CRAVENS

PIERCY

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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Chapter Eight

Planning for
New Products

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Planning for New

Products

The Innovation Mandate

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PLANNING FOR
NEW PRODUCTS
 Importance of New Products
 Customer Driven Process
 Steps in New Product Planning
 Idea Generation
 Screening/Evaluating/and
Business Analysis
 Product and Process
Development
 Marketing Strategy and Market
Testing
 Commercialization
 Variation in the Generic Planning
Process
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Importance of
New Products

 Innovation at top of potential

value drivers (Ernst & Young)

Innovation initiatives extend

beyond new goods and services
to include ideas, processes, and
business practices

 Organizations must build a

culture of innovation
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New Product Planning

as a Customer Driven
Process
 New product
classifications:

1. Newness to market
2. Newness to company

 New product types:

– Transformational
innovations
– New product category
– Product line extensions
– Incremental improvements
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High
New-to-world
products
10%
New product
lines
20%
Newness to company

Improvements/ Additions
revisions to to existing
existing product lines
products 26%
26%

Cost
reduction Repositionings
s 7%
11%

Low High

Newness to market

Size of circle denotes number of introductions relative to total.

Source: New Product Management for the 1980s, Booz Allen & Hamilton Inc. 1982.
 8-8

Finding Customer
Value Opportunities

Customer value analysis

Objective is to identify
needs for:

1. New products
2. Improvements to existing
products
3. Improvements in
production processes
4. Improvements in
supporting services
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Matching Capabilities to
Customer Value Opportunities

– Fit between capabilities and

product offering

Transformational Innovations

– “new-to-the-world” ideas
– Customers not always the
best guides
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Customer
Expectations

Customer
Satisfaction
Gap OPPORTUNITIES
Actual (1) New Products
Product (2) Improvements
Performance (3) New and Improved
Processes
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Characteristics of
Successful
Innovations
Creating an
Innovative
Culture

Selecting the
Leveraging Right
Capabilities Innovation
STRATEGIC Strategy
INITIATIVES

Making Resource Developing and

Commitments Implementing
Effective New
Product
Processes
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Developing an
Innovation Culture
 Innovation Workshop for
top executives to develop
an innovation plan.
 Innovation Statement
highlighting objectives and
senior management’s role
and responsibilities.
 Training programs for
employees and managers.
 Communicate the priority of
innovation.
 Speakers to expose
employees to innovation
authorities.
Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003,
43.
 8-13

The Innovation Strategy

Spells Out Management’s
Priorities for New Product
Opportunities
1. Set specific New Product
Objectives.
2. Communicate the role of New
Products throughout the
organization.
3. Define the areas of strategic
focus:
Product Scope
Markets
Technologies
4. Include longer term
discontinuous projects in the
portfolio along with
incremental projects.
Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.
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NEW PRODUCT
PLANNING PROCESS

Customer
Needs
Analysis

Screening
Idea Business
and
Generation Analysis
Evaluation

Marketing Product
Strategy Development
Development

Testing

Commercialization
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Achieving Cross-
Functional Interaction
and Coordination

R&D

Operations Marketing

Finance
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Responsibility for New

Product Planning

 Coordination of new product

activities by a high-level general
manager
 Inter-functional coordination by a
team of new product planning
representatives
 Creation of a project task force
responsible for new product
planning
 Designation of a new products
manager to coordinate planning
between departments
 Formation of matrix structure for
integration new product planning
with business functions
 Creation of a permanent design
center
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IDEA GENERATION
 Idea search: targeted or open-
ended?
 How extensive and
aggressive?
 What specific sources are
best for generating a regular
flow of new product ideas?
 How can new ideas be
obtained from customers?
 Where will responsibility for
the new product ideas search
be placed?
 What are potential threats
from alternative (or disruptive)
technologies?
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BENETTON’S STRATEGY
TO REVIVE APPAREL IDEA
GENERATION
“We didn’t take advantage of the [industry’s] quick
transformation,” says Silvana Cassano, the ex-Fiat
manager who assumed the post of chief executive of
Benetton Group on May 5.
The transformation saw the best retailers turn
into cutting-edge users of digital technology.
Benetton’s competitors-notably Spain’s Zara and
Sweden’s H&M Hennes & Mauritz-have raised the bar
for the entire industry. These retailers can beam new
styles from the catwalk to the shop floor in less than a
month-and at bargain prices. Both deploy
sophisticated technology to track which items are
selling and which aren’t, so winners can be speedily
restocked and slow movers yanked down from the
racks. They’ve got the look down, too-cool and
minimal for the working women who love Zara, and
over-the-top trendy for H&M’s teen fans. And
Benetton’s look? Blan. “The Benetton brand is out of
fashion,” says Sagra Maceira de Rosen, retail analyst
at J.P. Morgan Chase & Co. in London.
 8-19

Benetton’s Strategy
(continued)

Cassano is out to change that. The message

he delivered in his first encounter with shareholders
was short and powerful: Benetton is going to refocus
on the apparel business, which encompasses the Sisley
and Benetton brands.
It’s no secret that Benetton’s core casual wear
business has suffered neglect. In 1994, founder
Luciano Benetton launched an ill-fated diversification
into sports equipment, snapping up trophy brands
such as Prince (tennis rackets), Rollerblade (in-line
skates), and Killer Loop (snowboards). But the
strategy foundered and last year, Benetton sold the
entire equipment division, booking $190 million in
write-offs. The company posted its first annual loss-
$10.5 million, on revenues of $2.3 million.

Source: “Has Benetton Stopped Unraveling?” Business Week, June 30, 2003, 76.
 8-20

Direct
Search
Alliances/
Acquisition/ Technological
Licensing Innovation

METHODS
OF
National Exploratory
GENERATING
Policy Customer
IDEAS
Studies

Creative Facilitating
Methods Lead User
Linking Analysis
Marketing
and Technology
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SCREENING, EVALUATING,
AND BUSINESS ANALYSIS

IDEA GENERATION

SCREENING
(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS
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Business Analysis

 Revenue Forecasts

 Preliminary Marketing
Plan

 Cost Estimation

 Profit Projections

 Other Considerations
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PRODUCT AND PROCESS

DEVELOPMENT

NEW
PRODUCT
CONCEPT

PRODUCT
DEVELOPMENT MARKETING
AND USE STRATEGY
TESTING DEVELOPMENT

MARKET
TESTING

LAUNCH
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Product and
Process
Development
 Development of the new product
includes:
– Product design
– Packaging design
– Decisions to make or purchase
product components

 Product Development Process:

– Product Specifications
– Industrial Design
– Prototype
– Use Tests
– Process Development

 Collaborative Development
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Does it have the

required attributes?

Verify PURPOSE OF Ideas for

claims USE TESTS improvements

Identify use
situations
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MARKETING
STRATEGY AND
MARKET TESTING
 Marketing Strategy Decisions
– Market Targeting
– Positioning Strategy
 Market Testing Options
– Simulated Test Marketing
– Scanner – Based Test Marketing
– Conventional Test Marketing
– Testing Industrial Products
– Selecting Test Sites
– Length of the Test
– External Influences
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Scanner-based Test
Marketing
Less artificial than simulated
testing

Costs less than full-scale market

test

Test is controlled by using IRI’s

2300 panel members in each test
city

Cable TV enables use of controlled

ad testing

Tests take about 12 months

Costs are $250,000+

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COMMERCIALIZATION
The Marketing Plan
– Complete marketing strategy

– Responsibilities for execution

– Cross – functional approach

Monitoring and Control

– Real – time tracking

– Role of the Internet

– Include product performance

metrics with performance
targets
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Marketing Strategy

Market
Target(s)

Marketing
Objectives Program(s)
 8-30

VARIATIONS IN THE
GENERIC NEW
PRODUCT PLANNING

 Technology Push
Processes
 Platform Products
 Process – Intensive
Products
 Customized
Products