Screening of New Product Ideas

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SCREENING OF NEWPRODUCT IDEAS

Dr M R Suresh, SDMIMD


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Stages of new product

development process

Strategy

Idea generation

Screening

Concept development and testing

Business Analysis

Product development and testing

Test marketing

Commercialization /Launch


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Screening of ideas

Idea screening- the first evaluation of innovative

ideas

A term applied to different approaches to

evaluating new product ideas Screening is the first in a series of evaluations

beginning when the collection of new product

ideas is complete

Follows therefore that the initial evaluation cannot

be very sophisticated

The purpose of screening is an initial assessment

to weed out unsuitable ideas


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The mortality curve

Curve A

Slow kill rate- many new product ideas beingallowed to go through generation anddevelopment stages

Implicationswasted development andevaluation expenditure on ideas that would notbe launched and which therefore would notgenerate return

Development resources being spread over alarger number of development projects,jeopardizing the resources and quality given toanyone

Longer development effort as effort is spread over

a large number of projects


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Contd..

Curve B- faster kill rate

Implications?

Lower costs as concept and product

developmentoccurs for a smaller number of

products

Possible killing of products with potential

due to insufficient development and testing Cooper et al showed in 2004 that best

performing companies did significantly more

idea screening than other firms


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contd

In some industries Rand D costs are very high,

early expenditure may be higher, marketing

costs may be low. Other industries it may be

the other way (e.g basic cosmetics) If development activities can take place based

on rigorous screening, resources can be

more sharply focused


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Influence of risk in screening

Killing off product ideas which may have

potential

Developing product ideas which might fail

Must have a strategic orientation

If go error is fatal, screening process must be

more stringent

If drop error is risky, the process must be leesstringent relatively


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Effective screening

Based on evaluation of firms strengths and

weaknesses in the light of the market,

technological and market opportunities

Take the example of a medium sized enggmanufacturer

Potential market size, avoiding large

competition, fit with engg capabilities,development costs, fit with distributors

Which is an attractive idea?


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Type of screens

Kucmarski (1992)

Growth role

Category

Strategic role

New product type

Internal strength

Financial risk


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1.Growth screen

Enter a new category of business that represents a newaddition to the company's portfolio (e.g ITCsunfeastnoodles)

Expand a companys global /domestic market share within aproduct category ( e.g new variations by Maggi noodles)

Deliver a price advantage which will allow firms to gainmarket share at the expense of competition

Create a whole new category of product-market, strategicallyexpanding sales

(e.g Danone, the dairy giant developed a range of soya

based foods to take advantage of growth in demand for dairy-free foods)

(e.g Indian IT companies trying to develop products forgovernment)


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2.Category screensCan be used to encourage new product project in categories

where the company capability is most suited. Demand anew product idea which:

Has proven consumer attractiveness (volume)

Is not dominated by one or two major players

Demonstrates growth potential

Has room for additional products which might offer benefits tothe consumer

Does not require marketing or other investment which thecompany cannot match easily

(e.g BakeMark UK, a subsidiary of Dutch ingredients firm

launching Spicy Naan for the UK market) (Imitation is a risk, new product idea should have definite

advantage)

Useful as it provides guidelines judging new categories toexplore


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3.Strategic role screensAre usually statements which define competitive, market and

business requirements that new products are expected tosatisfy

Vary from industry to industry, but flows from new productstrategy

Demand a new product idea: Are technologically superior to products currently available?

Capitalize on existing distribution and delivery systems

Are able to provide a foothold in product markets currentlyoutside the companys sphere of activity

Allow the company to develop technical or marketing skills ina new sphere

Are aimed at growth markets

Will use up excess capacity


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4.Screen for new product types

Classify ideas into:

New to world

New to market

New to company

New item/ product line


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5.Internal strength screens

Raise issues which examine whether the idea:

Makes use of patented technology

Increase of use of an efficient manufacturing

system Capitalizes on existing marketing and sales efforts

Exploits technological, engineering, design ormarketing skills

Similar to category screens? Category screens focus on competitive

position and attempt to screen out categories ofproduct-market which may be deemed

inappropriate


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6.Financial screens

Objective of any NPD is generate profits


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Historic Roadblocks to Creativity

I think there is a world market for maybe five computers.Thomas Watson , Chair, IBM, 1943.

Computers in the future may weigh no more than 1.5tons. Popular Mech anics , 1949.

I can assure you that data processing is a fad that wont

last out the year. Bus iness bo ok s editor, Prentice-Hall ,1957.

So we went to Atari and said, ...Well give it to you. Wejust want to do it. Pay our salary, well come work foryou. And they said no. So then we went to HP, and

they said We dont need you, you havent got throughcollege yet. Steve Jobs, co -foun der, Apple Compu ters.

640K of RAM ought to be enough for anybody.B il l Gates,Mic roso ft, 1981.

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Barriers to Firm Creativity

Cross-functional diversity: Diversity leads tomore creative stimulation but also to problemsolving difficulties.

Allegiance to functional areas: Team members

need to have a stake in the teams success, orwont be loyal to the team.

Social cohesion: If interpersonal ties amongteam members are too strong, candid debate

may not occur, resulting in less innovative ideas. Role of top management: Management should

encourage the teams to be adventurous,otherwise only incremental changes will occur.

Figure 4.4

4-17


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Some Patterns in Concept Generation

Customer needfirm develops technologyproduces form

Firm develops technology finds match toneed in a customer segment produces form

Firm envisions formdevelops technology toproduct formtests with customer to seewhat benefits are delivered

Note: the innovation process can start withany of the three inputs.

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The Toilet Brush Example

Idea: A new and improved toilet brush.

Concept: A toilet brush that contains detergent,refillable, and easy for the customer to attach

to the handle. Product (executions of this concept):

Lysol Ready Brush

Scrubbing Bubbles Fresh Brush

Clorox Toilet WandOthers?

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What a Concept Is and Is Not

IS: Learning needs of computer users can be met by

using online systems to let them see training videos

on the leading software packages. (good concept;

need and technology clear)

IS NOT: A new way to solve the in-home

training/educational needs of PC users. (need only;

actually more like a wish)

IS NOT: Lets develop a new line of instructional

videos. (technology only, lacking market need andform)

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Screening-process and criteria:

Market and firm characteristics (Cooper)

Product performance, uniqueness, market potential, technicalfeasibility, intuition (Hart and others)

Facto rs that shou ld be central to the sc reeningprocedure:

tech feasibility, demand/market need, competition, buyerbehaviour, channel behaviour, corporate strategy, productadvantage, marketability, makeability

At each stage, evaluation more complete, may repeat criteriabut becomes tighter with more reliable data.

As far as idea screening is concerned it flows from theproduct strategy of the firm, PIC and somewhat related tofirm specific goals.

More complex screening takes place in subsequent stagesbring customer dimension i.e concept testing and evaluation


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Risk/Payoff Matrix at Each Evaluation

Cells AA and BB are correct decisions.

Cells BA and AB are errors, but they have different

cost and probability dimensions.

Decision AStop the Project Now BContinue to Next Evaluation

A. Product would fail if

marketed AA BA

B. Product would succeed if

marketed AB BB


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Generic risk strategies

To be considered by the Product Management

team

Avoidance: eliminate risk

Mitigation: reduce risk to an acceptable levelthrough redesign or increasing product

reliability

Transfer : shift risk to an organisation betterequipped to handle

Acceptance: Develop a contingency plan

Planning the Evaluation System: Four


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Planning the Evaluation System: Four

Concepts

Rolling Evaluation (tentative nature of new

products process)

Potholesfirm competencies

Peopleneed to have strict standards

Surrogate questions


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An A-T-A-R Model of Innovation Diffusion

How to forecast sales and profit for proposed new item?

Profits = Units Sold x Profit Per Unit

Units Sold = Number of buying units

x % aware of product

x % who would try product if they can get it

x % to whom product is available

x % of triers who become repeat purchasers

x Number of units repeaters buy in a year

Profit Per Unit = Revenue per unit - cost per unit

Figure 8.5


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The A-T-A-R Model: Definitions

Buying Uni t : Purchase point (person or

department/buying center).

Aware: Has heard about the new product with some

characteristic that differentiates it.

Avai lable: If the buyer wants to try the product, the

effort to find it will be successful (expressed as a

percentage).

Trial: Usually means a purchase or consumption of the

product.

Repeat: The product is bought at least once more, or

(for durables) recommended to others.

Figure 8.6

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A-T-A-R Model Application

10 million Number of owners of video cellphones

x 40% Percent awareness after one year

x 20% Percent of aware owners who will try product

x 70% Percent availability at electronics retailersx 20% Percent of triers who will buy a second unit

x Rs50 Price per unit minus trade margins and

discounts (Rs100) minus unit cost at the

intended volume (Rs 50)= Rs5,600,000 Profits

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Points to Note About A-T-A-R Model

1. Each factor is subject to estimation.

Estimates improve with each step in the development

phase.

2. Inadequate profit forecast can be improved bychanging factors.

If profit forecast is inadequate, look at each factor and

see which can be improved, and at what cost.

Getting the Estimates for


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Getting the Estimates for

A-T-A-R Model

xx: Best source for that item.

x: Some knowledge gained.

Figure 8.7

Item Market

Research

Concept Test Product Use

Test

Component

Testing

Market Test

Market Units XX X X X

Awareness X X X X

Trial XX X X

Availability X XX

Repeat XX X

Consumption X X X XX

Price/Unit X X X X XX

Cost/Unit X XX


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Many Ideas Are Eliminated At the Idea screening

stage

PIC eliminates most new product ideas even before they aredeveloped into concepts as it provides the backdrop for ideamanagement and screening

Ideas of the following types are excluded:

Ideas requiring technologies the firm does not have. (e.gKMF getting into cow cheese or higher end cheesevarieties)

Ideas to be sold to customers about whom the firm has noclose knowledge. (selling FRP based technologies for

household construction) Ideas that offer too much (or too little) innovativeness.

(prefabricated houses)

Ideas wrong on other dimensions: not low cost, too closeto certain competitors, etc.


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Market Analysis and Initial Reaction

Market analysis: in-depth study of market area that the PIChas selected for focus.

Conducted immediately after PIC approval.

e.g coiled springs study for an engg firm

Initial reaction: preliminary, inexpensive assessment ofconcepts, which may be flowing very quickly at this point.

Avoid quickly eliminating out concepts without

forethought

Do not include idea source in initial reaction. Respect the fragility of ideas -- have more than a

single person involved.

Use more than pure intuition -- keep records and stay

objective.


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Concept Testing Cautions and Concerns

If the prime benefit is a personal sense (aroma,taste).

concept involving new art and entertainment (e.gHarry Potter series).

concept embodying a new technology that userscannot visualize. (e.g virtual reality products)

If concept testing is mishandled by management,then blamed for product failure.

customers simply do not know what problems theyhave in many situations, situations of new physicalexperience

These concerns have to be handled in concept

evaluation as much as possible 9-35

Wh t l ti d


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Why concept evaluation and

testing- some issues

This stage is viewed as an extension of ideageneration and screening, those ideas thatscreened to be of potential value aredeveloped and screened further to getspecifications that would have greater appealto consumers

The more detailed the effort the greater the

chance of lesser development costs and thelater prototypes developed would more closelymatch customer needs and preferences

Iterative cycles


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Consumer purchases for end benefits

Concept testing seeks to understandconsumers' perceptions ofcharacteristics, end benefits andacceptance of the concept

Marketing manager's job is to bring inthe voice of the market

New product development involves

marketing, R&D, and production


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Relationship between product and needs

Multilevel view of product satisfaction

Core benefit, generic product, augmented product,potential product

Limitation of Kotlersapproach as per Saren andTzokas (1994)

Conceptualization of the product in isolation from the

customer-supplier context Regarding product as an autonomous unit that can be

deconstructed and understood in its basic elements iswrong

Existence of a product for consumption is not realized

by its material nature but by its symbolic meaning thatsociety, consumers, producers have ascribed by meansof culture, use/experience and their interaction

The pluri-signified product

Object (physical , tech features), Supplier (credibility,service, technical capability), Buyer (context,

perceptions, needs, ability, objectives, expected


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Process of concept testing

Test of perception, influenced by all that

influences perception

Information given about the product concept

Timing of evaluation

Context of the concept

Nature of the product concept: emotive to

functional continuum


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Concept Is an idea to satisfy consumer need

Essence of the product

Concept testing a system to redefine, reshape and coalesce

ideas to arrive at a basic concept for a

product that has good chances of marketacceptance.

Concept tests are conducted to Qualitatively assess relative appeal

Provide information for further productdevelopment and advertising

Indicate potential segments


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CONCEPT SCREENING TEST

to get a feel of market acceptance

to identify potential ideas for further development New product screening test

Alternative buying incentive

PROCEDURES

Use concept statement Interviewing - mall intercept

New product concept screening (8 ideas)

Alternative buying incentive (12 to 15)

Questions asked - purchase intent, frequency,

uniqueness, believability, importance of sales message Sampling - non probability

Purchase intention score


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Concept

Six possible combinations of conceptcommunication mode and tone

Mode can be words only, visual only,words plus visual

Tone can be factual, persuasive Studies in USA in the context of Pfizer

indicate use of visuals increasedpurchase intention scores by 20%

Implication is that nave comparison ofconcept scores across types is risky


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Procedures

Concept presentation: Sheets, advts, actual prototype ofproducts. No. of concepts is few. Description of the product.

USE A CONTROL CONCEPT Interviewing : Central location, mall intercept, cost

constraints

Questions asked - purchase intent, frequency, key benefit,believability, uniqueness, attribute ratings, overall rating

Non probability sampling Purchase intention scores

For non durable goods, the frequency of purchase isimportant

Purchase intent is an indicator of trial, but does not tell

whether the proposed product is part of a consumer's dailylife or special occasion item

Concept test ought to throw light on % households inclinedto try, expected number of purchases, expected units perpurchase


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Concept screening - diagnosis

Managers seek to understand purchase intention measures.For this purpose standard questions on

uniqueness/differentiation from other products etc areincluded

Specific attribute diagnostics seek to probe whichattributes/benefits contribute to purchase intention usingopen ended questions or on scales measuring perception/importance of attributes

e.g. ease of preparation ( excellent to poor)ease of preparation ( very important to not

important)

The above data can be used for quadrant analysis. Rating(excellent to poor on X axis), Importance (Not important to

very important on Y axis ) Concept testing does not differentiate purchase intention of

triers and repeat buyers. Satisfaction is not an aspect in aconcept test

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Screening of New Product Ideas

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