New Product Development
Chapter Eight
Key Learning Points
Why new products are important
Factors affecting new product success
Three major approaches to new product
development
Steps in bringing a new product to
market
Impact of the Internet on new product
development
Special topics in new product
development
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Figure 8.1
Percentage of Current Sales by New Products
Developed in Last 5 Years by the Company’s
Industry Rank
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Table 8.1
Top 10 Global Companies in R&D
Spending (2007)
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Table 8.2
Top 10 R&D Spending Countries
(as a % of GDP)
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Overview
Innovation is life in high-tech
industries.
30,000+ new supermarket products
are introduced annually.
Firms are constantly pressured to
find the next big thing.
New products offer many benefits.
Most new products fail.
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Overview
New products can be classified into
three categories.
Minor product changes can also
result in new products.
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Figure 8.2
New Product Idea Mortality Curve for PDMA
Member Firms, 1990 and 1995
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Table 8.3
New Product Success Factors
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Figure 8.3
New Product and
Service Development Process
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New Product Development
The Rugby Approach:
New products result from constant
interaction among interdisciplinary
team members.
Firms using this method have six
characteristics.
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Figure 8.4
The Target Costing Process
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Figure 8.5
Sources of Ready-Made New-Product
Concepts
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New Product Development
Elements of Brainstorming
Openness and
participation
Problem
orientation
Leaders guide
the discussion
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Building on
each other’s
ideas
Encouraging
many diverse
ideas
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New Product Development
Screening new product concepts
Concept testing gets customer
reactions to the product concept.
Data collection
Purpose may vary
Conjoint analysis can also be used to
test concepts.
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Table 8.4
Conjoint Analysis Illustration
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Table 8.5
Conjoint Analysis Illustration Results
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Activity
Visit the following website to
experience conjoint analysis in
action as you concept test ideas for
a movie theatre:
http://elabresearch.ucr.edu/conjoint
/conjoint_movie/conjoint_movie.htm
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Discussion Question
Suppose you were responsible for
planning a concept test for a {product of
your choice} using conjoint analysis.
1. Identify the key attributes that you
would evaluate.
2. For each attribute, identify the
alternatives or levels being
evaluated.
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Table 8.6
Hierarchy of Needs
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Figure 8.6
Consumers’ Importance Weights of
Competitive Products
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Table 8.7
List of Engineering Characteristics
for a Car Door
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Figure 8.7
The House of Quality
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New Product Development
Business analysis: forecasting
demand
Product use tests involve getting
potential customers to try prototypes.
Diagnostic small sample tests
Limited time horizon consumer test
Market tests
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New Product Development
Market Test Design Decisions
Action
standards
Where to test
What to do
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How long
How much
Information
gathering
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New Product Development
Sales forecasting for new products
Forecasting often relies on purchase
intention data or other qualitative
data.
Many approaches have been
developed for frequently purchased
items.
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Figure 8.8
Typical Penetration for a New Brand
Over Time
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Figure 8.9
Typical Repeat Rate for a New Brand
Over Time
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Figure 8.10
Repeat Rates and Product Performance
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New Product Development
Simple Market Share Forecasting
Using the Parfitt-Collins Model
(P) = An estimate of eventual penetration rate
(R) = An estimate of the ultimate repeat rate
(U) = An estimate of the relative product category
usage rate by buyers of the new brand
Eventual Market Share = P x R x U
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New Product Development
Sales forecasting for new products
Pretest market data from laboratory
experiments can be used to forecast
sales.
ASSESSOR
Forecasting the success of radical
innovations is more difficult.
Information acceleration
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Figure 8.11
BASES Estimate of Contadina Year-1
Sales Volume
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New Product Development
Launching the new product
Launching requires that objectives
be set, the strategy be developed,
and that the implementation be
planned and executed.
Implementation is often a key factor
in product failure.
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“Because of shorter product
life cycles and faster
technological obsolescence,
companies are finding that
quicker time-to-market with
new products has become a
competitive advantage.”
- Russell S. Winer
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Table 8.9
Reported New-Product Introduction
Time Reductions
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Topics in New Product
Development
Importance of shorter product
development cycles
Several factors influence time to
market.
Importance of product design
IDEO is the best-known firm.
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Topics in New Product
Development
IDEO’s Design Process
Observation
Brainstorming
Rapid prototyping
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Refining
Implementation
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Topics in New Product
Development
New product development over the
product life cycle
PLC can serve as a guide to the types
of innovation sought by the firm.
Improving the integration of
marketing and R&D
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Executive Summary
New products are necessary for a firm’s longterm survival.
Several factors correlate with successful new
products.
Several new product development approaches
exist.
New product concepts are either ready-made
or result from a creative process.
Product definition must use consumer input.
Many methods exist to forecast demand.
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