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8.5. Developing Better Products
There is often debate within firms as to what constitutes a ‘better’ product. For marketers, the definition must be ‘a product that more closely meets our customers’ needs than does the product it supersedes’. Engineers, accountants and managers may have differing definitions; there is, however, general agreement that firms must introduce new products if they are not to be left with a range of obsolete, dying products. New product development (NPD) is therefore a crucial area of marketing activity, and a great deal has been published on the subject.
New product development - Venture teams or project teams develop new products or projects. Typically a venture team will be an interdisciplinary group, perhaps comprising engineers, research scientists, finance experts and marketers. Among other considerations, marketers need to take an overview of the product range to see how the proposed new products match up with existing products. Sometimes a new product can lead to cannibalism of old product lines (in other words, the company ends up competing with itself). Sometimes it can be more effective to carry out a product modification (in terms of quality, function or style) rather than develop a new product from scratch. The task of creating new products is, of course, more art than science. It is therefore difficult to generalise about the process, but a frequently quoted model of the NPD process was given by Crawford and follows this sequence:
- New product planning - The firm examines its current portfolio, opportunities and threats and decides what kind of new product would best fit in with future strategy.
- Idea generation - Specific ideas for the product are expressed, perhaps through a brainstorming session of the venture team.
- Screening and evaluation -The ideas are checked for feasibility and marketability.
- Technical development - The engineering aspects of the product are investigated, and a prototype is developed.
- Market appraisal - Formal market research is carried out to assess the product’s viability in the market.
- Launch - Assuming the market research is positive about the product, the firm puts it into production.
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There are six broad types of innovation strategy:
1. Offensive. Pride in being the first. This is very much the strategy of firms such as Sony and 3M.
2. Defensive. ‘Me-toos’, copies of other companies’ products, but slightly better.
3. Initiative. Straight copies of other companies’ products.
4. Dependent. Led by bigger companies, perhaps customers or suppliers. For example, Microsoft produces new computer software, so it is dependent on new technology developed by computer chip manufacturers.
5. Traditional. Not really innovative at all; the firm is merely resurrecting oldfashioned designs.
6. Opportunist. Selling and marketing of inventions.
Launch decisions might revolve around areas such as test marketing, if the firm test markets the product (i.e. launches the product in a small geographical area to see whether it will be successful), this may save money on promotion but lose the advantage of surprise. On the other hand, if the firm goes for a national launch, this means committing large amounts of money, and mistakes are much harder to correct afterwards. The process of launching in one area at a time is called roll-out. The promotion policy will be affected by the customer category the firm is aiming for: innovators, early adopters, early majority, late majority or laggards. Whether to go ahead or not with a new product is a decision which revolves around five dimensions. These are as follows:
- Strategic fit. The degree to which the new product fits in with the company's overall marketing strategy.
- Technical feasibility. Whether an effective product can be made economically
- Customer acceptance. Whether customers like the product.
- Market opportunity. The level of competition the firm might be expected to face, and the current state of the external environment.
- Financial performance. Whether the product will prove sufficiently profitable to be worth launching.
Of these, customer acceptance is the most widely used throughout the new-product development process.
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