Consumer Psychology: New Product Development and Creativity

•       New Product Development

–      Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.

Major Stages in New-Product Development 

Fuzzy Front End (FFE)

•       Defined by Koen, the fuzzy front end includes the chaotic, unpredictable, and unstructured activities that precede a more formal new product development process. This is stage after an opportunity has been realized and before a formal product development process is deemed ready. Here, a concept may be generated and then the decision made regarding the feasibility of this concept and whether it is worthy of further investment of resources.

•       Practically, the FFE may not be a formal or detailed part of the product development process. However, it may end up taking up to half the total development time and this is the point where serious commitments regarding time, investment and the nature of the envisioned end product are decided. Because of this, it sets the direction for the whole project and the product. This is why the importance of this phase cannot be overlooked and it should be included in the overall projected product development cycle time.

The Eight Stages of Product Development – 1. Idea Generation

•       Ideas for new products can be obtained from basic research using a SWOT analysis. Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (searching for user patterns/habits) may also be used to get an insight into new product lines or product features.

•       Lots of ideas are generated about the new product. Out of these ideas many are implemented. The ideas are generated in many forms. Many reasons are responsible for generation of an idea.

•       Idea for new product can come from many sources, such as customer, scientists, competitors, employees, channel member, and top management.

•       customer need and wants are the logical place to start the search.

•       Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase 

2. Idea Screening

•       eliminate unsound concepts prior to devoting resources to them.

•       The screener should ask several questions:

–      Will the customer in the target market benefit from the product?

–      What is the size and growth forecasts of the market segment / target market?

–      What is the current or expected competitive pressure for the product idea?

–      What are the industry sales and market trends the product idea is based on?

–      Is it technically feasible to manufacture the product?

–      Will the product be profitable when manufactured and delivered to the customer at the target price?

3. Idea Development and Testing

•       Develop the marketing and engineering details

•       Product Idea - It is an idea for a possible product that the company can see itself offering to the market.

•       Product Concept - It is a detailed version of the idea stated in meaningful consumer terms.

•       Product Image - It is the way consumers perceive an actual or potential product.

–      Investigate intellectual property issues and search patent databases

–      Who is the target market and who is the decision maker in the purchasing process?

–      What product features must the product incorporate?

–      What benefits will the product provide?

–      How will consumers react to the product?

–      How will the product be produced most cost effectively?

–      Prove feasibility through virtual computer aided rendering and rapid prototyping

–      What will it cost to produce it?

•       Testing the Idea may involve asking a number of prospective customers to evaluate the idea

4. Business Analysis

•       Estimate likely selling price based upon competition and customer feedback

•       Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation

•       Estimate profitability and break-even point

5. Beta/Market Testing

•       Produce a physical prototype or mock-up

•       Test the product (and its packaging) in typical usage situations

•       Conduct focus group customer interviews or introduce at trade show

•       Make adjustments where necessary

•       Produce an initial run of the product and sell it in a test market area to determine customer acceptance

6. Technical Implementation

•       New program initiation

•       Finalize Quality management system

•       Resource estimation

•       Requirement publication

•       Publish technical communications such as data sheets

•       Engineering operations planning

•       Department scheduling

•       Supplier collaboration

•       Logistics plan

•       Resource plan publication

•       Program review and monitoring

•       Contingencies - what-if planning

7. Commercialisation

•       Launch the product

•       Produce and place advertisements and other promotions

•       Fill the distribution pipeline with product

•       Critical path analysis is most useful at this stage

8. New Product Pricing

•       Impact of new product on the entire product portfolio

•       Value Analysis (internal & external)

•       Competition and alternative competitive technologies

•       Differing value segments (price, value and need)

•       Product Costs (fixed & variable)

•       Forecast of unit volumes, revenue, and profit

Product Life Cycle

 “…in addition to nonstop advertising, food companies must

bring out a constant stream of new products to keep sales up

and revenue high.”  (The End of Food)

Types of new Product

5 New Product Classes?

•       New-to-the-World

•       New Product Lines

•       Additions to Existing Product Lines Extensions 

•       Product Improvements

•       Repositioning

New to the World

•       Innovative products→ create a new market

•       “the thoroughbreds of product innovation”

•       Examples:

•       Kellogg’s Pop Tarts (1963)

•       Oscar Mayer’s Lunchables (1988)

•       Dreyer’s Slow-Churned Light Ice Cream (2003)

New Product Line

•       Allows a company to enter an existing market for the first time - often copies a rival’s product

Line Extension

•       Company makes additions to existing product lines

•       Wendy’s Homestyle Chicken Strips

•       Heinz green and purple ketchup (2000)

Product Improvements

•       Quality, feature, service enhancements toward greater value -Different flavor, change in packaging (i.e. tamper proof)

Repositioning

•       Existing products targeted to a new market

•       Cereal becomes a portable snack (Kellogg’s)

•       7-Up – the “un-cola”

Classifying New Products

•       New-to-the-World: Innovative products. Create a new market.

•       New Product Lines: Allows the company to enter an established market for the first time.

•       Additions to Existing Product Lines: Extensions. 

•       Product Improvements: Quality, feature, service enhancements toward greater value. 

•       Repositionings: Existing products targeted to a new market.  Gerber graduates, Hilton and professional businesswomen

Development Time Matters

Strategy making has changed...The premium now is on moving fast and keeping pace...The best strategies are irrelevant if they take too long to formulate.
                                                     ----Kathleen M. Eisenhardt

Speed kills competition.
                                                       ----Richard D. Stewart

As a strategic weapon, time is the equivalent of

money, productivity, quality even innovation.
                                                       ----George Stalk, Jr.

Common Causes of New Product Failures

•       Overestimation of Market Size

•       Product Design Problems

•       Product Incorrectly Positioned, Priced or Advertised

•       Costs of Product Development

•       Competitive Actions

•       To create successful new products, the company must:

–       understand it’s customers, markets and competitors

–       develop products that deliver superior value to customers.

Where do new product ideas come from?

•          Opportunity Identification

–        Market Intelligence: Understand changes in the market and the best segments (profitable, growing) to enter

–        Internal Intelligence or idea Generation: Generate new product ideas to enter these markets.

•          Systematic Search for New Product Ideas

–        Internal sources

–        Customers

–        Competitors

–        Distributors

–        Suppliers

Perceptual Mapping

•       Objective: getting feedback from customers.

•       Identify holes

•       Helps see opportunities

•       Axes derived from surveys to see how primary attributes valued. 

–      Conjoint analysis: Define demand at the at the attribute level. Ppl drink wine not just ‘cause it’s wine

•       Have ppl rate attributes they like, conduct CA to analyse where these things cluster and overlap may lead to a new product/line

–      e.g. Organic food

•       How is our product is perceived and the competitive density of the space

Critical Path Analysis

•       CPA calculates…

•       the longest path of planned activities to the end of the project

•       The earliest start time and latest finish that each component can take without making the whole project longer

•       Identifies which activities are critical (i.e. on the longest path) and which have float (i.e. can be flexible without lengthening project time)

Creativity

Innovation is the implementation of new ideas at the individual, group or organizational level

Creativity is the development of ideas aboutnproducts, practices, services, or procedures that are novel and potentially useful to the Organization

Invention is incremental

•       How can a creative idea come about?

•       It must be related to existing ideas

–      Otherwise, how would people think it up?

–      How could it be implemented?

•       What does it mean for an idea to be ahead of its time?

–      A creative idea must be comprehensible to others

•       What good is an invention that nobody wants?

•       Suggests that existing ideas may constrain creativity.

New inventions

•       Innovative inventions are often based on known products.

•       Early railroad cars were designed like stagecoaches on tracks.
     •Engineer and brakeman were not moved inside until later.
     •Stagecoaches were a good solution to initial problems
     •Other problems were not discovered until later.

What Does It Take to Be Creative?

Ø  Time

Ø  Hard work

Ø  Mental energy

Most creative acts are rather mundane

Invention is 99% perspiration and 1% inspiration.      -Thomas Alva Edison

Characteristics of Creative People

Ø  Openness

Ø  Persistence

Ø  Self-confidence

Ø  Independence

Ø  Attraction to complexity

Ø  Tolerance of ambiguity

Ø  Risk-Taking

Creativity Enhancers

Ø  Focus on intrinsic motivation

Ø  Creativity goals

Ø  Developmental feedback

Ø  Supportive supervision

Ø  Healthy competition

Ø  Participative decision making

Ø  Autonomy

Ø  Hire creative people

Ø  Enriched, complex jobs

Ø  Provide resources

Ø  Clear organizational goals

Ø  Instructions to be creative

Ø  Recognize and reward creativity

Ø  Encourage risk taking

Ø  No punishment for failure

Ø  Workforce diversity

Ø  Internal and external interaction

Ø  Diverse teams skilled at working together

Ø  Supportive climate

Ø  Organizational culture the promotes innovation

Ø  Flexible, flat structures                                                 

Ø  Close interaction and relationships with customers

How Can Organizations Foster Creativity?

Hire creative & diverse workforce            Provide resources esp. time

Design complex & challenging jobs          Set clear org. goals

“Be Creative!”                                                   Set creativity  goals

Use diverse teams                                          Recognize & reward creativity

Create the right org. culture

Management Style and Creativity

Ø  Encourage risk taking

Ø  Provide autonomy

Ø  Encourage productivity - “sweat equity”

Ø  Supportive supervision, climate, and work group

Ø  Participative leadership

Creativity Killers

Ø  Excessive focus on extrinsic motivation

Ø  Limits set by superiors

Ø  Critical evaluation

Ø  Close, controlling supervision

Ø  Competition in a win-lose situation

Ø  Control of decision making

Ø  Control of information

The Business Psych

New product development

–      High risk / high return

–      Technological innovation

–      Creative destruction

Location of R&D

–      Disperse R&D to trend/technology leading markets

•       High investment on basic and applied research

•       Strong underlying demand; affluent consumers

•       Intense competition

Ø  Integrate R&D, marketing and Production

Ø  Ensure:

–      Product development driven by customer needs

–      New products can be manufactured efficiently/effectively

–      Time to market is minimized

–      Plan clearly: goals, milestones, budgets

Ø  Use cross-functional, multinationally diverse teams

Ø  Span: initial concept development to market introduction

Ø  Team composition critical

–      Assign heavyweight project manager

•       High status in organization; high power and authority

•       Dedicated to fullest possible extent to project

–      Team should have representative from each function

Ø  Physical co-location

–      When appropriate?

–      Build team culture

–      Communication and conflict resolution processes

Creativity

Different types of tests

•       Verbal Fluency – the ability to produce a large quantity of words with some constant theme (e.g. write as many words with a particular beginning or end, c.f. the game of scrabble)

•       Ideational Fluency – the ability to produce large numbers of original or unusual ideas on a given topic.

•       Lateral Thinking – thinking flexible about the ways to find a solution to a problem.

Guilford (1967)

•       Four aspects:

      Fluency – generation of ideas

      Flexibility – lateral thinking

      Originality – unique ideas

      Elaboration – new connections

And known for divergent and convergent thinking

Divergent and Convergent

•       Convergent = the ability to give the "correct" answer to standard questions that do not require significant creativity, for instance in most tasks in school and on standardized multiple-choice tests for intelligence

•       Divergent = a thought process or method used to generate creative ideas by exploring many possible solutions

Convergent Creativity Test

•       Remote Associates Test

•       Three words – what is the word that relates to all the others?

•       E.g. Crab, juice and computers

•       Answer=apple

•       1. Bass–Complex–Sleep

•       2. Desert–Ice–Spell

•       3. Base–Show–Dance

•       4. Inch–Deal–Peg

•       5. Soap–Shoe–Tissue

•       6. Blood–Music–Cheese

•       7. Jump–Kill–Bliss

•       8. Shopping–Washer–Picture

Evaluate your results

•       Fluency - how many uses you can come up with

•       Originality – how uncommon those uses are (e.g. “test-tube holder” is more uncommon than “building a house”)

•       Flexibility – how many areas your answers cover (e.g. cufflinks and earrings are both accessories, aka one area)

•       Elaboration – level of detail in responses; “10-bed bachelors pad for worms” would be worth more than “paperweight”

Discussion questions

•       Yesterday I went to the zoo and saw the giraffes and ostriches. Altogether they had 30 eyes and 44 legs. How many animals were there?

•       Which would be worth more, a pound of £10 pure gold coins or half a pound of £20 pure gold coins; or would they be worth the same?

•       Marsha and Marjorie were born on the same day of the same month of the same year to the same mother and the same father - yet they are not twins. How is that possible?

•       The legendary runner Flash Fleetfoot was so fast that his friends said he could turn off the light switch and jump into bed before the room got dark. On one occasion Flash proved he could do it. How?

•       How many cubic centimeters of dirt are in a hole 6 meters long, 2 meters wide and one meter deep?

•       A man who lived in a small town in the United States married 20 different women of the same town. All are still living and he never divorced any of them. In this town polygamy is unlawful; yet he has broken no law. How is this possible?

•       A famous superpsychic could tell the score of any baseball game before it starts. What was his secret?

•       Professor Bumble, who is getting on in years is growing absent minded. On the way to a lecture one day he went through a red light and turned down a one way street in the wrong direction. A policeman observed the entire scene but did nothing about it. How could Professor Bumble get away with such behaviour?

•       If a boat, at low tide, has 6 of its 12 ladder steps in the water. How many ladder steps will be in the water a high tide?

•       Whoever makes it doesn't use it, whoever buys it doesn't want it and whoever uses it doesn't know it?

•       Erin stumbles across an abandoned cabin one cold, dark and snowy night.  Inside the cabin is a kerosene lantern, a candle, and wood in a fireplace.  She only has one match.  What should she light first?