MKTG 3650 Chapter 11 NPD New Product Development is Important World Changing for the better Survive and Thrive survival o NPD exists as a mega business activity that profoundly influences your life often o NPD activity and output contributes materially to almost every Firm s ongoing o How fast Firms die depends largely on the industry in which they compete o Existing products are rarely murdered Instead they slowly commit suicide outlive their usefulness failing to change in ways that would have permitted them to offer what the world now sought Solves Problems Known and Unknown o Most Firms most pressing challenge derives from the needs they face to achieve genuinely sustainable differentiation in markets that have become increasingly commoditized and globalized o Marketing competitors will do the most damage when little to no differentiation exists between their product portfolios Benefits Economies in Every Way o The outcomes generated by NPD generally but inevitably benefit societies cultures and economies as well as increasing productivity and economic growth o The 1990s are considered the last great decade of sustained economic growth in the United States The Internet invented in the 1970s initially blossomed into a potentially profitable innovation during the 1990s Original oil services called directional drilling were perfected and made new again during the decade During 1980 1988 Reagan s administration promoted the idea that the United States should develop a new product known as Star Wars Some argue that Star Wars financially forced the Soviet Union out of business because the USSR could no longer spend enough to keep up in the Arms Race o The performance of legal accounting medical engineering technology development and analysis and information management functions is increasingly outsourced to India or China or other places with more foreign country providers entering the scene every year o Learned ability to solve current and emergent problems more creatively may prove the ultimate survival skill Promotes Your Success What is a New Product o The allure of new always has and always will be desirable and a driver of sustainable marketing success o The New acts as a bait and hook that first catches eyes and then plastic cards New to the World Products o These products are also called discontinuous innovations because they dramatically changed the solutions to existing consumption related problems o Examples of discontinuous innovation include the original telephone developed in 1876 by Alexander Graham Bell VCRs PCs automobiles aircraft and electricity o Extensions of what was once the discontinuous innovation are called dynamically continuous innovations New to the Firm Products o Can be derived from or based on continuous innovations o Simple improvements revisions upgrades to existing products already produced by other Firms may offer opportunities for new to the Firm products Improvements Revision Upgrades Subtractions Deletions to Existing Products o Product additions or deletions could be initiated to create new or added value for existing or newly targeted customer segments o Also called continuous innovation this sort of less intense but still useful creative endeavor is actually the most common type of NPD Other Types of NPD Efforts o Repositioning this occurs when existing products are repositioned for new uses new applications or new market segments o Cost reductions Firms develop newer but less expensive versions of current products o Certain personal endeavors When one purposefully adds new skills or experiences improves skills or abilities one already possessed or refrains from behaviors or activities that had detracted or distracted others from one professional s or personal value Invention vs Innovation Invention o An aspect of uniqueness and or something that is new o Uniqueness is reflected in the unique form formulation or function of the new o Form captures what is actually new about a product o Formulation relates to the uniqueness of how a new product will be made or thing formulated o o Function relates to what the presumed new product does o Inventions may address either practical or merely salable customer problems Innovation o An overall process whereby inventions are transformed into commercial products that can be sold profitably For this to happen innovations must be capable of delivering practical or perceptual value that benefits some targeted segment o Discontinuous Innovations New products that require customers to learn new things acquire new experiences and adapt their current consumption behaviors before they can be properly used o Dynamically Continuous Innovations Generally arises when two or more concepts or product ideas are combined o Continuous Innovations Modest or ongoing upgrades of existing products and include the lion s share of innovations o Cigarette Break Cigarettes can be used to illustrate the difference between discontinuous continuously dynamic and continuous innovations Basis for Classifying Innovations o How radically new and innovative the new product actually is o The degree of learning and or behavioral changes that must occur amongst targeted customers before they will be willing or able to adopt the innovation Inventions and Innovations Can Be Mothers o The invention of something that is converted into something else new and useful often creates presumed needs for the product The Diffusion of Innovation Diffusion entails the movement of atoms or particles from areas of greater concentration to areas of lower concentration In marketing terms diffusion entails the rate of adoption of a new product throughout a particular market population nation or global region The adoption rate for any innovation is measured from the point at which the product is introduced to a new market market segment or social system to the point at which the last customer in the market segment or social system has learned about or adopted the new product for use The adoption rate for innovations measures the velocity or speed at which new products ideas or technologies spread or are adopted throughout markets market segments or social systems Customers and prospective customers are usually classified into one of six categories based on the rate at which the new product is adopted o Innovators 2 5 Adopt innovations first enjoy higher social status are better informed and more knowledgeable about the innovation in question possess the