Managing New Products: Ideas to Strategy 163
spend $20 million to $50 million to develop and advertise one new product—it is a
wonder that companies continue to innovate at all. Yet product failures can serve one
useful purpose: Inventors, entrepreneurs, and new-product team leaders can learn
valuable lessons about what notto do.
Some of the reasons for new-product failure are: (1) a high-level executive
pushes a favorite idea through in spite of negative market research findings; (2) the
idea is good, but the market size is overestimated; (3) the product is not well designed;
(4) the product is incorrectly positioned, ineffectively advertised, or overpriced;
(5) development costs are higher than expected; or (6) competitors fight back harder
than expected.
What can a company do to develop successful new products? Cooper and
Kleinschmidt found that new products with a high product advantage succeed 98 per-
cent of the time, compared to products with a moderate advantage (58 percent suc-
cess) or minimal advantage (18 percent success).^4 Madique and Zirger studied suc-
cessful product launches in the electronics industry and found greater new-product
success when the firm: has a better understanding of customer needs; a higher
performance-to-cost ratio; a head-start in introducing the product before competitors;
a higher expected contribution margin; a higher budget for promoting and launching
the product; more use of cross-functional teamwork; and stronger top-management
support.^5
MANAGING NEW PRODUCTS: IDEAS TO STRATEGY
The process of developing new products spans eight stages, each with a particular set
of marketing challenges and questions to answer (see Figure 3-8). If the company can-
not answer “yes” to the key question at each of the first six stages, the new product will
be dropped; in the final two stages, the company has the option of further develop-
ment or modification rather than immediately dropping the new product. This sec-
tion covers the stages from idea to strategy and analysis; the following section covers
the stages from product development through market testing and commercialization.
Idea Generation
The marketing concept holds that customer needs and wantsare the logical place to start
the search for new product ideas. Hippel has shown that the highest percentage of
ideas for new industrial products originates with customers.^6 Many of the best ideas
come from asking customers to describe their problems with current products. For
instance, in an attempt to grab a foothold in steel wool soap pads, 3M organized con-
sumer focus groups and asked about problems with these products. The most frequent
complaint was that the pads scratched expensive cookware. This finding produced the
idea for the highly successful Scotch-Brite Never Scratch soap pad.^7 In addition to cus-
tomers, new-product ideas can come from many sources: scientists, competitors,
employees, channel members, sales reps, top management, inventors, patent attor-
neys, university and commercial laboratories, industrial consultants, advertising agen-
cies, marketing research firms, and industry publications.
Idea Screening
Once the firm has collected a number of new product ideas, the next step is to screen
out the weaker ideas, because product-development costs rise substantially with each
successive development stage. Most companies require new-product ideas to be
described on a standard form that can be reviewed by a new-product committee. The