CHAPTER 8

PRODUCT INNOVATION
AND DEVELOPMENT
STRATEGIES

A Presentation by: Shahneela

Naheed
The Different levels of a product
 The Different levels of a product
◦ Core benefit level: is the core customer value and the core customer need that is being
provided/fulfilled by a product or service. Core benefit: accomodation.

◦ Basic product level: are the basic different attributes of a product which delivers the core
benefit to the customers. Basic level: bed, bathroom, towels, desk, AC, closet.

◦ Expected product level: are the different attributes and performance marks a consumer
expects from a product or service. Expected level: clean bed sheets, clean washroom, clean
towels, functional AC and closet.

◦ Augmented product level: are the additional customer services and benefits that a
company provides to its customers. Augmented level: complimentary breakfast.

◦ Potential product level: are all the possible augmentations and transformations the product
or offering might undergo in the future. Potential level: pool, gym, playzone for kids, laundry
services, better customer service.
 Types of Consumer Products
◦Convenience Products:
Products consumers purchase
frequently with minimal
effort.
◦Laundry detergent, chewing
gums, chocolates, magazines,
fast foods, beverages, etc.

Low priced, low

involvement, frequent
purchase, minimum
comparison.
 Types of Consumer Products
◦ Shopping Products:
Products consumers buy
only after comparing value,
quality, price, and styles.
◦ These include:
◦ Clothes and shoes
◦ Appliances and furniture
◦ Childcare
◦ Home remodeling
◦ Economic hotel, airline
services.

Mid-high involvement, less

frequent purchase, careful
comparison on suitability,
quality, price and style, fewer
outlets, strong augmented
product
 Types of Consumer Products

◦ Specialty Products: Products

with unique characteristics and
brand identity.

Expensive, exclusive distribution, high

involvement, less frequent purchase, careful
comparison on quality and style, offers strong
augmented product.
 Types of Consumer Products

◦Unsought Products: Products

consumers aren’t aware of or
haven’t thought of buying until
they need them. preplanned
funeral services, charities.
Customer doesn’t plan to buy or
doesn’t know about.
 What is Innovation?
◦ Innovation is something along
the lines of ‘introduction of
something new’ or ‘new idea, or
a method or a device’.
◦ The difference between
innovation and invention is that
invention applies to things that
are new to the world, whereas
innovation refers to subsequent
changes and adaptations.

Smart beam: When you connect a new device, like your phone or
tablet, to a router with Smart Beam Technology, the router will use
Smart Beam's intelligent algorithm to detect where that device is
and where it's moving in order to send a focused wireless signal
Innovations of telephones
Innovations of wallet

Innovations of Colgate toothpaste

 Ph balanced water
with electrolytes
by PepsiCo

Water's pH level
determines how acidic it
is and ranges from 0 to
14. A pH of 7 is
considered neutral.

“WORLD’S FIRST ACTIVE

WHEELCHAIR that fits the standards of
a universal cabin luggage SIZE
RESTRICTION”
 THE INNOVATTIVE TECHNOLOGY BY
LANCOME

“Our unique color assessment and color

blending technology delivers outstanding
color accuracy.

Every Le Teint Particulier formula is

customized to your precise skin tone
measurements using a proprietary
algorithm that analyzes and then matches
your exact skin tone.

Pure red, blue, yellow and white pigments

are measured and blended to create your
unique shade.

Your foundation is created and bottled on-

site, right before your eyes and the
Lancome color expert can adjust the color
based on your personal preferences.”
https://www.lancome-usa.com/le-teint-
particulier.html
 Disruptive Business Model
Business Model – expresses the nature of the activities and
processes a company performs to deliver goods and services to
customers. Every company operates according to a business model
which may or may not be effective.
Challenges of setting a complete new model for existing
companies:
low-cost competition, unattractiveness in the adoption phase.
A Disruptive Business Model is the discovery of fundamentally
new ways of doing business in an existing market. New business
models attack existing markets by emphasizing different product or
service attributes than the established competitors do.
Possible New Attributes:
Product, Price, Placement, Speed of Execution, Design,
Location, Ease of use.
 3 Scopes of Disruption (Markides, 2006)

Technology

Products Business models

 Disruptive Technology
Disruptive technology is an innovation that significantly alters the way that
consumers, industries, or businesses operate. A disruptive technology sweeps away
the systems or habits it replaces because it has attributes that are recognizably
superior.

https://www.youtube.com/watch?
https://www.youtube.com/ v=A5C7CqfvlEU
https://www.youtube.com/ watch?v=qlvrVwbtNDE
watch?v=8_yXEluXLbU
Disruptive Business Models (Supply Chain)

bKash is a mobile financial service in Bangladesh operating

under the authority of Bangladesh Bank as a subsidiary of BRAC
Bank Limited. bKash is the fastest and safest medium of
financial transaction, bKash makes your life simple with Send
Money, Add Money, Pay Bill, Mobile Recharge, Payment and
many more services.
https://www.youtube.com/watch?v=NrmMk1Myrxc
Disruptive Products
Adding to Existing Lines: Line Extension

Egg McMuffin

Heinz Green
 Cost Reductions: Low end Entry

Armani Exchange (also known as A|X), is aimed more

towards street style lovers, teenagers and the mass
market. It is also the most accessible and affordable of the
Armani brands. It is designed by various designers under
Giorgio Armani rather than the iconic designer himself.
Improvements/ Revisions
 New Product Lines:
Brand Extension & New Brand

Brand extension

New brand
 New to the World

https://www.forbes.com/
sites/ciocentral/
2017/05/08/is-2017-the-
breakthrough-year-for- https://
flying-cars/ www.wareable.com/
#787f70ea6943 smart-jewellery/best-
smart-rings-1340
 Repositions

By 2014, the company was back with a record

$16 billion in annual revenue.

Starbucks offers one of the strongest examples of

brand repositioning as a “what’s old is new again”
strategy.
 NPD: New Product Development

1. Process

2. Toolkit strategy

3. Systematic
inventing
 1. Process
1. Generation of Ideas:
listing attributes and changing combinations,
brain storming, customer requests, competition,
market trend analysis, gap analysis
2. Screening/Business Analysis/Concept:
positioning, associations, USPs, concept
designs, screening out options
3. Development/Test/Marketing:
sales forecasting, product development, market
tests, marketing mix
 Google’s ‘20% time’ policy

◦ One of Google's most famous management philosophies is something called "20%

time."
◦ Founders Larry Page and Sergey Brin highlighted the idea in their 2004 IPO letter:
◦ "We encourage our employees, in addition to their regular projects, to spend 20%
of their time working on what they think will most benefit Google," they
wrote. "This empowers them to be more creative and innovative. Many of our
significant advances have happened in this manner."
◦ Huge 20% products include the development Google News, Gmail, and even
AdSense.

Source: http://www.businessinsider.com/google-20-percent-time-policy-2015-4
 Idea generation by Amazon
“We have a thing called "working backwards."

• The first thing we do is we write a mock press release,

ignoring every technical thing we can't do for now. It's our
aspirations.
• We also write FAQs where we identify every question we would
receive as if we issued the press release.
• We answer the questions in aspirational ways too, ignoring,
for the moment, the technical hurdles. In some cases we
actually build things.”
1. Start with the end.
Often, planning a project from step one results in overspending on initial stages and rushing (or
underfunding) the all-important work that comes later.
Instead, try planning your project by working backwards from the final steps. Often this enables
you to allocate time and resources in a more balanced manner.
2. Find the consumer's perspective.
More isn't always better. Too many choices can be paralyzing--for both employee and consumer.
Start by thinking of the consumer, and what he or she truly wants--as opposed to what it's possible
to provide. Then narrow things down and focus on the best options.
https://www.inc.com/justin-bariso/heres-the-trick-amazon-uses-to-brainstorm-amazing-
ideas.html
 2. Toolkit Strategy

•Makes sense when you are faced with

The toolkit strategy shrinking markets
enables customers of
•Customers seeking customised products
NPD companies to
undertake their own •Need to go through lots of repetitions to
innovation develop a product
•Suitable if an organisation uses high
quality computer based simulations
 3. Systematic Inventive Technique (SIT)

Objective is to identify the Innovation Sweet Spot (aligned

with positioning + differentiation, desirable invention)
 Product Rollovers
Product rollovers is the displacement of old products by innovations.

Short product life cycles increase the frequency of product rollovers. Ideally, existing
innovation would be sold out just at the introduction of a new one but that rarely
happens. When a later version of product is announced, people cancel orders of the current
product.
2 Strategic
options:
•Should the old product be sold
out before introducing the new 1. Solo-product roll
or should they be sold
simultaneously?
•If sold simultaneously, should
they be sold at different prices,
in different geographic regions 2. Dual-Product roll
or different channels?
(Billington, Lee and Tang, 1998)
 Solo-Product Roll
◦This aims to have the entire range of old products sold
out at the planned introduction date.
◦For example, HP’s 5Si series printer was succeeded by the 8000
and later by the 8100 and 8150 which brought higher resolution
and faster printing.
◦High-Risk and High-Return Strategy.
◦Expensive if
1. old product is sold out too early or
2. there are high inventory levels in place, as potential sales may be
lost. (What is High Inventory level? Having high inventory levels in
your warehouses generally means your company is struggling to
manage its inventory and make proper sales)
 Dual-Product Roll
◦ This is where both old and new products sell simultaneously for a
period.
◦ Less risky but requires marketing of both old and new products. So, there
is a risk of creating confusion for consumers.
◦ The point is to manage new products and the process of displacement of
old products jointly rather than separately.
◦ Confusions can be reduced by:
1. Geographic Rolls
2. Separate Channels
3. Dual Pricing (can be introduced with the aggressive pricing of older
products)
 Dual pricing

USD 49.99

Geographic rolls

Daimler Benz smart car:

was first introduced in
Europe and then in North
America

USD 99.99 USD 199.99

Separate Channels
 Disruptive Technologies: A. Roger’s Perspective ‘62

Rogers identified five adopter types: adoption model

Adoption of innovation is categorized by consumers’
readiness to accept new technologies.
The idea of adopting new technology is to improve
productivity and fuel growth, not to chase the hype or
follow the trend for the sake of doing it.
5 Adopter Types by Roger
 Disruptive Technologies:
Moore’s Perspective for B2B markets

In 1991, Geoffrey Moore

expanded on the innovation
diffusion mode in Crossing
The Chasm by demonstrating
that companies typically see
fast growth in the two
first market segments,
innovators and early
adopters, only to significantly
slow and often completely
stall when trying to move into
the larger early majority
market.

Moore called the space

between these groups the
chasm.
 Disruptive Technologies: Moore’s
• Chasm Strategy: Innovative Perspective
products do not normally slide in from the left-hand
side and work their way steadily across to the right. Instead, they often meet with
the failure, which he categorized as falling into the “chasm”.

• Studies show only 10-12% of new products make it to the market.

• 40% disappear after Product Screening, a further 20% disappear during product
Development and around 10% are dropped after test marketing.
• Once introduced to the marketplace, around 30-50-% of all new products fail to
meet with commercial success and for the high-tech products the position may be
considerably worse.
• Moore’s perspective is geared towards B2B rather than B2C. But it is applicable to
both.
• Acceptance depends on ease of comprehension, competency with the existing
social values, pros and cons of the innovation, reference group, infrastructure of
the market, self efficacy, expected investment, etc.
Important reading: http://crossingthechasmreview.blogspot.com/
 Options for Innovation
(Berthon, Hulbert & Pitt, 1999)

High

Interaction
Follow Mode
Market Orientation
Mode
Custome Innovation
r focused
focused
Market The Technological
orientation Orientation
is a customer- scale measures the
centered Isolate Mode Shape Mode tendency or habit
approach to of seeking to
product increase one's
design Low High range of skills and
uses of technology-
based resources
Technological Orientation and programs
 Innovation Modes/Options for Innovation

Degree of focus on innovation and / or on customer:

1.Isolate Mode: flows between customer and technology; are non-
existent. Nokia made innovations but they were vague/indirect to
market needs and preferences.
2.Follow Mode: technology is used in response to the needs and wants
of the customers. For example, Japanese brand Shiseido’s ‘White
Lucent’ used to lighten appearance of skin discoloration due to sun
exposure.
3.Shape Mode: shaping is where a company applies technology that
defines human needs and determines the nature of customer demand.
For example, Palm device (PDA: Personal Digital Assistant).
4.Interaction Mode: true dialogue occurs between an organization’s
application of technology and what customers want. For example,
 Follow mode

Isolate mode

Interaction mode
Shape mode