Reducing the Risks of New Product Development

Risk, a Constant Companion

1. New Products are only successful if people buy them.

2. Studies say that 50% or greater of new products fail. Why?

Not because they don’t work
Not because they are not good products.
Not because of technical issues.
3. Then Why?

A Faulty Understanding of customer needs.
If you don’t understand what the customer needs or wants you can not fulfil that need.

Customer Integration

Integrate customers into the innovation.
Ask for product ideas
Only pursue the most popular
Get purchase commitment before final development
This is called “Collective Customer Commitment”
Major Changes Needed.

The traditional New Product development process.
Makeup of New Product Teams.
Involve the Customer, Designer, Production and management in the NPI Decision.
Reduce the Risk of Failure by getting purchase information before Production.
Sell Before You Produce.
Limitations to Traditional Market Research

1. Focus Groups

Too small to be indicative of population.
Lack Realism, only verbal description of product.
Not a measure of real purchasing behaviour
2. Test Marketing

Expensive
Time Consuming
Exposed to high level of noise from competitors.
Food for Thought

Only 50% of fortune 500 companies use focus groups.
Less than 25% of fortune 500 companies use limited roll out or Concept testing.
Many consumer goods companies do not regularly survey potential customers.
Excuse; “Behaviour of Customers is often impossible to predict”
So what do they “Do”

1. They develop variants of existing products.

Different sizes
Added functionality
2. They put off manufacture till they see what will sell.

Stock or manufacture generic components.
3. Manufacture on Demand. Full Customisation.

Customers define one off products for manufacture.
Collective Customer Commitment

1. Not a new idea

New homes bought from plans.
Concept products assess the willingness to buy
2. What is new

This concept used for FMCG products.
3. Why?

Consumers now are more informed.
They want a greater say in what they purchase.
Collective Customer Commitment

1. Very successful when testing Innovative Products.

Yamaha, Electronic Guitar. An aid to learning how to play guitar. Pre order enough to allow production
2. Very Successful when market segment is small

The Best of Both Worlds

1. Does Collective Customer Commitment suit all firms

2. No.

It will suit some firms and will not suit others.
Some firms will use a hybrid of conventional and collective customer commitment.
For firms that can use it, collective customer commitment can reduce significantly the Risks associated with new product development.

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