New Products Design

and Development

Prof. Estuardo Lu
MBA, Industrial Engineer
 “Eat your own fruit”
Once a disciple was complaining up to his master.
“You always tell us stories, but you never reveal its
meaning”.
The master replied:
“Would you like someone offer you chewed fruit?”

"No one can understand the meaning for your.

Not even your master. You have to do it by yourself"
 THE MEANING OF PRODUCT

PRODUCT
IS A SET OF TANGIBLE AND UNTANGIBLE ATTRIBUTES THAT
CONSUMERS BUY TO SATISFY THEIR NEEDS IN THE FORM OF
BENEFITS RECEIVED.

THE PRODUCT CAN BE:

• A PHYSICAL GOODS
• A SERVICE
• A PLACE
• A PERSON
• AN IDEA
• AN INSTITUTION
 Traditional Vision
Product Orientation

(1) (2)
Product (1)

Profits (2)

Companies Consumers

“Sell what you produce”

 Marketing Vision
Market Orientation

Loyalty, Recommendation (4)

Information (1)

Product (2)

Companies Consumers
Profits (3)

“Produce what you can sell”

 Marketing Orientation

What do I sell?

What do they buy?

• Nobody needs drills…

• People just need holes.

 PRODUCT

A product is the
Cornerstone of Define
Marketing strategy businesses

Manufacturer Revlon:
 2 points of view “In the factory we make
Consumer cosmetics,
in the store we sell dreams and
hope”

(Defines Market and the Competition)

8
In conclusion…

We do not produce
products, we satisfy
customer needs.

A business starts with the

customer and their needs,
not with a design or sales
or production skills
Marketing Orientation

The companies that will

succeed in the market,
will be those that answer
better to the needs of its
consumers.

The role of the company

is to provide value to their
customers in exchange
for recurring profits.
Value
 Example: Value of a cup of coffee

1950 Coffee, sugar, milk S/. 0.20

(economy of raw materials)

1970 Coffee packaged / instantaneous S/. 0.50

(economy of goods)

1980 Coffee in a cafeteria S/. 4.00

(economy of service)

2000 Starbucks Coffee, Altomayo Coffee S/. 15.00

(economy of experience)
Which is the secret?

The trick is to find an attribute

that distinguishes us, that
means a customer benefit
and communicate it as
clearly as possible,
associating it
with a brand.
Differentiation
 PRODUCT DESIGN PROCESS
TO CREATE VALUE

BRAND
PRODUCT/SERVICE CUSTOMER

PERSONAL AND
FEATURES PROFESSIONAL SATISFACTION
SITUATION

REAL
HYPOTHETICAL NEEDS AND /OR
ADVANTAGES MOTIVATORS ADVANTAGE
BENEFITS
 Diferentiation through selling concept

CONCEPT
PRODUCT Elaborated version of the
IDEA idea, expressed or
translated in terms
It is what we believe of customer satisfaction
will help solve a problem and benefits
or customer need that there is in the
product.

It is giving meaning to the

idea in terms to do sense
to the customer.
 Benefits and Satisfaction of Needs

Customers buy for some of these reasons:

• Security: Avoid fears, worries, insecurity, warranty...

• Affection: Love,, friendship, sympathy, membership...

• Well-being: Comfort, utility, health, saving time, service,

avoid efforts, improving the standard of living...

• Pride: Vanity, envy, emulation, prestige, be more...

• Novelty: Fashion, be the first to use something, show that

you are up to date…

• Economy: Earn money, profits, improving benefits, saving...

 What is a Brand?

"The brand is a name, term, sign, symbol or design, or

that combination of these, whose purpose is to
identify the goods and services of one seller or group
of sellers and to differentiate them from the
competition."
American Marketing Association

The brand indicates the origin for the product to the

customer and protects both the consumer and the
competition manufacturer that could offer identical
products in appearence.
 Is there a difference between
Product/Service and Brand?

What will be most successful?

• A great product with a good brand

• A good product with a great brand

 Product/Service vs. Brand

Coca Cola vs. Pepsi in Blind taste test

– Prefer Pepsi 51%
– Prefer Coca Cola 47%
– None 2%

Coca Cola vs. Pepsi in Taste test with brand

identified
– Prefer Pepsi 23%
– Prefier Coca Cola 65%
– None 12%
 Why the brand is useful?

• Brand is created primarily to:

Capture and enhance customer
loyalty to the product or service
Who is He?
 The differentiation…

"These days building the best server is no

longer enough. That's just the entry price"
 The Brand is not the product

PRODUCTO
MARCA
 The BRAND is not the product

BRAND
PRODUCT

FUNCTIONAL VALUE
CAN BE COPIED
OBEY A CURVE OF OBSOLESCENCE
EMOTIONAL VALUE
UNIQUE AND REGISTERED
ETHERNAL, ENDURING IN
THE MIND

EXIST IN “THE HEART” OF

CUSTOMERS
The Experience is the last 90%
Tom Peters
Value proposition of the BRAND

EXPERIENCE

Value Ratio : Benefit / Cost

SERVICE

PRODUCT

COMMODITY
The Differentiation is in the Experience

Starbucks:
"We identified a third site, and this is really what made
the difference. This third site is not the office or home.
It's the place to our consumers that are looking for
refuge."

Harley-Davidson sells the ability for a 43-year old

accountant to dress in all black leather, ride through
small towns and have people be afraid of him.

Hertz Rental Car:

"Renting a car is transformed into an experience of time
saving and convenience. The car itself is not ."
 ¿And who should lead this
marketing process?

The "Product Managers" or "Brand Managers"

are the responsible of the business product units,
the seeking of opportunities and must find ways
to increase sales by changes in the marketing
mix strategies.
 MARKETING PROCESS
STRATEGIC MARKETING
(MIND OF THE COMPANY)
• Mission.
• Investigate and identify needs and
functions to cover.
• Identify segments: markets and
products.
• Analyzes potential market
attractiveness and its life cycle.
• Analyzes competition and discover
sustainable competitive advantages.
• Development strategies are chosen.
MEDIUM AND LONG TERM
OPERATIONAL MARKETING
(COMMERCIAL ARM OF THE COMPANY)
• Conquest of existing markets.
• Application of commercial mix
(Marketing Mix = 4 Ps).
• Application is restricted to a
Annual Marketing Plan.
• The goal is to obtain
market share in the short term.
SHORT AND MEDIUM TERM
Strategic and Operational Management

Which marketing is more important?

A good tactic doesn't correct a bad strategy.

An excellent strategy doesn't serve unless it goes through a
good operational tactic.

The speed of changes in the environment makes that

Strategic Marketing must:

1. Search for solid strategies.

2. Create a permanent vigilance system of the environment.
3. Develop the ability to adapt to change rapidly.
4. Renew products / markets.
What´s a new product?
“ Business has only two
functions:
marketing and
innovation.”
Peter Drucker
 CLASSIFICATION OF THE
TYPES OF PRODUCT

- Goods
 According the tangibility
- Services

- Durable
 According the use of the product
- Nondurable

- Consumption
 According the buyer
- Industrial
 TYPES OF CONSUMER PRODUCTS

- Unintended
- Convenience
· Common use MASSIVE
CONSUMPTION
 According to purchasing effort · Impulse purchase
· Emergency
- Comparision
- Special
 TYPES OF INDUSTRIAL PRODUCTS

 Commodities (agricultural, sea, mines, forest, dephts of the earth)

 Processed materials (metal sheets, syrups, steel, plastic)

Facilities, buildings (factories, offices), lands

 Capital Goods
Equipment: - Heavy (lathes, milling machines, cranes
- Auxiliary (hand tools, drills, truck)

 Components (spark plugs, headlights, wheels, ...)

Operating (oils, solvents,lubricants, ...)

 Supplies
Materials (paint, nails, screws, ...)
 Services (maintenance, telecommunications, consulting, advertising ...)
WHAT IS A NEW PRODUCT?

New Product
Articles unseen by the world,
the market, the manufacturer,
the seller or any combination
thereof.
 Drivers of New Product
Introduction
Market Stimulus Technological
Interfunctional Stimulus
• Produce what you • Sell ​what you can
can sell. • Product
produce
• Identify market needs innovation is the
• The new technologies
to cover. result of a present opportunities
• Marketing is key: coordinated of manufacturing new
- Market research effort by all products for which we
departments of need create a market.
- CRM (feedback)
the company • R&D is key
 TYPES OF INNOVATIONS
Moderate High Investment
Investment Highest Risk
Modarate Return High Reward
Degree of external newness

Moderate
Low Investment Investment
Moderate Return High Reward
Technological uncertainty
Degree of internal newness
 “S CURVE” OF TECHNOLOGY EVOLUTION
CONTINOUS INNOVATION VS. RADICAL INNOVATION
SCOPES OF APPLICATIONS TO INNOVATION
(Examples)

Innovation
Innovation Focus
Degree
Increase, adapt and New ways of doing New ways of
develop something managing

Business
Product Process
Model
Innovation Innovation
Innovation
Radical / Disruptive Google DELL Apple

Semi-Radical Nintendo Microsoft Samsung

Incremental 3M Toyota WalMart

“The enterprise that does not
innovate inevitably ages and
decline.
And in a period of rapid
change such as the
present... the decline will be
fast”

Peter Drucker
 CURVA S – Example
Portable Music Players
TYPES OF NEW PRODUCTS

New to the World

New Product Lines

Additions to the Product

Lines
Improvements or Revisions of
Existing Products

Repositioned Products

Low Price Products

 NEW PRODUCTS:
TYPOLOGY OR CATEGORIZATION
High
NEW PRODUCT LINES 10%
20%
RADICALLY NEW PRODUCTS

26% PRODUCTS ADDED TO EXISTING LINES

26%

REFORMULATIONS
OF
EXISTING REPOSITIONINGS
PRODUCTS
COST
11% REDUCTIONS 7%

Low
High
NEW TO THE MARKET
*Cooper , R. (1988)
 New to the World

Also called discontinuous innovations: These products create a

completely new market. Represent the smallest category of new
products.
Ten of the most significant new products introduced to the world in the
last 100 years are:

1. Penicillin
2. Radio transistors
3. Polio vaccine
4. Mosaic (the first graphical browser in network)
5. Microprocessor
6. Black and white TV
7. Photocopier of commom paper
8. Alto universal computer (prototype of PC)
9. Microwave oven
10. ARPANET (Base of the Internet)
 New Product Lines

• Goods that the company did not offer before, which allows
to enter an established market.

Heinz Frozen Food recently introduced a new product line called

Boston Market Home Style in obedience to a 10 years license
agreement with Boston Chicken Inc.
The new line will strengthen three lines of Heinz including Budget
Gourmet (product line of high-priced) and Smart Ones (product
line of nutritional advice).
 Additions to the Product
Lines

• This category includes new products that complement the

established lines of business.

Examples of additions include brands Huggies Pull-Ups and

Pampers Easy-Ups of disposable diapers of training. This
product category represents one billion U.S. dollars in the
United States.
 Improvements or
Revisions of Existing
Products

• The product "new and improved" presents

a significant change or slight.

Rakes Schick Quattro and Intuition

The new formulas of Tide with Bleach

(whitening), Tide Free (no fragrance), Tide
Wear Care (keep longer shiny fabrics) and
Tide with Bleach Powder, are examples of
improvements or revisions of existing
products.
 Improvements or
Revisions of Existing
Products
• Another type of revisions are packaging
enhancements.

The EZ Squirt Ketchup bottle of Heinz is small

and is made of a plastic easy to oppress, its
nozzle of needle-shaped allows that small
hands can decorate food..

Tide Kick packaging includes a nozzle so that

the detergent can be rubbed directly on a
stain.

• Most of new products are into the categories

of revisions or improvements.
 Repositioned Products

• These are existing products for markets or new market

segments.

“How about Jeans”

 Low Price Products

• Refers to products that offer performance similar to

competing brands, but at lower prices.

The HP Laser Jet 3100 is a multifunction machine

with functions of copier, scanner, printer and fax
combined.
This new product is the lowest price that many
conventional color copiers and much lower than the
combined price of the 4 items purchased separately.
 Low Price Products

Wal-Mart makes its way to penetrate the fashion market for low-
priced dominated by Target.

Despite a decline in clothing industry, Wal-Mart was able to

increase sales in a recent six-month period.
 New Products Launched
by Type
Repositioning
New Products 7%
10% Product
Improvement
Cost
26%
Reduction
11%

Additions to the
New Lines lines
20% 26%

*Cooper , R. (1988)