Lecture 1: New Product Introduction

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Lecture 1New Product Introduction

• LECTURE OUTLINE
• Importance of New Product Development
• New Product Classification
• Why New Products Fail
• New Product Development Process
• Economics of New Product Development
• Idea Generation

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New Products
HIGH
10
20
New to the world products
New product lines
New to the company
Addition to existing product line
26
26
Revisions/ improvements to existing products
11
7
Repositionings
Cost reductions
LOW
HIGH
New to the market
3
What It Takes to Launch One Commercially
Successful New Product
Number of ideas, projects, and products
3,000
3,000 300 200 100 0
300
Time
125
9
4
1.7
1
Ideas submitted to firms patent department
Raw unwritten ideas
Small projects
Significant developments
Major developments
Commercial product launches
Commercially successful new product
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About 80 of New Products Fail

• Reasons New Products Fail
• too small a target market or market size
  overestimated
• Hasty introduction without adequate information
• poor product quality
• bad timing
• bad execution of the marketing mix

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New Products from Sony
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Why new product development canbe a dice roll
some forecasts

• I think there is a world market for maybe five
  computers. Thomas Watson chairman of IBM, 1943
• The radio craze will die out in time. Thomas
  Edison, 1922
• There is no reason anyone would want a
  computer in their home. Ken Olson chairman and
  founder of Digital Equipment Corp., 1977
• Video wont be around more than six months
  people will soon get tired of staring at a
  plywood box. Daryl F. Zanuck president of
  20th Century Fox, 1946

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New Product Development Process
Idea Generation
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Estimated Typical Costs of Developing Major New
Products
9
Estimated Time Required for Development Of New
consumer Products
Average Time Span Range for Majority (Months)
of Products
Opportunity identification 5 4 8 Design 6 2
15 Testing Pretest market 3 2 5 Test
market 9 6 12 Introduction setup 4 2 6
TOTAL TIME 27 16 46
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RD engineering
Design for manufacturing
Customer needs
Product design
Process needs
Sales
Forecast
Marketing
Production
Inventory
Fund requests
Budgets
Budgets
Budgets
Fund requests
Fund requests
Finance
Cross-Functional Integration
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Idea Generation - Sources

• Employees/Managers
• Customers/Lead Users
• Competitors
• Distribution / Suppliers
• Other sources technology, legal environment

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Idea Generation - Methods

• Formal ideal generation e.g., forms, survey
• Brainstorming
• Focus groups
• Lead user analysis
• Other creative ways