Innovation Management

New Products &

Market Testing

Kevin O’Brien

Learning objectives

Appreciate the importance of balancing consumer needs, technical feasibility and business viability in new product development (NPD)

Be able to describe the main evaluation steps in the NPD process

Understand the (classical) role of marketing research in NPD

Have an awareness of different approaches to market testing

The Challenge

(Source: IDEO)

How to maximise successes?

Improve odds on each individual product market research, segmentation, competitor

analysis etc. linear NPD process predictable, incremental new products (the 90%)

Introduce many products in quick succession and hope one succeeds probe and learn, market experimentation,

expeditionary marketing iterative NPD process highly innovative (discontinuous) new products

(the 10%)

Conventional NPD Process

Title of ‘evaluation set’Development phases Evaluation phases

Idea

Evaluation

Evaluation

Evaluation

Evaluation

Evaluation

Concept/design

Prototype

Pre-production model

Launch model

Idea screening

Concept testingBusiness analysis

Product testing(functional & market)

Test-marketing

Post-launch evaluation

Sources of Ideas

Brainstorming Intuition, associations of

ideas Product-centred

Features, functions, benefits Analogy, force relationships

Market-based Gap analysis, perceptual

mapping Scenario-based

Activity analysis, problem analysis, scenario analysis

Empathic design

How to identify latent customer needs? Evident but not yet obvious

Problem identification Problems and frustrations with current solutions

Story-telling How do you behave? How do you feel? Listen to customers’ stories

Observation Observation in a natural setting Product selection and use

(Leonard & Rayport, 1997)

Concept Development & Testing

Concept development detailed description of the idea stated in terms

meaningful to the customer Concept testing

present to target consumers as words, pictures, physical mock-up or virtual reality form

assessment of benefits, willingness to purchase, acceptable price

initial target market profiling Concepts offering potential are progressed

Concept Development & Testing

Consumer perceptions Concept uniqueness Concept believability Ability to solve problem Inherent interest Value for money

Concept presentation Line drawings Photographs Storyboards Mock-ups

Business Analysis

Development costs R&D capabilities, time to market

Market potential target market, positioning, sales, market share &

profit forecasts Marketing costs

promotion, distribution, sales force etc Business attractiveness

return on investment, level of risk forecasts of first time sales, repeat sales, rate of

adoption & replacement sales How important is this project to the overall

business strategy?

Product Development & Testing

Concept developed into a workable product Design and development challenges:

technical feasibility customer needs ease of manufacture

Initial models produced which undergo: Functional testing Consumer testing Channel testing

Does the product fulfil the concept statement?

Product Development & Testing

Product-related decisions Content & form of

presentation (number of product variants?)

Disclosure of identity (blind or branded?)

Explanation/supervision of test

Location of test Use of comparator products Consumer panels

Representative? Ad hoc surveys

Who? When? Where?

Lead users

Innovators/early-adopters Pioneers in (B2B) markets Can’t find processes/materials/equipment to meet

novel requirements Already working on innovations/prototypes

Early experience with problem Rich and accurate feedback

Highly motivated Beta-tests, early market probes, joint development

But not easy to identify ….. Start with generic problem, network contacts,

workshops(von Hippel, 1988)

Market testing

Product (and marketing programme) are tested in realistic market conditions prior to full-scale launch product, advertising, positioning, distribution,

branding, pricing, packaging, sales budgets Acts as a final screen in the NPD process

cancel projects which fare badly Provides real data to test assumptions from

market research, analysis and planning improved sales and profit forecasts

Costly, time-consuming, highly visible

Market testing

Standard test markets full marketing campaign in small number of

representative cities store audits, consumer & channel surveys

Controlled test markets panels of stores in different geographical

locations panels of shoppers

Simulated test markets simulated shopping environments

“Probe & learn” NPD process

Gain market insights by experimentation launch early versions of products into plausible

initial markets learn from these small-scale market trials modify the product and marketing approach launch again, and again, and again ……

Learning and adaptation rather than analysis A process of “successive approximation” Important in directing the development effort Appropriate when technologies and markets

are uncertain

(Lynn et al., 1996)

“Probe & learn” NPD process

Notebook market (1986-90) 30+ product launches

Hard disks/floppy disks Microprocessor speeds LCD/plasma screens Price points

Explored every market niche Withdrew more products than competitors

had launched Achieved market leadership

References

Leonard, D. and Rayport, J.F. (1997) Spark innovation through empathic design, Harvard Business Review, Nov-Dec, 102-113.

Lynn, G.S., Morone, J.G. and Paulson, A.S. (1996) Marketing and discontinuous innovation: the probe and learn process, California Management Review, 38(3), 8-37.

Von Hippel, E. (1988) The sources of innovation, New York: Oxford University Press.