Product Strategy

Product Strategy - Product Snapshot Product Snapshot...

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Unformatted text preview: Product Snapshot Product Snapshot Product – anything offered to a market to satisfy a need or want Core benefit – the basic benefit the customer is purchasing (e.g. automobile – convenience, performance) Basic product – the features that make­up the product (e.g. engine size, brake type); what the customer gets Expected product – attributes/conditions customers expect when they buy (what the customer wants) Augmented product – a product configured in such a way to exceed customer expectations (e.g. company reputation, warranty) Product Approaches Product Approaches Product mix – set f all items that a firm offers for sale Width – number of product lines a company has (e.g. retailer – athletic shoes, CDs, clothes, appliances) Length – total number of items in the mix (e.g. number of different types of athletic shoes) Depth – number of variants of a product that are offered (e.g. number of different types of running shoes) Consistency – how closely related product lines are in end use Product Mix Example: National Park Service Product Mix Example: National Park Service Services: Interpreters in visitor centers provide an information service. Package: In the product world this is the container. In the NPS world this is the surroundings in which a program is delivered. The atmosphere of a visitor center might be considered the package in which the visitor center experience is delivered. Brand: The brand in our case is the National Park Service and all of the image attributes that are associated with the NPS. Product Item: A distinct unit within a product line that is distinguishable by size, price, appearance, function, or some other attribute. A guided hike along a particular trail is a product item. Product Line: A group of products within a product mix that are closely related, either because they meet the same need, function in a similar manner, or share some other characteristic. Interpretation might be considered a product line. Product Mix (assortment): the set of all product lines and items that an organization offers its target market(s). Everything the NPS offers target market(s) constitutes its product mix. Product Line Strategies Product Line Strategies Build, Maintain, Harvest, Divest – not all products are equally profitable Line stretching – add products to the line; move up market (specific target) or down market (cannibalization) Line filling – completeness (all things to all customers) Line featuring – attract customers Product Development Decisions Product Development Decisions Idea Generation Worth Considering? Meet Profit Goals? Business Analysis Idea Screening Compatibility? MakeAbility? Product Development Concept Development/Testing Customer Friendly? No! Sales expectations? Market Testing Sales expectations? Product Re-Development Marketing Strategy Development Cost Effectiveness? Commercialization Product/Program Modification The Product Strategy The Product Strategy A product includes physical objects, services, persons, places, organizations, and ideas. q Organizations must answer three questions: q » » » How can the organization assess and improve its overall product mix? How can the organization assess and improve individual products in its mix? How can the organization improve its handling of the products over their life cycles? (product life cycle decision) 1. Intangibility: Service products that cannot be tasted, felt, seen, heard, or smelled before the purchase of the product. Solutions » » » » Services Increase the services tangibility Emphasize benefits of service rather than describing its features Brand services to increase confidence Credible people add tangibility 2. Inseparability: Services are created and consumed at the same time. Solutions » » Use of intermediaries to perform tasks Pre­ and post­consumer involvement 3. Variability: It is virtually impossible to standardize a service 3. a, nor is it easy to assess the quality a service purports to deliver. Solutions » Replace people with technology » High quality people given excellent training » Monitor quality Perishability: Service products cannot be stored and the demand level is difficult to forecast. Solutions » Differential pricing » Reservation systems » Education » Rescheduling and part time employers » Shared services / facilities 1. The Product Life Cycle The Product Life Cycle Product Introduction (commercialization) ­ The period during which a new product is introduced, initial distribution is obtained, price is established and promotion is introduced. Growth ­ The period during which the product is accepted by customers, initial distribution is expanded, promotion is increased, repeat orders from initial buyers ar obtained, and positive word­of­mouth leads to more and new users. The Product Life Cycle The Product Life Cycle (cont’d) Maturity ­ The period during which competition becomes serious and eventually cuts deeply into the company’s market position. Decline ­ The product becomes obsolete and its competitive disadvantages result in obsolescence and decline in sales. Product Life Cycle Patterns Product Life Cycle Patterns Preintroduction Introduction Growth Maturity Decline Sales Investment recovery Profits Engineering and Development Sales Revenue: Profits Expenses Market Planning Manufacturing Marketing * Investment recovery = Total revenues - Total expenses TIME STAGE IN CYCLE Overall arketing M Strategy INTRODUCTION To Create Awareness and Acceptance Develop and Test Market Prototypes in Customer Plants Limited Number of Models to Gain Market Acceptance RAPID GROWTH MATURITY DECLINE Manage Costs and Maintain Profit Drop the Old Product from Product Line Provide Only Basic Models for Remaining Customers Use Minimum Efforts to Sustain Decreasing Demand Reduce Distribution Costs yet Keep Customers Move Stocks of Built Up Inventories Establish an Appreciable Maintain Market Share in Face of Competition Market Share Plan Replacement for the Introduce Replacement existing Product Demise Product into the Market Differentiate Product to Match Market Requirements Create a Preference Among Customers and Middlemen Maintain Competitive Edge Through Differentiation Maintain Preference Among Customers and Middlemen Product Strategy Product Design Promotion Strategy Channel Strategy Pricing Strategy Create Awareness and Provide Foundation for Sales Efforts Get Product to New Customers for New Market Penetration Match Value of Product to Market Needs Maintain Control of the Control the Channel for Channel Optimum Market Impact Adjust Price as Competition Enters Stabilize and Avoid Price Fluctuations The Market Evaluation Matrix Competitive Position Dominant Strong Average Tenable Weak Competitive Characteristics Competitive Position Opportunity to obtain share Financial needs Managerial needs Product Life Cycle Stage Introduction High Cashhungry; low earnings CashHungry,selffinancing; good to low earnings Entrepreneur High Growth Sophisticated Manager Critical Administrator Opportunities manager Maturity Low Cashrich; high earnings Fair cash flow; low earnings Decline Low PRODUCT CATEGORY SUGGESTIONS Protect existing market share by product improvements, price reductions, increased production efficiency, and improved market coverage. 1. Invest substantially in the product in order to achieve a large share of new sales. 2. Purchase existing market shares by acquiring competitors. 3. Withdraw support through: a. harvesting (cutback all supporting costs to some minimum level); b. divestment of the business; or c. deletion of item from the product line. Maintain market dominance and the strong cash flow position through product, technological, and price leadership. Guard against over-investment that may come through product proliferation and unattractive market expansion. Excess cash should support research and growth in other areas. 1. 2. 3. 4. Focus on a specialized market segment that can be dominated. Harvest. Divestment of the business. Deletion of item from the product line. Stars Stars Problem Children Cash Cows Dogs Managerial Implications of the Market Managerial Implications of the Market Share/Market Growth Portfolio Model A Build (a select few) Hold Share D F Divest High Market Growth Rate B Harvest E Harvest G Divest Low C 10x Forecast position Present of product position 1x Relative Market Share .1x (Share Relative to Largest Competitor) Marketing Strategies for Marketing Strategies for Product/Market Situations Star Markets Star Products Problem Products Cash Cow Products Dog Products Protect Revenues Product Positioning Strategy Product Improvement Strategy New Product Development Strategy Problem Markets Market Penetration Strategy Increase Revenue New Usage Strategy Vertical Integration Strategy Cash Cow Markets Market Expansion Strategy New Usage Strategy Maintain Revenue Horizontal Integration Strategy Dog Markets New Markets Strategy Vertical Integration Strategy Horizontal Integration Strategy Divest Revenue The Directional Policy Matrix The Directional Policy Matrix Market position Product R & D Production factors Competitive Capabilities Market growth rate PROFITABILITY Strong Attractive Leader Average Try harder Weak Double or quit Phased withdrawal Disinvest Market quality Industry situation Environment Average Growth Cash generation Custodial Phased withdrawal Unattractive Awareness Adoption and Diffusion of Products Interest The prospect searches for information about the new product. Evaluation The prospect mentally considers whether the new product would be useful. The prospect first learns of the new product but lacks information about its use, benefits, and so on. Trial The customer makes a trial purchase of the product to determine whether it is useful Rejection or Adoption The customer either decides to reject the new product (abandon it) or make regular use of it. Adoption and Diffusion of Products 2 1/2% Innovators 13 1/2 % 34% 34% 16% Early Early Late adopters majority majority Laggards Market and Sales Potential Market and Sales Potential How big is the total market for the product What sales volume levels can be expected, and in what time frames? Who will use the product? What buying influences will be involved with marketing the product? What are the purchasing habits of the purchasing people and the other buying influences? From whom do customer firms now purchase such products? How much do the customer firms now purchase of such products? Market and Sales Potential Market and Sales Potential (cont’d) How often will the product be purchased? In what quantities will it be purchased? What is the expected life cycle of the product ­ how soon will it become obsolete? Is the market for the product growing or shrinking? How soon will design changes be required? What service or technical assistance will be required? Company Capabilities Company Capabilities What technical resources and capabilities will be required to product and market the product? Does the company possess these resources and capabilities to the degree required, and should they be committed the this project? Can the product be produced with existing manufacturing and warehouse facilities, or will new facilities be required? Can the company’s existing channels of distribution be used to reach potential customers or will new channels have to be implemented? Company Capabilities (cont’d) Company Are existing customers also potential customers for the new product or will the company be dealing with totally new customers? Are company salespeople capable of selling the new product? Does the company possess the service capabilities to provide the level of service and technical assistance that will be required? Screening of New Industrial Screening of New Industrial Products Criterion Market size and growth potential Consistency with corporate objectives Ability to match competitors’ strengths Ability to sell and service customers Ability to engineer and manufacture product Total Weighting of Importance 30 10 20 15 15 100 Contribution of the Product Contribution of the Product Will the company’s distributor’s or manufacturer’s representatives accept the product in preference to competitive offerings? Does the product rill a gap in an otherwise incomplete product line? Does the product enhance the marketability of all the products in the company’s product line, or does it detract from other products? How will the new product affect the image of the company’s present products? Will the new product give the company’s sales force a more complete product system to sell? Contribution of the Product Contribution of the Product (cont’d) Will the new product have any effect on present company reciprocal agreements or compete with products of present customers? Will the new product compete with existing products or cause customers to split purchases between the company’s own products? Will company salespeople be able to sell the new product without sacrificing sale of existing products? Will the new product utilize excess plant capacity and contribute in that manner? Will the new product help counter seasonal demands of other company products? Might the product contribute because a very large customer wants or demands it? Choice of Delivery Choice of Delivery Characteristics q Access » Spatial ­ Location of delivery sites in relation to the potential user’s domicile or workplace (function of expected use patterns) » Temporal ­ The time lag between the customers first attempt at establishing contact with a provider and its actualization (time price of delivery) » Psychological ­ Potential customers perceived social distance to providers (social class, ethnic, racial, and cultural differences) Choice of Delivery Choice of Delivery Characteristics q Continuity » Ability of the customer to establish or to maintain a relationship with a provider of choice. q Comprehensiveness » Breadth of services that the customer may receive from the same set of providers or within the same physical setting. Comparison of Product Strategy Factors in Comparison of Product Strategy Factors in the Consumer and Industrial Markets Factor Importance of product in marketing mix Demand Consumer Market Important, but can at times be overshadowed by price or promotion Product designed for satisfaction of direct consumer demand Buyer and user often the same person More general even with large products Often short due to fads, fashion, changing consumer expectations Industrial Market Very important, at times more important that any other single mix element Product must consider derived and joint demand in addition to direct demand Buyer and user often not the same person nor in same department Product often designed to industrial customers’ specifications Often longer, particularly for traditional industrial products, but shorter for high tech products Buyer / user of the product Specifications Product life cycles Comparison of Product Strategy Factors in the Comparison of Product Strategy Factors in the Consumer and Industrial Markets (cont’d) Factor Product support activities Packaging Aesthetic characteristics such ad color and shape Failure rate of new products Consumer Market Important in some large consumer products but nonexistent in may others Both protective and promotional Often essential to product success Industrial Market Often critical as many industrial customers include support in buying specifications Primarily protective with minimal promotional packaging Usually not important with majority of products Often high; estimates are as high as 80% or more Lower, rates of 30-40% are common Usually not that dominant a factor in new product development Often a major factor in new Importance of product development marketing research Factor Factor I. Marketability Relationship to present distribution channels Relationship to present product lines Quality price relationship Number of sizes and grades Merchandisability Effects on sales of present products Profitability Very Good (5) Average (3) Rating Very poor (1) Can reach major markets by distributing through present channels Complements an existing product line Priced below competing products of similar quality Few staple sizes and grades Has product characteristics that lend themselves to imaginative promotion Should aid in sales of present products High return on investment Will have to distribute product through new channels to reach major market Does not fit in with any present product line Priced above all competing products of similar quality Heavy inventories required by many sizes and grades Product characteristics do not lend themselves to imaginative promotion Will reduce sales of presently profitable products Low return on investment Factor Factor Durability Stability Breadth of market Resistance to cyclical fluctuations Resistance to seasonal fluctuations Exclusiveness of design Very Good (5) Average (3) Rating Very poor (1) Basic product that is expected always to have uses Product will probably be obsolete in near future A national market, wide variety of consumers, and foreign-market potential Will sell readily in an inflation or depression A specialized market in a small marketing area Cyclical changes will cause extreme fluctuations in demand Steady sales throughout the year Severe seasonal fluctuations will necessitate layoffs and heavy inventories Can be protected by a patent with no loopholes Cannot be patented, easily copied design Factor Factor Product ability Equipment necessary Very Good (5) Average (3) Rating Very poor (1) Can be produced with equipment that is presently idle Company will have to buy all new equipment Production knowledge and personnel necessary New product can be produced with present knowledge and present personnel Can purchase raw materials from its best supplier(s) exclusively New type of product that will fill a need presently not being filled Very high value added restricts substantially the number of competitors Number of end users will increase substantially Low risk Mostly new knowledge and personnel are needed to produce the new product Company must buy most or all raw materials from other than best supplier(s) Raw Materials Growth potential Place in market Expected competitive situation­ value added Expected availability of end users Level of risk Product similar to existing ones on the market, adds nothing new Low value, all companies can profitably enter market Number of end users will decrease substantially High risk q Where can we plug a hole in or extend the offerings made to a market? How can we repackage an existing product or service to expand a market or create a new one? Where can we integrate or combine several products or processes (our own or competitors’) to create a new product or a new market? What segments of an existing market are beginning to develop different needs and requirements? Do these changes create a new­ product opportunity? How can we adapt what’s offered in one market to the need of another? Audit Questions Audit Questions q q q q Audit Questions (cont’d) Audit Questions q Which of our products needs simple improvements to maintain or improve their market position? What products have outlived their usefulness to the market, and how do we replace them? What do our customers and prospects say about their current problems and future needs that suggest new products? Which of our failures or rejections deserve another look? q q q Why New Products Fail Why New Products Fail 1. inadequately developed 2. superior competitive entries 3. good product but no continuing need 4. insufficient test marketing 5. failure to learn from failure General Reasons for New General Reasons for New Industrial Product Failures Percent of Product Failures (n = 114) Main Reason 63.2 21.1 19.3 4.4 4.4 Main or Contributing Contributing Reason Reason 14.9 78.1 23.7 44.7 21.1 40.4 8.8 13.2 0.0 4.4 General Reason Sales fell below expectations Profit margins fell below expectations Development costs exceeded expectations Investments exceeded expectations Other Analyses of the General Reasons for Analyses of the General Reasons for New Industrial Product Failure 1. Specific Causes Cited As Reasons for Product Failure Due to Poor Sales Performance (n=88) Percent Citing as Percent Citing as a Main or Percent Citing as a Contributing Contributing a Main Cause Cause Cause Cause 36.4 13.6 50.0 Competitors were more firmly entrenched in the market than expected 20.5 30.7 51.1 The number of potential users was overestimated 18.2 33.3 51.1 The price was set higher than customers would pay 20.5 25.0 45.5 The product had design, technical, or manufacturing deficiencies/difficulties 15.9 23.9 39.8 Selling, distribution, or promotional efforts were misdirected 14.8 25.0 39.8 The product was the same as competing products ... a “me too” product Analyses of the General Reasons for New Industrial Analyses of the General Reasons for New Industrial Product Failure (cont’d) 1. Specific Causes Cited As Reasons for Product Failure Due to Poor Sales Performance (n=88) Percent Citing as Percent Citing as a Main or Percent Citing as a Contributing Contributing a Main Cause Cause Cause Cause 5.7 18.2 23.9 No market existed for product 6.8 13.6 20.5 Timing was premature 2.3 3.4 5.7 Government action/legislation hindered sale of the product 2.3 2.3 4.6 Other Analyses of the General Reasons for New Industrial Analyses of the General Reasons for New Industrial Product Failure (cont’d) 2. Specific Causes Cited As Reasons for Product Failure Due to Poor Profit Margins (n=52) Percent Citing as Percent Citing as a Main or Percent Citing as a Contributing Contributing a Main Cause Cause Cause Cause 40.4 34.6 75.0 Production costs were greater than expected 25.0 25.0 50.0 Volume was lower than expected resulting in higher per unit costs 19.2 25.0 44.2 Price was overly optimistic: price was dropped 13.5 34.6 48.1 Competitive product was introduced: product’s price dropped 7.7 11.5 19.2 Selling, distribution, or promotional costs were higher than expected 0.0 0.0 0.0 Other Analyses of the General Reasons for New Industrial Analyses of the General Reasons for New Industrial Product Failure (cont’d) 3. Specific Causes Cited As Reasons for Product Failure Due to Excessive Development Costs (n=41) Percent Citing as Percent Citing as a Main or Percent Citing as a Contributing Contributing Cause a Main Cause Cause Cause Underestimated development difficulties 50.0 36.9 86.9 Product concept was changed during development 36.9 36.9 73.8 Analyses of the General Reasons for New Industrial Analyses of the General Reasons for New Industrial Product Failure (cont’d) 4. Specific Causes Cited As Reasons for Product Failure Due to Excessive Investment (n=12) Percent Citing as Percent Citing as a Main or Percent Citing as a Contributing Contributing Cause a Main Cause Cause Cause Estimates for production facilities were 33.3 33.3 66.6 too low Expected manufacturing/production process was altered during development 16.7 41.7 58.4 A new product should confer a number of competitive advantages upon the company; for example it Can be developed and deployed into the marketplace very rapidly. Fits within a current distribution network. Can dominate a marketplace niche. Can be sold with a healthy gross margin. Offers distinct advantages over existing products. Competitive Advantage Competitive Advantage Provides significant barriers to entry for potential competitors. Enhances the prestige of the company Provides an opportunity for spin­off products. Can attract the interest and enthusiasm of a key customer. Adds significantly to other product lines through synergistic effects. Has patentability or trade secrecy. Competitive Advantage (Cont’d) Competitive Advantage (Cont’d) Common Sources of New Common Sources of New Product Ideas q q Invention » Strokes of genius » Concept and hard work Acquisition » Purchase » License » Theft » Copying q q q Evolution » Fill-in » Extension » Repackaging » Combination and integration » Specialization » Adaptation » Pruning Rejects and failures Customers’ requests Producing the New Product Producing the New Product q Defining the “new” in a new product » Consumer’s perspective – – » The firm’s perspective – – – – Degree of consumption modification New task experience Changing the marketing mix Modifying product / service features New applications Innovations / inventions Barriers to Fast New Product Development Barriers to Fast New Product Development Lack of senior management commitment Old messages Failure to communicate strategic objectives and goals Failure to have a formal development program Rigid structure Unwilling champions Unrealistic expectations by management Functional area willingness to cooperate Lack of middle management support Informal criteria for evaluating potential projects Barriers to Fast New Product Development Barriers to Fast New Product Development (Cont’d) • Too many projects Unwillingness to take risks or tolerate failure Poor idea generation Failure to address marketplace needs Lack of a clear vision of the project Conflict within the team Bad experiences with teams Frequent changes in team leaders Inadequate technological base Frequent changes in product features and design specifications Barriers to Fast New Product Development Barriers to Fast New Product Development (Cont’d.) Obsessive development Team members not co­located Inability to visualize the product Not enough time to do the work Not enough money Releasing a new product before it’s ready Budget overruns Running out of time The “not invented here” syndrome Using multifunctional teams for every project Six Pathways to Innovation Core Technologies Combining and Diversifying Functional Functional Excellence, Exploitation and Differentiation Innovation Re-mixing Common Elements Uniquely Science and Applied Research Unmet Customer Needs -- Uses and Users Pure Imagination -Market Creation New Products face­lifting face­lifting non­functional design change minor functional change major functional change “Me­too” entry minor improvement major improvement technological breakthrough New­Product Selection Guidelines Provide higher quality than is usually seen in the market Provide higher quality than is usually seen in the market served. Broaden the offering to the market served. Help narrow and bring into high focus each market served. Afford an increased share of the market served. Provide above­average margin. New­Product Selection Guidelines Response to direct selling and promotional activities, Response to direct selling and promotional activities, require minimal advertising. Limit annual new­product introductions Require below­average investments. Enhance productivity. Encourage vertical integration. Give priority to ideas generated by the marketplace. Potential New Product Checklist Yes No Maybe Marketing/Sales Is there a marketplace need for this product? Does the customer need already exist? Will the consumers pay to satisfy this need? Can we be first in the marketplace with this product? Are there barriers to entry that can be erected? Does it fit our current markets? Does it fit into our channels of distribution? Can it be sold effectively with our existing sales force? Does it fit our marketing strategy? Can we be a low-cost producer of this product and/or a differentiated supplier? Potential New Product Checklist Design/Development/Manufacturing Does it fit with our core technologies? Is it technically innovative? Is it readily manufacturable? Can we manufacture it with our current facilities? Do we have the resources to do this project? Are we better off acquiring the product? Can we develop a high-quality product quickly and still meet marketplace needs in time? Can there be follow-on products? Yes No Maybe Potential New Product Checklist Financial Is the magnitude of this opportunity sufficient? Does it meet our minimum quantity requirements? Are the market projections reasonable? Are the development costs reasonable? Can the initial investment be minimized? Will it require a minimal capital investment? Will it meet return-on investment targets? Yes No Maybe Potential New Product Checklist Other Does it fit our corporate objectives? Does it fit or enhance the company’s image? Are there insignificant regulatory or compliance problems? Are there major risks if we do not proceed with this project? Are there few major risks if we do proceed with this project? Is there a potential proprietary position? Is there a product champion? Yes No Maybe Screening Model For New Product Ideas Positive factors that consumers see in new products. Positive factors that consumers see in new products. It offers one or more of the following services: amusement comfort convenience labor saving protection satisfaction Sales appeal creates desire for possession. Easy to use. Easy to understand. Outstanding quality. Price. Screening Model For Screening Model For New Product Ideas Positive factors for the company and its distributors. Profitability ­ will it be more profitable than current items and will it bring high gross profit? Attraction of more customers than current. Can it be produced in large volume? Will it aid the sale of other items? Will it require low capital investment? Will it be liked by customers? How fast will it turn over? Can it be promoted through existing advertising? Does it require manufacturing facilities which are already available? Screening Model For New Product Ideas Negative factors from company view. Negative factors from company view. Need for new channels and methods. Extensive and powerful competition. Materials which are difficult to obtain. Unfavorable patent situations. Final Decision Screen New Product: Develop and Launch, or Reject 1.. 1 2. 3. 4. 5. What is it? What does it do? What are its performance specifications? Its physical specifications? What are our qualifications to make it? Mastery of the technology? Ownership of the manufacturing processes? Knowledge of its market? Knowledge of the channels of distribution to the market? Who can use it? Why should these people be interested in it? (Specific customers and (SICs). Are we currently serving these markets? How does the market view our qualifications to make it? To service it? To sell it? Final Decision ScreenNew Product: Develop and Launch, or Reject? How many can be used (by specific customer and by SICs) at various price levels? On introduction? in 6 months? In 1 year? Etc.? What does the competition have that comes close? What would our competitive advantages be? Is the technology available to build it? Do we have it? Do others? What’s required to build it? Tools? Machinery? Space? Personnel? Storage? Test equipment? Other requirements? What do we have? What do we need to acquire? Final Decision Screen New Product: Develop and Launch, or Reject? Are the materials needed to build it available? From current suppliers? Elsewhere? What are the approval lead times and ordering cycles likely to be? How will samples or test and approval models differ from production models? How long will it take to have samples and test models available? Production models? What will it cost to make at various levels of production? In various modes of production? Final Decision Screen New Product: Develop and Launch, or Reject? Are subcontractors available? For parts? For major components? How will it be distributed and sold? Our own distribution and sales organization? A new distribution and sales organization? What will its impact be on competitive products? On our own products? What is the competitive response likely to be? Overall? By specific competitor? What are the sales support requirements? Training? Service? Spare parts? Other? What should our pricing, sales, and marketing strategies be? Final Decision Screen New Product: Develop and Launch, or Reject? • • • What are the advertising, lead generation, market conditioning, and sales promotion requirements? What product performance tests have been made? Inhouse? By customers? Where were the results? How will it be introduced? Customer by customer? Regional rollout? Nationally? What are specific plans? Timetable? What serious sales and manufacturing problems can we anticipate? How will we handle them? What will it cost to bring the product to market? How long will it take to get our money back? Thereafter, what will be our rate of return? • • Final Decision Screen New Product: Develop and Launch, or Reject? • • If we do not make it, how will it affect our manufacturing capability, growth, market position, customer base, and profitability? If we do not make it, how will it affect our manufacturing capability, growth, market position, customer base, and profitability? How does it satisfy each of the 11 strategic guidelines? How does it compare with our other new-product options? What assumptions have we made (Questions 1 - 30 above)? Are they valid? What is our decision? Do we make it? Or, do we set it aside and move on? • • • • The Three Stages of a New Product Development Project There are three distinct stages in a new There are three distinct stages in a new product development project: 1. Preparation 2. Performing the project 3. Ending the project The Preparation Stage The Preparation Stage Identifying Marketplace Needs Identifying and defining the marketplace needs, consistent with the company’s capabilities, mission, and strategic plan. Questions What is the company’s business and its market? What is the company’s mission and strategic plan? Has the strategic plan been updated and communicated to the entire organization? What are the company’s marketing capabilities? What are the company’s technological capabilities? Who are the company’s lead customers? Are company people visiting the lead customers? What are the needs of the lead customers? Do the lead customers have specific problems that the company can solve? What are the industry trends? What are the marketplace trends? Idea Generation Idea Generation Generating creative ideas that satisfy a marketplace need and identifying a specific concept for further evaluation. Questions Where are the ideas coming from? How are ideas to be evaluated? Who will evaluate the ideas? What are the criteria to be used in evaluating ideas? How are the ideas to be prioritized for further evaluation Have earlier ideas been reexamined? Concept Evaluation Concept Evaluation Testing the concept to see if it makes technological, marketing, financial, and business sense. Questions Does the idea fit the company’s criteria for new products? What are the new product’s preliminary feature and benefits? Does the concept meet a marketplace need? How big is the market for the proposed product? Can a marketplace niche be dominated? Is the proposed solution acceptable to potential customers? Is anyone else addressing this marketplace need? What are our competitors doing in this niche? What will the competitor’s reaction be? Is the market local, national, or international? Do we have the necessary marketing skills in place? Do we have a channel to the marketplace? If not, can we develop it? More Questions Will the new product cannibalize current product sales? What advantage does the new product provide the customer? What are the product cost objectives? Is the technology available? What are the elements of a development program? What are the major technical problems that have to be solved? What investment will be required for a development program? Can there be a proprietary position? Is patent coverage possible? What is the probability of success? What are the potential downside risks of proceeding? What are the risks of not proceeding? Feasibility Feasibility Determining whether the concept is technologically possible, whether it can be manufactured at an acceptable cost and within a reasonable time frame, and whether there is a sufficient market potential to justify continuing on with the development project. Questions Have product features been forgotten? Is there a market for the product? How big is the market? What is the potential product’s sales growth curve? Who are the lead customers? Have they been involved? What are the preliminary product specifications? Has a multifunctional project team been formed? Has the team selected its leader? Has the team identified the project objectives? More Questions Is there a product champion? What are the potential production problems? Can they be overcome? How long will it take to develop the product and what resources will be required? How will the project be financed? Has a business plan been prepared? What is the potential return on the investment? What is the potential for patent protection? Has a patent search been done? Has critical path project management been started? Has a project cost tracking system been set up? The Project Stage The Project Stage Early Development Developing early prototypes to test whether technical and production problems can be solved, to have something to show to the marketplace, and to prepare preliminary design specifications. Questions Does the marketplace need still exist? How big is the market and how much can be captured? Will a marketing program be supported after introduction? Should the market and/or product development work be done with a joint venture partner? Do we have the necessary marketing and sales skills in place? What will be the competitors’ reaction? Has a name been selected for the product? Has a channel to the marketplace been developed? How will the product be positioned in the marketplace? Have the barriers to entry been formulated? What will the prototypes look like? More Questions What are the product performance specifications? Can prototyping be accelerated? What are the preliminary design specifications? Do we have enough skills to make the product? Do the process capabilities match the product requirements? Does any major production equipment or tooling have to be ordered? What is the delivery schedule? What will be the cost? Will manufacturing of this new product cause any environmental problems? Can they be overcome? Have simulated use conditions been established? Has patent coverage been sought? Later Development Later Development Developing final prototypes and placing the prototype at field test sites for evaluation Questions Have design specifications been frozen? Where are the field test sites and are the target companies willing to test the prototype? Does the prototype satisfy the marketplace need? Do the lead customers still like the idea? What problems emerge from the test sites? Has a marketing program been prepared? Has a sales forecast been prepared? Has tooling been specified and ordered? How should the product be packaged? How much will the product sell for? Can we make money selling the product? How much? Has a warranty/service program been prepared? Do we have the necessary marketing and sales skills in place? More Questions Are new facilities needed? What production problems will there be? What are the final product performance specifications? Have reliability, safety, and stability studies been completed? Has Quality Assurance begun to prepare process control specifications? Has tentative production scheduling been determined? What is the manufacturing plan? Have the raw materials been specified and selected? Will the manufacturing and/or product comply with all applicable environmental regulations? Has patent protection been arranged? What is the product life­cycle cash flow forecast? Preproduction Preproduction Scaling up onto plant equipment, debugging tooling, and machinery; finalizing production and assembly methods; testing preproduction product; confirming production costs; refining marketing forecasts; finalizing quality assurance procedures; and training production workers. Questions Have tooling and machinery been received and debugged? What is the final pricing of the product? Is there an adequate profit potential? Will the customers pay for the product? Does the early production version satisfy the marketplace need? Will the marketing program be supported financially? Have the name and packaging designs been finalized? Can the production problems be overcome in time and at a reasonable cost? More Questions Have final drawings been finished? Is there a final bill on materials? Have the raw materials been ordered? What will it cost to make the product? Has production scheduling been finalized? Has worker training been defined and scheduled? Have Quality Assurance procedures been finalized? Will the manufacturing and/or the product comply with all applicable environmental regulations? How will the product be shipped? Commercialization Commercialization Beginning to ship to a number of customers and fine­tuning marketing forecasts, sales methods, and Quality Assurance procedures, and, later, full­ scale manufacturing, inventory, and shipping of the new product. Questions What are the finalized marketing and sales plans? Are sales training programs in place? Is there a customer feedback loop in place for rapid information on product acceptance and problems? Have first full production runs met design/production specifications? What improvements in production plans can be made? Have backup materials and/or manufacturing systems been determined and/or implemented? Has the business plan been revised. Has the product life­cycle cash flow forecast been finalized? What possible follow­on products can we make? The End Stage The End Stage (Project End and Evaluation) Dissolving the new product development team, evaluating the project’s performance, collecting all relevant documents into one location, recommending ways of improving project performance. Questions Is the team kept in place until after the product has been in production and doing well? What can be learned from the way the project was conducted? What should be done differently the next time? Were all the right people on the team? Were product features and design specifications frozen early enough? How could the development program have been accelerated? Did the project come in within cost and time budget? Has all relevant documentation been collected and put in a safe place? Questions To Ask At All Stages Of Development Is there continuing top management commitment? Does the product still fit the company’s strategy? Does it still make sense to continue this project? Is the development project meeting its milestones and staying within budget? Does the marketplace need still exist? Questions To Ask At All Stages Of Development What additional benefit does this product offer over existing products? Can the product be made at a cost that will allow an acceptable return? What possible follow­on products can be made? Will customers have to or be willing to pay for it? Will the company support the marketing activities required? What can be done to speed up the development program? Is there still a product champion? ...
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This note was uploaded on 12/21/2010 for the course BUSA 5336 taught by Professor Jeff during the Summer '09 term at UT Arlington.

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