated for over 25 years.

• MAANZ International offers Professional Memberships;

• Marketing Courses (Formal and Short)• And Marketing Publications

• www.marketing.org.au

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Dr. Brian Monger

• Brian Monger is the CEO of MAANZ International and a Professional marketer and consultant with over 40 years

experience.

Marketing In Black and White 3

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New Product Development

Given changes in consumer tastes, technology and competition, organisations must develop new products if they are to

remain competitive.

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The Need for New Offers

• The Value Offer Cycle Model (or more commonly known as the Product Life Cycle) shows that all

products have a finite life in their market.

• New offer development is risky. Many new products don’t succeed.

• This presentation looks at the management of new value offer development.

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What Is A ‘New’ Offer?

•There are typically four ways to classify a new offer:

•New to the world;•New to a specific market; •New to the organisation •A new application of an existing offer.

New to theOrganisation

New to theWorld

New to aSpecific Market

NewApplication/

ProductExtension

Newness to Market

Low High

Newness toOrganisation

High

Low

Figure 1 Offer Types

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What Drives New Offer Development?

• There are basically three distinct but interacting factors that drive an organisation

to develop new offerings:

• The culture of the organisation .• Stakeholder pressure. • Market pressure.

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Sources Of Ideas For New Offerings

• Externally• customers’ needs

• competitors• technology advances

• Internally• employees

• market research• consultants.

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The Offer Life Cycle

• The Offer Value Life Cycle Curve is shown in Figure 2.

• Its stages are outlined below.• Stage one: Development

• Stage two: Launch and introduction• Stage three: Growth• Stage four: Maturity

The Offer Life Cycle

• Stage five: Saturation• Stage six: Decline ‐ introduction of alternative

value offers• Stage seven: Elimination

Figure 2 Offer Life Cycle/Adoption Curve

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Why New Product Offers Fail

• Some of the reasons new products fail are:

• overestimated demand• lack of real organisation support

• poor design/technology• lack of effective research• poor marketing execution

• lack of distribution• high development costs

• strong competitive reaction

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Some of the reasons new products fail are:

•fragmented markets•social and governmental constraints•cost•capital shortage•need for speed•shorter product life cycles.

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Managing the Development Process

• Because so many new product offerings fail, organisations are anxious to learn how to improve their odds of new product success. • There are many elements involved in developing successful new products.

• However, to create them, an organisation must understand its consumers, markets and

competitors, and develop products that deliver superior value to customers.

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Predictors of New Offering Success• For an offer to succeed it must:

• meet the needs of the market better than competitive offerings (perceptually)

• be technically superior• offer better perceived value

• be interesting ‐ provide a perception of change/newness

• provide strategic synergy ‐ fit well with the organisation’s directions (vision, goals and objectives)

• provide cultural synergy ‐ fit well with the organisation’s current culture

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For an offer to succeed it must:

• have a better‐managed development process• have a better marketing synergy ‐ fit into the existing marketing experience and skills of the

organisation• have good technical synergy ‐ fit into the existing

technological experience and skills of the organisation

• be introduced to the market at the right time• have better new product launch management• survive better competitive responsiveness.

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New Concept Development Model• This model consists of three parts:

• 1. Identifying the uncontrollable influencing factors• 2. Identifying the controllable activities

• 3. Proceeding through five activity elements:• opportunity identification

• opportunity analysis• idea generation and enrichment

• idea selection• concept definition.

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New Product Development or New Market?

•Igor Ansoff developed a Product–Market matrix to show the options available in deciding on either a new product, a new market or some combination of both.

MarketPenetration

ProductDevelopment

DiversificationMarketDevelopment

Existing Product New Product

ExistingMarket

NewMarket

Figure 3 Ansoff’s Product-Market Matrix

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Market Evolution

• Market evolution is a process that parallels the Offer Life Cycle. As a product category matures, the industry goes through stages that mirror the

stages of a Offer Life Cycle:

• Market crystallisation.• Market expansion

• Market fragmentation • Market consolidation • Market termination .

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The Technology Life Cycle

• Another approach to the process of product development is the technology life cycle (TLC), which can be broken down into five stages.

• Bleeding‐edge• Leading‐edge • State‐of‐the‐art

• Dated• Obsolete

Differencesworth

Establishing

Distinctive

Pre-emptive Superior

Important

Affordable

Meets Objectives

Figure 4 Key differentiating factors in New Product Development

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Models Of Innovation/Product Diffusion

• There are several theories that try to explain the mechanics of new product offer diffusion

into the marketplace:

• 1. The Two‐step Hypothesis

• 2. The Trickle‐down Theory

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Diffusion of Innovations Theory

• 3. The Everett Roger’s Diffusion of Innovations Theory ‐ there are five categories of product adopters:

• Innovators• Early adopters.• Early majority .• Late majority .

• Laggards

• 4. Technology‐driven models

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Rate of Product Diffusion• The rate of diffusion is influenced by:

• the product’s perceived advantage or benefit to the buyer

• perceived riskiness of purchase• ease or complexity of product use; simplicity or

complexity of the product• immediacy of benefits to the buyer; how quickly

benefits will be obtained• observability of the value offered by the product

• trialability of the value offer

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Rate of Product Diffusion

• perceived value (buyer investment compared with perceived value)

• extent of changes required to purchase and use (including behavioural changes)

• return on investment in the case of organisational (B2B) products.

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The Product Development Process

• Developing strong new products relies on planning and on setting up a systematic product development process for finding and growing

new products.

• 1. Organisation goals and objectives• 2. Situation (need or opportunity)

• 3. Idea generation• 4. Idea screening

• 5. Concept development and testing

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The Product Development Process

• 6. Strategy development: (see also Chapter 5, ‘Planning: Strategy’).

• 7. Business analysis: • 8. Product development:

• 9. Test marketing: • 10. Commercialisation:

IdeaGeneration

IdeaScreening

ConceptDevelopmentand testing

MarketingStrategy and

Businessanalysis

ProductDevelopment

Testing theMarket Commercialisation

GUIDING STRATEGY

PROCESS STAGES

Commercialanalysis

Situational Factors

OrganisationalFactors

Figure 5: Steps in the Product Development Process

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Things That Drive Successful and Innovative Organisations

• Desire to be the best.• Effective values are practised and demonstrated

by all.• The organisational culture fosters employee

empowerment and involvement.• Excellence is viewed not as a destination, but

rather as a continuous journey.• The organisation is solution‐focused.

• There is a high level of employee engagement.

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• Perpetual innovation in products.• Perpetual innovation in the way you think. • Perpetual innovation in the way you lead.

• Goals are set for both leaders and staff that measure adherence to employee satisfaction, customer service

and effective leadership.• There is ongoing learning from the ‘Best Practices’ of top‐performing companies but you discover your own

best practices and build on them.• Dynamic leadership is displayed and continuously

reinforced.

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• Individuals in all roles look for every opportunity to help the sales force/business development

group.• All individuals are committed to exhibiting behaviours that help to retain customers and

breed customer loyalty.• All individuals recognise they are ‘ambassadors’

who must project a positive image of their company.

• Every effort to exceed expectations is made.

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• People work together as a team with a shared vision for a common goal for the

betterment of their company.• People take ownership of their role, and

strive to find new ways to be better contributors.

• Individuals answer not only to management but also to each other for their attitudes and

performance.

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Commercial Development of New Products

• New products need to appeal to both consumer and channel customers. In a new product the supplier needs to consider the following:

• clear objectives• a simple, effective message

• a big idea• ability to achieve the objectives and benefits of

consumer and channel customer.• a compelling idea

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What Does The Customer Want?

• Choice• Convenience• Customisation

• Health and wellbeing• Value for investment

• Indulgence

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What Does The Distributor Want?

• Differentiation• Increased traffic• Increased sales

• Category objectives• Thought/category leadership

• Rewards for store team• Promotional assistance

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In assessing the product, the supplier needs to consider:

• Maintaining brand identity ‐ ensure the new product is in line with existing brand(s) focus:• Will the new product maintain consistencyacross all existing brand touch‐points? Will the new product leverage and/or reinforce the

brand?• Cannibalisation ‐ How will the new product

affect the existing product line ?• Category growth ‐Will the new product create

additional growth in its category ?

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• Store space availability ‐ there is only so much shelf or floor space available in retail stores. Will something need to be removed?• Wear‐out factor ‐ At what point will a campaign lose its

effectiveness due to overplay ?• Production/supply timelines ‐ How quickly can we come to market? Can we meet demand, or more demand than expected?• Training ‐What is required to train salespeople and retail

salespeople ?• Relationship building: segment needs/channel needs ‐Will this product aid in building better relationships with distributors and

end users ?

• For more information about MAANZ International and articles about Marketing, visit:

• www.marketing.org.au• http://smartamarketing.wordpress.com• http://smartamarketing2.wordpress.com

• . http://www.linkedin.com/groups/MAANZ‐SmartaMarketing‐Group‐2650856/about

• Email: [email protected]

• Link to this site ‐ ‐ http://www.slideshare.net/bmonger for further presentations


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END

MAANZ International

• MAANZ International, is a Not for Profit, internet based professional and educational

institute which has operated for over 25 years.

• MAANZ International offers Professional Memberships;

• Marketing Courses (Formal and Short)• And Marketing Publications

• www.marketing.org.au


Dr. Brian Monger

• Brian Monger is the CEO of MAANZ International and a Professional marketer and consultant with over 40 years

experience.


• For more information about MAANZ International and articles about Marketing, visit:

• www.marketing.org.au• http://smartamarketing.wordpress.com• http://smartamarketing2.wordpress.com

• . http://www.linkedin.com/groups/MAANZ‐SmartaMarketing‐Group‐2650856/about

• Email: [email protected]

• Link to this site ‐ ‐ http://www.slideshare.net/bmonger for further presentations


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END

MAANZ MXPress Program