Giorgos Skoulidas

Part One Overview and Opportunity Identification/Selection

Chapter 1: The Strategic Elements of Product Development
Radical innovation: We are defining radical innovation as innovation that displaces or
makes obsolete current products and/or creates totally new product categories.
Competitors do the most damage when (1) there is so little product differentiation that price-
cutting takes everyone’s margins away or (2) when they have a desirable new item that we
don’t.
A successful new product does more good for a firm than anything else.
The new products team ideally is cross-functional, comprising personnel from marketing,
R&D, engineering, manufacturing, production, design, and other functional areas as well. All
members of a new products team make an important contribution to prod
Heuristics: rules of thumb that firms have found work for them: “On items such as this,
about 30 percent of the people who hear of a new brand, try it,” or “When the product
engineer from R&D disagrees with the process engineer from manufacturing, it’s better to go
with manufacturing.”
Simple intuition: hunch, or gut feel.
The term process innovation usually applies to functions, especially the manufacturing or
distribution process, and every new product benefits from this type of innovation.
The term product innovation applies to the total operation by which a new product is
created and marketed, and it includes innovation in all of the functional processes.
Sometimes the new product process is accidental, or serendipitous.
New-to-the-world products revolutionize existing product categories or define wholly new
ones. They are the most likely to require consumer learning and/ or incorporate a very new
technology. Launching them means risk.
Invention refers to the dimension of uniqueness—the form, formulation, function of
something. It is usually patentable.
Innovation refers to the overall process whereby an invention is transformed into a
commercial product that can be sold profitably. The invention may take but a few moments.
We have far more inventions than we do innovations.
Jobs in New Products Process:
Functional representative: These people may be representatives on several teams or just
one. An example is a marketing researcher or a production planner.
Project manager or team leader: This role is leader of a team of people representing the
functions that will be required.
New products process manager: responsible for helping project managers develop and
use good new product processes.
The Strategic Elements of Product Development
 The new products process is the procedure that takes the new product idea
through concept evaluation, product development, launch, and postlaunch. This
procedure is usually depicted as a phased process with evaluative steps between the
phases, but as you will see in upcoming chapters, it is rarely so straightforward
 The product innovation charter is essentially a strategy for new products. It
ensures that the new product team develops products that are in line with firm
objectives and strategies and that address marketplace opportunities.
 Product portfolio management helps the firm assess which new products would be
the best additions to the existing product line, given both financial and strategic
objectives.
The goal of a new products process is to manage down the amount of risk and uncertainty
as one passes from idea generation to launch.
The activities are not sequential, but overlapping. There is much pressure for firms to
accelerate time to market for new products, and a certain amount of phase overlapping is an
important tool in speeding new products to market.
Product development is truly multifunctional, where all functions (and, increasingly, the
customer as well) work together on a cross-functional team to accomplish the required tasks.
An evaluation task that includes conditional Go decisions is sometimes called a fuzzy gate.
When teams actually make a full “Go” decision, but fail to commit any resources to the
project. This is known as a hollow-gate problem and results in too many projects underway
and, inevitably, cost overruns and launch delays.
These characteristics (overlapping phases, fuzzy gates, and flexibility) are features of what
is called the third-generation new products process, which is the way most firms interpret
the process depicted in Figure 1.5
The PIC is developed by senior management and provides guidance to all functional areas
involved in innovation. It defines a scope of activity for new product development, helping the
product team identify what opportunities lie within the boundaries and where they should
focus their efforts. That way, perhaps fewer projects may be pursued, but they will generally
be of higher value to the firm.

Chapter 2: The New Products Process

The product innovation charter (PIC) starts with an honest situation assessment and
opportunity identification.
The new products process is the path the new product takes from idea to the time of
launch and beyond.
There needs also to be an assurance that the firm is developing the right products with
respect to its product portfolio.

The Phases in the New Products Process

Phase 1: Opportunity Identifi cation and Selection

At least three main streams of activity feed strategic planning for new products. They are as
follows.
• Ongoing marketing planning. Example: The annual marketing plan for a CD-ROM line
calls for a line extension to meet encroachment of a new competitor selling primarily on
price.
• Ongoing corporate planning. Example: Top management adopts a strategy that says
either own a market (meaning get either a first- or second-place share) or get out of it. This
will require new product activity in all desirable markets where the firm holds a minor
position.
• Special opportunity analysis. One or more persons (in the firm or a consulting firm) are
assigned to take an inventory of the firm’s resources (people, facilities, reputations,
whatever).
From these activities, the opportunities identified can be sorted into four categories. Here are
illustrations:
• An underutilized resource: A bottling operation, a strong franchise with dealers, or that
manufacturing process engineering department.
• A new resource: DuPont’s discovery of Surlyn, a material with hundreds of potential uses.
• An external mandate: The market may be stagnant, the competition may be threatening,
or customer needs may be evolving. Challenges like this will cause the firm to search for
new opportunities, as did the Tasty Baking Company in the case at the end of this chapter.
• An internal mandate: Long-range planning often establishes a five-year-out dollar sales
target, and new products people often must fill part of the gap between current sales and
that target. That assignment is called the product innovation (and/or acquisition ) gap.
Other common internal mandates are simply upper management desires, such as Steve
Jobs’s stated goal to “reinvent the phone” with the iPhone project.

Creating new product ideas, usually called product concepts.

The most fruitful ideation involves identifying problems people or businesses have and
suggesting solutions to them. This is the problem find-solve approach.

Before development work can begin on new ideas, they need to be evaluated, screened,
sorted out. This activity, sometimes called screening or pretechnical evaluation, varies
tremendously
Here comes the first formal type of evaluation. Concept test is used to see what potential
costumers think about the product. These views all come together in the full screen. It uses a
scoring model of some type and results in a decision to either undertake development or
quit. If the decision is to go ahead, the evaluation turns into project evaluation, where we
no longer evaluate the idea but rather the plan we propose for capitalizing on that idea.
This involves preparing a statement of what is wanted from the new product. Firms using
Quality Function Deployment (a method of project management and control) see this as
the first list of customer needs.
The Product protocol should be benefits the new item is to yield, not the features the new
item is to have.
-
The first three phases comprise what is popularly called the fuzzy front end (of the new
product process).
-

This is the phase during which the item acquires finite form—a tangible good or a specific
sequence of resources and activities that will perform an intangible service.
The marketing plan is sketched and gradually fleshed out.

The critical step (if a company takes it) is the market test, a dress rehearsal for the launch,
and managers hope any problems discovered are fixable between dress rehearsal and
opening night. If not, the opening has to be delayed. Given the time pressures involved,
managers have come up with many new ways to do reliable market tests quickly, to
complement the familiar test market, which can be inordinately time-consuming and costly.
First to mindshare
The firm with mindshare in a given product category is the one that the target market
associates with the product category and that is seen as the standard for competitors to
match. Firms that strive for mindshare think not about the speed of an individual product’s
development and launch, but rather about creating a dominant position in the mind of the
customer

Discovery-driven planning requires that managers make assumptions about the future in
order to build their forecasts and targets, recognizing that these assumptions may be quite
wrong. As more information becomes available, the targets are rethought, the forecasts
adjusted, and the plan evolves. A guiding principle in discovery-driven planning is the
reverse income statement, which starts from the bottom (required profits) and works
backward to required levels of revenues and costs.
Serial innovators: These are usually mid-level, technical employees who think and work
differently and follow their own new products process.
spiral development: If the final form of the product is truly unknown, it may make sense for
the firm to try several prototypes in rapid succession, showing them to customers, getting
feedback, trying another prototype, then continuing in this manner until an acceptable form is
identified.
The earliest prototype is called the focused prototype, it’s tested with customers, their
feedback is obtained and the next prototype is prepared for the cycle to continue.
In spiral development:
probe-and-learn: Through interaction with customers, designers are inspired to probe,
experiment, and improvise, and as a result, may come up with a successful new-to-the-world
product.
lickety-stick: The developing team develops prototypes from dozens of different new
product ideas (“lickety”), eventually settling on a prototype that customers like (“stick”).

Chapter 3: Opportunity Identification and Selection: Strategic Planning

for New Products
Corporate leaders make many strategy statements. Top-level statements like these guide a
whole firm and are parts of what are sometimes called mission statements.
A product platform is defined as a set of systems and interfaces that form a common
structure. It is from this common structure that a family, or stream, of products can be
developed efficiently. In simple terms, a product platform can be thought of as a basis for all
individual product projects within a family of products.
Modularization: decomposing complex systems into subsystems or modules. A car, for
example, can be decomposed into its engine-transaxle combination, interior, body,
dashboard, and so on. Honda and Toyota combine these subsystems into modular
products built on the same platform.
Platforms evolve in two ways:
bottom-up: The firm found a way to consolidate components within an existing family of
products to gain scale economies.
top-down platform procedure: The platform was designed at the outset to become the
basis for a family of products, possibly for years into the future.
Managers will usually prefer top-down platform development rather than development of a
single product, as it will certainly be more expensive and time-consuming. But the benefits
are the cost and time efficiencies that will be obtained with future products built from the
same platform, and ultimately, greater future competitive advantage.
The value of an established brand is called its brand equity.
Types of platforms:
-Technological platforms (shared components)
-Another common platform is the category platform (shared design or technology), either
product type or customer.
-Brand platforms (shared brand values). A company that has multiple companies like Detol
and Vanish are from RB. That all have their own platform with products

The Product Innovation Charter

The PIC is a document prepared by senior management designed to provide guidance to the
business units on the role of innovation
Background: “Why did we develop this strategy, anyway?”
The Arena (Area of Focus) Section of the PIC:
Focus is generally achieved by the use of core competencies. Technology, product
experience, customer franchise and end-use experience. Licensing or acquisition to
acquire technologies or market strengths are also fair game for inclusion in strategies.
Technology Drivers:
The most common technological strengths are in the laboratories
A firm can also have valuable non-laboratory technology.
The procedure of converting technical specification to product features and benefits, to
market needs, is called the T-P-M linkage.
Market Drivers:
Two market sources: Customer group & End-users
A variation on the single-customer focus is mass customization —where we offer all
customers a product of their individual choice
Putting one technical driver together with a market driver (dual-drive strategy) yields a clear
and precise arena focus.
Goals and Objectives Section of the PIC
goals are longer-range
objectives are short-term
goals and objectives are of three types: profit, growth and market status (market share)

Special Guidelines Section of the PIC

Degree of Innovativeness:

 First-to-market (risky)
 Can get it with: state-of-the-art breakthrough, leveraged creativity (most
common) which is to tweak technology in a new way, applications engineering,
where the technology may not be changed at all, but the use is totally new.
 Adaptive product: taking one’s own or a competitive product and improving it in
some way. The improvement may be technical or nontechnical.
 Imitation or emulation: deliberately wait to see winners emerge from among the
pioneers and early adopters.
Timing

 First: pioneering
 Quick second: tries to capture a good second-share position, perhaps making no
significant improvement, or just enough to promote.
 Slower : a firm knows the outcome of the pioneer’s efforts and has time to make
a more meaningful adaptation.
 Late: is usually a price entry keyed to manufacturing skills.

Miscellaneous guidelines:
product integrity: all aspects of the product are internally consistent

How to Prepare a Product Innovation Charter

1) we are always looking for opportunities, inside the firm or outside it.
2) we have to evaluate,rate, and rank them
3) we simply begin filling out the PIC form—focus, goals, and guidelines.
Product Portfolio Analysis: The New Product’s Strategic Fit
A strategic criterion might include:

 Strategic goals
 Project types
 Short-term versus long-term projects
 High-risk versus low-risk projects
 Market familiarity
 Technology familiarity
 Geographical markets
Whatever criteria are used, the objectives of developing the product portfolio remain the
same:
• Strategic alignment: most importantly, the portfolio ensures that the mix of products
reflects the PIC. Any new projects should be “on strategy”.
• Assessing portfolio value: projects should be selected so that the commercial value
of products in the pipeline is maximized. The familiar metrics such as net present value
or return on investment can be used.
• Project balance: the portfolio should make it easy to select projects that complement
the existing product line; for example, too many high-risk projects can be balanced by
 selecting a couple of lower-risk ones. There should be a nice mix of new-to-the-world
products, improvements and revisions, costreducing innovations, and so forth.
• Number of projects: one must also consider the number of products in the pipeline, as
resource commitments to too many projects inevitably leads to underfunding and
gridlock. Resources required by the portfolio should be in balance with the amount of
resources available.

Part 2: Concept Generation

Chapter 4: Creativity and the Product Concept
Managers can encourage creativity by:
- Creating competitive teams.
- Allowing innovators to play around with resources.
- Introducing an idea bank to store and document ideas from earlier.
- Giving out special rewards (creative people are unimpressed by group rewards).
Some organizations use a technique called itemized response. All client trainees must
practice it personally. When an idea comes up, listeners must first cite all its advantages.
Then they can address the negatives, but only in a positive mode.
Creative abrasion: encourage conflict by putting certain employees together on the same
team.

Three inputs required by the creation process:

 Form: This is the physical thing created, or in the case of a service, it is the
sequence of steps by which the service will be created.
 Technology: This is the source by which the form was attained.
 Need/Benefit: The product has value only as it provides some benefit to the
customer that the customer sees a need or desire for.
We put these together this way: Technology permits us to develop a form that provides
the benefit.
Any of the three can start the process, and in each case either of the other two can come
second. Example: Customer has a NEED, which a firm finds out about. It calls on its
TECHNOLOGY to produce a FORM that is then sold to the customer. Putting the benefit
last is very risky. Therefore we often put benefit first.
 The Concept Statement
Once a concept appears, with two of the three dimensions, we have to screen it before
undertaking development.
We require a product concept statement: Technical people and intended customers
must tell us the concept is worthy of development.
A concept, then, is a verbal and/or prototype expression that tells what is going to be
changed and how the customer stands to gain (and lose)
Important Sources of Ready-Made New Product Ideas:
User toolkits: A toolkit is a user-friendly set of design tools that customers can use,
together with their understanding of their own needs, to customize a product that would
be best suited to them. Examples: product configuration where you can configurate a
product (IKEA closet). Mass customization allows user toolkits.
Crowdsourcing: go online to obtain product ideas from customers efficiently.
Lead users: the customers associated with a significant current trend.
Open innovation: the process a company employs to externally search for. . . research,
innovation, new technologies, and products.
- Inbound open innovation: pay for help with innovation from other companies.
- Outbound open innovation: sell your innovation to others who can commercialize.

Chapter 5: Finding and Solving Customers’ Problems

Gathering the Problems
1) Internal Records: The most common source of needs and problems comes from an
organization’s routine contacts with customers and others in the marketplace. Daily or
weekly sales call reports, findings from customer or technical service departments, and tips
from resellers are examples.
2) Direct Inputs from Technical and Marketing Departments: Understanding about end
users and other stakeholders also lies in the minds of marketing and technical people. Most
of them have spent time with customers and end users.
Problems with using in-house people to report on customer problems: 1) each suggestion is
usually someone’s perception of what the customer problem is (2) there is usually a solution
given with each suggestion. These problems, including the time and difficulty of actually
gathering memories, lead us to depend more on active searching for stakeholder problems.
That is, making direct contact with all relevant stakeholders, asking them what their
problems and needs are.
3) Problem Analysis
Problem Analysis Procedure: reverse brainstorming: participants generate a list of key
problems with the product currently in use, then group and prioritize these such that product
development can focus on addressing the most important problems.
Step One Determine the appropriate product or activity category for exploration.
Step Two Identify a group of heavy product users or activity participants within that
category. Heavy users are apt to have a better understanding of the problems, and they
represent the bulk of the sales potential in most markets. A variation is to study non users to
see if a solvable problem is keeping them out of the market.
Step Three Gather from these heavy users or participants a set of problems associated with
the category. A good method of doing this is asking respondents to rate (1) the benefits they
want from a set of products and (2) the benefits they are getting. Omniscient proximity:
meaning that users face a minor problem frequently, so it is the first one mentioned.
Step Four Sort and rank the problems according to their severity or importance. It uses (1)
the extent of the problem, and (2) the frequency of its occurrence. This bothersomeness
index is then adjusted by users’ awareness of currently available solutions to the problem.
Methodologies to Use
Experts We have already mentioned going to the experts—using them as surrogates for
end users based on their experience in the category under study. Such experts can be found
in the sales force, among retail and wholesale distribution personnel, and in professionals
who support an industry.
Published Sources Published sources are frequently useful—industry studies, the firm’s
own past studies on allied subjects, government reports, investigations by social critics,
scientific studies in universities, and many others.
Stakeholder Contacts The third, and most productive, is to seek out the voice of the
customer (VOC)—that is, we will ask household or business/industry customers directly, via
interviewing, focus groups, direct observation, or role playing.
Interviewing The most common method by far is direct, one-on-one interviewing.
- Questioning individuals about product use and problems
- Phone, lab on the street
- Easy in-depth questioning (why, when and where?)
- Can be informal and inexpensive
- Also very expensive and time consuming
Focus Groups (qualitative technique)
- exploratory and depth-probing type of discussion required,
- easy and inexpensive to set up and use.
- stimulating people to speak out about things they are reluctant to mention when
in one-on-one interview situations. It’s much easier to talk about one’s problems
when others in the group have already admitted they have problems, too.
- High costs
Invite scientists and top-executives to avoid prayer groups: Managers sit behind the
mirror and pray for the comments wanted rather than really listening to what users
are saying.
Observation: Observation methods involve watching customers (or noncustomers) using
products in their own environments. The new product team observes the data carefully for
actions, body language, and so on and tries to identify customer needs and wants, and new
product ideas that might satisfy these needs.
- Helps to identify problems or unmet needs that customers did not realize.
 - Expensive and time-consuming
Role Playing There is little evidence of its successful use in generating ideas for new
products. Presumably, it would be valuable in instances where product users are unable
to visualize or verbalize their reactions. It should also be valuable where consumers are
emotionally unable or unwilling to express their views—for example, in areas of personal
hygiene.
4) Scenario analysis —comes into play because the ideal problem for us to find is one that
customers or end users don’t know they have at this time. We have to stay one step ahead
of the customers by anticipating their problems.
The scenario analysis procedure:
1) paint a scenario.
2) study it for problems and needs.
3) evaluate those problems and begin trying to solve the most important ones.
We distinguish scenarios between:
(1) extending the present to see what it will look like in the future
(2) leaping into the future to pick a period that is then described.
Leap studies can be static (there is no concern about how we get there) or dynamic (the
focus is on what changes must be made between now and then if the leap scenario is to
come about—the interim time period is the meaningful focus)

In a wild card study, one assesses the likelihoods of occurrence of the identified events
and investigates the threats or new product opportunities they suggest.
Solving the Problems
Group Creativity
Generally, individuals can handle really new ideas and find radical solutions to problems
better than groups can. Some feel that one reason small firms are more innovative than
large firms is that they do not often use group creativity. Brainstorming: One person
presents a thought, another person reacts to it, another person reacts to the reaction, and so
on.
Brainstorming

Rules to make it effective: mind the rules, number the ideas, get physical.
Brainsketching: participants draw their ideas rather than expressing them in words.
Brainsketching helps participants draw more connections with earlier ideas when coming up
with new ideas.

Electronic Brainstorming and Computer-Assisted Creativity Techniques

Electronic brainstorming, a form of brainstorming assisted by group support systems (or
GSS ) software, is said to overcome these limitations of traditional brainstorming, as it allows
participants to all answer at once, and also to answer anonymously.
Seeing the responses stimulates even more ideas and encourages follow-up discussion.
Electronic brainstorming outperforms traditional brainstorming in terms of productivity and
output of unique ideas.
Online Communities
An online community can be defined as any group that interacts using a communications
medium such as online social networking.
Private online communities consist of 500 or fewer carefully selected members.
Firms can also access proprietary online panels (POPs) , which may contain hundreds of
thousands of individuals who are statistically representative of a target market.
Online communities allow firms to obtain new ideas from customers and get feedback on
new concepts. They are also a way to establish rapport with customers, enable customer
support, and build emotional bonds between customers and the firm.
Managing and building the community requires hiring personnel.
A community takes time to mature and the longer it is in operation, the more difficult Is to
organize the content and make it easy for participants to find their way around.
Disciplines Panel: assemble experts from all relevant disciplines and have them discuss
the problem.
Chapter 6: Analytical Attribute Approaches: Introduction and Perceptual
Mapping
Product attributes are of three types:
- Features (what the product consists of)
- Functions (what the product does and how it works)
- Benefits (how the product provides satisfaction to the user)
Analytical attribute techniques allow us to create new product concepts by changing one
or more of its current attributes or by adding attributes, and to assess the desirability of these
concepts if they were to be developed into products.
perceptual gap analysis (quantitative attribute technique)
conjoint analysis is also a quantitative technique.
And several others such as dimensional analysis, checklists, relationships analysis, and
analogy.

Gap analysis
Gap analysis is a statistical technique with immense power under certain circumstances. Its
maps of the market are used to determine how various products are perceived by how they
are positioned on the market map.
Gap maps are made in three ways:
determinant gap map: Managerial expertise and judgment is used to plot products on a
map.
Determinant gap maps are speedy and cost-efficient, but have the weakness of being driven
by only managerial judgment. Customer perceptions may indeed be quite different. Plus,
brand perceptions might be more difficult for managers to judge correctly.
AR perceptual gap map: a manager uses customer attribute ratings to get data from users.
Attribute ratings (AR) perceptual gap mapping asks market participants to tell what attributes
they believe products have.
Factor analysis is typically used to reduce the large number of attributes to a small number
of underlying dimensions (also called factors), which can then serve as the axes of the
perceptual map.
Cluster analysis can then be used to group individual respondents together into benefit
segments based on their preferences.
OS perceptual gap map: a manager uses overall similarities to get data from users.
Perceptual maps are based on marketplace perceptions of reality, which may or may not be
accurate. They can complement each other, and both have a place in our work.
All gap mapping is controversial, perceptual maps especially so. The most troublesome
aspect is that gap analysis discovers gaps, not demand.
Qualitative techniques
Trade-off analysis (often called conjoint analysis) is a technique that is more commonly
used in concept evaluation, but it can be used in generating high-potential concepts for
future evaluation. Trade-off analysis refers to the analysis of the process by which customers
compare and evaluate brands based on their attributes or features.
A full-profile conjoint analysis is one for which we obtain information on all possible levels
of all the product’s attributes.
Is Conjoint the Right Method?
One should be able to break down the product into discrete attributes. Conjoint analysis
assumes that customers combine these features rationally when evaluating brands, and
there are cases where this is not a realistic assumption.
With complex products such as cars is that there are so many hundreds of attributes that
one might conside, but the average customer can only handle about 10 of these in a given
conjoint stud, at most. The researcher must be certain that all the important ones are
included.
Other issues are just not handled by conjoint analysis. Purchase occasion is not included,
variety-seeking behavior is not considered and decisions made jointly may pose difficulties.
Adaptive conjoint analysis shows only a few attributes at a time to the respondent and
adapts to the respondent as the conjoint exercise goes on. In the adaptive technique, the
respondent is first asked which attributes are most important and which levels are most liked
or disliked, then pairs of options are shown to the respondent that focus only on the most
important attributes and levels that are most liked or disliked.
Choice-based conjoint analysis in which the respondent is shown several alternative
product choices and is asked which he or she would prefer.
Both of these procedures minimize the number of attributes and levels any one respondent
has to be exposed to.
A dimensional analysis uses any and all features. The task involves listing all of the
physical features of a product type. Product concept creativity is triggered by the mere listing
of every such feature, because we instinctively think about how the feature could be
changed.
A checklist produces a multitude of potential new product concepts, but most of them will be
worthless.

Creativity template exists of four types of templates:

- Attribute dependency template: Find a functional dependency between two independent
variables, e.g. color of ink changes on cup if fluid is hot.
- Replacement template: Remove one of the components of the product and replace it with
one from another environment, e.g. antenna on a Walkman is replaced by the headphone
cord.
- Displacement template: Remove an intrinsic component and its function, this may create
another product as the function changes, e.g. removing cd drives on laptop to get ultra-thin
PC.
- Component control template: Identify and create a new connection between a
component internal to the product and one that is external to the product, e.g. toothpastes
with added whiteners.
Another method is analogy. Analogy is getting ideas by looking to others. For example a tire
repair store that gets idea by looking to a coffee boutique.
The value curve creation approach focuses on adjusting key attributes of current products in
order to create customer value systematically. Four questions drive this model:
- Reduce: can we reduce any attributes to levels that are below industry standards?
- Eliminate: can we totally eliminate attributes that are industry standard?
- Raise: can we increase any attributes to levels above industry standards?
- Create: can we create any new attributes that are not industry standard?
Another way to think about product attributes is in terms of product enhancements:
modifications to the core product that provide new benefits to customers:
- Upgrade: improve quality of the core product for customer segments. Upgrades effectively
segment the market vertically (price-sensitive customer versus those who see value in
paying for the upgrade)
- Add-ons: add extra products in order to customize or provide variety, e.g. a cruise ship
delivers three types of tours. Add-on enhancements segment the market horizontally, e.g.
the cruise that targets segments according to preference
- Extras: add features that appeal to customers depending on their usage rate, e.g. a new
service for a hotel like parking. Extras, such as discounted parking for high-users segment
the market according to usage range.
- Accessories: provide stand-alone complementary products, e.g. Apple makes a phone
case for their phones. Create a product system and contribute to increasing switching costs.

Chapter 7
The overall purpose of evaluation is to guide us to profitable new products.

The Cumulative Expenditures Curve

In the middle of that figure, a gradually upward-sloping curve represents the accumulation of
costs or expenditures on a typical new product project from its beginning to its full launch.
The early expenditures curve is representative of product development in technical fields,
such as pharmaceuticals, optics, and computers.
The lower curve in the figure shows the opposite type of firm, say, a consumer packaged
goods company. Here the technical expenditures may be small, but a huge TV advertising
program is needed at introduction.
The Risk/Payoff Matrix

First, throwing out a winner is very costly, because the ultimate profits from a winning
product are bound to be much greater than all of the development costs combined, let alone
those in just the next step. So error AB is much worse than BA.
The new products team should consider four generic risk strategies:
- Avoidance: Eliminate the risky product project altogether, though an opportunity cost
is incurred.
- Mitigation: Reduce the risk to an acceptable, threshold level, perhaps through
redesigning the product to include more backup systems or increasing product
reliability.
- Transfer: Move the responsibility to another organization, in the form of a joint
venture or subcontractor, for example. The other party would be better equipped to
handle the risk.
- Acceptance: Develop a contingency plan now (active acceptance) or deal with the
risks as they come up (passive acceptance).
The Decay Curve
That figure depicts the percentage of any firm’s new product concepts that survive through
the development period.

Decay curve C is roughly the shape of one decay curve from a leading company in the
paper industry that wanted to kill off all possible losers early and spend time developing only
those proposals worthy of marketing.
Decay curve A represents one for a service firm that had very low development costs and
wanted to drop a project only when there was solid evidence against it.
Planning the Evaluation System
We usually assume everything is tentative, even up through marketing.
What results in some cases is a sort of rolling evaluation. The project is being assessed
continuously, figures are penciled in, premature closure is avoided, and participants avoid
mindsets of good and bad. This is, in a way, dealing with risk via acceptance or mitigation.
Potholes
One critical skill of product developers is the ability to anticipate major difficulties, the
potholes of product innovation.
We should carefully scan for the really damaging problems (the deep holes) and keep them
in mind when we decide what evaluating we will do. If the pothole is deep enough, the
development team may have to seriously consider the risk avoidance option: Drop the
project!
Surrogates
The timing of factual information does not often match our need for it. So, we look for
surrogate questions to give us pieces of information that can substitute for what we want to
learn but can’t.
The A-T-A-R Model
This is taken from what is called diffusion of innovation, explained this way: For a person
or a firm to become a regular buyer/user of an innovation, there must first be awareness that
it exists, then there must be a decision to try that innovation, then the person must find the
item available to him or her, and finally there must be the type of happiness with it that leads
to adoption, or repeat usage.
- For awareness, we want to know if the buying unit has been sufficiently informed to
stimulate further investigation and consideration of trial. If it has only heard the product’s
name, it probably won’t.
- For trial of our new product, we might imagine an in-store situation where the prospective
customer tries out the smart phone and sees if the product is satisfactory.
Sometimes firms use vicarious trial where a person or fim who did try something shares
results with someone who can’t try it. But trial there should be
In a trial, we want two things to happen:
1. The buying unit went to some expense to get the trial supply—if there was no cost,
then we can’t be sure there was evaluation of the product message and interest
created. Anyone can taste some sausage in a supermarket, but that doesn’t mean
the taste was a true trial.
2. The buying unit used the new item enough to have a basis for deciding whether it is
any good.
- For availability, we want to know whether the buyer can easily get the new product if a
decision is made to try it.
Another measure commonly used is all commodity volume , or ACV, which is the
percentage of the market that has access to the product in local distribution channels.
- Repeat is easy for consumer packaged goods (usually, a repeat purchase), but it really
means the trial was successful—the buying unit was pleased.
The evaluation techniques (primarily concept testing, product use testing, and market
testing) will provide the data needed for the A-T-A-R model.

Concept testing
It is in concept testing where we get our first confirmation that this will be a quality product.
We save time by gathering information and making decisions that help assure the product
will move through development fast, and with a minimum of looping back to correct some
problem.
Concept testing is part of the prescreening process, preparing a management team to do
the full screening of the idea by providing input into the full screen just before beginning
serious technical work.
Concept testing consists of several evaluations:
The Product Innovation Charter, Market Analysis, Initial Reaction, Concept Testing and
Development
The PIC itself will eliminate many new product ideas. In advance and without knowing the
concepts, the firm decides to reject ideas that violate PIC guidelines. Following the PIC
should result in excluding the following kinds of ideas:
• Ideas that require technologies the firm does not have.
• Ideas to be sold to customers about whom the firm has no close
knowledge.
• Ideas that offer the wrong degree of innovativeness (too much or too
little!).
• Ideas wrong on other dimensions: not low cost, too close to certain
competitors, and so on.
Market Analysis: The second evaluation that precedes appearance of the concept is an in-
depth study of the market area that the product innovation charter has selected for focus.
The study takes place immediately after the PIC is approved, and the depth of the study
depends on how well the firm already knows the market selected. Ongoing ideation in
support of present product lines takes place within a standing type of PIC, and no special
study is necessary.
Initial Reaction
Quick and inexpensive initial reactions must resist the “bazooka effect” (where suggestions
are quickly blasted out), so several provisos apply:
1. The idea source does not usually participate in the initial reaction.
2. Two or more persons are involved in any rejection decision.
3. The initial reaction, though quick, is based on more than a pure intuitive sense.
One suggested way for firms to do a rough early screen is to evaluate it on three factors:
• Market worth: What is the attractiveness of the new product to the targeted customer
population?
• Firm worth: Is the new product project viewed positively by management? Does this new
product project enhance the firm’s competencies?
• Competitive insulation: Can the product’s advantage be maintained against competitive
retaliation?

Important things to know about concept testing

- When the prime benefit is a personal sense, such as the aroma of a perfume or the
taste of a new food, concept testing usually fails. The concept cannot be
communicated short of actually having some product there to demonstrate.
- Concepts embodying new art and entertainment are tough to test. Whistler could not
have concept-tested his idea for a painting of his mother.
- When the concept embodies some new technology that users cannot visualize, it is
also a weak tool.
- There are times when firms mismanage concept testing and then blame the tool for
misleading them.
- Consumers sometimes simply do not know what problems they have.
- On services, because there is usually little technical development, there is less need
to do concept testing.
The Purposes of Concept Testing
1. To identify the very poor concept so it can be eliminated.
2. To estimate the sales or trial rate that the product would enjoy—a sense of market
share or a general range of revenue dollars.

The number or percentage of people who definitely would buy or probably would buy
are usually combined and used as an indicator of group reaction. This is called the
top-two-boxes score, as it is the total number of times one of the top two boxes on
the questionnaire (defi nitely or probably) were checked.

3. To help develop the idea, not just test it.

Considerations in Concept Testing Research
Prepare the Concept Statement
A concept statement states a difference and how that difference benefits the customer or
end user: “This new refrigerator is built with modular parts; consequently, the consumer can
arrange the parts to best fit a given kitchen location and then rearrange them to fit another
location.”
Format
Several formats:
- A narrative (verbal) format
- Drawings, diagrams, and sketches
- Prototypes, or models which are a more expensive form of concept statement
because many decisions have to be made about the new product to get it into a
prototype. Prototypes are useful only in special situations with concepts so complex
that the buyer cannot react without more knowledge than a simple narrative would
give.
- Virtual reality captures the advantages of the prototype without most of the
disadvantages.
One decision that needs to be made here is whether to present a commercialized or
noncommercialized concept statement.
A noncommercialized concept statement (or a stripped description) presents just the
facts.
A commercialized concept statement (or an embellished description) that sounds more
like how the product would actually be promoted or advertised to customers.
If testing several concepts, be consistent: don’t mix commercial with noncommercial concept
statements, and don’t mix radically new concepts with minor improvements.
Offering of Competitive Information

Customers of all types know much less about their current products and other options than
we would like. A new concept may well offer a benefit that the customer doesn’t realize is
new. Many new product managers, however, don’t like to overload the concept statement; it
diffuses the message and confuses the customer.
Price
Price is part of the product and buyers can’t be expected to tell purchase intentions without
knowing price. An exception occurs for those complex concepts requiring many decisions
before the cost is known.
Define the Respondent Group
The solution is to think in terms of stakeholders —any person or organization who has a
stake in the proposed product.
Select the Response Situation
There are two issues in the response situation: (1) the mode of reaching the respondent, and
(2) if personal, whether to approach individually or in a group.
The real-time response survey, combines the best features of focus groups and surveys
and has proved useful in screening new consumer product concepts.
Another similar technique now used in concept evaluation is to employ group support
systems (GSS) software in a focus group setting and to have the participants react to
different versions of products.
Prepare the Interviewing Sequence
We first explore the respondent’s current practice in the area concerned, asking how people
currently try to solve their problems, what competing products they use, and what they think
about those products. How willing would they be to change? What specific benefits do they
want? What are they spending? Is the product being used as part of a system?
This background information helps us understand and interpret comments about the new
concept, which are asked for next.
Variations
There are variations to all these procedures. The above procedure assumed one-on-one
contact with potential buyers. The real-time response surveys employing GSS, discussed
earlier, can provide information on buying intentions efficiently as groups of customers
respond to the product concepts presented to them.
Analyzing Research Results
Through benefit segmentation, a firm may identify unsatisfied market segments and
concentrate its efforts on developing concepts ideally suited to the needs of these segments.
Identifying Benefit Segments

We can ask them to rate how important each attribute was in determining their preference
among brands. These importance ratings can be used to model existing brand preferences
and predict likely preferences for new concepts.
Cluster analysis puts observations together into relatively homogeneous groups on an
importance map. Generally, practical judgment or experience play an important role in
criteria and rules of thumb. Like factor analysis, cluster analysis is also a data reduction
method.
Joint Space Maps
We can now overlay the benefit segments onto our perceptual map. The result is called a
joint space map, it allows us to assess the preferences of each benefit segment for different
product concepts. Joint space maps can be developed using ideal brand ratings or
preference regression.
The most direct way is to get customers to rate their ideal brand on each attribute. Using
the factor score coefficient matrix, we convert the ideal brand ratings to factor scores and
plot the ideal brand positions directly on the perceptual map.
Preference Regression
Preference regression is another method that can be used to identify the optimum
combination of attributes desired by the market. This method relies on a different kind of
numerical input. In preference regression, we do a regression analysis to relate the factor
scores of each brand to the rankings of brands. The relative sizes of the regression
coefficients we obtain give us an indication of the relative importance of each factor.
Preference regression can also be done on attribute ratings instead of factor scores.
Conjoint Analysis in Concept Testing
Conjoint analysis is extremely useful in concept testing because of its ability to uncover
relationships between attributes (features, functions, benefits) and customer preferences.
Advantages of concept testing:
- It can be done quickly and easily.
- It gives the screeners invaluable information for the sorting out of less valuable
concepts.
- It proves market research technology exists.
- It is reasonably confidential.
- It helps us learn a lot about buyer thinking.
- It enables segments and positionings to be developed in tandem with the concept.

Disadvantages:
- Concept testing is a bit treacherous—mistakes are easy and can be costly.
- It is not a tool for amateurs.

Chapter 8: The Full Screen

The full screen often involves the use of a scoring model, which is an arrangement of
checklist factors with weights (importance) on them.
1) The full screen accomplishes three objectives:
it helps the firm decide whether it should go forward with the concept or quit. It helps us look
at the feasibility of technical accomplishment (is technology up to the task, do we have it,
can we afford it?) and at the feasibility of commercial accomplishment (will we get out of
the project the profits, market share, or whatever it is we are doing product innovation for?)
2) The full screen helps manage the process by sorting the concepts and identifying the
best ones. The best of the concepts can be rank ordered or prioritized.
Unacceptable, but possibly worthwhile, concepts get cycled back into concept
development where more work may make them acceptable. Further, a record is kept of
 rejected concepts to prevent reinventing the wheel when a similar concept comes up
again later.
3) The full screen encourages cross-functional communication.
The Scoring Model
Selecting factors in real life is not that easy, and how we pick them is no accident. First, if
we could, we would use only one factor. There is one factor that covers both technical and
commercial accomplishment, a financial term called net present value of the discounted
stream of earnings from the product concept, considering all direct and indirect costs and
benefits. We use surrogates if we can’t make a good estimate for the net present value
(almost every time).

Level Four factors have answers, or at least answers we can estimate better than the factors
at higher levels.
The scoring
To combine the individual’s team member’s ratings many firms have found that groupware
(e.g., Lotus Notes) aids the process greatly.
Unusual Factors
On some factors, a bad score constitutes a veto. These are sometimes called culling
factors. (sth like a hurdle)
The Scorers or Judges
Top business unit managers (presidents, general managers) should stay out of the act,
except, of course, in small firms.
Technical people generally feel more optimistic about probable technical success, and
marketers are more pessimistic.
Weighting: some firms measure its effect using sensitivity testing
Profile Sheet
The profile sheet graphically arranges the 5-point scorings on the different factors. If a team
of judges is used, the profile employs average scores.
-
Cooper and his coauthors have advocated a two-level screening model, which combines
checklists with scoring models. The two levels are:
Must-meet criteria: they include good strategic alignment between project and strategy, and
acceptable risk-return ratio. They are designed to weed out the bad projects and function as
high hurdles for the new product project.
Should-meet criteria: they include strategic importance, product advantage to the
customer, and market attractiveness. They characterize good business propositions.
-
The Analytic Hierarchy Process (AHP) is a general technique that systematically gathers
expert judgment and uses it to make optimal decisions.
It can be applied in full screening as a way to prioritize and select new product projects.
When used as a full screen technique, AHP gathers managerial judgment and expertise to
identify the key criteria in the screening decision, obtain scores for each project under
consideration relative to these criteria, and rank the projects in order of desirability.

Chapter 9: Sales Forecasting and Financial Analysis

We begin the financial analysis with the sales forecast. This is typically the responsibility of
the marketing person on the new product team. Once sales have been projected over the
next several planning periods, we can assess costs, make profit projections, and calculate
key financial benchmarks such as net present value or internal rate of return.
The most straightforward kind of forecast to conduct is a sales analysis, used for current
technologies being sold into current markets. Time series and regression forecasts are
useful here.
For selling a new technology into a current market a product line or life cycle analysis is
recommended.
Reasonable forecasts can be obtained by analogy: the new generation’s life cycle curve
would be forecasted as similar to that of the current generation.
If a current technology is being sold into a new market, customer and market analysis would
be required to minimize the uncertainty surrounding the behavior of the new market.
For new-to-the-world or new-to-the-firm products, the best forecasting methods would be
scenario or “what-if” analyses. The forecasting is very difficult in this case.
The A-T-A-R model can be used to construct a sales or profit forecast, and market
researchers long ago pushed the early, simple models into far more powerful forecasting
devices.
Diffusion of innovation refers to the process by which an innovation is spread within a
market, over time and over categories of adopters. Individuals in the earlier adopter
categories influence the purchase behaviors of later ones through word of mouth and other
influence processes.
A diffusion model commonly used for durable goods is the Bass model, which estimates the
sales of the product class at some future time t.
Managerial judgment, or standard procedures for market potential estimation, can be used to
estimate m, the number of potential buyers. Past sales can be used to estimate p (initial trial
probability) and q (a diffusion rate parameter).
What makes forecasting difficult?
- Target users don’t always know what the new product will actually be, what it will do
for them, what it will cost, and what its drawbacks will be, nor will they have had a
chance to use it.
- Information about marketing support may be lacking.
- Internal attitudes can be biased, and politics are always present.
Actions by Managers to Handle These Problems
- Improve the New Product Process Currently in Use
- Use the Life Cycle Concept of Financial Analysis
- Use the Life Cycle Concept of Financial Analysis: Forecast What You Know. Why try
to forecast what people in the marketplace will do, if there is no reasonable way we
can do so?
Approve Situations, Not Numbers. Analyze to find what the success factors are, and
then look to see if the situation offers them.
Many firms “bet” on a top-notch scientist, sales force, trademark, or reputation.
Another situation variable is leadership. Some firms encourage the champion
system. They expect champions to force their way past a restrictive financial system.
This makes for a strange but very workable practice of evaluating teams and their
leaders, rather than the ideas they come up with. These firms don’t seek great new
products; they seek concepts that they can manage into great new products.
- Commit to a Strategy of Low-Cost Development and Marketing: Develop a stream of
new items that differ very little from those now on the market, insert them into the
market without great fanfare, and watch which ones end users rebuy. Drop those that
don’t find favor.
- Go Ahead with Sound Forecasts But Prepare to Handle the Risks: There are lots of
ways to put risk back into product innovation while managing it well. One approach is
to isolate or neutralize the in-house critics. Another approach defers financial
analysis until later in the development process. Another strategy is to use market
testing rollouts.
The riskier the new project is expected to be, the higher the required rate of return
Real-options analysis may be used to estimate the net present value of a new
product when it is still in the concept stage.
- Use Different Methods of Financial Analysis on New Products, Depending on the
Situation
- Improve Current Financial Forecasting Methods
Firms are increasingly using a combination of financial analysis and PIC considerations
when making the tough decisions on which new product projects to commit to.
The strategic portfolio model for portfolio management can clearly be used in project
selection. It is typical of a top-down strategic approach—that is, the firm or SBU lays out its
strategy first, then allocates funds across different kinds of projects.
Management can also take a bottom-up approach to strategy development by building
strategic criteria into their project selection tools.
The top-performing firms often use a combination of top-down and bottom-up approaches
and consider strategic as well as financial criteria when selecting projects.

Chapter 10: Product Protocol

It’s something that keeps the team together, something that allows them to make reasonable
speculations. In this book we will call the activity protocol preparation, and the output is a
product protocol.
What the customer actually buys consists of one or more core benefits, a formal product
presentation (physical form or service sequence), and an augmentation of things from
presale technical service to a money-back guarantee.
Purposes of the product protocol:
- to specify what each department will deliver to the final product that the customer
buys.
- It communicates essentials to all of the players, helps lead them into integrated
actions, helps direct outcomes that are consistent with the full screen and financials,
and gives all players their targets to shoot for.
- A third purpose of the protocol relates to time through the process, or cycle time.
- The protocol gives requirements in words that can usually be measured. It thus
permits a development process to be managed . It tells what is to be done, when and
why, the how, the who, and perhaps most important, the whether.
Protocol’s Specific Contents
Target Market: In most cases, we know the target market very well. Perceptual and
preference mapping techniques can be very helpful in developing this part of the protocol, as
benefit segments will have been identified and their specific needs will be understood. The
target market needs to be spelled out here, quite specifically.
Positioning Product positioning announces the item as new and gives the end user a real
reason for trying it. In the process, it shows the end user what problem it attacks and what
about it makes it better than whatever they are using now.
Product Attributes: features, functions, and benefits
Benefits are the most desirable form for a protocol to use, better than functions and
features. Information obtained from conjoint (trade-off) analysis and other concept testing
techniques can be extremely useful in determining what combinations of features, functions,
and specifications ought to be built into the product. An advantage of specifying the protocol
in terms of benefits is that it places no (or very few) constraints on the R&D staff: They are
given free rein to figure out how best to design the product so that it provides the desired
benefit.
Functions. Function attributes sometimes cause confusion.
Features. The bigger problem with features is that they deprive the firm’s most creative and
inventive people of the freedom to use their skills.
Detailed Specifications On occasions, customers make such decisions and call for
products with specific features. This is dangerous. If the customers are qualified and have
reason to know better than we do what features will do for them, we are wise to listen.
Another case where features may be needed is where a firm is benchmarking competitive
products. One strategy is to have the Best of the Best. Take the best features in the market,
all products combined, and assemble them in your new product. This sounds great, but it
means our product design is being led by competitors, not end users.
Still other situations where features will appear in protocols are
1) Where regulations stipulate a particular feature (e.g., prescription containers).
2) Where end users own major items of equipment that impose limitations (e.g., under-
dash space limitations for disk players).
3) Where established practice in a customer industry is too strong for one supplier to
change (e.g., for many years software makers had no choice but to put MS-DOS as a
feature requirement).
4) Where upper managements have personal preferences.
In general, as a conclusion to this section on attributes, it is still the best policy to write
protocols in terms of benefits, using performance or specific features if that helps explain
and doesn’t inhibit too much.
Other Components of the Product Protocol
- Timing: Most new products today must come out faster, but not all do. Some involve
major technical breakthroughs that cannot be put on the clock. The distinction needs
to be clear to all. And if there is a date to meet, it should be right here.
- Financials: Typically, the protocol will include price level, discounts, sales volume,
sales dollars, market share, profi ts, net present value, and many of the other
financial data introduced in the previous chapter.
- Production: This one is much like marketing requirements, some focusing on what
the function will prepare to do and what that will accomplish—thus, plants to be built,
volumes, and quality to be achieved.
- Regulatory Requirements: These are highly varied, but managements today
understand the need to have advanced understanding on them.
- Corporate Strategy Requirements: Key ideas (such as core competencies) will have
already been captured in the product innovation charter. Also, at this time, the
assurance of upper management support is important.
- Potholes: As we have seen before, there are potholes in product innovation, just as
they are on that stretch of highway as you drive at night—and they are capable of
bringing a new product down. Management that doesn’t take a good look ahead
deserves to hit one. We don’t usually drive into known potholes, so listing them here
helps.
VOC has been defined as a “complete set of customer wants and needs, expressed in
the customer’s own language, organized the way the customer thinks about, uses, and
interacts with the product . . . , and prioritized by the customer in terms of both
importance and performance—in other words, current satisfaction with existing
alternatives.”
If the VOC process was successful, the new product team should have obtained about
70–140 customer needs statements from these interviews. The customer needs
statements should then be organized into 15 to 25 groups, called affinity groupings.
The misconceptions about VOC that can lead to its misuse and should be avoided:
-The real value of it comes from organizing and clustering the stated needs and
prioritizing them into their relative importance. This is a quantitative process and is often
overlooked.
-Firms get VOC only from customers. Much important information can be obtained from
noncustomers, average customers, and customers who favor the competitor’s product.
-Many managers believe that customers don’t know what they want while they’re good at
stating their needs. It is up to the firm to match customer need to engineering
characteristics. This may be accomplished through Quality Function Deployment.
-It is tempting just to ask customers what they want and need, it is better to ask what
they like and dislike about current products and what outcomes they would like to see in
the future.
Quality function deployment (QFD) is a tool of project control in an industry with
incredibly complicated projects.
It can lead to reduced design time and costs, and more efficient communication between
project team members from functional areas.
QFD has also been successfully used earlier in the new products process, very early in
the fuzzy front end in concept generation, because it can help the new products team
think of novel new concepts that will satisfy customer needs.
QFD is designed to ensure that customer needs are focused on all through the new
product project: product engineering, parts deployment, process planning, and
production.
The first step of QFD is the house of quality (HOQ). The value of the HOQ to firms is in
the way it summarizes multiple product aspects simultaneously and in relationship to one
another.
Down the left-hand side of the HOQ appear the customer attributes (CAs), called need or
requirements. CAs are identified through market research: focus groups, interviews, and
the like.
At the far right of the HOQ are the ratings of the proposed new product and its main
competitors on each of the Cas.
The upper section of the HOQ shows engineering characteristics (ECs): edge
sharpness, resolution, and so on.
Finally, the top part of the house (the peaked “roof”) shows the trade-offs between ECs
that the technical personnel must consider.
 Outcomes of QFD
Everything is driven by customer needs.
QFD encourages cross-functional dialogue and interaction throughout the technical
development process—which is precisely the kind of agreement called for by the product
protocol.
QFD is expressive, in both cost and employee time, due to the extensive data collection
at the VOC phase. It probably is best suited to major projects such as new platform
development or major process reengineering.
The term matrix hell has been used to describe its application, and highly trained
technical personnel may not be able to resolve conflicts that arise.
The efficiency of QFD can also be improved by doing one or more of the following:
• Concentrate on only some of the engineering characteristics: either the
apparently most critical ones or some others where improvements might be easy
to accomplish.
• Organize the engineering characteristics into groups and designate responsibility
for these to specific functional areas (i.e., manufacturing, product design, even
marketing).
• Do a cost-benefit analysis on each engineering characteristic to identify which
ones provide the greatest benefit relative to associated cost of improvement on
that characteristic.
The protocol process is very complicated. For one thing, it is fraught with politics.

Part 4: Development
Chapter 11: Design
Design is the synthesis of technology and human needs into manufacturable products.
Technology-driven innovation starts with the technology; the role of design is to modify
the product so that it can accommodate the performance characteristics. Market-driven
innovation starts with the customer; here, design modifies the product so that it meets
customer expectations.
In design-driven innovation it is design itself that takes on the leadership role.
Contributions of Design to New Product Goals
Design for Speed to Market
Design for Ease of Manufacture
Design for Differentiation
Design to Meet Customer Needs Deep understanding of customer needs is required in order
for the firm to translate a high-potential technology into a product that provides meaningful
benefits to the customer.
User-oriented design is design based on collaboration with customers and capturing the
VOC.
Universal design is the term sometimes used to mean the design of products to be usable
by anyone regardless of age or ability. Principles of universal design can be used to develop
products for new markets based on unmet customer needs. The designer considers the
abilities of real people in real-world settings when applying universal design principles.
Design to Build or Support Corporate Identity
Many firms have established visual equity across the products they sell: a recognizable
look or feel that they use consistently. Product design can thus help build or support public
perception of the firm and, ultimately, its corporate identity.
Design for the Environment
Design for disassembly is the technique by which products can be taken apart after use for
separate recycling of metal, glass, and plastic parts. In fact, green design is now a driving
force within many firms
Design is not just a field in which artists draw pictures of new microwaves. It blends form and
function, quality and style, art and engineering. In short, a good design is aesthetically
pleasing, easy to make correctly, reliable, easy to use, economical to operate and service,
and in line with recycling standards. Ergonomics can be defined as studying human
characteristics in order to develop appropriate designs.
Product Architecture
Product architecture has been described as the process by which a customer need is
developed into a product design.
Architecture improves ultimate product performance, reduces the cost of changing the
product once it is in production, and can speed the product to market.
To understand architecture development, consider that a product contains components (a
portable CD player-recorder has a chassis, motors, disk drive, speakers, and so on) that can
be combined into chunks (the base, the disk handling system, the recording system, and
the sound production system). A product is also composed of functional elements (for a
CD player, these might include reading disks, recording sound, producing sound, and
adjusting sound quality). The product’s architecture is how the functional elements are
assigned to the chunks and how the chunks are interrelated.
A Process for Product Architecture
1. Create the Product Schematic. The schematic shows the components and functional
elements of the product and how they are interconnected.
2. Cluster the Schematic Elements. Here, the chunks (or modules) are defined.
3. Create Geometric Layout. Here, using simulations, computer-aided design, or other
techniques, the product is arranged in several confi gurations to determine the “best”
solutions.
4. Check Interactions between Chunks. Understand what happens at the interfaces
between chunks.
Clearly, careful product architecture development is critical to a firm seeking to establish a
product platform.
If the architecture permits the designers to replace chunks or modules easily, several new
products can be designed as technology improves, market tastes change, and
manufacturing skill increases.
A derivative product refers to products based on the same platform as an existing product,
but modified incrementally in terms of technology or customer need fulfillment.
Industrial designers’ job is to take a problem and somehow visualize a solution to it.
The designer can sketch hundreds of thumbnail ideations for review, working with other
personnel. The best parts of each ideation are combined into a single design in a step called
design consolidation.
There are several factors that can be considered by industrial designers when deciding on
the appropriateness of a design. These may include quality of user interface, emotional
appeal, maintenance and repair, appropriate use of resources, and product differentiation.
Emotional appeal could include, for example, the sound made by a cell phone when the lid is
closed.
Prototype Development
A comprehensive prototype would be a prototype that conjures up the image of a fully
functioning, full-size product essentially ready to be examined by potential customers.
Industrial designers make use of focused prototypes, which examine a limited number of
performance attributes or features. Focused prototypes are also used in cases where the
product is not so new to the world to learn about how the product works and how well it will
satisfy customer needs.
A more comprehensive physical prototype is necessary to determine how well all the
components fit together.
More advanced prototypes can be used as milestones— the performance of the prototype
can be tracked periodically to see if it has advanced to desired levels.
Once a comprehensive prototype exists, of course, it can be taken to potential users to be
tested in a real usage situation, and improved and refined. This is known as product-use
testing.
Industrial designers, trained to develop aesthetics (styling), structural integrity, and function
(how the product works), directly overlap with the design engineers, who are technical
people who convert styling into product dimensions or specifications. Technical people are
not devoid of ideas on styling, and stylists are not devoid of thoughts on how the mechanics
can work.
Improving the Interfaces in the Design Process
colocation (putting the various individuals or functional areas in close proximity). When the
different groups are not in regular contact and cooperating, there is a tendency for
information to be lost. Many firms have tried colocation to shorten communication lines and
increase team cohesion. Colocation helps integrate departments and improve information
flow, and also allows the team members to identify and resolve product development
problems quicker.
Too-distant collocation might lead to team members letting their problems pile up rather than
resolving them immediately.
digital colocation Sometimes, the effects of colocation are achieved without actual physical
proximity of team members, using communications technology (WebEx etc.)
Global teams (at least 2 different countries)
Produceability engineer: an independent third party who understands both design and
production and who can work in the design studios to see that production requirements are
met by design decisions. But this is not a satisfactory solution—adding another person rarely
is.
In addition, partnering upstream with vendors is a possibility. There are security risks, patent
uncertainties, cooperation that cannot be mandated in an emergency, and the like. But most
companies are doing it by using technology searches, demands that suppliers value
engineer their product, and inclusion of supplier people on the new product teams.
-
Computer-Aided Design and Design for Manufacturability
- CAD (computer-aided design)
- CAM ( computer-aided manufacturing)
- CAE (computer-aided engineering)
- DFM (design for manufacturability)
and other variations refer to computer-based technologies that allow for very efficient
product design and development. These technologies offer lots of advantages—people have
to work together to understand and use them, they force the integration of all needs into one
analytical set, they are fast, and they do more than the human can do alone even if there
were ample time. They also help improve the images of team players who may lack status.
Product designers often use design for manufacturability (DFM) techniques to find ways
to minimize manufacturing costs. An apparently trivial detail in the design phase might have
huge manufacturing cost consequences later on, so manufacturing implications need to be
considered early in product design.
front-loading: identifying and solving design problems in earlier phases of the new products
process.
The most important DFM process is design for assembly (DFA) , which is concerned with
checking ease of assembly and manufacture and encouraging product simplification.
DFA leads to fewer components, resulting in lower materials costs as well as savings in
assembly time. The DFA program can react to any design proposal with information about its
time and cost result. It also points out the major design elements contributing to slow time or
high cost, so the designer can work directly on them.
Three-dimensional CAD mock-ups have been successfully used to front-load design
problem identification. Car manufacturers also use CAD techniques to improve the decking
process. This refers to assembling the car’s powertrain into the upper body.
Stereolithography is a technology that permits free - form fabrication, that is, the creation of a
solid object directly from a three-dimensional computer model. This process is sometimes
called rapid prototyping.
How can one go about improving product design even further? A familiar concept in new
product development—the voice of the customer—might be revisited. By starting with the
customer’s needs, a better basic product would be designed in the first place. This process
is sometimes called interaction design.

Chapter 12: Development Team Management

The further across the figure, the greater is the commitment of company personnel to the
new product project. Projectization: the further to the right, the greater the projectization.
heavyweight means high projectization. Lightweight or Functional is the opposite.
Functional, means the work is done by the various departments with very little project focus.
There usually is a new products committee or a product planning committee. The work is
usually low risk and probably involves the present line of products.
An advantages associated with a lightweight team is that the team leader can usually ensure
relatively easily that members are informed about key issues, and communication is
comparatively easy. A drawback drawback is that functional area managers are strong and
can dominate the project leader, weakening his or her effectiveness.
The higher the projectization, the more the power leans toward the project manager.

The functional matrix option is the most lightweight of these. Here, a team exists, with
people from the various departments, but the project is still close to the current business.
Team members think like functional specialists, and their bosses back in the departments
win most of the face-offs.
In the balanced matrix option, both functional and project views are critical—neither
ongoing business nor the new product should be the driver.
The most heavyweight of the three is the project matrix option, which recognizes the
occasional need for stronger project push. Here projectization is high. Team people are
project people first and functional people second.
The venture option extends projectization to its ultimate and is most useful for new-to-the-
world or new-to-the-firm products. Team members are pulled out of their departments and
put to work full time on the project. A think-tank environment, designed to identify new ideas
or solutions to new product-related problems, is one type of venture. It may be spun outside
the current division or company—a spinout venture.
There are inevitably role-conflict issues in any matrix organization.

Three competencies tied to radical innovation were identified:

• Discovery: Creating, recognizing, and articulating radical innovation opportunities.
• Incubation: Transitioning the radical opportunity into a business proposal.
• Acceleration: Ramping up the business so that it is comparable to other
businesses within the parent organization.
[…] If a project is important and faces lots of opposition of the types just mentioned, then we
increase the projectization. If the opposition is very high, a venture team organization may
be called for. if the product development will entail only minor variations to a standard
product or platform, it is possible that lower projectization will be the preferred option.
Building a Team
Culture of collaboration
Firms will need to foster a culture of collaboration that will help them harness creativity,
share information among. departments, encourage growth of intellectual capital, and get
more efficient in new product development. Ideally, collaboration results in synergy: The new
product outcome is greater than the sum of the capabilities of the individual participants.
The Team Assignment and Ownership
Also critical is “buy-in” on the part of everyone on the team—this is sometimes called taking
ownership in the project. With ownership comes enthusiasm, commitment, energy, and
pride.
Groups of skilled specialists create new products, not individual leaders.
Product champion describes those who have taken ownership, but want all members of the
team to join in the ownership.
It takes three things to have ownership:
• Training helps assure that no one will take ownership without the skills and
knowledge required by the task.
• Empowerment means that a person has been cut loose. It is essentially a
statement from senior management that they are ready and willing to trust the
person’s judgment.
• Motivated means the person has been encouraged to want to succeed.
Selecting the Leader
Leaders must be general managers. They must be able to spot the need for change and
convince others of this need. They also need to get potential team members to accept the
idea of being on a team, ensure their commitment, encourage information sharing, increase
interaction, and generally feel comfortable working with people from other functional
areas.They lead without direct authority and so must win personal support. They must have
strong self-confidence, empathy, a good self-awareness of how others see them, and be
experts in personal communication.
Senior management usually prefers to pick the leader and then let that leader identify the
team players. This increases the likelihood of good team chemistry and commitment, but
also assures that a capable leader is leading. Senior management can also help increase
the leader’s chance of success by providing appropriate resources and empowering the
leader to make key decisions.
Selecting the Team Members
Teams need the Integrators, who love to relate to people from other departments or other
firms. They naturally give, and get, respect.
Receptors respect others and welcome information from them but do not desire personal
relationships. They are good contacts but not particularly good team members.
Isolates prefer to be left alone. They are deep specialists in their field and really want
nothing to do with people from other functions. They are rarely able to play a role in new
product team operations.
The core team includes those people who are involved in managing functional clusters.
Ad hoc members are those from important departments (such as packaging, legal, and
logistics) whose importance is brief in time and thus not needed on the core team.
Extended team members may come from another division of the firm, corporate staff, or
another firm.
-
The champion within the corporation plays a role similar to that of the entrepreneur starting
up a new business. His or her role is to push past the roadblocks; bypass corporate
hierarchy and persuade other people in the firm to support the innovation. Champions will
not win every time, but their task is to see that no project dies without a fight. Champions
also play a key role in bringing information to the new product team through both their
contacts within the organization and their external network.
In most cases, the project manager plays the champion role. Other times the champion is
self-appointed, often a technical person associated with the discovery that started the
project.
The second most important role is that of sponsor. This person does not drive anything but
is higher up in the firm, is supportive, and lends encouragement and endorsement to the
champion.
A network consists of nodes, links, and operating relationships.
- Nodes are people important to the project in some way.
- Links are how they are reached and what important ties they have to others in
the network.
- Operating relationships are how these people are contacted and motivated to
cooperate in the project.
An appointed team is not yet ready to operate. There must be top management support
and, hopefully, a good image around the firm.
A term that is now emerging to describe high-performance teams is charged behavior:
team members derive enjoyment from working together. Encouragement to take risks,
quality focus, interdepartmental linkages, exposure to customer input, and the nature of
competition, among other factors, are positively related to charged behavior.
Part of the challenge of new products is managing the interfaces across the functional
areas, as the key functions must cooperate often and effectively to improve product
development performance.
Managing the friction between functional areas:
• Top managers get the interfaces they deserve because they can eliminate most
of the problems any time they choose to do so.
• Interface management primarily takes time, not skills.
• Participants who continue to be a problem should be taken out of new product
team situations; they get some perverse satisfaction out of reactions to their
behavior.
Healthy disagreements between functional areas can lead to more critical analysis and,
ultimately, bring vitality to new product development.
Integrative conflict management styles such as confrontation (collaborative problem
solving to reach a mutually agreeable solution) and give-and-take (reaching an acceptable
compromise solution) are better at fostering a positive environment for innovation than
dysfunctional styles such as withdrawal (avoiding the issue), smoothing (seeking a
superficial solution), or forcing a solution.
Compartmentalized thinking: functional areas tend to focus on their own goals.
Information either does not flow across departments effciently, or it is interpreted differently
by different departments.
Solution: establishing empowered cross-functional teams and HOQ.
Inertia: Market information is not used if it does not conform to specifications.
Using only monetary rewards can lead to problems. Some may feel that the satisfaction of
being on a successful team is reward enough, and the money isn’t necessary. Others may
complain that all team members get rewarded—a problem that is compounded if the same
dollar figure is awarded to everyone on the team.
If the project is relatively long or less complex, rewards tied to the project’s profit outcome
tend to enhance performance
For risky projects, it is preferable to reward the team’s processes during product
development.
Firms can also consider rewarding the team at frequent milestones, as this can help boost
team spirit and positively affect organizational culture.
Closing the Team Down
Some firms close out early, well before the item is marketed; they bring in operating people
bit by bit.
A second practice lets the team prepare for the marketing but, at the last minute, the regular
people launch it. The key team people are usually kept close to the action to help solve
problems.
A third practice lets the team actually market the item and either become the nucleus of its
standing management as a new division or turn it over to the regular organization after it has
been successfully established.
A virtual team is one whose members are linked electronically.
Benefit: The ability to communicate despite geographic dispersion. In addition, virtual teams
can meet in synchronous mode, or in asynchronous mode. Asynchronous avoid time zone
problems and working around holidays.
Challenges: Members must be familiar with the technology. Performance measurement and
managerial control may be more difficult, and dealing with power conflicts may be more
challenging than in a face-to-face format. Different values and cultures within many firms.
Firms with a very hierarchical chain of command or poor teamwork skills in general tend to
have difficulties with implementing virtual teams.
Firms often complement virtual teams with at least some traditional team meetings.
Great challenge to overcome at global virtual teams, cultural and communication barriers.
Global new product teams pose special challenges to managers, due to communication
challenges and cultural differences.
Visual Issues Management software allows all participants to visualize the designs in three
dimensions, do mark-ups, flag problems, and track changes. Engineering and reengineering
costs are reduced and speed to market is increased using such tools.
Certainly, multinational firms that encourage globally dispersed research and development
activities accumulate and use knowledge more effectively, resulting in greater innovative
capability.

Chapter 13: Product Use Testing

Our task is to devise a method for testing the end users’ experience with the new item, and
we call the activity product use testing (PUT) , or field testing , or user testing.

It shows up in several of the key concepts driving the whole new product process—the
unique superior product, the repeat buying percentage in the A-T-A-R paradigm, and the
requirements in the protocol. A product that does not meet end-user needs fails on one of
the three key causes of failure.
The Role Of Marketing During product Development
Marketing people are now involved from the very beginning of the new products process.
They advise the new products team about how the product development underway fits in
with the firm’s marketing capabilities and the market’s needs.
That means that marketing plays a gatekeeper role, funneling information from the
marketplace to the new product team that it thinks is important and possibly missing out on
other, more critical information in doing so. The whole idea behind lead user analysis is that
key customers are part of the team itself and provide information directly. A really market-
oriented firm thinks of marketing’s task as information coordination —deciding what
information the various sources have (customers, lead users, distributors, etc.), and what
information the members of the new products team need.
Manufacturing’s also are involved in the new products process from the beginning, advising
the team on the manufacturability of the product under consideration.
Marketing Ramp-Up, or the “I Think We’ve Got It” Phase
An important turning point occurs when the early prototypes are made and are passing
performance tests. The “I think we’ve got it” phase is where marketing’s work for launch
begins. It’s also where manufacturing’s responsibilities pick up.
Why Do Product Use Testing?

Once the prototype is ready, marketing begins an important part of the ramp-up process:
assessing the physical prototype among real customers. A prototype could be in a crude,
early form, or could be a finished or nearly finished product.
Use testing means testing the prototype under normal operating conditions.
The risks and costs of use testing are usually small compared to the loss of the earnings
flow from a successful product.
Even in consumer packaged-goods industries, there should be more serious consideration
of the counter arguments for use testing. They include the following:
Assessing Competitive Reaction. A firm developing new items is well advised to build its
innovation on a technology base where it has some insulation from competitive copying.
competitors today are finding that copying someone else has small gains.
The Complexity of Customer Needs. End use is indeed complex, and there is no way it
can be simulated in laboratories, where use is isolated from user mistakes, competitive
trashing of the concept, and objections by those in the user firm or family whose work or life
is disrupted by the change. In addition, for new-to-the-world products, several product use
tests may be needed for a company to get it right.
Customers’ Communication of Their Needs. End users also often have trouble
communicating their wants and their satisfactions, short of having the finished item.
Assurance of Delivery of a Quality Product. firms often just assume they will be able to
deliver the outer ring of augmented product quality.
Knowledge gained from product use testing:
Pre-Use Sense Reactions. Almost every product gives the user a chance to react to
immediate sensations of color, speed, durability, mechanical suitability, and so on. Initial
reactions are important, especially on service products.
Early Use Experiences. This is “does it work” knowledge. Key specifics are such things as
ease of use, surface variables, can they manage it, are there still bugs, and is there any
evidence of what the item will eventually do.
Alpha and Beta tests
Beta tests are short-term use tests, at selected external customer sites, sometimes
preceded by internal alpha tests with employees. These are designed to tell the
manufacturers one thing: Does this product work, free of bugs? Beta tests are not designed
to tell them about meeting customer needs and solving problems.
Most alpha tests resemble those of the Microsoft Explorer—a quick test of a very early
version of the product with employees, where the product often is not nearly ready to release
to customers, even as a beta version.
In hurrying this product to market, the firm committed several mistakes:
• Concluded the beta tests before there was time for key bugs to show up.
• Neglected to test thoroughly a part of their package that they licensed from
another firm.
• Continued selling and installing the $180,000 program after hearing of
horrendous problems with it.
• Promised “single-source solution” to technical problems when in fact they
depended on Taylor to handle problems on their part of the package.
• Took the stance with individual customers that the product worked well, so the
problems must be caused by the customer.
Beta testing may not meet all of the developer’s needs. As a result gamma testing
designates the ideal product use test, where the item is put through its paces and
thoroughly evaluated by the end user. To pass this test, the new item must solve
whatever problem the customer had, no matter how long it takes. Gamma testing is
so critical on new medicines and medical equipment that the United States demands
it; such testing can take up to 10 years.
Even though gamma testing is the ideal test, firms anxious to save time and money
or to leapfrog competitors nevertheless opt to go with beta testing.
case-based research may be used as a very comprehensive form of product use
testing.
The first stage is investigation: The developer interviews users to learn their
expectations and how they will likely use the product. In the development stage,
users are encouraged to try early prototypes of the new software and explore its
menus and features. As an interesting twist, they speak out loud during product use,
describing any problems they encounter. This stage is followed by a preliminary beta
test with end users in a real work environment. Product use problems are identified at
this stage, and solutions to all of these will be provided in the software instruction
manual. This is all followed by a standard beta test.
Managers should decide what it is they need to learn from the product use test. The
objectives should still be clear and should include the requirements spelled out in the
protocol. Some managers like to do a potential problem analysis at this point.

Some use testing is done with lab personnel at the plants where the products are first
produced.
Experts are the second testing group. Experts will give more careful consideration
than will typical users and probably will express more accurate reactions. They will
not be interested in the same things that interest customers, however.
The third test group option, employees, is widely utilized though often criticized.
Obvious problems of possible bias can be overcome to some extent by concealing
product identities and by carefully training and motivating the employee panel.
Stakeholders are the next choice, and the set includes customers and noncustomers,
users and nonusers, resellers, end-user advisers, users of competitive products,
repair organizations, and technical support specialists whose reactions to new
products have been sought.

Any sample should be representative of the entire population for which the product is
targeted and the results should be accurate (have validity) and reproducible (have
reliability )
How Should We Reach the User Group?
mode of contact: Mail(limited in depth of questioning but more flexible, cheaper,
faster) and personal.
individual contact and group contact. Individual is preferred but groups are cheaper
Location: point of use (home, office, or factory) or a central location (test kitchen,
shopping center, theater, or van)?
point-of-use location is more realistic and permits more variables to operate. But it
offers poor experimental control and permits easy misuse.
the central location offers very complete facilities, good experimental control,
speed, and lower cost. The central location approach is winning, but industrial firms
will almost certainly stay with on-site studies.
Identity disclosure: Knowing a new item’s brand introduces halo-image effects,
maybe distorting user reactions. Developers may need a competitive comparison
(only blind tests can determine this). Or they may want to know if users perceive the
new item to be better (honest perception requires brands). A good compromise is to
do both, first a blind test, followed by a branded test. This covers most of the issues.
Service products can rarely be tested blind.
How much info?

Conducting use tests with virtually no comment other than the obvious “Try this.” run
the risk of missing some of the specific testing needs.
Commercial explanation, includes just the information the customer will get when
actually buying the product later.
full explanation. It may be necessary to include a great deal of information just to
ensure the product is used properly.
Some people do one round of testing with full explanation, followed by a brief round
at the commercial level.
How much Control over Product use?
Total control is essential when accurate data are required and when patient safety
is a concern. Many industrial products also require total control to avoid dangerous
misuse.
But most testers want users to experiment, to be free to make some mistakes, and to
engage in behavior representative of what will happen later when the product is
marketed.
So two modes of looser control— supervised and unsupervised —have developed.
Services are almost always under some supervision because they cannot be “taken
home” to use.
How Should the Test Be Conducted?
• In a monadic test where the respondent tests a single product for a
period of time. Services usually must be monadic, though there are
exceptions.
• In a sequential monadic test where there are back-to-back monadic
tests with the same respondent. It is sometimes called a staggered paired
comparison.
• In a paired comparison where use of the test product is interspersed
with that of a competitive product.
• In a triangular comparison, similar to paired comparison but with two
competitive products versus one test product (or two test products versus
one competitor).
The monadic is the simplest and the most valid. But it is less sensitive in
results.
The usual side-by-side or simultaneous form of paired comparison is the most
unrealistic test, but it is by far the most sensitive.
A sequential monadic is probably the ideal combination, though it takes
longer.
Some use tests require short periods (up to a week) or extended (up to 6
months)
Longer period is needed if substantial learning is required, if initial bias should
be overcome or if the product entails an acquired taste. A longer period is
also needed if the product faces a full range of variations in use.
The initial, quick test predicts the early reactions of those people we call
innovators.
Generally speaking, three different sources of the product are employed in a
use test— batch, pilot plant , and final production. If the firm will employ just
one type of use testing, then the final production material is far and away the
best. Batch product should be used alone only if the production process is
prohibitively expensive.
What Should Be the Form of the Product Being Tested?

One view favors testing the best single product the organization has
developed. The opposing view favors building variants into the test situation—
colors, speeds, sizes, and so on.
The latter approach is more educational but also much more costly. Services
are almost always tested in multiple variations, given that it is usually easy to
make the changes.
-
Testers have long realized that they want comparative figures, not just
absolutes.
 Who Should Do the Product Use Test?
personnel within the company or personnel outside the company? The firm
may not have the necessary personnel skilled in information technology
analytical capability.
the functions (marketing, technical) historically have jockeyed for control. But
today, the development team is responsible—the same team that handled the
prototype concept testing.
In Product Use testing:
• Don’t Change the Data Just Because They Came Out Wrong.
• Be Alert to Strange Conditions
• What If We Have to Go Ahead without Good Use Testing? Work
some use testing into the early marketing and have alternatives
against negative outcomes. Also, surrogate tests are available if
time or money limitations prevent a full product use test. Quick
results are possible, for example, through constructive evaluation
(the respondent uses the item, describing activities and explaining
problems encountered) or retrospective testing (the user reviews
videos of conventional product use testing previously done).

Part 5: Launch
Chapter 14: Strategic Launch Planning
Strategic launch decisions include:
- strategic platform decisions that set overall tones and directions.
- strategic action decisions that define to whom we are going to sell and how.
Tactical launch decisions are marketing mix decisions such as communication and
promotion, distribution, and pricing that are typically made after the strategic launch
decisions and define how the strategic decisions will be implemented.
Strategic launch decisions include the desired innovativeness of the product, the time to
market, the competitive stance or positioning, the driver of new product development and
others.
Many of these decisions will have been made earlier in the new products process, at PIC or
product protocol specification, and may be very difficult or expensive to change at this point,
hence the term strategic givens. They are frequently difficult or costly to change once
made. They do, however, determine the strategic context for the marketing plan and thus
influence the tactical decisions made later. The tactical decisions are more easily modified.
5 requirements for an effective market launch plan:
 The market launch plan is treated as a key part of the new products process, as
central to this process as the development phase.
 Planning for the market launch begins early in the new products process.
 The market launch plan is based on good-quality market intelligence that has been
gathered throughout the new products process.
 Sufficient human and financial resources are devoted to the market launch.
 Salespeople, technical support people, and other customer service people who are
engaged in the product launch should be part of the new product team.
The strategic givens are decisions that are already made for us, so to speak; they
“come with the territory” when a project is undertaken. They cover the full range of the
organization’s operations and are often set in concrete without our knowing it. They
comprise that awful resistance to change that new products people frequently lament.
When the product innovation charter (PIC) was being developed, a basic set of strategic
goals was outlined. Much has been learned and things may have changed so we should
update them.
Business firms use a complex set of measures as goals. The most used set of measures
for individual products is as follows:
The cash-to-cash metric, sometimes called the time-to-break-even metric, is simply the
time between the initial cash investment and the time of payment for the finished
product, and it is becoming increasingly popular. Using the cash-to-cash metric, the firm
must also keep in mind that they need to be efficient and effective in getting the product
to market—not just fast. The cash-to-cash metric is improved by using suppliers that
efficiently achieve order fulfillment, practice effective inventory management, and
successfully collect accounts receivable.
Strategic Platform Decisions
Type of Demand Sought
For a new-to-the-world product: The firm must develop an entry strategy with the
emphasis on stimulating primary demand for the product category. The launch plan
must stimulate adoption of the new product category and lead to diffusion through the
marketplace.
For a product improvement or upgrade to existing product: The launch is expected to
achieve customer migration (that is, existing customers should be encouraged to
migrate to the new product), with switch-in from competitors’ customers where possible.
We could say that the goal here is to stimulate replacement demand.
For a new entry or line addition in an established market: The emphasis is on stimulation
of selective demand (drawing market share away from competition). The launch plan
must stimulate trial purchase, which is a precursor to adoption. Pepsi’s objective is to get
loyal Coca-Cola drinkers to break their habit at least once to try the newcomer brand.
Permanence: 3 options
- We are in to stay, and no thought is given to getting out.
- In to stay if we meet our goals. This cautions against alliances that would
make escape difficult; it is especially useful when a firm is using the new
product to enter another sphere of activity.
- Temporary. This may sound strange—spending months or years developing
a new item only to limit its life to a few months or a couple years.
Occasionally, a temporary product will catch on and become permanent.
Many tactical decisions change if the plan is temporary—using contract
manufacturing rather than building a new plant and borrowing a sales force
from agents or other manufacturers.
Aggressiveness
An aggressive entry seeks lots of attention early on, so most of the promotional dollars are
spent early, and most of the resources go to getting early trial.
Some firms will slink into the market with a cautious entry. They are uncertain about
something important. This is not a negative posture, just one where being aggressive has a
risk the firm wants to avoid.
The aggressiveness can be balanced. This simply means the firm is not trying to be
pugnacious or slinking. The average of all new product introductions in a given industry
would be balanced, but this does not mean normal.
Sometimes this is a good place to raise the issue of marketing costs as an investment.
Competitive Advantage Will our product lower end-user costs by virtue of its price, or will
our product offer new benefits by virtue of its differentiation?
Product Line Replacement
Most new products relate to existing products in the company’s product line; they do not
enter markets new to the firm. How should we manage the replacement of the existing by
the new? The firm has several clearly different strategic options.

The decision on when to launch the next generation of product is likely to depend on at least
three important forces: the competitive environment, customer expectations, and profit
margins.
Competitive Relationship
Occasionally a product innovation charter will have a statement something like this: “The
product(s) that will come from this program will not be aimed at XYZ Company, nor threaten
a piece of business that is important to that firm.” Other firms are aiming their new item
directly at a specific competitor.
There are 3 options: Make no reference to specific competitors, aim directly at a specific
competitor, and avoid a specific competitor. Unintentionally trying to do two or three of those
mires the tactical managers in a frustrating set of conflicts.
Scope of Market Entry
This issue relates to a firm’s desire to do market testing.
Image
Will the new product need an entirely new image, a major change in an existing image, a
tweaking of an existing image, or no change whatsoever in an image?
-
The target market decision
Alternative Ways to Segment a Market
End-Use
Geographic and Demographic
Behavioral and Psychographic. Markets can be segmented according to psychographic
variables: values, activities, and lifestyles.
Benefit Segmentation. benefit segments are of great interest in new product development.
We can identify segments based on benefits sought and develop products to satisfy the
needs of one or more of these segments.
The PIC usually makes quite clear what market group the new project will focus on, and the
target market may be clear from the original concept generation. The firm’s method of
operation may constrain the choice. A focus may come from concept testing or product use
testing. An early target market may reject a concept in an early trade-off analysis or when
they actually try out a prototype. Thus many firms use parallel development, keeping two or
three target alternatives in development.
Micromarketing and Mass Customization
Retail scanners and sales information systems yield the databases that display very small
targets with unique purchase patterns. These clusters have been labeled micromarkets.

scanner data to cluster food buyers into six groups:

1. Loyalists, who buy one brand at all times.
2. Rotators, who have a 2- or 3-product set
3. Deal-selectives, rotators whose movement is determined by presence of deals.
4. Price-driven, who buy all major brands, always on deals.
5. Store brand buyers, who do as their name implies.
6. Light users, who buy too little for a pattern to show.
Direct marketers and online marketers use tighter segments than mass media marketers,
stemming from their databases. Database marketing has grown exponentially in recent
years and allows firms to target their customers in new ways.
The ultimate smallness, and the ultimate building customer value, is mass customization
Another extension of mass customization is virtual product testing. Customers build the
desired product, get an assessment of the resulting price, and then state their likelihood of
making a purchase. Researchers can track the way customers make the trade-offs between
product features and price, and thus better understand what features are and are not
important in the purchase decision.
What makes a product appealing for one segment may mean nothing to other segments; we
call this the broaden the market fallacy.Targeting to diverse groups can cause dissonance
in the promotion. Changing the target can be a disaster if promotional and trade-show
materials and dates are all prepared; packaging, pricing, and branding are fixed; and the
concept and product use tests were conducted only with the original target group.
Product Characteristics
There are 5 factors that measure how soon a new product will diffuse into the marketplace:
1. The relative advantage of the new product. How superior is the innovation to
the product or other problem-solving methods it was designed to compete
against?
2. Compatibility. Does it fit with current product usage and end-user activity? A
continuous innovation requires little change or learning by customers, as
compatibility with prior experiences and values is high; the more discontinuous
the innovation, the more learning is required.
3. Complexity. Will frustration or confusion arise in understanding the innovation’s
basic idea?
4. Divisibility (also called trialability ). How easily can trial portions of the product
be purchased and used?
5. Communicability (also called observability). How easy is it for the user to see
the benefits of using the product?
the innovators (the first 5 to 10 percent of those who adopt the product) and on the early
adopters (the next 10 to 15 percent of adopters), early majority (perhaps the next 30
percent), late majority (perhaps another 30 percent), and the laggards (the remaining 20
percent).
The theory of innovation diffusion states that, if we could just market our new product to
those innovators and early adopters, we could then sit back and let them spread the word to
the others.
Early users do come typically from the innovator group. In the industrial setting, early
business adopters are often (not always) the largest firms in the industry, those who stand to
make the greatest profit from the innovation, and those who have presidents who are
younger and better educated.
The crossing the chasm model suggests thinking of the innovators and early adopters as
the visionaries and later categories as the pragmatists. These two new groups of adopters
will differ in their expectations of the new product, and the pragmatists may not use the
visionaries as their opinion leaders.
The target market decision essentially measures
- how much potential is in each target market option.
- how well our new product meets the needs of people in each of those markets.
- how prepared we are to compete in each—that is, our capacity to compete there.
Product Positioning
A product positioning statement is created by completing this sentence: Buyers in the target
market should buy our product rather than others being offered and used because:____
Positioning is now seen as an ingredient of total strategy, not just an advertising ploy.
The end user’s memory slate is clean; potential buyers have no previous positioning in mind
for a new item. Now is the best chance ever to effect a particular positioning for their item.
Positioning alternatives fall into two broad categories.
1) The first is to position to an attribute. The benefits used in positioning can be direct
(such as “saves you money”) or follow-on (such as “makes you more attractive,” an indirect
result of the cleaner teeth or cleaner breath given by this toothpaste).
Feature-function-benefit work as a triad. Trying to use all three can be confusing, and target
buyers won’t spend much time on clarifigcation.
2) The second alternative in positioning is to use surrogates (or metaphors). “Use our
dietary product because it was created by a leading health expert.” Specific reasons why the
product is better are not given have to be provided by the listener or the viewer.
If there is no longer an open feature-function-benefit positioning that users want, developers
can try to build preference for some unique attribute their product has, or they can turn to
surrogates.
Creating Unique Value for the Chosen Target
Once a market segment has been targeted and a positioning statement created for it, we
have a chance to cycle back to the product itself and see if we can enhance its value to the
chosen market.
The core benefit of the product may receive the greatest attention during the development
phase. The bundle that he or she receives and takes home can comprise much more.
During later phases of the new products process, we try to add extra benefits to the core
product through branding, packaging, warranty, presale service, and so on—such that we
increase the value of the augmented product to the customer.
Trademarks and Registration
Every new product must be identifed, and the accurate term for what identifies products is
trademark. , a trademark is usually a word or a symbol. That symbol may be a sequence of
letters and/or numbers, a logo or a design. A word string such as “just do it” can be a
trademark, as can a sound signature such as the 3-note NBC chimes or the “Intel Inside”
sound. The law just requires it to identify and differentiate the item using it. It also requires
that the firm uses, or intends to use, the trademark—this requirement is called bona fide
intent.
Technically services have service marks and businesses have trade names.
Registration. in the United States you can ask that your trademark be registered. If you can
get it registered, you can keep that trademark forever, even if another firm later displays
proof of prior use.
The trademark should not be immoral or misleading, should not be too descriptive of a
product type, should not be confusingly similar to trademarks belonging to other products.
What happens if, shortly after launch, other manufacturers begin encroaching on our mark?
We move aggressively to stop them.
Companies seek trade dress protection. Trade dress refers to a wide range of product
identifiers: In addition to brand name, it can include packaging, colour, décor, or packaging
takes on a secondary meaning, which is the name of the brand
phonemes, or the raw sounds of the letters. Some letters are associated with pleasant or
unpleasant feelings, others may suggest size or speed.
Managing Brand Equity
The best brand names are assets that provide value to both the firm and its customers, as
they communicate quality, build positive brand images, and encourage customer loyalty.
This value is known as brand equity.
A brand with high equity encourages loyalty among customers, making advertising and other
forms of promotion more efficient. High equity also means high brand awareness, which
makes it easier for the firm to create other associations. Brand equity can also be associated
with higher perceived quality and thus can support a premium positioning for a brand. A
high-equity brand can more easily be used as a bridgehead for launching brand
extensions.
Brand equity can provide sustainable competitive advantage.
Brand extensions can be either vertical or horizontal depending on whether the new brand is
in the same product category as the parent one. A brand extension can boost acceptance of
the new product, but problems with the new product can result in dilution of the parent
brand’s equity. An unsuccessful extension, or too many extensions, can lead to brand equity
erosion.
Humorous names tend to work best only in cases where the product will have only a limited,
local market.
Emphasizing the product’s name or benefits might create a safe distance from the brand
being extended.
A consideration is whether the brand being extended has a functional or a prestige image.
Gillette could probably launch a downscale extension of the Fusion razor easily, while
Mercedes risks tarnishing its reputation if it launches a low-end Mercedes car. Often, a
flagship brand (a dominant brand in a product category) is extended in this way, as its
brand equity is already quite high. But flagship brands should be extended carefully, and
then probably only to brands of similar or better quality to avoid risking brand name dilution
and consumer confidence.
A strong parent brand, successful previous brand extensions, strong marketing support,
good acceptance at the retailer level, good fit between parent brand and extension, and low
perceived risk of the extension are all associated with more successful brand extensions.
Brand Equity and Branding Strategies
Umbrella bands: businesses that put their corporate name on every product they make.
Individual brands: firms that seem to go out of their way not to mention the company name
in the brand.
Global Brand Leadership
The goal is not necessarily to pursue a single global brand, but rather to create a strong
presence in every market through global brand leadership. This requires an overall global
brand strategy that coordinates the brand strategies used in the individual countries, and a
commitment to allocate suffi cient resources to brand building.
Packaging
In such firms, packaging decisions are often made at the highest levels. In fact, more money
is spent on packaging food and beverage products than on advertising them.
The Role of Packaging
primary packaging (the material that first envelops the product and holds it, such as a pill
bottle), secondary packaging (the box that holds the pill bottle), or tertiary packaging
(bulk packaging that holds secondary packages for shipment).
All form of packaging serve several roles:
Containment, protection, safety, display and information and persuasion.
One of the strategies sometimes used in package design is family packaging, that is, using
a key design, or some other packaging element, to integrate the packaging of several
individual items.

Chapter 15: Implementation of the Strategic Plan

The Launch Cycle
The launch cycle is an expansion of the familiar introductory stage of the product life cycle
(PLC) into substages. It picks up the preparations during the prelaunch period, the
announcement, the beachhead phase, and then the early growth stage that links the launch
cycle back to the PLC.
Prelaunch and Preannouncement
The prelaunch stage is when we are building our capability to compete. This means the
training of sales and other promotional people, building service capability, putting out
preannouncements if they are in order, and arranging for stocking of the product at the
reseller level.
We see a planned sequence of announcements, often geared to keeping competitors
guessing and to keeping competitors’ customers from stocking up just prior to our being
available. One sequence of periods goes like this: (1) nondisclosures; (2) product testing—
beta testers sign confidentiality forms; (3) anticipation— position releases telling about the
problem being solved; (4) influentials—press kits for editors, industry researchers, and
some customers; (5) broadcast PR—full press releases, product for reviews; (6) promo
pieces—the start of advertising. Stages 3 and 4 are used for preannouncements.
Preannouncement can be used to hype interest in the upcoming product, to keep current
customers from switching to a competitor, and to encourage prospective buyers to wait for
the new product. Of course, in many markets, there is almost no attempt to keep secrets.
The preannouncement decision is often tied to whether there are network externalities .
Indirect network externalities exist if product sales are dependent on sales of
complementary products (more xbox games, more xbox sales).
Direct network externalities exist if product sales are dependent on the number of people
that have adopted it.
For high-tech products with indirect network externalities, there may be two
preannouncements, first to program developers, then to consumers.
Preannouncement can also be used to block a competitive entry.
There is also another risk involved in preannouncement: the product is never launched! The
preannouncement might have been made simply to keep shareholders or the finance
markets happy, without concern for the real danger of not being able to fulfill the signal. In
the software field this has resulted in what is called vaporware —signaled but not delivered
until much later, if ever.
Announcement, Beachhead, and Early Growth
The second stage of the launch cycle, beachhead, refers to the heavy expenditures
necessary to overcome sales inertia. Rising expenditures curve up to the point where sales
are increasing at an increasing rate. Announcement kicks off the beachhead phase.
The key decision in the beachhead phase is to end it—inertia has been overcome, and the
product has started to move. This decision triggers a series of actions. Improvements and
flankers will now be brought along as scheduled; new budgets will be approved and
released; temporary marketing arrangements will be made permanent.
Decisions made at launch and throughout the product life cycle need to be made in
accordance with the strategic decisions made earlier. There are three common patterns for
launch strategies and tactics:
- The innovative new product. Get a foothold in the market early in the product life
cycle. Common tactics accompanying this kind of launch are a broad product
assortment, a new brand name and distribution channels, and a higher price.
- The offensive improvement. Erect barriers to entry. Managers find it more
beneficial to use existing distribution channels, high consumer promotion and
advertising, and a broad product assortment.
- The defensive addition. increase penetration in existing markets; appropriate tactics
include smaller assortments, penetration pricing, and promotions to the customer and
the sales force.
Lean Launch and Launch Timing
Supply chain managers try to keep the supply chain system flexible, so that it can respond
rapidly to sales changes. This flexibility is called a lean launch, and keeping the launch lean
means that the firm does not commit to too much inventory during the early days of launch,
but can ramp up quickly should sales take off.
A principle that drives lean launch is postponement , or delaying finalization of product form
and identity until late in the development process, and delaying commitment of inventory
until the last possible moment. This reduces lead times, minimizing uncertainty and
increasing operational flexibility until the nature of the demand is more certain.Postponement
actually can be manifested two ways: time postponement (deploy inventory as late as
possible) and form postponement (lock in product design as late as possible).
To successfully implement a lean launch firms must have good information technology
systems in place so that sales can be tracked, and raw materials and inventory can be
replenished effectively.
A late launch means the product does not meet its sales potential or, in the extreme, misses
the opportunity window altogether. Too early a launch, and the product may be
commercialized without enough information on the marketplace.
Launch tactics
Communications plan:
Communications is the term most widely used to cover all of the information and attitude
effort we put into changing how the end user sees our situation. The communications
requirements are the specifics that must be communicated in our plan.
The communications task is performed with a communications mix. There can be up to 4
mixes:
- communications to the reseller by us.
- communications to the end user by the reseller.
- communications to the end user by us.
- the total communication effort by our team to the end user.
The Copy Strategy Statement:
It can be used to convey to every advertising and promotion creative person the following
items (among many others):
- The market segment being targeted
- The product positioning statement
- The communications mix and the pieces covered by this statement
- The major copy points to be communicated
Personal Selling
A new product is an intrusion for the sales force. it is important to (1) investigate in advance
any possible reasons why salespeople might object to the new product, (2) give them all the
training and materials they need to be effective, and (3) make sure the product is available in
their territories when they start seeking orders.
Alliances
Technical departments form strategic alliances with universities, government units, private
research centers, and even competitors to access what they need. Advertising is another
area for alliances—long-standing agreements are signed with advertising agencies.
A-T-A-R Requirements

Awareness is the necessary first step toward adoption. Awareness means different things on
different products and is sought aggressively by almost all new product marketers.
(examples page 272) All three people “heard of” their new items on a single day and in a
single message. They may even have heard the positioning and understood it. But one is
minutes away from trial and the others months or years away.
How to get awareness? The ideal is a mix: an announcement ad or sales call, then favorable
mention by a friend, then seeing the item in use, then a reminder of some type, then getting
some professional endorsement in a news account or column, then a reminder of some sort,
and then an opportunity to buy it.
Stocking and Availability

Services are usually sold directly, and so are many goods. But most goods use resellers,
such as distributors and retail dealers. It is usually sufficient to have the resellers’ views
represented by experienced salespeople— sales managers and trade relations directors.
We start with a statement of what the reseller’s role will be. For stocking distributors,
(1) prestocking activities such as training and installation of equipment, (2) stocking of the
new item, (3) preparation for promotion, including training salespeople and service people,
and (4) actually doing the promotion, whether just listing the item in a catalog, adding the
item to selling schedules, or working with individual buyers to determine their needs and
convert interest into sales.
Somewhere along the line we have to know that resellers can do what we want and need,
and that they will do it.
Trial
This is the stumbling point for most products that fail; and it is the cause of winning products
not winning a great deal more. Trial of a new product is limited usage.
A firm can spend a fortune on free samples to generate trial.
Trial may be personal, vicarious, or virtual.
A key requirement is that a trial must have some “cost” associated with it.
(Cheese taste at supermarket example) That is usually not enough for the next step in the
process—the acceptance of the item, its adoption into a usage system, or its repeat
purchase. The cheese taster probably would want to buy a small package and take it home
for the real trial.
Barriers to trial cause customers to delay or even permanently postpone trial.
Low Relative Advantage and Low Compatibility: low incremental advantage and
relatively incompatible with buyers’ experiences.
High Relative Advantage and High Compatibility: Here one finds products that are clearly
superior on attributes that buyers consider important. Skimming pricing and selective
distribution are recommended if the early adopters are likely to exert high search efforts in
order to get the desired attributes.
High Relative Advantage and Low Compatibility: one finds the new-to-the-world products
that, are likely to be somewhat incompatible in terms of values or use
Low Relative Advantage and High Compatibility: These are the direct opposite of the
products in the upper right cell: familiar products yet low relative advantage.

This emphasis on price has led sellers to adopt complex discount schedules. Using
discounts also fi ts with the most popular of the new product price strategies:
- Premium —a very high price, intended to stay that way, with clear product
differentiation.
- Skim —a price clearly above the market, but appropriate to a differentiated product,
nonthreatening to competition, and with room for some price manipulations.
- Penetration —the price that is clearly low and designed to buy one’s way into the
market. Dangers: little room to discount, tough to raise later after share is achieved,
and if met immediately, just wastes the opportunity and at a lower price.
Skim seems to achieve the benefit both ways—brings some of the product’s value to our
bottom line and gives marketers freedom to meet special opportunities, yet doesn’t price
ourselves out of the market.
Repeat Purchase
If our target market buyers do a serious trial on our new item, and if we had previously been
assured from the product use test that people would like it, repeat buying is virtually assured.
Usually we have actions in the marketing program to encourage further usage (e.g., long-
term discounts, new uses for the item, ready availability of additional product as well as of
continued service).

Chapter 16: Market Testing

We have a marketing plan, now what do we do? Market the item quickly before competition
finds out what we are up to? Or find a way to check out what we have done to see if it really
looks as if we will be successful, before spending a lot of money on the launch? The option
open to us is called market testing.
test marketing (sell the product in two or more representative cities) is in fact now a
relatively minor market testing technique. it’s lost much ground to newer, faster, and cheaper
methods. Scanner-based methods are, of course, a big part of the trend in obtaining quick,
reliable marketplace information. Many firms have replaced the traditional test market with a
product rollout.
The Market Testing Decision

When is the decision made? The longer we wait, the more we will know about our product
and its marketing program; that makes testing more useful and more reliable. But the longer
we wait to do the test, the higher the costs, the later the entry, the more damage competitors
can do, and so on. The solution is to begin the testing as soon as a technique can be found
that will tell us what we need to know.
Market Tests Must Have Teeth Meaning that managers are willing to take action based on
the results. In some cases, negative market test results are ignored, because the product
team does not want to kill the CEO’s pet project!
We needed to establish more difficult hurdles at the time of concept evaluation, because
committing to development of a new concept is costly and time-consuming, and it incurs
opportunity costs since other promising concepts are not developed.
Planners go to market testing to gain two important insights.
- To obtain solid forecasts of dollar and unit sales.
- To get diagnostic information to help them revise and refine anything about the
launch that seems to require it.
The Factors for Deciding Whether to Market Test

One experienced P&G market researcher said he considers skipping the market test if the
following conditions exist:
1. Capital investments are small and forecasts are conservative.
2. The use tests went well and consumer interest is high.
3. The company knows the business well and has been successful there.
4. Advertising is ready and successfully tested; sales promotion plan does not depend
on perfect execution.
Interestingly, one way P&G market tests new products is to list them, together with their
retail price, on their Web site. They judge likely interest in a new product by how many
customers click on the site and order the product!
Another type of information need is more operational. It is for learning, learning how to do
something that the launch requires.
Today’s managers anticipate this problem by building in customer involvement. Firms that
involve customers from the early beginning get early answers to lots of questions.
total quality management programs familiar in many firms force some of the learning
needed for items earlier in this list.
Costs
Costs Market test costs include:
- direct costs of the test—fees to market research firms
- costs of the launch itself—for production, selling, and so on
- lost revenue that a national launch would have brought.
Sometimes the costs of launch are so great that firms don’t even consider market testing.
Nature of the Marketplace
If competitors can take retaliatory action that will hurt us, chances are the testing will be
quick, if at all. Another marketplace characteristic is that customers may literally demand the
new item. The marketplace may not be good for market testing, especially in the case of
global launches.
Methods of Market Testing:
Pseudo Sale This approach asks potential buyers to do something. The action is distinct
and identifiable, and much of the marketing strategy is utilized in the presentation; but the
key factor here is little pain for the buyer—no spending, no major risk. It is, as the name
says, a pseudo sale. It can be done early.
Controlled Sale Here the buyer must make a purchase. The sale may be quite formal or
informal, but it is conducted under controlled conditions. The method is still research
because the product has not been released for regular sale. Some key variable (often
distribution) is not opened up but is contrived. Controlled sale is more vigorous than the
pseudo sale, however, and much more revealing.
Full Sale The firm has decided to fully market the. But it wants to do so on a limited basis
first to see if everything is working right. Barring some catastrophe, the product will go to full
national launch.
Pseudo Sale Methods
The speculative sale method asks them if they would buy it.
In the pseudo sale method called “speculative” we go to the customer, give them the full
pitch on the product in a version close to ultimate marketing, answer questions, negotiate
prices, and lead up to the closing question, “If we make this product available as I have
described it, would you buy it?”
They make pseudo sales calls—presenting the new product as though it were available for
purchase. The difference this time is that the product is real, as are the price, delivery
schedules, selling presentation, and so on. The target customer is real, and the positioning is
clear.
Situations where the speculative method fits include:
1. Where industrial firms have very close downstream relationships with key buyers.
2. Where new product work is technical, entrenched within a firm’s expertise, and only
little reaction is needed from the marketplace.
3. Where the adventure has very little risk, and thus a costlier method is not defendable.
4. Where the item is new and key diagnostics are needed.
The simulated test market (STM) method creates a false buying situation and observes
what they do. (often called premarket testing)
The central idea is to get estimates of trial purchasing and repeat purchasing. Awareness
comes from the advertising agency’s component testing, and the firm’s managers supply the
other factors of market units, availability, prices, and costs that are required to turn
A-T-A-R into a sales forecast.
Output
Consumers give their opinions on the product, they buy or ask for some, they react to it, and
so on. But the key purpose is to estimate how well the product will sell so the various
services offer trial rate, repeat rate, market share estimates, and volume estimates.
One of the more prominent models is ASSESSOR, which is distinguished by its ability to
make two forecasts (one using an A-T-A-R model and one using a preference model) and
comparing the two to come up with market share predictions.
New Advances in STMs
Virtual testing techniques have been combined with traditional simulated test market
procedures as well. One such development is called the visionary shopper (VS). The
respondent is brought into a virtual retail store environment and encouraged to shop around,
“take products off the shelf” and read the label, and make purchases.
Criticism
The STM technique has its critics. All major packaged goods firms use one or more of the
methods, but we don’t know how often or with what confidence. Everything in the system is
slightly false: The mall intercept creates false conditions at the start, then the stimuli are
unrealistically administered, the store is obviously fake, and much attention is focused on the
behavior of the consumers being tested. The calculations require a set of givens from the
client before the formulas can be run. The method may be less applicable for products that
are totally new to the market or that are sold predominantly by personal selling or point-of-
purchase promotion.
Controlled Sale Methods
Controlled sale. A market testing method that assumes distribution, or gets it automatically,
without having to spend time and money to get it.
Informal Selling Product developers want potential buyers to see the product and hear the
story, to make a trial, and to actually use the product. Personal selling is the primary
promotional tool. The presentations in the informal selling method are for real, and cash
sales take place.
Direct Marketing Another method of controlled sale is by direct marketing. Though usage
of the term direct marketing varies, here it includes the sale of a (primarily) consumer
product by the maker directly to the consuming unit by means of the mail, telephone, TV,
fax, or computer network.
Minimarkets The new products manager first selects one or several outlets where sale of
the new product would be desirable. Instead of using whole cities (as in test marketing), we
use each store as a mini-city or minimarket, thus the name.
The minimarket situation is more realistic, actual buying situations are created, great
flexibility is allowed in changing price and other variables, somewhat more confidentiality is
possible than with test marketing, and it is cheaper.
One variation on minimarkets, controlled-distribution scanner markets (CDSMs), is
based on scanner technology and has received much attention in the consumer packaged
goods field.
Scanner Market Testing (variation of minimarket testing)
InfoScan is a system of auditing sales out of outlets selling grocery store products. These
audits were done in stores with scanner systems, and the data were reported for major
metropolitan markets. InfoScan is a method of market test design and data gathering.
InfoScan and its competitors are known as single-source systems. The excitement of
single-source systems is the flexibility to do many different things in many different markets,
with coordinated services, in rich detail, and (best of all) in days, not months.
Full Sale Methods
Test Marketing refers to that type of market testing in which a representative piece of the
total market is chosen for a dress rehearsal. The purpose of most test marketing is for firms
today use it more to fine-tune their plans and learn how best to do so. Test marketing is too
expensive to be used as a final exam.
Pros
- In contrast to other test methods, test marketing is intended to offer typical market
conditions, thereby allowing the best sales forecast and the best evaluation of
alternative marketing strategies. It reduces the risk of a total or major flop.
- The test market offers the most abundant supply of information and many less
important but occasionally valuable by-products.
- The test market also permits verifying production.
Cons
- The method is expensive. Costs are often acceptable if the data are accurate, thus
allowing the test markets to be projected to a national sales figure. But test market
results are not really projectable. We cannot control all environmental factors.
- Takes time.
- Competitors can mess up a test market city.
The Test Parameters
“Where should we test?” and “How long should the test run?”
Picking Test Markets The demographics and level of competition should be representative,
the distribution channel should not be too difficult to get in, and there are no regional
peculiarities in product consumption.
Duration of Test

The Rollout
Test marketing is not dead, but marketers now prefer a market testing method called rollout.
It gives the dress rehearsal value of a test market but avoids many of its problems.
The starting areas are not representative areas but, rather, areas where the company thinks
it has the right people, and perhaps the right markets, to get the thing going.
Roll out by business segments . Market the new adhesive in the shingles business first, gain
experience, build up some cash flow, and establish credibility. Then gradually begin selling it
to the siding firms and make whatever changes are indicated. Still later, roll it on into the
brick field.
Contrasts with Test Marketing
A rollout has many advantages. The biggest are that it gives management most of the
knowledge learned from a test market, it has an escape clause without losing the full budget
if things bomb, and yet we are well on our way to national availability as early rollout results
start coming in.
Other firms may find rollouts to be just as big a risk as full launch. Here is why:
1. Their biggest investment may be in a new production facility and to roll out requires
the full plant at the start.
2. They may be in an industry where competitors can move very fast, so a slow
marketing gives them as much chance to leapfrog as would test marketing.
3. Available distributors are powerful, and none are friends willing to trust them.
4. They need the free national publicity that only a full national launch can get them;
rollouts tend not to be newsworthy

Some firms want a system of two or more techniques. Such firms usually begin with a
pseudo sale method or a form of STM if they are in consumer packaged goods. Pseudo sale
is cheap and quick. Learning is limited, but it is a good leg up on the problem. It often doesn’t
hold up the process. The firm then turns to one of the controlled sale methods, especially
informal selling for industrial firms or minimarkets for consumer firms. If the second test will
be the last, firms tend to slide directly into a full-sale method. Advances in information
technology ensure that firms will have quicker and better data available at the individual
household and business firm level far out into the future.
Chapter 17: Launch Management
There are five major areas in the gap analysis matrix:
Market window accuracy should be measured. If a product’s market window of
profitability is shorter than expected, this may indicate a turning point in the life cycle and
may require strategic thinking for the next product put into development
Executive support. Senior management vision and a hardworking, knowledgeable product
champion are essential to good launch supervision and coordination. Any weaknesses in the
level of support provided to the new product should be identified and corrected.
The business case should be validated. A solid business case, showing desirable financial
projections, is critical in making the go decision.
Sales preparedness is also checked. This means getting commitments from sales
managers, hiring and motivating the sales force, and providing sufficient training and
materials to help them do their job.
The extent of cross-functional alignment should be considered. Good communication
must exist throughout the organization in order to develop products that really address
customer needs in a satisfactory way.
The Launch Management System
A launch management system contains the following steps.
1. Spot potential problems. These problems occur either in the firm’s actions or in the
outside environment
2. Select those to control. Each potential problem is analyzed to determine its
expected impact. Expected impact means we multiply the damage the event would
cause by the likelihood of the event happening. The impact is used to rank the
problems and to select those that will be “controlled” and those that won’t.
3. Develop contingency plans for the control problems. Contingency plans are what
will be done if the difficulties actually occur. the best contingency plans are ready for
immediate action.
4. Design the tracking system. The tracking system must send back usable data fast.
. There should be trigger points. These points trigger the contingency plan. Without
them, we just end up arguing.
Step One: Spot Potential Problems
- Four techniques are used to develop the list of potential problems.
First is the situation analysis made for the marketing planning step. The problems
section in the marketing plan will have summarized most of the potential troubles
from the situation analysis.
- A second technique is to role-play what competitors will do after they have heard
of the new product.
- Third, we look back over all the data accumulated in the new product’s file. Start
with the original concept test reports, then the screening forms, the early lab testing,
the rest of the use tests. and records of all internal discussions. These sources
contain lots of potential troubles, some of which we had to ignore in our efforts to
move the item along.
- Fourth, it is helpful to start with a satisfied customer or industrial user and work back
from that satisfaction to determine the hierarchy of effects necessary to produce it.
 One problem usually overlooked is the possibility of being too successful. It can be
expensive and should be anticipated if there is any particular reason to think it might
happen.
Launch management plans also contain problem items such as:

 Vendors fail to deliver the new parts in the volume promised.

 The new conveyor lines will be stretched to their limit. The stress limits provided
by suppliers may be in error, and/or our manufacturing workforce may misuse the
technology.
 Samples of the new product are critical in this introduction, yet we have not
proven our ability to package the small units needed.
The development does not end when the item arrives at the shipping dock. It ends when
enough good-quality product has performed satisfactorily in the hands of the end user.
We do not “control” sales and do not have tracking lines and contingency plans for low sales.
Unless you know what is causing poor sales, you don’t know what solution to use. Instead,
we use the above efforts to list the main reasons why sales may be low and then track those
reasons.
Step Two: Select the Control Events
The judgment used to reduce the list of problems is usually based on the potential damage
and the likelihood of occurrence. Figure 19.4 shows an expected effects matrix

At the bottom/right are problems that should be taken care of now; they shouldn’t have
gotten this far. In between are problems handled as suggested by the patterns on the boxes.
Potholes are harmful, but sinkholes are disaster. Potholes rarely hurt us because we
anticipate them; sinkholes are tough to anticipate.
Step Three: Develop Contingency Plans
Step Four: Design the Tracking System We now have a set of negative outcomes, for
most of which we have standby contingency plans ready to go. The next step is developing a
system that will tell us when to implement any of those contingency plans.
Tracking
The tracking concept in new product launch shares many similarities with tracking projectiles
launched into space.
Three essentials are involved:
First is the ability to lay the planned trajectory . What is the expected path? What is
reasonable, given the competitive situation, the product’s features, and the planned
marketing efforts? Setting useful trajectory paths requires a base of research that many firms
do not have when they launch a new product.
Second, there must be an inflow of actual data indicating progress against the plan. This
means quick and continuing marketing research geared to measure the variables being
tracked.
Third, we have to project the probable outcome against the plan. Unless the outcome can be
forecast, we have little basis for triggering remedial action until the outcome is at hand. The
key is speed—learning fast that a problem is coming about, early enough to do something
that prevents it or solves it.
Selecting the Actual Tracking Variables

If the problem is some specific step of action or mind, like awareness, then the answer is
clear—find out how many people are aware of the new item. Trial is easy; repeat purchase is
easy. What about trade support?
Selecting the Trigger Points
Given that we have found useful variables for warning that a problem is coming about, the
last step is deciding in advance how bad it has to be before turning the contingency plan
loose. To avoid these no-win situations, agree in advance what level will be the trigger and
put the triggering decision in the hands of a person with no vested interest.
Nontrackable Problems
Typically, management watches sales, and, if they are falling below the forecast, someone is
asked to find out why. This means interviewing salespeople, customers, distributors, and so
on. It’s a difficult inquiry because things are changing so fast and because most participants
have vested interests—they may not reveal the true problem even if they know it.
When the cause is found, a remedy is devised. If it’s not a fast-moving market, time may be
available to get the new product back into a good sales pattern. If it’s too late, the new item
is dumped or milked for a while. The loss may be very little if the costs of launch were low,
as they often are for small firms, for line extensions, and for products that were never
expected to amount to much.
Effective Innovation Metrics
The use of an innovation dashboard that establishes performance metrics for innovation
inputs, process effectiveness, and performance outcomes. Input metrics include R&D
spending, number of employees devoted to innovation, and number of new ideas in the
pipeline. Process effectiveness metrics include number of new products introduced, time to
market, number of patents filed, and budgeted versus actual time and cost incurred. Finally,
performance metrics include percentage of sales derived from new products, number of
successful new products, return on investment in innovation, time to break even, and
improvement in customer satisfaction.
Product team leaders are encouraged to ask for help when they run into a development
problem; no requests for “help needed” is a signal that a project might be running into
trouble.
Another useful idea is to get external validation for metrics.
If there are too many or overly complex metrics, they will become a problem unto
themselves.
Finally, metrics need to be adjusted and fine-tuned through time, so that they are aligned
with business goals—and firms need to learn from their metrics.
As a final thought, we are observing an increased use of social media metrics in launch
management.
Social media can be profitably used for launch management as well. During product launch,
customer feedback can be gained via online sources, measured and compared to products
already on the market. Sentiment analysis tools can be used to categorize the overall
positive or negative sentiment about the product as expressed online, as well as to identify
opportunities for improvement. Insights about after-sale service can be obtained from online
sources and shared among service providers so as to improve customer support.
Very small firms may have the energy to deal with only a couple of problems; the manager
may use what we call eyeball control to move around the market and find if they are
coming about, and then have in mind what will be done if they are.
Launch Management and Knowledge Creation
Much important knowledge can be created at the postlaunch phase by conducting an
after-action review (AAR), and AAR practitioners include some of the most successful
innovating firms today.
An AAR is designed to capture the events leading up to the product launch and to try to
understand the thinking behind the actions taken. The goal is to identify what went right and
what went wrong. A good AAR includes statements of planned objectives and actual results,
an attempt to rationalize the observed variances, a statement of what has been learned, and
an outline for the next steps. The AAR need not be terribly formal—in some cases, a couple
of individuals meeting briefly after a customer visit might suffice—but nevertheless it must be
done.
Temporary products have much less need for launch management. By the time any launch
problems are identified, the time to solve them is past.
The product deletion decision is obviously a complex one with a potentially strong ripple
effect. In this process, the firm must first decide whether the product’s performance merits
consideration for deletion. It then explores ways by which the viability of the product might be
restored through quality or price adjustments or perhaps targeting new markets. Before
making the deletion decision, the firm must systematically evaluate the full effect of the
deletion on overheads, expenses, and capacity utilization and also determine whether the
deletion would leave a major hole in the fi rm’s product line. Finally, if deletion is necessary
or inevitable, its speed must be determined.
Some evidence exists that new-to-the-world product projects may be harder to shut down.
Managers tend to be more optimistic about the chances of success, be more emotionally
committed to the project, and be more likely to want to continue the project right through to
launch.
If a product or product line is discontinued, it may still hold revenue opportunities. It can be
sold to another firm outright. Alternatively, the firm can sell the rights to the product or its
brand name, its formulation or blueprints, its manufacturing process, its distribution channel,
its technology or core subassemblies, or the whole business unit. Another possibility is to
become the big fish in a shrinking pond because there is low threat of new competition
entering the market.
If abandonment is necessary, the manager’s job is not finished. A lot of people need to be
notified.