The Manager's View provides solutions and advice based on management and marketing principles that are used by GWR Research (www.gwrresearch.com). Many of the posts are related to or are taken from the author's books "The Manager's Guide to Building a Successful Business" and "Developing Successful Marketing Strategies". More information on the books is available at Amazon.com, BarnesandNoble.com or Businessexpertpress.com
NEW PRODUCT DEVELOPMENT PROCESS
NEW PRODUCT DEVELOPMENT PROCESS
As markets and
customer preferences change companies adapt to insure success. Adaptations
usually are made to capitalize on markets and expertise a firm has developed
over its life.
are limited to updating packaging or marketing approaches or finding new uses
for established products.
occasions where new products are needed in order to meet new customer needs or
address a disruptive market innovation.
changing market needs and market disruptions it is necessary to find good ideas
and then have a process to evaluate and narrow the field to the ideas most
likely to succeed.
Generating new product ideas
The first step in
generating good ideas that will further develop the markets and expertise that
defines the firm is to clearly articulate the job customers are hiring the firm
Here it is
important not to be too restrictive in the focus of the definition. It is
probably better for an owner of a baseball team to define his firm’s job as sports
entertainment as opposed to the more focused definition of professional
Once the job the
customer has hired the company to perform is defined then it will be easier to
identify new product ideas that are based on the firm’s strengths.
There are several
methods to develop new product ideas that are very useful such as brainstorming,
market research and product attribute modeling.
widely used and involves getting key employees (and sometimes customers)
together to find solutions to challenges facing the firm. The key to successful
brainstorming is good note taking, allowing all ideas to be presented without
negative feedback and encouraging all participants to contribute without
letting a few dominate the exercise.
can be the result of research surveys designed to uncover market opportunities.
This research involves current customers, individuals with characteristics
similar to current customers or a random selection of individuals. Examining a
firms records and reviewing sales staff information on the market and the
competition can also provide solid market research.
modeling is a unique way of generating new product ideas by choosing a job the
company is hired to perform and describe the absolute worst outcomes. After identifying
the bad outcomes participants go back through the exercise and determine what
actions could be taken to eliminate the negative outcomes. For example if a
company made suitcases an exercise might be to list all of the negative
attributes for suitcases (such as not fitting in overhead bins in aircraft,
wheels that wobbled, instability etc.). The follow up exercise would be to
create a suitcase that addressed all of the negative attributes.
The best idea
generation will likely come from a program that involves all of the idea
generation techniques, First, market research, then brainstorming based on the
research and finally product attribute modeling.
Identifying the best ideas
After the idea
generation process there are likely to be a number of ideas that are
attractive. The challenge is to find a way of objectively identifying those
ideas that have the most promise.
For this process
it is important to assemble a committee of key employees from each part of the
business. The committee should have members from sales, IT, finance,
accounting, production, R&D, and engineering. This structure allows any
idea to have the insights of the various parts of the organization. The
committee should be led by an individual that can keep the group generating
customer focused ideas and prevent efforts to kill product ideas because they
don’t fit with current thinking.
new product ideas there should be specific criteria identified that the new
product must meet before moving to the next level of consideration. A list of
evaluation criteria might look like the following:
1.Profitability/market acceptability- will the product generate a profit and a market?
2.Accreditation requirements – Does the product meet industry and legal
3.Length of project – Can the product be introduced in an acceptable time
4.Accommodate systems – Does the new product make use of current systems
or will new ones need to be developed?
5.Fit Image – Does the product fit the image the firm wishes to project?
6.Resources – is the new product resource and capital intensive?
7.Gateway capacity – Does this product lead to the possibility of new
products or businesses being developed?
8.Negative Gateway capacity – Does this product have the potential of
damaging other aspects of the operation?
9.Customer acceptance – will the customer accept this product over others
offered in the market?
If product ideas
successfully meet all of the criteria then product ideas can be chosen to move
forward to a product planning process. Those chosen as having the highest
priority should best meet all of the criteria with the least organizational
When introducing a new product or service to the market a
key, and often critical, consideration is the price for this offering. I have
seen folks simply take the cost of production and use a percent mark up as a
pricing model. This is the simplest model and it provides a good example for
the need to consider other pricing model options.
Here are 10 things to consider before setting a price for
your product or service: ·Mark up
Based on Cost Vs Retail. In the opening paragraph I gave the example of a
model being used that marked up a product by a percent over the cost. The cost
used here is generally direct cost or labor and materials. If someone wants a
30% of the asking price to be the mark up, then using 30% of cost won’t provide the
desired outcome. Simply put, it is the wrong math. If something costs $1 to
make and it is marked up by 30% for a selling price of $1.30 then the profit of
based on the asking price is 23.07%. To arrive at a 30% mark up based on the
selling price it is…
THE IMPORTANCE OF PRODUCT PRICING By
Gary Randazzo The impact of pricing
strategies can be critical for the success of new product launches, a company’s
image and ultimately a company’s short and long-term success. REACTING TO THE COMPETITION I have worked in
several industries and found that pricing is often overlooked as a key
marketing tool. In many instances pricing is driven by the sales department and
is a reaction to the competition. This reaction assumes the competition knows
the market better and has a superior marketing strategy. When reacting to
the competition it is important to understand that you are being drawn into a
game whereby you play by the competitor’s rules. You are playing their game and
changing your strategy. Your hope here is that you can play the game better or
that the competitors can’t play their own game very well. I am reminded of
a time where my company was vying for the business of a key customer. The
customer was a shrewd negotiator. We understood the valu…
TO CLARIFY YOUR MARKETING STRATEGY, START CLASSIFYING YOUR CUSTOMERS
From Texas CEO Magazine, December 2012
By Gary Randazzo
Every business, at some point, will review its marketing strategy. The cause for a strategy review can come from a difficult business environment, a windfall in profits, a change in technology or a change in customer preferences. When a marketing strategy review is in order it can be challenging to decide where to start.
Classifying customers, based on the amount of their spending, can be a good place to begin. Spending used as a metric can help the analyst understand which customers provide the biggest impact:
1) Key customers representing the largest percentage of sales and profit
2) Customers with the potential to provide greater sales (under-potential)
3) Customers that do little or no business with the organization but use products similar to those offered by the organization (nonusers)
This simple classification may…