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New Products

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  1. 9 New Products

  2. Considerations in Adding or Dropping a Variant Adding Dropping • Customer based • New customer attracted • Old customer cannibalization • Confusion and dilution of brand equity • Operations based • Loss of economies of scale • Problems in gaining additional distribution • Additional servicing needs • Old customers lost • Customer switching • Signal of weakness • Impaired efficiency • Maintaining distribution • Servicing old versions

  3. Product Stages • Idea generation • Concept development • Feasibility screening • Concept testing • Product development • Product testing • Market testing • Go-no-go decision

  4. Assessing the Impact of Product Redesign on Customers Current Customers

  5. Proactive Idea Generation • Customer analysis • Competitor analysis • Active search • Category analysis • Brainstorming

  6. Reactive Idea Sources • Customers • Employees • Suppliers • Distribution channels • Operations people • Internal and External R&D • Design • Entrepreneurs

  7. Common Formal Tests • Concept testing • Surveys • Focus groups • Demonstrations • Product testing • Product tests • Discrimination and preference testing • Market tests

  8. Decisions for a Market Test • Action standards • Where to test markets • What to do • How long • Cost • Information gathering

  9. Keys to Eventual Sales • Awareness • The eventual proportion of consumers who try the product (trial). • The proportion of triers who remain with the brand (repeat). • The usage rate of the product category among eventual users.

  10. Ultimate penetration level (45%) • Penetration (percent) • 10 20 30 40 • • • 1 2 3 4 5 Period Typical Penetration for New Brand Over Time

  11. Typical Repeat Rate for New Brand Over Time

  12. Repeat Rates and Product Performance

  13. Really New Products • Create or expand a new category, thereby making cross-category competition the key • Are new to customers for whom substantial learning is often required • Raise broad issues such as the appropriate channels of distribution and organizational responsibility • Create (sometimes) a need for infrastructure, software, and add-ons

  14. Examples of Really New Products

  15. Getting Ideas for Really New Products • Asking (or listening to) dissatisfied customers • Asking nonrepresentative customers • Using open-ended, qualitative (vs. structured survey) procedures • Involving customers as co-developers • Listening to scientists and newcomers rather than engineers and experts • Scanning the literature for interesting possibilities

  16. Evaluating Really New Products • Relative advantage • Compatibility • Risk • Complexity • Observability/communicability • Trialability/divisibility

  17. Evaluating New Products

  18. Evaluation Criteria for New Products • Customer Level • Do customers like it? • Is it unique? • Will they buy it? • How soon/fast will they buy it?

  19. Evaluation Criteria for New Products (cont.) • Firm Level • Does it add to our customer base through… • Acquisition? • Expansion? • Loyalty/retention? • Enhanced brand equity? • Does it detract from our customer base through… • Cannibalization? • Customer defections? • Lowered brand equity? • Do we have the capabilities to… • Develop it? • Produce it? • Distribute and sell it? • Buy or partner to do a-c?

  20. Evaluation Criteria for New Products (cont.) • Firm Level • Will it be profitable… • On a stand-alone basis? • Long-run impact on produce line? • Are there other benefits associated with it… • Learning/capacity enhancement? • PR? • Are there other costs associated with it… • Legal liability? • PR? • Can we control the market in the long run?