New Product Development Strategy - Canisius College



New Product Development Strategy

New Product Management

1. What is a Product?

2. What is Value?

* Economic Value =

1. Form 3. Place

2. Time 4. Possession

New Product Development Strategy

How is Value Added?

Offer - Creating Value

Marketing Enhancing

(MARKETING MIX) &

Support Delivering

Value

New Product Development Strategy

Why Are New Products Needed

External Pressures

(1) Competition

(2) Technology invention

(3) Material Scarcity

(4) Gov't Regulation

Internal Pressures

(5) The objective - Sales growth

(6) Financial goals

Others ??

New Product Development Strategy

Nature of the

Product Life Cycle (PLC)

Cycles Stages

* Product form * Introduction

* Product class * Growth

* Brand * Maturity

* Decline

New Product Development Strategy

Alternative Strategies

Proactive Reactive

* R & D * Defensive

* MKTG. * Imitative

* Entrepreneurial * Responsive

* Acquisition * Second but

* Economies of better scale

New Product Development Strategy

ADVANTAGES

Proactive Reactive

* Pioneer's * R & D Costs

reward = 20% decline

* Economies of * Risk declines

scale

* Lower costs

New Product Development Strategy

New Product Development Process

1. Opportunity Identification

* Market Definition

* Idea generation and selection

2. Design

* Using - Perceptual mapping

- Product positioning

- Concept testing & sales

forecasting techniques

* Finally develop: prototype

basic marketing mix

New Product Development Strategy

New Product Development Process

3. Testing

* Product tests

* Advertising tests

* Pretest market forecasting

* Test marketing

4. Introduction

* Launch planning

* Tracking the launch (panel data)

5. Life Cycle Management

* Market response analysis (MDSS)

* Competitive defense (Defender)

* Innovation at maturity (Recycle)

* Portfolio Management (BCG)

New Product Development Strategy

Steps in Opportunity Identification

1. Identify markets with best opportunities

2. Define these markets

3. Select markets for new products with best match to

your firm

4. Generate suitable product ideas to tap potential of

selected markets

5. Screen and refine ideas

New Product Development Strategy

STEP 1: MARKET PROFILE ANALYSIS

Rating Form: Ranking markets

Profile: Strengths and weaknesses of each market

PROCEDURE

1.List and weigh market-selection criteria

specific to your firm.

2.Rate each market using each criterion

(e.g., scale -2 to +2).

pute weighted sum of ratings.

pare summary ratings and choose best markets.

New Product Development Strategy

Simplified Example: MARKETS

Characteristics BUFFALO TORONTO SYRACUSE

1. Potential 0 +1 +2

Wt. = .4 0 .4 .8

2. Penetrability +2 -1 0

Wt.=.2 .4 -.2 0

3. Reward +1 +2 +2

Wt.=.3 .3 .6 .6

4. Risk +2 +2 -2

Wt.=.1 .2 .2 -.2

WEIGHTED TOTAL .9 1.0 1.2

Note: Sum Wt. = 1.0

New Product Development Strategy

STEP 2A: MARKET DEFINITION

Identify boundaries of potential

markets (size, relationships

with company's position, etc.)

a.) Product-Oriented Approach:

SIC System

New Product Development Strategy

b.) Consumer-oriented Approaches

i)Purchase/Usage (Behavior)

Regression Cross-elasticity of demand

Judgment Similarities in usage

Panel Data Brand switching

New Product Development Strategy

ii) Consumer Judgment

Decision sequence analysis

(protocol; hierarchy)

Perceptual mapping

cluster products/brands into groups

according to consumer perception

of similarities of products/brands

* Combination of and

New Product Development Strategy

STEP 2B: SEGMENTATION

Demo- 1. Age, income, sex, race,

graphic education, occupation

Psycho- 2. AIO, attitudes,

graphic perception, VALS

Usage Rate 3. Heavy/Average/Light

User

New Product Development Strategy

STEP 2B: SEGMENTATION

Preference/ 4. Consumer response

Choice to new

product offerings

Summary -- STEPS 2A & 2B

2A: Identifies products

2B: Identifies markets

New Product Development Strategy

STEP 3: MARKET SELECTION

1.Potential # of existing brands

Market +

Share MARKETING BUDGET

2. Cannibalization of existing products

3. Organizational capability

NOW DECIDE

WHICH MARKETS TO ENTER

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