162 CHAPTER9POSITIONINGPRODUCTSTHROUGH THELIFECYCLE
lasts forever. The key to setting one offering apart from competing offers throughout
the life cycle is to select a suitable differentiation strategy and create a distinctive posi-
tion in the market.CHALLENGES IN NEW PRODUCT DEVELOPMENT
Companies that fail to develop new products (either goods or services) are putting them-
selves at great risk. Over time, existing products are vulnerable to changing customer
needs and tastes, new technologies, shortened product life cycles, and increased compe-
tition. Yet new-product development also entails considerable risk: Texas Instruments lost
$660 million before withdrawing from the home computer business; RCA lost $500 mil-
lion on its videodisc players; Federal Express lost $340 million on its Zap mail service; and
the British-French Concorde aircraft will never recover its investment.^1
A company can add new products in two ways: through acquisition (buying
another company, buying another firm’s patent, or buying a license or franchise) or
through development (using its own laboratories, hiring independent researchers, or
hiring a new-product-development firm). Moreover, there is more than one category
of new product.Types of New Products
Even though thousands of products are offered for the first time each year, less than
10 percent are entirely new and innovative. Booz, Allen & Hamilton has identified six
categories of new products:^2- New-to-the-world products:New, innovative products that create an entirely new market,
such as the Palm Pilot handheld computerized organizer. - New product lines:New products that allow a company to enter an established market
for the first time, such as Fuji’s brand of disks for Zip drives. - Additions to existing product lines:New products that supplement a company’s estab-
lished product lines (package sizes, flavors, and so on), such as Amazon.com’s auc-
tions and e-mail greeting cards. - Improvements and revisions of existing products:New products that provide improved per-
formance or greater perceived value and replace existing products, such as Microsoft
Office 2000. - Repositionings:Existing products that are targeted to new markets or market seg-
ments, such as repositioning Johnson & Johnson’s Baby Shampoo for adults as well
as youngsters. - Cost reductions:New products that provide similar performance at lower cost, such as
Intel’s Celeron chip.
The new-to-the-world category involves the greatest cost and risk because these
products are new to both the company and the marketplace, so positive customer
response is far from certain. That’s why most new-product activities are improvements
on existing products. At Sony, for example, over 80 percent of new-product activity is
undertaken to modify and improve existing Sony products. Even new-product
improvements are not guaranteed to succeed, however.Why New Products Fail—and Succeed
New products are failing at a disturbing rate; by one estimate, 80 percent of recently
launched products are no longer around.^3 Given the high costs—a company can