Most new products fail. The risk of failure can be reduced by establishing a sound NPD process or new product development process.
Although there are variations, the basic process includes the following distinct stages: ideas are generated, screened, evaluated in more detail, developed, tested and finally launched.
Ideas come from everywhere. Whether from sophisticated social, anthropological or technical studies that reveal hidden needs and opportunities for new products; or just ideas from brain-storming teams, suggestions from customers, distributors and employees.
Ideas are then screened to see how well they match the market’s needs; and simultaneously fit with the organisation’s overall objectives, strengths and resources.
The ideas that get through the initial screening are researched and developed into concepts for further evaluation. Although often presented on concept boards and researched in focus groups, some organisations, like Coca Cola, carry out concept research among larger numbers of potential customers. The commercial viability of an idea is also evaluated by estimating costs, prices, sales, revenues, investment and profit.
The big spending then starts with the development stage. Teams of Research and Development specialists create prototype after prototype, testing and refining until they achieve the best solution.
To invest or not to invest. That is the question. A big investment goes into the tools which manufacture the final product. The tools can take 6 months to make. Once they are commissioned then there is no turning back. This may require board room approval.
Meanwhile marketing specialists develop the rest of the marketing mix. Brand names are registered, packaging designed, distribution channels selected, sales force briefed, and promotional activities prepared.
This is followed by testing – laboratory and real life testing for safety and performance as well as market acceptance.
If the results are positive the product is launched usually on a ‘roll-out’ basis in one area after another, allowing demand and production to build up in a co-ordinated manner. The roll-out can also identify any last minute, hidden problems before going national or global.
The NPD process is not a linear sequence of events. Results from tests, customer feedback and general discussions send everyone back to the drawing board. So the NPD process is a series of loops rather than a linear process.
NPD plays a big continual part in a company’s long term success. Constant improvement of old products along with the development of new ones means companies like Sony produce 1,000 new products per year or 4 new products each day. Their founder Akio Morito, explained the underlying NPD drive when he said that his job was to make his products obsolete.
Product Lifecycle
One of the most common concepts referred to in marketing is the product life cycle. Whether it is candles, Political, economic, social and technological changes affect product life cycles. The time frame can vary according to the industry but the pattern remains the same: slow sales growth, rapid sales growth, mature sales, and falling sales, as the product is launched, grows rapidly, matures and eventually declines. horseshoes, hair nets or Harrier jets – products have life cycles. That means they all have a beginning… and an end.
Perhaps a little simplistic but nevertheless it can provide a useful insight into a common pattern of total industry sales which the marketer must recognise. Businesses, like steam engine manufacturers refused to see the end of their product’s life cycle. They went out of business. They did not acknowledge the inevitable end of their product’s life cycle.
Although candles and horseshoes still exist today, their sales have peaked long ago and are now minuscule compared to the vast volumes which were sold during previous centuries. Vinyl records and turntables have a shorter life cycle.
Black and white TV had a relatively short cycle which was extended by colour TV which is now near its decline stage as multimedia on-line PC/TVs emerge.
The marketing mix varies during each stage of the product life cycle.
A product’s life cycle can be extended by finding new users, new uses, increased usage and of course, product modification.
New users mean new target markets. New uses for a product mean that new benefits and new ways of using the product have to be found. Increased usage is simply trying to get customers to increase their quantity and frequency of use.
Extended or not, the Product Life Cycle is usually applied more easily to product form rather than product class or specific brands. For example, a product form such as black and white TV has a clearer life cycle than televisions in total which is a product class
Different products and whole industries have different time horizons, for example the horseshoe’s life cycle has had hundreds of years while TV may have perhaps only 70.
The danger of over-dependence on the life cycle means that a temporary dip in sales could trigger a premature withdrawal of a product – if the dip is misinterpreted as the final decline of the product. Peter Doyle, in the linker, explains his dislike for the concept.
Finally, the life cycle is more descriptive than predictive. It describes the behaviour or sales pattern of a product as opposed to predicting its future sales precisely. Despite this limitation , the steam engine companies might just have survived in some manner or form if they’d been aware of where they were on the Product Life Cycle and its fatal finality.
Product and the Marketing Mix
Over a hundred years ago Ralph Waldo Emerson suggested that “If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbour, though he builds his house in the woods the world will make a beaten path to his door.”
This is certainly not true today. Many excellent products fail because no one knows about them, or they are wrongly positioned, or they’re not available when people want them, or they’re too expensive for the chosen target market.
Other excellent products fail because a competitor’s lower priced and inferior product is widely available before you even get to launch your product on the market place. Going back to the Emerson’s better mousetrap, ironically the best product is not always the best option. For example, the product might be so good that it costs too much to produce and therefore the best product might just put you out of business.
Do customers really want that extra feature? Can you afford it? Can they afford it? Can competition copy it? Whatever the decision, the final combination of the core product, tangible product and augmented product along with price, promotion and distribution need to work together if a product is to be successful.. Better mousetraps are often beaten by poorer mousetraps. It happens all the time.
Competitors constantly juggle their marketing mixes to maximise their product sales. Speed to market; blocked distribution channels; clever pricing strategies; powerful promotions; are all used by competitors to win and keep market share.
The better mousetrap also needs to be part of a coherent, fully integrated marketing mix. The distribution has to get the product to where the target customer can buy it when they want it. The prices have to reflect the desired quality image while simultaneously matchingwhat customers can afford. Finally, customers need to know about the product – it needs to be promoted in the right way.
Each element of the marketing mix should support the product’s positioning. The product, its price, its distribution channels and of course the promotion should all reinforce the same message. Without a coherent, fully integrated mix even the best product in the world will fail.
Diffusions of Innovations
New products and new ideas are more appealing to some buyers than others. In fact buyers can be segmented according to how much they like new ideas.
Research suggests that there is only a small percentage of buyers in consumer markets, about 2.5 that really like to be the first to try new products. They tend to be better educated and, in a sense, are always ready to risk buying an innovative product. Not surprisingly , they’re called the ‘Innovators’.
There is another, much bigger, group who also like to adopt innovative products, but only after seeing them being used and enjoyed by the innovators. This second and larger group of buyers is called the ‘Early Adopters’. These opinion leaders represent about 13.5of all the eventual buyers and because they tend to be very sociable, they influence other people.
After the first two groups have risked buying the new product, the bulk of the market opens up. This is the majority of buyers. There are two groups within this majority: ‘Early Majority’ and the sceptics…
…the ‘Late Majority’. Of equal size, their total represents about 68of all the buyers in a particular market.
There is one last group of buyers who appear to resist new products. In a sense they lag behind all the other buyers who have now started buying the new product. These ‘Laggards’ represent a significant number of buyers, about 16
If you throw a stone into a pond, watch what happens. After the splash, small waves ripple outwards from where the stone landed. Each wave creates another circle of wavelets. And so on.
The diffusion of new products is a bit like this. There is a centre circle, a particular group of people who are the first to try a new product. They influence the next circle, or group of people, who, in turn, influence the next circle of people.
The key to the diffusion of innovations is to find the centre circles – the Innovators and Early Adopters, and then, spread out from there. Target the Innovators and the Early Adopters. Don’t start with the laggards. These different circles of people have different profiles, media habits, lifestyles, levels of income, education and attitudes towards risk.
And as marketers get better at diffusing new products, services and ideas, product life cycles get shorter . There is an accelerated diffusion process as speed to market, reduced payback periods, shorter life cycles and ferocious competition combine to create a faster moving model of diffusion. Electronically accelerated diffusion means using databases to profile and target each of the different types of buyer within the diffusion process.
Now, if your new product has a global market, it may be worth considering whether some countries, or cultures, have more innovators than others. Whether you could target ‘innovator cultures’ in a global diffusion process?
Product Design Research
Good designers invest in research. Initial research into the market place, existing products, users and environments, is followed by more focussed research as they move into, and refine, subsequent product concepts.
Some designers will spend weeks researching a particular product area. This may involve collecting pictures, ads, leaflets of other products. It may even involve collecting images of the environment in which the product may be used. And then they try and make sense of all the information and arrange the images into groups and clusters. Trends, patterns and gaps may emerge offering the designer new opportunities. There is much research to be carried out before attempting any actual design work.
Here is Kevin Thompson of Grey Design talking about their ‘design wheel’ which they use as an initial research tool before carrying out any design work whatsoever. In this case they are researching pots and pans for the kitchen.
“As a brand and product developers, we at Grey Matter work at the sharp end of New Product Development. The product wheel is a concept developed by Grey Matter, to help us and our clients have a clearer understanding of the market place in which their products operate. The main purpose is to identify and clearly explain the visual cues and codes that operate in their particular market sectors.
We also highlight future trends, by identifying the key influences that affect the market, and examine their inter-relationships in any one particular market.
The aim of this presentation technique, is to place products in rank order against each other within a 3D flat space.
I am going to demonstrate this using 2 visual wheels prepared for the Prestige Group based on the domestic UK Market. The first wheel maps the Environment in which the products are used. The wheel shows the various styles of Kitchen common to the UK domestic market.
The centre of our wheel shows the mass market moving outwards to Aspirational.
So, at 12 o’clock round to 4 o’clock we have traditional wooden finishes flowing into new and emerging kitchen designs at 6 o’clock. This sector accounts for approximately 85of the UK market.
From 6 o’clock we move into the minimalist kitchens evolving into Psuedo-professional at 8 o’clock, ending up with continental colours at 11 o’clock.
Outside the perimeter of the wheel, we show 3D product samples that reflect the look and feel of the individual sectors. Now… if we focus on the continental colours, we see primary colours in the scrap art imagery supported by 3D samples showing stainless steel and highly decorated finishes.
The next wheel maps stainless steel cookware. As before the centre shows the mass market moving towards aspriational at the perimeter. We use the same descriptors as before so we can map the products against the environment wheel. If we could superimpose the two wheels they would correlate. The interesting feature of this wheel is the gaps in the product offers. These could present opportunities for New Product Development.
We at Grey Matter find this type of visual mapping is much easier to understand and more useful than the traditional bi-polar mapping techniques.”
So there you have it. Careful research helps to identify better design solutions to market challenges.