Download New products & market testing

Innovation Management
Kevin O’Brien
New Products &
Market Testing
Learning objectives
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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?
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Improve odds on each individual product
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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
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probe and learn, market experimentation,
expeditionary marketing
iterative NPD process
highly innovative (discontinuous) new products
(the 10%)
Conventional NPD Process
Development phases
Evaluation phases
Title of ‘evaluation set’
Idea
Evaluation
Idea screening
Evaluation
Concept testing
Business analysis
Evaluation
Product testing
(functional & market)
Evaluation
Test-marketing
Evaluation
Post-launch evaluation
Concept/design
Prototype
Pre-production model
Launch model
Sources of Ideas
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Brainstorming
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Intuition, associations of
ideas
Product-centred
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Features, functions, benefits
Analogy, force relationships
Market-based
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Gap analysis, perceptual
mapping
Scenario-based
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Activity analysis, problem
analysis, scenario analysis
Empathic design
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How to identify latent customer needs?
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Problem identification
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Problems and frustrations with current solutions
Story-telling
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Evident but not yet obvious
How do you behave?
How do you feel?
Listen to customers’ stories
Observation
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Observation in a natural setting
Product selection and use
(Leonard & Rayport, 1997)
Concept Development & Testing
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Concept development
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Concept testing
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detailed description of the idea stated in terms
meaningful to the customer
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
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Consumer perceptions
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Concept uniqueness
Concept believability
Ability to solve problem
Inherent interest
Value for money
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Concept presentation
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Line drawings
Photographs
Storyboards
Mock-ups
Business Analysis
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Development costs
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Market potential
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promotion, distribution, sales force etc
Business attractiveness
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target market, positioning, sales, market share &
profit forecasts
Marketing costs
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R&D capabilities, time to market
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
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Concept developed into a workable product
Design and development challenges:
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Initial models produced which undergo:
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technical feasibility
customer needs
ease of manufacture
Functional testing
Consumer testing
Channel testing
Does the product fulfil the concept statement?
Product Development & Testing
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Product-related decisions
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Content & form of
presentation (number of
product variants?)
Disclosure of identity (blind
or branded?)
Explanation/supervision of
test
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Location of test
Use of comparator products
Consumer panels
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Representative?
Ad hoc surveys
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Who? When? Where?
Lead users
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Innovators/early-adopters
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Early experience with problem
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Rich and accurate feedback
Highly motivated
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Pioneers in (B2B) markets
Can’t find processes/materials/equipment to meet
novel requirements
Already working on innovations/prototypes
Beta-tests, early market probes, joint development
But not easy to identify …..
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Start with generic problem, network contacts,
workshops
(von Hippel, 1988)
Market testing
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Product (and marketing programme) are
tested in realistic market conditions prior to
full-scale launch
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Acts as a final screen in the NPD process
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cancel projects which fare badly
Provides real data to test assumptions from
market research, analysis and planning
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product, advertising, positioning, distribution,
branding, pricing, packaging, sales budgets
improved sales and profit forecasts
Costly, time-consuming, highly visible
Market testing
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Standard test markets
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Controlled test markets
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full marketing campaign in small number of
representative cities
store audits, consumer & channel surveys
panels of stores in different geographical
locations
panels of shoppers
Simulated test markets
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simulated shopping environments
“Probe & learn” NPD process
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Gain market insights by experimentation
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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
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Notebook market (1986-90)
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30+ product launches
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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.