In dynamic markets companies must constantly introduce new products and services to keep up with changing consumer wants and needs. Discuss the common challenges of developing successful new products
A good NPDS can help organize research, prioritize customer needs, and reduce cost overruns, to ensure a smooth development process. Describe the three common approaches to strategically developing new products
User-Centered Design (UCD) Here, the needs, wants and limitations of end users of a product are given a great deal of attention at each stage of the design process. The main element in this process is that user-centered design tries to optimize the product around how users can, want, or need to use the product, rather than forcing users to change their behaviors to accomodate the product.Flexible Product Development Flexible product development is the ability to make changes in the product being developed or in how it is developed, even relatively late in development, without being too disruptive. Flexibility is important because the development of a new product naturally involves change from what came before it. Change can be expected in what the customer wants and how the customer might use the product, in how competitors might respond, and in the new technologies being applied in the product or in its manufacturing process. The more innovative a new product is, the more likely it is that the development team will have to make changes during development. Flexible development counteracts the tendencies of many contemporary management approaches to plan a project completely at its outset and discourage change thereafter. These include Six Sigma, which aims to drive variation out of a process; Lean, which acts to drive out waste; and traditional project management and phased development systems (including the popular Phase–gate model, discussed next), which encourage upfront planning and following the plan. Although these methodologies have strengths, their side effect is encouraging rigidity in a process that needs flexibility to be effective, especially for truly innovative products. Flexibility techniques must be used with discretion, for instance, only in the portions of a product likely to undergo change, in order to minimize potential disruptions, delays, and cost overruns. Phase-Gate Model In a phase–gate model, also referred to as a phase–gate process, the process is divided into stages or phases, separated by gates. At each gate, the continuation of the process is decided by (typically) a manager or a steering committee. The decision is based on the information available at the time, including the business case, risk analysis, and availability of necessary resources (e.g., money, people with correct competencies). The phase–gate model may also be known as stage-limited commitment or creeping commitment.The success of product-driven companies is directly tied to new product development, which is generated through innovative ideas. Identify the five primary sources of product innovation
Non-technical Development This approach involves finding a niche in the market without making radical changes to the basic product category (i.e., in terms of the underlying technology). "Build a Bear Workshop" provides a good example of this style of innovation: Unlike other conventional stuffed animal manufacturers, the Build a Bear Workshop allows customers to choose their bear's body, sound, clothing, stuffing, and heart. For example, a customer can choose a lower-priced paper heart with their wish, or they can invest in a higher-priced electronic heart. After customers make choices, they then observe the production process in the shop. In this way, customers create their own custom-designed toy. This business model does not rely on developing new technology, but a modified production process and a unique idea that draws the consumer in.Environment Certain ideas developed in one environment or geographical location have the potential to do well when imported into new environments. Good examples of this style of innovation are Wal-mart in China and IKEA in the United States–ideas that proved a big hit outside of the cultures that they were traditionally employed in. Large-retail stores are now achieving success in Asian nations, through importing the idea of economies of scale, which in turn enable one-stop shopping and lower prices. Similarly, IKEA achieved great success in the United States through importing the idea of a warehouse-type retail setting from Europe.Serendipity Serendipity plays a role in product innovation. The word serendipity derives from "serendip," which means "Sri Lanka" in Persian. The fairy tale, The Three Princes of Serendip, tells the story of three men who continuously discover something that is completely unrelated to what they originally set out to find. Thus, the term "serendipity" describes a situation where one accidentally discovers something fortunate, while looking for something else entirely. For example, penicillin was discovered quite by accident when Alexander Fleming discovered that a mold contaminating one of his experiments possessed powerful antibacterial properties. While not exactly a strategy that can be purposefully conducted by companies attempting to come up with a specific product, the process of serendipity frequently occurs due to government funding of general and scientific research, causing technological and other spillovers into the commercial realm. Purposeful Development Purposeful development occurs when there is a strong need for certain goods or services. As Plato once said, "Necessity is the mother of invention." In other words, this type of innovation occurs when existing product lines cannot satisfy current needs or current demand. As a result, organizations are willing to invest considerable funds to create a successful innovation. Thus, purposeful development occurs when there is a need that requires satisfaction, as opposed to when demand creation is required for a new product for which there is no initial desire in the marketplace. A good example of purposeful development is the heavy investment that pharmaceutical firms make to discover new prescription drugs.During screening, the company evaluates whether to devote further resources to the development of a product at various stage gates. Discuss the benefits and shortcomings of product screening
Concept testing is important for evaluating consumer responses to a product before market introduction. Explain concept testing, its disadvantages, and alternative methods used to evaluate consumer behavior toward new concepts
The output of the business analysis stage is a prediction about whether the product is likely to be profitable or not if ultimately produced. Demonstrate knowledge of the components included in the business analysis stage of product development
Development involves setting product specifications as well as testing the product with intended customer groups to gauge their reaction. Describe the steps involved in the technical and marketing development stages of new product development
Concept Test The testing process usually begins with the concept test. The product concept is a synthesis or a description of a product idea that reflects the core element of the proposed product. For example, a consumer focus group might be assembled and the interview session might begin with the question: "How about something that would do this?"Consumer Testing The second aspect of market development involves consumer testing of the product idea. This activity usually follows the construction of the prototype or limited production models. Various kinds of consumer preference can be conducted. The product itself can be exposed to consumer taste or use tests. Packaging, labeling, and other elements in the mix can be similarly studied.Test marketing is the final stage before commercialization, and is where all the elements of the marketing plan are tested. Discuss the requirements that must be satisfied to conduct successful test marketing of new products and distinguish test marketing from initial product testing
Commercialization the process of launching a new product; it may involve heavy promotion and filling the distribution networks with the product. Describe the three steps that must be implemented during the commercialization of new products
Marketers must learn from their own previous failures, and others' failures, to ensure that they are successful for the next product launch. Describe how market structure and business model, culture and communication, political and regulatory, and product/service factors impact a company's market success and failure
Market structure and business model A retailer that wants to follow Wal-Mart's strategy of low prices needs to expand rapidly. In Germany, there were not enough appropriate locations to support such expansion. Wal-Mart did not build their own stores, but took over existing supermarkets that had a completely different business model - they were very small and had a limited range of goods. They were also located far apart, which resulted in high logistical costs. With their strategy of "everyday low prices," Wal-Mart is very successful in the United States and elsewhere. However, due to the extreme competition, Germans are accustomed to the low prices that are offered by numerous discount supermarket chains. For this reason, Wal-Mart's low price strategy did not create sufficient competitive advantage.Culture and communication When products are introduced, it is important to consider cultural factors. Wal-Mart decided to operate its German locations from the UK. Thus, its "corporate language" was English. However, many of the older German Wal-Mart managers did not speak English. Some managers did not stay on after the Wal-Mart acquisition. Key business connections were lost, which resulted in the loss of major suppliers. It would have been far better to retain and communicate effectively with the German managers who had know-how about the local market.Politics and regulation Wal-Mart's managers violated German laws repeatedly, simply because they were unfamiliar to them. For example, Wal-Mart always stays union-free, but Germany has a history of strong, politically powerful unions. Ver.di, one of Germany's biggest unions, sued the company for failing to publish key financial statements in 1999 and 2000. A fine, as well as much negative press, harmed Wal-Mart's reputation. After its expansion strategy failed, Wal-Mart began a price war to drive small competitors out of business. One part of the price war was to introduce a private label called "Smart Brand" and sell most of these products below manufacturing costs. The reaction of many competitors was also to decrease their prices, which led to a profit setback for the entire industry. Finally, the Federal Cartel Office interceded and stopped the price war.Product/service failure Good customer service, combined with low prices, could have been a new market niche in Germany. One part of Wal-Mart's customer service program was to ensure someone was always there to help. However, customer reaction was negative, because customers who normally do their grocery shopping in discount supermarket chains are used to self-service. They found this annoying, and it did not create a reputation for providing good customer service.Conclusion Wal-Mart tried to apply its U.S. success formula in an unmodified manner to the German market. As a result, they didn't have sufficient knowledge about the market structure and key cultural / political issues. In addition, structural factors prevented Wal-Mart from fully implementing its successful business model. The final outcome was that it had to abandon its offerings in Germany. Had Wal-Mart paid careful attention to these issues prior to entering the German market, it could have had a very different outcome.CC licensed content, Shared previously |