Post on 30-Mar-2015
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Innovation Management
New Products &
Market Testing
Kevin O’Brien
Learning objectives
Appreciate the importance of balancing consumer needs, technical feasibility and business viability in new product development (NPD)
Be able to describe the main evaluation steps in the NPD process
Understand the (classical) role of marketing research in NPD
Have an awareness of different approaches to market testing
The Challenge
(Source: IDEO)
How to maximise successes?
Improve odds on each individual product market research, segmentation, competitor
analysis etc. linear NPD process predictable, incremental new products (the 90%)
Introduce many products in quick succession and hope one succeeds probe and learn, market experimentation,
expeditionary marketing iterative NPD process highly innovative (discontinuous) new products
(the 10%)
Conventional NPD Process
Title of ‘evaluation set’Development phases Evaluation phases
Idea
Evaluation
Evaluation
Evaluation
Evaluation
Evaluation
Concept/design
Prototype
Pre-production model
Launch model
Idea screening
Concept testingBusiness analysis
Product testing(functional & market)
Test-marketing
Post-launch evaluation
Sources of Ideas
Brainstorming Intuition, associations of
ideas Product-centred
Features, functions, benefits Analogy, force relationships
Market-based Gap analysis, perceptual
mapping Scenario-based
Activity analysis, problem analysis, scenario analysis
Empathic design
How to identify latent customer needs? Evident but not yet obvious
Problem identification Problems and frustrations with current solutions
Story-telling How do you behave? How do you feel? Listen to customers’ stories
Observation Observation in a natural setting Product selection and use
(Leonard & Rayport, 1997)
Concept Development & Testing
Concept development detailed description of the idea stated in terms
meaningful to the customer Concept testing
present to target consumers as words, pictures, physical mock-up or virtual reality form
assessment of benefits, willingness to purchase, acceptable price
initial target market profiling Concepts offering potential are progressed
Concept Development & Testing
Consumer perceptions Concept uniqueness Concept believability Ability to solve problem Inherent interest Value for money
Concept presentation Line drawings Photographs Storyboards Mock-ups
Business Analysis
Development costs R&D capabilities, time to market
Market potential target market, positioning, sales, market share &
profit forecasts Marketing costs
promotion, distribution, sales force etc Business attractiveness
return on investment, level of risk forecasts of first time sales, repeat sales, rate of
adoption & replacement sales How important is this project to the overall
business strategy?
Product Development & Testing
Concept developed into a workable product Design and development challenges:
technical feasibility customer needs ease of manufacture
Initial models produced which undergo: Functional testing Consumer testing Channel testing
Does the product fulfil the concept statement?
Product Development & Testing
Product-related decisions Content & form of
presentation (number of product variants?)
Disclosure of identity (blind or branded?)
Explanation/supervision of test
Location of test Use of comparator products Consumer panels
Representative? Ad hoc surveys
Who? When? Where?
Lead users
Innovators/early-adopters Pioneers in (B2B) markets Can’t find processes/materials/equipment to meet
novel requirements Already working on innovations/prototypes
Early experience with problem Rich and accurate feedback
Highly motivated Beta-tests, early market probes, joint development
But not easy to identify ….. Start with generic problem, network contacts,
workshops(von Hippel, 1988)
Market testing
Product (and marketing programme) are tested in realistic market conditions prior to full-scale launch product, advertising, positioning, distribution,
branding, pricing, packaging, sales budgets Acts as a final screen in the NPD process
cancel projects which fare badly Provides real data to test assumptions from
market research, analysis and planning improved sales and profit forecasts
Costly, time-consuming, highly visible
Market testing
Standard test markets full marketing campaign in small number of
representative cities store audits, consumer & channel surveys
Controlled test markets panels of stores in different geographical
locations panels of shoppers
Simulated test markets simulated shopping environments
“Probe & learn” NPD process
Gain market insights by experimentation launch early versions of products into plausible
initial markets learn from these small-scale market trials modify the product and marketing approach launch again, and again, and again ……
Learning and adaptation rather than analysis A process of “successive approximation” Important in directing the development effort Appropriate when technologies and markets
are uncertain
(Lynn et al., 1996)
“Probe & learn” NPD process
Notebook market (1986-90) 30+ product launches
Hard disks/floppy disks Microprocessor speeds LCD/plasma screens Price points
Explored every market niche Withdrew more products than competitors
had launched Achieved market leadership
References
Leonard, D. and Rayport, J.F. (1997) Spark innovation through empathic design, Harvard Business Review, Nov-Dec, 102-113.
Lynn, G.S., Morone, J.G. and Paulson, A.S. (1996) Marketing and discontinuous innovation: the probe and learn process, California Management Review, 38(3), 8-37.
Von Hippel, E. (1988) The sources of innovation, New York: Oxford University Press.