Grow up your brand with "The Baby Steps"

Hierarchy of Effects Models- "The baby steps"

Various illustrations of the notion that marketing promotion induces consumers to move in steps from one mental state to the next before eventually deciding to purchase a particular product; in this model the steps, in ascending order, are Awareness, Knowledge, Liking, Preference, Trial and Loyalty. It sounds like “Baby Steps” growing up from nothing to the great brand. Let’s quick discover each step and its appropriate communication tools.

Unawareness => Awareness

This is first step that target customers do not know anything about the brand. They cannot recall and even recognize the brand. So the best communication tool that should be employed is mass advertising. It could be huge billboards which display the brand name or logo. It should be placed at high traffic areas where target customers are. The content contained in ad should be simple and stimulate consumers to recognize the brand name and what products or services the brand offers.

Awareness => Knowledge

The target customers might have brand awareness but they do not know much about its features and benefits. So communication tool must be able to convey products features and benefit in detail. For example, the brand website could show product portfolio, features, benefits and pictures. Beside the website, company could hand out brochures or send direct mail to target customer. Moreover, company should evaluate the effectiveness and accuracy of communication in order to ensure that target customers have got the right information of the brand.

Knowledge => Liking

Once the target customers know the brand, the next step is “How do they feel about it?” So the best way to make them like the brand is to link the brand to the things they like. The association might be celebrity endorsement, lifestyle and so on. Furthermore, the brand might be the sponsorship of public events that are relevant to the target customers. With this method, consumer will use affective think rather than cognitive thinking to make decision on even product such as laptop.

Liking => Preference

Once the target customer looks favorably on the brand, Would they prefer it to the others? To make the brand be preferable, opinion leader could be used to promote the brand quality, value and other features as well as comparative advertising. Product manager should monitor closely what are the factors customers prefer and how competitors respond to improve communication methods later on. (Comparative ads, Word of Mouth, Opinion leader)

Preference => Trial

The target customers might prefer the brand but they do not build up a conviction of buying. The simple action is sampling. Moreover, brand shelf space, shelf facing and shelf locations in retails are crucial because they affect customer trial.

Trial => Loyalty

This step is the last but not least since it greatly benefits to the brand. Customers will repeat buying and spread good word of mouth. The moment of truth is crucial and must be managed properly in term of shelf display, packaging, merchandising and logistic in order to make sure that customer get right product quality and the right time. The appropriate communication tool is sale promotion and loyalty programs which might be membership, peer to peer incentive, redemption card and so on.

New Product Management (10)

Chapter 10: The Full Screen

Purposes: after the original idea emerged, we put it concept format, then gave it a brief initial exposure for reaction by key players. Concept testing then enables us to add thoughts of potential users to the set of market and other data collected since the time of the PIC. We have been compiling inputs of key functional people in the firm. We now have as much info as we are going to get before undertaking technical work on the product. It involves the use of scoring model – an arrangement of checklist factors with weights (importance) on them.

Full screen has three objectives:

1) It helps the firm decide whether it should go forward with the concept or quit decide whether these financial/ human resources should be devoted to the project – whether we can do (feasibility) the job or we want to do it (what will we get out of the project – profits and market share).

2) It helps manage the process by sorting the concepts and identifying the best ones (rank order/ prioritize, and record is kept of rejected concepts to prevent reinvention).

3) It encourages cross-functional communication (it is a learning process which makes manager more sensitive to how other functions think).

The scoring model

What social activity to undertake in the weekend – Four criteria are listed out: fun (much, some, little, none), involve more than 2 people (over 5, 4-5, 2-3, and under 2), affordable (easily, probably, maybe, no), and something capable of doing (very, good, some, little) - 4 point scale was chosen, and three activities are skiing, boating, and hiking. Then the person proceeds to evaluate each option and total the score for each. Boating is the final answer 3+4+4+4 = 15 points in total. However, some protesting could be made (a special person will be present at skiing, hiking enable more exercise, and etc). A scoring process is what we actually use in making decisions. The person’s objections contain the basic problems of new product scoring model.

What is being evaluated?

There is a financial term called net present value of the discounted stream of earnings from the product concept, considering all direct and indirect costs and benefits. It is the bottom line on an income statement for the product, where we have included all costs and then discounted back the profits into what their value is today. We use surrogates for it. Profit/ net present value comes from chances of technical accomplishment and commercial accomplishment (sales, margins, and expenses). Sales would depend on the newness of the wholesalers, familiarity with the market, and product advantages.

Analytic Hierarchy Process (AHP) – a technique that systematically gathers expert judgment and uses it to make optimal decisions. It can be applied in full screening as a way to prioritize and select new product projects. AHP gathers managerial judgment and expertise to identify the key criteria in the screening decision and obtain scores under consideration relative to these criteria and rank the projects in order of desirability. AHP converts the comparison data into a set of relative weights, which are then aggregated to obtain composite priorities of each element at each level. The available choices are rank ordered in terms of their prefer-ability to the manager.

If an idea progresses through early concept testing (much more productive when it is in prototype form) and development to the point where it is a full-blown concept ready for technical workup, it must then be screened. Screening is commonly done with scoring models, whereby the firm’s ability to bring off the required development and marketing is estimated.

New Product Management (9)

Chapter 9: Concept Testing

The importance of up-front evaluations

The biggest cause of new product failure is that the intended buyer did not see a need for the item – no purpose, no value, and not worth the price. In concept testing, we get our first confirmation that this will be a quality product. We save time by gathering information and making decisions that help assure the product will move through development fast. We lower cost in several ways (avoid the rising cumulative expenditures curve and the best time to get off a loser is at the bottom of the curve, the elimination of the many losers naturally picked up in an aggressive concept generation program, info gathering also helps make cost forecast). The highly relevant is also the stage where we set the basic marketing strategy on firm ground. We confirm the target market and settle on a product positioning statement which guides all the rest of the marketing activities.

PIC – the earliest evaluation that a firm makes is of itself and its situation. These decisions decree what types of new products fit best (ex. Nabisco sought technological breakthroughs in snack foods). The PIC will eliminate many new product ideas as firms will reject ideas that violate PIC guidelines. Following the PIC should result in excluding these ideas: ideas that require technologies the firm does not have, ideas to be sold to customers about whom the firm has no close knowledge, ideas that offer the wrong degree of innovativeness, and ideas wrong on other dimensions (not low cost, to close to certain competitor). When used at the beginning of the new products system, it precludes the unfortunate practice of having unwanted proposals eat up valuable development fund before they are detected.

Market analysis – The second evaluation that precedes appearance of the concept, it is an in-depth study of the market area that the PIC has selected for focus. This study takes place immediately after the PIC is approved.

Initial reaction – concepts begin flowing in (usually very fast), and opinions on them are formed instantly. Firms have special technique to handle this deluge more systematically (for example: if either sales VP or engineering VP approved the idea, the idea will be sent to another VP, and once both VPs approved, the idea went to a committee – both VPs primarily use their experience to judge). However, firms must resist the “bazooka effect” (where suggestions are quickly blasted out) – the idea source does not usually participate in the initial reaction (idea originator should not be able to vote), two or more persons are involved in any rejection decision, and the initial reaction is based on more than a pure initiative sense (evaluators are trained and experience and records are kept). PIC is often use in this initial reaction (knowing what a firm really wants). Most firms also use heuristics (rule of thumb) for this rough screening – evaluation are based on three factors: market worth, firm worth, and competitive insulation.

Concept testing and development – most major firms make use of concept testing (while some firms rely on intuition and experience). It is a mandatory part of the process for makers of customer packaged goods and its use is growing in industrial firms. However, there are times when this does not help – when the prime benefit is a personal sense. Concept testing usually fails in testing the aroma of new perfume or the taste of new food as the concept cannot be communicated short of actually having some product there to demonstrate (a type of gun failed badly in concept test and became very successful in real market). 2nd, concepts of new art and entertainment are tough to test (Whistler could not have concept-tested his idea for a painting of his mother). 3rd, when the concept has some new technology that users cannot visualize and 4th when firms mismanage concept testing and then blame the tool for misleading them (New Coke got favorable reply when tested and sometimes customers were asked to predict their behavior without knowing all the facts – they will deceive developers who are not careful). 5th customers sometimes simply do not know what problems they have. For service, there is also a prototype concept testing (which is much more reliable with physical prototype to talk around).

What is a new product concept?

A concept is an idea or an abstract notion – the product promise, the customer proposition, and the real reason why people should buy. It is a stated relationship between product features and customer benefits (needs) – it is a claim of proposed satisfaction. This promise can have four interpretations: producer/ consumer’s perception of the features of the new product, and the producer/ consumer’s estimate of the benefits delivered by that set of features. A complete new product concept is a statement about anticipated product features that will yield selected benefits relative to other products/ problem solutions already available.

The purpose of concept testing – concept testing is a part of the prescreening process (full screening of the idea just before beginning serious technical work. The purpose is

1) To identify the very poor concept so it can be eliminated.

2) To estimate the sales/ trial rate that the product would enjoy (market share/ revenue). The top-two-boxes score is the total number of times one of the top 2 boxes on the questionnaire were checked. Researchers usually calibrate their figures (if the total is 60%, the real figure might be 25% - while sometimes experience calibrates the probable intention higher than the respondents say now – on complex items, customers prefer to have a chance to see the final item and hear about it).

3) Purpose is to help develop the idea.

Considerations in concept testing research

Preparing the concept statement - A concept statement states a difference and how that difference benefits the customer (it sounds like a positioning statement).

1) Format – should make the new item’s difference absolutely clear, claim determinant attributes, offer a chord of familiarity (to things familiar to customers), and be short, credible, and realistic. There are different formats: a narrative format (brief, only minimum of attributes), a drawing/ diagram (usually supplemented by a narrative statement), a model/ prototype (only useful in special situations – simple to prepare food or concepts so complex that customer cannot react without more knowledge), or in virtual reality (captures the advantages of the prototype without most of it disadvantage).

2) Commercialized concept statement – presented in promotional style (a marvelous new way to chase the blahs from your diet has been discovered by General Mill scientists – a low-calorie version of ever-popular peanut butter – as tasty as ever and produced by a natural process). This format draw different reactions and produce more realistic evaluations but they also risk bias of good and poor ads writing. It should be simple, clear, and realistic.

3) Offering of competitive information – customer know much less about products and other options than we’d like. A new concept may offer a benefit that customer does not realize is new. One solution is to provide a full data sheet about each competitive product while most data will be bent slightly in favor of the new product (with full info).

4) Price – whether to put a price in the concept statement. Some object saying reaction to concept is wanted (not price). Yet price is part of a product (an attribute in customers’ eyes) and buyers cannot be expected to tell purchase intentions without knowing price.

Define the respondent groups – we would like to interview all persons who play a role in deciding whether the product will be bought and how it might be improved. Stakeholders – any person/ organization that has a stake in the proposed product. Some try to seek out small number of lead users, influencers, or large users. This saves money and gets more expert advice but often fails to reflect key differences. Some firms try to put interest in innovators and early adopters (concentrate concept testing solely on them), if this group is interested, others are likely to be so.

Select the response situation – There are two issues: the mode of reaching the respondents and if personal, whether to approach individually or in a group. Most testing takes place through personal contact (direct interviewing samples about 100-400 people or smaller), which allows the interviewer to answer questions and to probe areas there the respondent is expressing a new idea or is not clear. Groups (focus-groups) are also excellent when we want respondents to hear and react to the comments of others. The real-time response survey combines the best features of the focus groups and surveys (proven useful in screening new customer product concepts) – computers are used in real time that result can be read directly and moderator can develop original open-ended questions and ask them in real time.

Interviewing sequence – simple interviewing situations state the new product concept and ask about believability, buying intentions, and other info wanted. We first explore the respondent’s current practice (how they are trying to solve their problems, what competing products they and what do they think, how willing would they be to change and what specific benefits do they want?). This helps us understand and interpret comments about the new concept. We are especially interested in what changes they would make in the concept (what it would be used for and why, what would be replaced). We are exploring what people are doing and thinking.

Analyzing research results – most firms rely on a simple top-two-boxes score (may be adding 30% based on industry experience). Sometimes more info is needed as we cannot assume that all customers will have the same needs or look for the same benefits. Through benefit segmentation, a firm may identify unsatisfied market segments and concentrate efforts on developing concepts which suit those needs.

To identify benefit segments, customers are to rate how important each attribute was in determining their preference among brands (importance rating – used to model existing brand preference and predict likely preferences for new concepts). Cluster analysis puts observations together into relatively homogeneous groups (it is also a data reduction method like factor analysis). It groups together individuals into a small number of benefit segments.

Joint space maps – a perceptual map which allows us to assess the preferences of each benefit segment for different product concepts. The most direct way is to get customers to rate their ideal brand on each attribute. We expect the brand that is located closest to a segment’s ideal brand will be preferred by that segment. Preference regression can be used to identify the optimum combination of attributes desired by the market. This relies on a different kind of numerical input (ranking of brands). The relative sizes of the regression coefficients give us an indication of the relative importance of each factor. The ideal vector represents the optimum proportion of attributes desired by this market.

Conjoint analysis – It is useful in concept testing too (not only concept generation). Based on the three attributes of Salsa, conjoint analysis can be used to identify high-potential gaps: combinations of attributes that customers like, and are not on the market yet. The model identifies the levels of combinations from most to least preferred. Each combination could be thought of as a concept and the top-ranking concept have the highest potential and should be consider for further development. This analysis is extremely useful in concept testing because its ability to uncover relationships between attributes and customers’ preferences. Benefit segments can also be identified as the analysis identifies each customer’s value system, the relative importance of the attributes to each customer, and the preferred level of each attribute.

New Product Management (8)

Chapter 8

The Concept Evaluation System

New products fail because there was no basic need for the item (as seen by the intended user), the new product did not meet its need, and the new product idea was not properly communicated to the intended user – they did not need it, it did not work, and they did not get the message.

The Evaluation System for the basic new products process

Though overall purpose of evaluation is to guide us to profitable new products, each individual evaluation step task has a specific purpose in the new product process. Ideas become concepts, concepts get refined, evaluated, and approved, development projects are initiated, and products are launched.

Phase 1 (Opportunity identification and selection) – someone decided the firm had a strong technology, or an excellent market opportunity, or a serious competitive threat – where should we look? What should we try to exploit? And what should we fight against? Market descriptions - it makes sure we play the game in our home field.

Phase 2 (Concept generation) – ideas begin to appear, and the purpose of evaluation changes. The initial review is if this idea is worth screening, the goal is to avoid the big loser/ sure loser, and tries to spot the potential big winners. Evaluation techniques are the PIC, immediate judgmental response, preliminary market analyses, and concept testing.

Phase 3 (Concept/ project evaluation) – the decision on whether to send the concept into full-scale development - full screen, should we try to develop it. The evaluation techniques are checklists, profile sheet, and scoring models.

Phase 4 (Development) – in traduces the part of the process where the parallel or simultaneous technical and marketing activities are done. Have we got what we want? Is this part ready? Is this system clear for use? Have we developed it? If not, what should we try? A protocol check tells whether we are ready to develop a product for serious field testing. There are also prototype tests, concept tests, and product use tests.

Phase 5 (Launch) – the technical efforts yield a product that evaluators say meets Customers’ request. Whether the firm has proven itself able to make and market the item on commercial sale – usually done by market testing. Evaluation techniques include: speculative sale, simulated test market, informal selling, control sale, test marketing, and rollout.

The Cumulative Expenditure Curve

The new product evaluation system flows with the development of the product. An early expenditures curve represents the product development in technical fields (pharmaceuticals, optics, and CPUs) where R&D is the big part of the cost package, while marketing cost is small. For an average curve, a gradually upward-sloping curve represents the accumulation of costs/ expenditures on a typical new product project from its beginning to its full launch. The late expenditures curve represents customer packaged goods company where technical expenditures may be small, but huge TV ads are needed at introduction.

The risk/ payoff matrix

At any single evaluation point in the new product process, the new product faced four situations (4 cells matrix): two broad outcomes (success or failure) and two decisions options (move on or kill the project). If the firm is to stop the project where it is going to succeed, a winner is discarded and it is much worse. On the other hand, if the project is to continue when it is going to fail, a loser is continued to the next evaluation point. But throwing out a winner is very costly as the profits from a winning product are bound to be much greater than all of the development costs combined. The exception is the opportunity cost – when good candidates wait in the wings, the losses of dropping a winner are much less because the money diverted will likely go to another winner.

There are 4 generic risk strategies:

a) Avoidance – eliminate the risky project altogether, though an opportunity cost is incurred.

b) Mitigation – reduce the risk to an acceptable, threshold level, through redesigning the product to include more backup systems or increasing product reliability.

c) Transfer – move the responsibility to another firm (joint venture or subcontractor).

d) Acceptance – develops a contingency plan or deal with the risks as they come up.

The decay curve

The risk matrix leads to the idea of a decay curve. It depicts the percentage of any firm’s new product concepts that survive through the development period. A firm usually wants to kill off all possible losers early, and spend time developing only those proposals worthy of marketing. The curve is partly a plan and partly a result and the two should synchronize. It helps the manager see the need for thinking through the stream of development costs and the risk/ payoff matrix.

Planning the evaluation system

1) Everything is tentative – we usually assume everything is tentative: form can be changed and so can costs, packaging, positioning, service contracts, the marketing date, the reactions of government regulators and Customers attitudes. Firms are finding ways to avoid commitment by transferring risk: by having another supplier produce the product for a while before a facilities commitment, or by negotiating a tentative license, or by asking probable customers to join a consortium to ensure the volume needed to build the facility. However, financial analysis should be done as early as possible to avoid wasting $ on poor projects. Another tentative matter is the marketing date (marketing actually begins very early in the development process).

2) Potholes – product developers should have the ability to anticipate major difficulties, the potholes of product innovation. They can be costly when we fail to see them coming in time to slow down or steer around them. We should carefully scan for the really damaging problems and keep in mind when we decide what evaluating we will do. Campbell’s key strengths are manufacturing cost and whether customers think the product tastes good. Example of potholes can be a quick entry by a price-cutter (in case where there is no patent protection or other barriers to competitive entry) or customer might be unwilling to take the time to learn to use complex new products, or uncertainty regarding the FDA approval for pharmaceutical products.

3) The people dimension – product developers also have to remember they are dealing with people, and people cause problems. An idea may have little support outside R&D (fragile and easy to kill). An evaluation system should contain early testing that is supportive. Concept testing is sometimes called concept development to reinforce the idea of helping the item, not just killing it off. There is also personal risk – risk to jobs, promotions, bonuses, and etc. The evaluation system should be supportive of people and offer the reassurance.

4) Surrogates – the timing of factual info does not often match our need for it. We look for surrogate questions to give us pieces of info that can substitute for what we want to learn but cannot. Examples are: Did they keep the prototype product we gave? (Instead of will they prefer it?), does it match our manufacturing skill? (Instead of will cost be effective?), did it do well in field testing? (Will it sell?). Only when we know our final cost and the competitor’s cost can we answer the original question. But the surrogates helped tell us whether we were headed for trouble.

The A-T-A-R model (awareness, trial, availability, and repeat)

The last tool used for designing an evaluation system for new project is based on how we forecast sales and profit on a new item. The calculation is much like a pro forma income statement. The model is taken from diffusion of innovation: for a person to become buyer of innovation, there must 1st be awareness that it exists, there must be a decision to try, then the person must find the item available, and there must be the type of happiness with it that leads to adoption and repeat usage. We use the formula to calculate all the way to profit, and so we include target market size (potential adopters), units purchased by each adopter, and the economics of the operation. The model came from customer products marketing and can be applied to all types of new products including industrial and services. In this chapter it is shown to be used early in concept evaluation as a rough forecasting tool (providing early sales and profit forecast based on estimates specific to the new product) – however, it is also used in more detailed sales forecasting model.

Profits = buying units x percent aware x percent trial x percent availability x percent repeat x annual units bought x (revenue per unit – costs per unit)

Profits = units sold x profit per unit

Two things are important about this model’s sales and profit forecasts.

1) Each factor is subject to estimation (in every development phase we are trying to sharpen our ability to make the estimates)

2) An inadequate profit forecast can be improved only by changing one of the factors

Awareness: we want to know if the buying unit has been sufficiently informed to stimulate further investigation and consideration of trial.

Trial: we might imagine an in-store situation where customer puts on the headphones and see if the product is satisfactory. Vicarious trial is where a person/ firm who did try something shares results with someone who cannot try it. We want two things to happen in a trial: the buying unit went to some expense to get the trial supply (if there was no cost, then we cannot be sure there was evaluation of the product message and interest created), and the buying unit used the new item enough to have a basis for deciding whether it is any good.

Availability: we want to know whether the buyer can easily get the new product if a decision is made to try it (Percentage of those outlets and distributors).

Repeat: means the trial was successful and the buying unit was pleased.

New Product Management (7)

Chapter 7: Analytical Attribute Approaches: Trade-off Analysis & Qualitative techniques

Trade-off analysis (often called conjoint analysis) – it is more common used in concept evaluation, used in generating high-potential concepts for future evaluation. Trade-off analysis refers to the analysis of the process by which customers compare and evaluate brands based on their attributes/ features. Conjoint analysis: one of the most common analytical tools used to assess tradeoffs (like factor analysis which is a tool used to develop perceptual maps – tradeoff analysis is the broader term). With conjoint analysis, we can represent a product as a set of bundle of attributes. It puts all of the determinant attributes together in new sets, and identifies which sets of attributes would be most liked/ preferred by customers.

Using trade-off analysis to generate concepts

Coffee has three determinant attributes: flavor, strength, and intensity of aroma. If we could get customer preferences (or utilities) for each attribute, we could combine the best level of each attribute into an overall favorite product. Unless this particular combination was already on the market, we would have our new product concept. Cards representing new products that combined specific features, functions, and benefits would be prepared, and customers were asked to sort the cards by preference from top to bottom. As business buyers tend to make a more rational analysis of product features, trade-off analysis is becoming increasingly valuable for industrial product innovation.

A conjoint analysis application

Supposed our understanding of the market and recent customers research, we have found that three attributes are uppermost in Customers’ minds when they buy Salsa – spiciness (mild, medium, extra hot), color (green or red), and thickness (regular, thick, extra thick). There are three x 2 x three = 18 types that can be made. Then 18 cards will be designed (each with pictures or verbal description), and each respondent will be asked to rank the cards from 1 to 18 where 1 is “like most”. The largest range in utilities is found for spiciness, thus spiciness is this individual’s most important attribute influencing likes and dislikes – while color is the least important. This analysis uses monotone analysis of variance (MONANOVA), a data analysis technique, to find these patterns within the rank order data. Trade-off analysis allows the manager to identify which attributes are the most important and which level of these attributes are the most popular. However, it may be about half the market likes the mild and the other half goes for extra hot, and if we examine the average and conclude that medium-hot is best, in reality nobody may like it. Moreover, if there are more attributes and levels – there could be more than 400 cards to rank. We must choose the combination that most closely meets their desires by trading off attributes wanted more against those wanted less.

A guideline of conjoint analysis includes:

1) Able to specify the product as a bundle of attributes (difficult for perfume as in factor analysis)

2) Know what the determinant attributes are before we do the conjoint analysis (AR gap mapping can be helpful).

3) Respondents should be familiar enough with the product category and attributes to be able to provide meaningful data (conjoint analysis will be less useful in case of new-to-the-world products).

4) The firm should be able to act on the results (to actually develop a product).

Discrete choices method is used when dealing with the complexities of many product situations. Conjoint results are a valid early indicator of ultimate product success, at least for product line extensions (conjoint analysis, perceptual mapping, as well as product trial will be rich sources of customer info later in the new product process). In the case of major innovations, customers without a high level of expertise may be unable to access the innovation’s benefits, and concept test results may not be validly predict how well the actual product will be received.

Virtual prototypes in concept testing

There are either static pictures of the prototypes or video clips that stimulate the product in action (less costly to produce and test than actual physical prototypes). Information acceleration (IA) – developed & 1st applied to GM, the respondents are brought into a virtual buying environment that simulates the info typically available in a realistic purchase situation. They see ads, read car magazines, and hear statements from salespeople and Word of Mouth. Customers could walk around the showroom and look at computer generated car prototypes.

Qualitative techniques

1) Dimensional analysis – listing all of the features of a product type. The product concept creativity is triggered as we instinctively think about how that feature could be changed. Just by citing a unique dimension could spark ideation.

2) Checklist – today’s most widely used idea-generating techniques – 8 powerful questions which lead to useful ideation: Can it be adapted, modified, reversed, combine with anything, magnified, minified, rearranged, and can something be substituted? It produces a multitude of potential new product concepts (though most are useless). However, one attribute could be made dependent on another (a child’s bath mat changes color if the water is too hot), an attribute might be removed, leading to an essentially different product.

3) Relationships analysis – 2 analytical attribute techniques: the 2-dimensional matrix, and the morphological matrix. Both require the respondent to find relationships among dimensions to generate new product concepts. Attributes are features, functions, and benefits – but other aspects of products are not always included as attributes in definitions (different places of use, occupations of users). Relationship analysis uses them too. We seek all dimensions that help, and there is no fixed set of these.

i) 2-dimensional matrix – relationship analysis goes direct to a new product idea. The number of these matrixes that can be prepared is almost unlimited. A slightly different kind of relationships analysis employs as its dimensions the product’s utility lever (how the product affects the customers’ life) and buyer’s experience cycle (at what point does the product affect the customer).

ii) Morphological/ multidimensional matrix – simultaneously combines more than 2 dimensions. The matrix can include many dimensions. Dimensions could be cleaning instrument (broom), ingredients (alcohol), objects to be cleaned A/C filter), package (aerosol), substance to be removed (blood), and texture (cream). What at 1st appears to be noise may simply be a great new idea no one would have thought of easily without the matrix.

4) Analogy – we can get a better idea of something by looking at it through something else. It is used heavily as part of the problem-solving step in problem-based methods. Preparing, serving, and consuming meals in a plane are clearly analogous to doing so in the home (result in the good ideas for new processes in the home kitchen). Amusement park designers watched cattle being herded and came up with queues for those waiting to go for a ride. An analogy for bicycles might be driving a car (incorporate steering, moving, slowing, curving and others – but autos have 4 wheels for stability, built-in communication). The analogy should meet 4 criteria: vivid & have a definite life of its own, full of concrete images, should be a happening – a process of change/ activity, and a well-know activity and easy to visualize and describe.

New Product Management (6)

Chapter 6: Analytical Attribute Approaches: Introduction and perceptual mapping

Products are groups of attributes – a product is really nothing but attributes (Three types: features, functions, and benefits). A person may buy a pair of shoes because he likes the appearance of leather (feature), excellent walking capability (function), or because they are very comfortable (benefit). The three basic types of attributes occur in sequence – a feature permits a certain function which leads to a benefit.

Analyzing product attributes for concept generation and evaluation

Analytical attribute techniques allow us to create new product concepts by changing one or more of its current attributes, or by adding attributes, and to assess the desirability of these concepts if they were to be developed into products. These are more useful in Western culture as thought goes heavily toward rearranging things (Eastern tend to start work anew). Commodity type products are a major focus as slight rearrangements can differentiate one item from its competitors (allowing it to carry higher price). There are a variety of quantitative and qualitative attribute analysis techniques. One common quantitative technique is perceptual gap analysis (frequently used in concept generation and throughout new product development, during launch, and beyond), while another is conjoint analysis (to be introduce later) – as for qualitative techniques are dimensional analysis, checklists, relationships analysis, and analogy.

Gap analysis is a statistical technique whose maps of the markets are used to determine how various products are perceived by how they are positioned on the market map. The open spaces are gaps, and a map that shows gaps is called a gap map. Gap maps are made in three ways:

1) Determinant gap maps (managerial expertise and judgment is used to plot products on a map). Usually made up of two dimensions. Ex. crunchiness and nutrition value are thought to be important in snack. The scales ran from low to high on both factors and each brand on the market is scored by the managers. While the scoring may seem arbitrary and subject to managerial error, it is often a good place to start (many maps could be prepared, each with different pair of attributes, and they can also be three dimensional). Managers would have valuable and useful beliefs and judgments that may be very helpful in guiding concept generation. Attributes used should be differentiating or important (such attributes are called determinant attributes), as they help determine what snacks are bought. Our purpose in this is to find the spot where a gap offers potential as a new item which people might find different and interesting. This map is speedy and cost efficient, but it involves only managerial judgment. Customer perceptions may be quite different.

2) Perceptual gap maps based on attribute ratings (AR) – (a manager uses customer attribute ratings to get data from users). This method asks market participants (buyers and users) to tell what attributes they believe the products have. It is based on marketplace perceptions of reality, which may or may not be accurate. It begins with a set of attributes that describe the product category being considered, then we gather customers’ perceptions of the available choices (brands, firms) done by using 1-5 or 1-7 scales. This results in a huge data cube (not very helpful). Then we reduce the cube into something more manageable – a perceptual map. Factor analysis – a statistical technique which is used to reduce the attributes to a small number of underlying dimensions that serve as the axes of the perceptual maps. Cluster analysis can then be used to group individual respondents together into benefit segments based on their preferences. The info is based on how customers perceive the products; it may be unlike what managers had previously believed. And the perceptual map does not have all the info contained in the snake plot. But the two most important factors underlying customer perceptions are retained.

3) Perceptual maps based in overall similarities (OS) – (a manger uses overall similarities to get data from users). The problem with the AR was that users sometimes make purchase decisions using attributes they cannot identify, and some have difficulty scoring attributes because of various aspects of focus groups settings. AR essentially views products as bundles of attributes, for it to be effective, the attribute set needs to be complete. For perfume, customers’ decisions may be driven more by brand image, aesthetics or other attributes that are difficult to verbalize (Customers also could not clearly describe the attributes of pillows and could not communicate the attribute they wanted. OS techniques run on perceptions of overall similarities between pairs of brands (for 5 choices, there are 10 pairs). Respondents could rank the pairs from most similar to most dissimilar

It is important to note that gap analysis discovers gaps, not demand – and gaps often exist for goods reasons (fish-aroma air freshener). New products people have to see if the gaps they discovered represent things people want. And as in all of ideation of new products, people must avoid being bound by what is now impossible. For years map on painkillers showed a big hole where strength was paired with gentleness. The strong/ gentle part of the map was always empty – a painkiller that was potent and yet did not irritate the stomach could not be made. But Extra-Strength Tylenol proved everyone wrong. The most popular soaps were positioned as either deodorant or moisturizers (Dove), and a perceptual gap exists (a brand that offers both attributes). Lever 2000 successfully filled that gap as a combination deodorant/ moisturizing.

New Product Management (5)

Chapter 5: Problem-based Ideation: finding & solving customers’ problems

The flow of problem-based concept generation essentially is from study of situation, to use of various techniques of problem identification, to screening of the resulting problems, and to development of concept statements that will then go into the evaluation phrase. The whole system is based on close involvement with parties who have info to help us.

The leading cause of new product failure is the absence of a perceived need by the intended end-user. If our development process begins with a problem/ need the end-user has and agrees is important, then we have answered the toughest questions.

Gathering the problems – Four sources for needs & problems of stakeholders (two involve directly access within the firm, a 3rd called for problem analysis, and 4th for scenario analysis).

1) Internal records: the most common source comes from an organization’s routine contacts with Customers & others in the marketplace (Customer/ technical service departments, sales files, warranty files, customer satisfaction studies). A complaint files becomes a psychological projective technique (using the hot line to handle user complaints which helps defuse criticism & can lead to new products).
2) Direct inputs from technical & marketing departments: most marketing & technical have understanding about end-users & other stakeholders (as they spent time together). Technical people may be found anywhere, not just in R&D or engineering. The problems with using in-house people to report on customer problems are i) each suggestion is usually someone’s perception of what the customer problem is , and ii) there is usually a solution given with each suggestion. These problems together with the time & difficulty of gathering memories, lead us to depend more on active search for stakeholder problems. That is, making direct contact with all relevant stakeholders, asking them what their problems & needs are. The methods of direct user contact are what we usually mean when we say problem analysis.
3) Problem analysis: it is much more than a simple compilation of user problems. Taking inventory is the beginning, analysis is the key. If people are asked what they want in a new house and also what are their problems with their current house, we will get distinctly different subject matter on each list. Their problem is better predictor than the want list. User verbalize their wants in terms of current products, whereas problems are not product specific (Needs & wants from shampoo is clean, manageable hair which reflects recent promotions of product benefits, for problems – answers may range into areas unrelated to shampoo such as color/ style). Many award-winning product designs have resulted from problem analysis. IBM sent researchers to get pictures of customers’ home and found that space is at a premium for home users, as home desk are smaller than offices’. The new model was thus given a sleek design with built in speakers & became very popular.

The general procedure: one common use procedure is reverse brainstorming – participants generate a list of key problems with the current product, then group& prioritize these such that product development can focus on addressing the most important problems.

i) Determine the appropriate product/ activity category for exploration

ii) Identify a group of heavy product users/ activity participants

iii) Gather a set of problems associated with the category, then respondents are asked to rate: the benefits they want and the benefits they are getting (the differences indicate problems).

iv) Sort & rank the problems according to their severity/ importance (various methods can be used: the extent of the problem & the frequency of its occurrence (Toyota was facing disappointing sales in US and the customer research found that Customers think the cars were too small, the firm came up with larger models and was successful. Heinz also understood that children are the heavy Customers, so it came up with package redesign – curvier squeeze bottle & green & purple color ketchup).

Methodologies to use (how to gather the list of Customer problems as Customers often does not perceive problems well enough to verbalize them).

i) Experts – using them as surrogates for end-users, based on their experiences (Nokia used 8,000 scientists & managers to collect environmental info & identify the main challenges. This has helped sustain growth through the introduction of innovative, successful new products).

ii) Published sources – industry studies, the firm’s own past studies, government reports, investigations by social critic customers, and scientific studies in universities.

iii) Stakeholder contacts – ask household/ Customers directly through…

a) Interviewing: most common, direct, one-on-one. Sometimes it is a full scale, very formal & scientific survey. As many end-users do not think much about the products, and often just accept them as parts of living, even very informal discussions with individuals can reopen thinking, bringing to mind things forgotten.

b) Focus groups: designed to yield the exploratory & dept-probing type of discussion required & it can be easy & inexpensive to use. We are not seeking facts or conclusions, just genuine problems. People are stimulated to speak out about things they are reluctant on when in one-on-one interview situations. It usually cost $3,000 to $10,000 for a two hour meeting (about 10 mins talk per participant). However, the outcome is not always successful, as it is qualitative which depends on in-dept discussions rather than the power of numbers. To increase its usefulness, scientists & top executives are invited rather than prayer groups (when mangers just pray for the comments wanted rather than really listening to what users are saying).

c) Observation: watching Customers using products in their own environments (video cameras/ photos are sometimes used to record observational data). Ford sent a team of designers to watch how people use their cars (like a zoologists watching animals in their natural habitat) – known as “gorilla research”.

d) Role playing: long been used in psychology to enhance creativity, but little evidence if it is successful in new products. It is valuable where product users are unable to visualize or verbalize their reactions, as well as where Customers are emotionally unable or unwilling to express their views.

4) Scenario analysis: comes into play because the ideal problem for us to find is one that Customers do not know they have at this time. We have to stay one step ahead of the Customers by anticipating their problems. The procedure is: paint a scenario, study it for problems & needs, evaluate those problems & begin trying to solve the most important ones. The ideal one should be a “stylize narrative” (like a story). It takes several different forms, distinguishing between extending the present to see what it will look like in the future, and leaping into the future to pick a period that is then described. Leap studies can be dynamic (the focus is on what changes must be made between now & then if the leap scenario is to come about) and static (there is no concern about how we get there). Wild cards study (high-impact, low-probability events) – one assesses the likelihoods of occurrence of the identified events & investigates the threats or new product opportunities they suggest.

Solving the problems (problem has to be specified in order that a good, creative solution is found).

1) Group creativity – new products people use individual problem-solving effort, but many think that group creativity is more effective. However, some small firms are more innovative and this could be due to the less use of group activity. One person presents a thought, another person reacts to it, and another person reacts to the reaction, and so on. This presenting/ reacting sequence gives group creativity its meaning.

2) Brainstorming – two basic principles: deferral of judgment (requires participants to be free to express any idea that comes to mind without worry about criticism from others in the group. The judicial mind weighs evidence but discourages the free flow of idea) and quantity breeds quality (our most dominant thoughts are the habitual thoughts which we are most comfortable. To have really new ideas we must break though these conventional thoughts & ideas).

3) Electronic brainstorming & computer-assisted creativity technique – a form of brainstorming assisted by group support systems (or SGSS) software, allow participants to all answer at once (anonymously) through a network of computer terminals.

4) Disciplines panel – assemble experts from all relevant disciplines & have them discuss the problem.

5) Concepts generation techniques

i) Using props – in developing the Fruit Juicers line, a consultant filled the room with samples of fruits, varieties of perfumes, and lists of dozens of ice cream flavor.

ii) Role playing – a pair of Bausch & Lomb executives play the roles of eyeball & contact lens to think of ways the lens could stop hurting the eye balls.

iii) Imitating nature – goats eat waste & emit in small pellets. Whirlpool developed Trasher Smasher compactor based on this aspiration.

New Product Management (4)

Chapter 4: Preparation & Alternatives

In preparing the firm for ideation, the firm needs to get the right people, put them in the correct environment, and get them ready for the ideation process. Then a creative person needs to know what is being searched for (what is a concept & how it is typically found & identified), and then explore a specific system of active concept generation. Product innovation does not begin with a new product idea only. It is better to select a playing field & some rules before starting the game.

Finding the right people, making them productive, and activities to encourage productivity

According to P&G, creativity is “the everyday task of making non-obvious connections”. The firm selects unconventional individuals – diverse experiences, great enthusiasms for innovation, & foreign experience. Most people think reproductively (solve problems in ways that worked in the past), but creative persons think productively (inventing new ways to think) – ex what is half of 13? The key is to keep looking, even after the solution has been found. two types of creativity: artistic & scientific (new product needs both). According to the standard MBIT, there are four personality scales: intuitive-sensory, perceiving-judging, extroverted-introverted, and thinking-feeling (creative persons tend to be more intuitive, perceiving, extroverted, and thinking). The key is getting this kind of persons to be involved in the new product process at the earliest phases (just as important as the process itself).

Creative people can benefit from training (company’s product, its markets, competition, technology used, and etc). Dell’s CEO says that it is important to keep the employees unafraid of failure, as innovation involves learning from failure. Management should allow innovators freedom and permits them to help select projects for development, and job assignments should be challenging. 3M’s chairman says “We do expect mistakes as a normal part of running a business, but we expect our mistakes to have originality”. Firms often use a computerized database (idea bank or refrigerator of ideas) to store & document ideas from earlier, unused new product projects, for reuse later. These ideas are from market research, test market results, project audits, design plans, engineering notes).

There are a lot of killer phrases that can stop creativity (extremely discouraging to fragile ideas), even though they are often well-intentioned. Some firms use a technique called itemized response – when an idea comes up, listeners must 1st cite all its advantages, then they can address the negatives but only in a positive mode.

The Concept

A new product only really comes into being when it is successful – that is when it meets the goals/ objectives assigned to the project in the PIC. When launched, it is still in tentative form, as changes are quite apt to be necessary to make it successful. It is still a concept, an idea that is not fulfilled. There are 3 inputs required by the creation process:

1) Form – the physical thing created or the sequence of steps by which the service will be created.

2) Technology – the source by which the form was attained, the power to do the work (the base of innovation, the one that served as the technical dimension of the focus-arena).

3) Need/ benefit – the product has value only as it provides some benefit to the C that the C sees a need or desire for.

Technology permits us to develop a form that provides the benefit – if any of the 3 is missing, there cannot be product innovation (unless one buys a product ready-made & resells it without change). The innovation process can start with any one dimension: Customer has a need, which a firm finds out about; it calls on its technology to produce a form that is then sold to the customer. Or a firm has technology and then finds out a need a given market groups has, which is then met by a form of product. Or a firm envisions a form of product, which is then created by the use of a technology, and then given to customers to see if it has any benefit. However, putting benefit last is very risky, since it comprises a solution trying to find a problem (ex – DuPont spent years finding applications where Kevlar could yield a profitable benefit). The best is to put benefit 1st (technology-driven scientist put benefit 1st because they have some idea of need that is leading them in their efforts). When all we have is need, then it is regarded as “idea”.

The concept statement

Any two of the three (form, technology, need/ benefit) can come together to make a concept, a potential product. Once a concept appears, we have to screen it before undertaking development, and it requires a product concept statement (to do concept testing, we need the statement which meets these info needs). A concept is a verbal and/ or prototype expression that tells what is going to be changed & how the customer stands to gain (& lose). Anything that does not communicate gain & loss to the intended buyer is still just an idea that needs work. The famous toy inventor said “Notice what things your child play with, and try to spot what’s lacking – and look for holes - a lack of certain item on the market” – benefit, technology, and form are stated in order. The importance of these three dimensions varies by industry. In most, one of the three often needs no attention because of general knowledge within the industry (for pharmaceutical – technology is the only unknown & thus the focus of attention, for food companies- benefit is the prime variable).

To create new product concepts, there are five routes: technology, end-user, team, other insiders, and other outsiders (two involve receiving product ideas created by others and three involve a managed process run by the team).

Important sources of ready-made new product ideas: 40-50% of new product ideas are ready-made, coming at least partially from employees, suppliers, end-users, other stakeholders, and published info. In reality, smaller firms often have the expertise in idea exploration (early stage research), but they lack the resources & skill to carry out extensive development, testing, or commercialization. Large firms turn to these companies as a rich source of new product ideas. End-users who use a product often have ideas for improving it. Most End-users’ concepts are for product improvement rather than new-to-the-world products, and they are less likely to come up with ideas that are easily developed into real products. Product development professionals or more experienced users will have a more realistic view of what is and is not feasible. For industries like engineering or chemical, customers provide little or no help.

Many firms seek new product ideas from their lead users (Customers associated with a significant current trend). They are at the front edge of the trend, have the best understanding of the problems faced, and expect to gain significantly from solutions to those problems. However, they may also be outlanders, or not established members of that trade, or even if they are really leaders, they may think they have already solved their problems. The important principle is to ask customer for outcomes – what it is they would like the product to do for them.

Kawasaki asked JET SKI customers what they wanted and most suggest the improvement on the comfort. But by the time the firm added seats to their products, other firms had done so – reducing one-time leader to “me-too” competitor. The firm could have looked to the motorcycles it produced & got the seat idea. Chrysler got the idea for building a cup holder into their trucks by observing that many drivers had installed the cup holders themselves. An engineer of Chrysler also observed that his wife struggled in putting a child’s car seat into minivan, and came up with the idea of integrating car seats into the van’s seating system, which became very popular. Many firms now get end-user input for new product ideas by involving them effectively, from the earliest stages of the new products process, on their new marketing teams – this bring their needs & problems directly on the table.

New Product Management (3)

Chapter 3: Opportunity Identification & Selection – strategic planning for new products

Strategy is the foundation for new products management & serves as a loose harness for the integration of all the people & resources used in generating new products. Bausch & Lomb almost lost its market position when its managers concentrated too much on improving old products. Being forced to review their strategy, they found many more opportunities.

Much innovation is done by very small firms – their focus, their ease of communication & cooperation, their clear dependence on some strength that has to succeed if the firm is to succeed. They are a working unit that larger firms imitate.

New product people act as a company within a company. They do everything the company as a whole would do*: develop & allocate a budget, do financial analysis and projections, assign & implement tasks & responsibilities, and etc. A new products strategy charts the group decision (what markets areas they should be looking for new business in). This new products strategy is called the product innovation charter (PIC).

New product strategy inputs

Corporate leaders make many strategy statements. Top-level statements like this guide a whole firm, and are parts of something called mission statement (Kellogg’s president insists that the firm was in the cereal business – every new product team had to put restriction into any team mission statement they wrote; only in recent years that its corporate strategy was changed). Corporate strategy affects product platforms & individual product projects. A platform can be a technology, a design, a subsystem – anything that can be shared by one or more product families (Chrysler LH car platform resulted in Concorde & Intrepid models, and famous author’s name on the cover is also a type of platform). Firms find that it is not efficient to develop a single product (it may cost $3 billion to develop a new car), so marketers try to spread these costs over several models (product families that share similarities in design, development, or production process). However, Customers often want distinct products, while common products produce the greatest cost efficiencies – therefore, the firms need to decide on the level of commodity to attain. Planning for product platforms is difficult work; there need to be excellent cross-functional communication, serious top-management involvement & support. BMW continue to develop each model individually, believing that sharing a common platform would hurt its cars’ appeal.

As brands are normally billion $ assets, brand platforms are normally personally driven by CEOs. Brands can serve as the launching pad for scored of products, and any team using a platform brand must conform to the strategy of that brand. Brand equity is the value of an established brand. The measurements through market research tell the amount of free promotion & integrity the brand equity brings to a new item that uses it. A poor product concept will not succeed just because of a good brand name, and may indeed damage the brand’s equity. There is also a category platform (product type or customer) – most marketing effort is conducted at category group level. A strategic business unit is also a platform.

Firms are trying hard to look for new opportunities, it takes time and money – They essentially audit the firm & any environment relevant to it. Opportunities can come from many different sources: underutilized or new resources, mandates originating external to the firm or internal mandates.

Non-corporate strategic planning: Although many strategic planning comes from the top down, much also come from the heads of functions (marketing, technical, production, and finance, as well as suppliers & Customers). The greatest functional inputs come from marketing, where ongoing planning utilizes a range of techniques designed to give sharper market focus & new positioning. A variation of product-market matrix: risk in changing in use/ user mode and risk in change in operations or marketing mode. Inputs can also start at the lower level of activity & influence upwards, as when a new product is so successful it drives corporate strategy to change (pharmaceutical firm can be so successful in new proprietary food product that a new division & strategy was created).

The Product Innovation Charter (PIC) – it reminds us that the strategy is for products, not processes & other activities (should be in writing but it often is not). It is for innovation and it is indeed a charter. PIC can be thought as a kind of mission statement, but applied at a micro level within the firm and adapted to new product activities. Most firms have PIC, though it may not go by that name, and PIC works – firms with PIC were found to outperform others in new product performance. PIC consists of:

1) Background – keys ideas from the situation analysis, reasons for preparing PIC
2) Focus – clear technology & market dimension which should match & have good potential
3) Goal-objectives – what the project will accomplish (short & long term). Evaluation measurements.
4) Guidelines – any rules/ requirements imposed by the situation/ upper management.

Focus – it takes focus to unlock the necessary power of innovation to convert limited resources into a strong competitive thrust. Core competencies are an excellent place to start the search for charter arena (focus) definitions. We can narrow the focus by targeting & segmentation. It is achieved by using 4 types of strengths or leverage capabilities: technology, product experience, C franchise, and end-use experience. Licensing or acquisition can also be used to acquire technologies or market strengths. However, relying solely on technology is risky (we are not sure if it is what Customers want). Letting Customers stated wants drive product is unlikely to work well, except when there is enormous unmet needs and very slow-reacting competitors (Fujitsu bet on technology & lost, while NEX bet on C needs & won). There are 3 market drivers:

i) Technology drivers – the most common technological strengths are in the laboratories

ii) Market drivers – 2 market sources: Customer group and end-use. The best new product ideas are based on customer problems, and these served as the heart of the concept generation process. Service firms find customer-focus comfortable as their operations involve customer as an actual co-producer of the service. They simply involve C as an integrated partner in the new product development process. A variation on the single- customer focus is mass customization – where we offer all Customers a product of their individual choice. As for the focus on end use (skiing would lead to new lodges, new slopes, new travel package, and services for lodge owners)

iii) Combinations: Dual-drive – Penn Sports put their tennis ball technology to making ling of ball toys for dogs, Toto use global-satellite technology on being golf course superintendents, and Gap use a dual drive of EU styles & American women. The best option is a balanced or dual-drive strategy.

Goals & Objectives – anyone working on product innovation ought to know the purpose because work can change in so many ways if the purpose changes. Goals are longer-range, general direction of moment (market dominance), whereas objectives are short-term, specific measures of accomplishment (25% market share in 5 yrs). There are three types of goals & objectives: profit, growth, and market status (market share).

Guidelines (rules of the road) - There may be managerially imposed, or consensus thinking of team members (certainly strategic)

i) Degree of innovativeness – first-to-market (pioneering) is a risky strategy. There are 3 ways to get into it: state-of-the art breakthrough often used by pharmaceutical (but most 1st-to-market product do not extend the state of the art; instead they tweak technology in a new way). Leverage creativity (most common) – thinking up creative applications to arrive at new product. Applications engineering – the technology may not be changed at all, but the use it totally new. Adaptive product – taking one’s own or a competitive product & improving it in some way. Adaptation alone is also risky. The pioneer often obtains a permanent advantage; if other things are equal, the 1st product in a new market gains an average market share of around 30%. The 2nd firm can take over the market if its adaptation is clearly superior. Imitation (or emulation) – wait to see winners emerge from pioneers & early adopters. Also has its risk as a firm cannot wait too long to enter the market as the earliest firm may have established loyal customer bases & ties to the supply networks & distribution channels (there is also patent, trademark, copyright problem).

ii) Timing – 4 options: 1st (pioneering), quick 2nd (tries to capture a good 2nd-share position, perhaps making no significant improvement or just enough to promote – have to enter before the innovator is successful. It is often seen as a forecaster of how successful the innovator will be), slower (safer as a firm knows the outcome of the pioneer’s efforts & has time for meaningful adaptation – but good marketing opportunities may be taken by quick 2nd), and late (usually a priced entry keyed to manufacturing skills.

iii) Miscellaneous guidelines – some firms recognize weaknesses (a pharmaceutical firm may say “It must be patentable” A smaller firm may say “All products must be part of the system”). There is also product integrity – all aspects of the product are internally consistent (Honda was successful in putting a new steering system in a coupe with sporty image, while Mazda failed when putting it in a 5-door hatchback, positioned for safety).

How to prepare PIC?

First, look for opportunities inside or outside the firm (potential options in technologies/ marketplaces are surrounding us), then evaluate, rate, and rank them (most valuable creative skill in product innovation is the ability to look at a building an operation, or a department & visualize how it could be used in a new way). Then fill out the PIC forms: focus, goals, and guidelines.

The new product’s strategic fit

With a written PIC, upper management must approve them and it must fit as a part of the firm’s overall business strategy – it should provide an appropriate balance to other products already being offered, before allocating any scare financial resources to it (many firms use product-portfolio approach).

New Product Management (2)

Chapter 2: The New Products Process

The Highlighter Saga – an ongoing operation faced a problem, the problem was studied, and the solution was checked against ongoing new product strategy, and then approved for action. It is typical that the new products process does not usually begin with a new idea (it is folklore that someone wakes up in the middle of the night with a great insight). It usually begins with what amounts to strategy - the mature market & the competitive activity which are threats. The development also does not take place in the research lab and marketing does not start when the product is finished – it often starts before ideation, and the process ends when the new product is successful (after some in-flight correction).

The Basic New Product Process (State-gate process): Opportunity identification & selection (E: direction – where should we look?), concept generation (E: Initial review – is the idea worth screening?), concept/ project evaluation (E: Full screen – should we try to develop it?), development (technical/ marketing tasks), and launch. “Gate” refers to evaluation tasks between the stages or phases which the hard GO/ No-Go decisions need to be asked. Firms using this process have reported improvements in product teamwork, less rework, greater success, earlier identification of failures, improved launch, and up to 30% shorter cycle times. Per each phase, there are the evaluation task different kinds of question need to be asked - concepts that pass this stage move on to development & begin incurring significant costs. They are best answered through progress reports.

In reality the activities in the Basic New Product process are not sequential, but overlapping. There is also much pressure to accelerate time to market for new products, and this overlapping of phases is an important tool in speeding new products to market. Product development today is a multifunctional program, where all functions work together on a cross-functional team.

Phase 1: Opportunity identification & selection

It is strategic in nature & is the most difficult to describe/ define. There are 3 main streams of activity feed strategic planning for new products.

i) Ongoing marketing planning (the annual marketing plan for a line extension to meet encroachment of a new competitor selling primarily on price).

ii) Ongoing corporate planning (management adopts a strategy that says either own a market or get out of it. This will require new product activity in all desirable markets where the firm holds a minor position).

iii) Special opportunity analysis – 1 or more persons are assigned to take an inventory of the firm’s resources (a firm called for an audit of its manufacturing operation and it turned out that a process engineering had been overlooked which skill could serve as the base for a new products program.

From the above activities, the opportunities identified could be sought into 4 categories:

i) An underutilized resource

ii) A new resource (discovery of new resource)

iii) An external mandate (the stagnant market combined with a competitive threat)

iv) An internal mandate (long range planning of sale target & the new products must fill part of the gap between current sales & that target – product innovation gap)

Opportunity identification is the process of creatively recognizing such opportunities (analyze to confirm that a sales potential does exist). Some opportunities may not fit with company skills, too risky, does not go with the firm’s self image, some require more $ than the firm has.

Phase 2: Concept generation

Product concepts are the new product ideas created by new products people. The most fruitful ideation involves identifying problems people/ businesses have & suggesting solutions. The 1st ideation step is to study those people, and find what problems they have.

Phase 3: Concept/ project evaluation

Before development work can begin on new ideas – they need to be evaluated, screened, and sorted out. It is called screening or pre-technical evaluation. Technical people may propose a solution to the competitive problem, and there is a concept test to see what potential Customers thought about it. If the decision is to go ahead, the evaluation turns into project evaluation where we no longer evaluate the idea but the plan we propose for capitalizing on that idea. This involves preparing a statement of what is wanted from the new product, called product protocol – it is important that there be agreement between the various groups before extensive technical work get under way.

The lack of good info complicates all pre-technical evaluation. The 1st three phases is called the fuzzy front end – the product concept is fuzzy but by the end of the project, most fuzz will have been removed.

Phase 4: Development

In this phase, the item acquires finite form – a tangible good or a specific sequence of resources & activities that will perform in an intangible service. It is the stage which the marketing plan is sketched & gradually fleshed out. Business practice pieces:

i) Resource preparation: for product improvement/ line extensions it is often fine. But for new-to-the-world products, then the team may need special training, new reward systems, revisions in the firm’s usual project review system, and special permission. Without adequate preparation of the ball field, a firm does not get much of the home advantage.

ii) The major body of effort: the actual development of the item/ service itself, the marketing plan, and a business/ financial plan that final approval requires. Marketing decisions are completely interlaced with technical ones and involve package design, brand name selection, and marketing budgets. Along the way, concept evaluation continues; we evaluate the concept well enough to permit development work. Prototypes are evaluate to be sure that the technology being developed meets the needs & desires of the Customers in a way that creates value for them, while at the same time being profitable.

iii) Comprehensive business analysis: the financial analysis is still not firm, but it is good to assure the management that this project will be worthwhile.

Phase 5: Launch

Launch (commercialization or often – the announcement) is the time/ that decision where the firm decides to market a product (the Go/ No go). This decision is more attitude than anything else. A firm can always pull out, even during a test market. The last few wks or months just before & after announcing the new product is really a launch phase. Market test is the 1st time the marketing program and the product are active together (like dress rehearsal which managers hope any problems discovered are fixable between dress rehearsal & opening night – if they aren’t then the opening has to be delayed). There is also launch management – the plan of tracking after the launch.

The Concept Life Cycle

The new product process essentially turns as opportunity into a profit flow. Both beginning & end is not product. It is an evolving concept that at the end becomes a product if it is successful.

Phase 1:

opportunity concept – a company skill/ resource, or a customer problem

Phase 2:

Idea concept – 1st appearance of an idea

Stated concept – a form/ a technology, plus a clear statement of benefit

Phase 3:

Tested concept – it has passed an end-user concept test; need is confirmed.

Fully screened concept – passes the test of fit with the company’s situation

Protocol concept – a product definition that includes the intended market user, the problem perceived, the benefits, plus any mandatory feature.

Phase 4:

Prototype concept – a tentative physical product/ system procedure (including features & benefits)

Batch concept – 1st full test-of-fit with manufacturing; it can be made (features, characteristiCustomers, & standards).

Process concept – the full manufacturing process is complete

Pilot concept – a supply of the new product, produced in quantity from a pilot production line, enough for field testing with end users.

Phase 5:

Marketed concept – output of the scale-up process from pilot (either a market test/ full scale launch).

Successful concept – new product meets the goal of the project

Speeding the product to market

One of today’s most discussed management goals in product development is accelerated product development (APD), or speeding the product to market. When we let the development process lag, we lose the competitive race. The firm that gets to market 1st has a major short-term advantage, which may sustain for years if its follow-up development practices are sharp. Marketing people are now getting involved much earlier in the new products process. Cycle time metric is the way management measures speed to market (time to market). Marketing can strive to accelerate premarket speed (pre-testing the marketing plan more quickly) and post-announcement speed (getting the sales rep into the field more quickly). There is also the value of mindshare (rather than being 1st to market) – the firm that the target market associates with the product category & that is seen as the standard for competitors to match.

Techniques to shorten cycle times include: the use of cross-functional teams (individuals from marketing, R&D, production, and etc.), parallel or concurrent processing (strategic overlapping of stages – in car making), reducing product complexity (appropriate prototype management), investing more human & capital resources, and turning to a more participative leadership style (top management – how to get through the process faster without sacrificing quality).

Risk & guidelines in speeding to market – cost that are not evident can be disastrous, attempt to cut critical step to get cycle time down (when facing high turbulent environment, product development should be kept as flexible as possible). Product that is brought out too soon may still has bugs (in situations where there are high opportunity costs & low development risks – it’d be better to speed up cycle time, but when there are low opportunity cost & high development risks (Boeing) – it is more appropriate to get the product 100% right.

New services: Services & goods are often arrayed on a scale of pure service (counseling), primarily service & partly a good (insurance), primarily a good & partly service (automobile), and pure good (candy bar). Successful new services found tended to come from firms that used a systematic, comprehensive new service development process with clearly defined stages & regular evaluations & reviews (identical to the new products process). Iterations are less expensive in the development of services and most development runs fast to prototype as there is less cost. There is no inventory of services since they are produced at the point of consumption. In service business, we inventory service capability (McDonalds sell parking convenience as a service, but it was actually created when the parking lot was built – even consultant know to drive the right type of car, use the right business case, wear the right clothing – all have an impact on how well the intangible service recommendations will be accepted & used – such supportive goods are part of the new product creation tasks). New services tend to be successful if they were delivered by trained expert personnel, if they were new & fit well to the market needs, or if the service experience to the customer was improved – a unique superior service. It often fail when they are quick & dirty line additions with little Customer value, or me-too services with no new benefits. Speed in service leads to enhance reputations, images, & increased Customer loyalty.

New-to-the-world products

The fundamental market-related question is whether the market will ultimately value the offering. It is usually difficult for potential Customers to provide useful info about likely acceptance (or perceived value) since they have nothing to which they can compare to, they may not even be able to visualize its potential (99% of technological breakthroughs, people had not been asking for it). These items often require major commitments in form resources & technology, and years of R&D. To be able to make the difficult link between breakthrough technology & market need, firms need to adept at market visioning (“what could be”). With a new-to-the-world product, it is especially important that the voice of the customer (VOC) be brought in as early as possible (at concept generation to provide input to both marketer & R&D). Early Customers involvement with these products is sometimes accomplished by using focused prototypes – early, limited performance versions that Customers can try out & comment on. Through interaction with Customers, designers are inspired to probe, experiment, and improvise, and come up with a successful new product (probe-and-learn). In lickety-stick, the developing team develops prototypes from dozens of different product ideas (lickety), eventually settling on a prototype that Customers like (stick)

Senior management can support R&D in several ways: recognizing & building the firm’s core technical competencies & capabilities, by encouraging knowledge flow throughout the firm, by developing effective, streamlined work processes, by clearly linking basic & applied research, and by assuring an exciting work environment.