New-product development process a process that moves logically through five steps: (1) idea generation, (2) screening, (3) idea evaluation, (4) development and (5) commercialisation.
ID A•4 ERAT Ideas from: Customers and users Marketing research CoMpefitors Other markets Company people intermediaries, etc.
tested is that the new idea will not be profitable. This puts the burden on the new idea to prove itself, or be rejected. Such a process may seem harsh, but experience shows that most new ideas have some flaw that can lead to problems and even substantial losses. Marketers aim to discover these flaws early, and either find a remedy or reject the idea. Applying this process requires much analysis, both within and outside of the company, before money is spent to develop and market the product. This is a major departure from the production-oriented approach—developing a product and then expecting the sales department to sell it. The new-product success rate varies among industries and companies, but many companies are improving the way they develop new products. If a company does not use an organised process, it may bring many bad or weak ideas to the market at great expense. A company that aims to develop a new product generally seeks to reduce the risks. While an orderly process of new-product development can never guarantee that a new idea will develop into a successful commercial, venture, it can contribute significantly to a sub-stantial reduction in one or,more of the risks involved in developing new products. Developing new”prodders’ involves financial risks. Many different costs are involved, from market research to building prototypes, and laboratory testing or staff consultation. Duplication by competitors is another risk in new-product development. Having spent a considerable amount of time and money developing a. new product, a company is often exposed to competitive piracy, even though patent and copyright regulations may provide some protection. In some instances the pirates may be the very intermediaries who are vital for the successful introduetion of the new product. Another risk in fast-evolving industries occurs when the time involved in product development means that the new product rapidly reaches obsolescence before its full profit potential is achieved. Quantum leaps in the area of medicine, or physics, can contribute to the premature death of generations of improved products in which companies have a high level of investment. To move quickly and avoid expensive new-product failures, companies need to follow an organised new-product development process—moving logically through five steps (see Figure 9.5): (1) idea generation, (2) screening, (3) idea evaluation, (4) development (of product and marketing mix) and (5).cornmercialisation.” Although there are significant differences, the general process is similar for both consumer and business markets, and for both goods and services. e-.)-.-2
step 1—idea generation °’ New ideas can come from a company’s own sales or production staff or research and development efforts, intermediaries, competitors, consumer surveys or other sources, such
Strengths andweakne; Fit with objectives Market trends Rough RCI estimate
iReactions rdit customers Rbugh estimates of cost, • sales and profits’.
R&D , .Develop model or ‘service prototype Tett marketing mix Revise plans as needed ROI estimate
`Finallse’product’and marketing plan Start production and Marketing – out’ in . select markets Final ROl estimate 7,7
Figure’ ,5 NeW-product development process Source: Adapted from Frank R. Bacon Jr and Thomas W. Butler, Planned Innovation, University of Michigan Institute of Science and Technology, Ann Arbor, 1980
340 / PART THREE The marketing mix
as trade associations, advertising agencies and government agencies. Marketing managers identify opportunities that have not yet been identified by competitors by analysing new and different views of the company’s markets, and studying present consumer behaviour. Ideas for new service concepts can come directly from the analysis of consumer complaints. The end-of-chapter case study highlights the importance of innovation, design and feedback for successful new-product development. No company can always be first with the best new ideas. The search for ideas should include attention to the activities of current or potential competitors. For example, Ford has new-product specialists who buy cars made by other companies as soon as they are available. They take the cars apart to search for new ideas or improvements made by the other companies. Similarly, British Airways talks to travel agents to learn’ about new services offered by its competitors. Many other companies use similar approaches.” Many companies now look to international markets for new ideas. Food fads come and go, so restaurant chefs are always looking for new ideas from overseas. These are then picked up by food manufacturers’ food scientists and end up on our supermarket shelves. For example, the ‘magic’ ingredient in many meals in Australia and New Zealand in the early-1990s was the sun-dried tomato. This product originated in Italy where they are eaten when ripe tomatoes are not available. In 1999 the new ‘magic’ ingredient became truffle oil, then blood oranges, then white balsamic vinegar—what will be next?” from customers who Research shows that many new ideas in business markets cor7 identify a need that they actually have.. They approach a supplier ith the idea, sometimes even contributing a particular design or specification. These customers become the lead users of the product, but the supplier can also pursue the opportunity in other markets.°° Companies need a formal procedure for seeking new ideas. The following checkpoints along with the hierarchy of needs and other behavioural elements discussed earlier, should be reviewed regularly to ensure a continual flow of new and sound ideas. This permits early identification of opportunities and allows companies the time to take advantage of them. Although later steps eliminate many non-viable ideas, a company must have some ideas that succeed.
Screening involves evaluating new ideas using product-market screening criteria, which involves the use of a resource (strengths and weaknesses) analysis, a long-run trends analysis and a review of the objectives of the company. A sound new idea should eventually lead to a product (and a marketing mix) that provides the company with a lasting competitive advantage. Opportunities with better growth potential are likely to be more attractive. The life cycle stage at which a company’s new product enters the market also has a direct bearing on its prospects for growth. Screening should consider the strategy for a new product over its whole product life cycle and the attractiveness of the new product in both the short and long term. social responsibility The screening process should also consider how a new product affects customers over time. Ideally, the product should increase consumer welfare and not only satisfy a whim. Different kinds of new-product opportunities are shown in Figure 9.6. A socially responsible company pursues
Screening evaluating new ideas using product-market screening criteria.
Socially responsible company focuses en providing long-run consumer welfare by pursuing desirable and salutary opportunities rather than deficient ores.
LONG-RU CONSUME WELFAR
Figure 9.6 Types of new-product opportunity. Source: Adapted from Philip Kotler, ‘What ConsuMerism Means for Marketers’, Harvard Business Review, May—June 1972, pp. 55-6
CHAPTER NINE Product management and new-product development / 341
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