New Product New Product InnovationInnovation

National Correctional National Correctional Industries Association Industries Association

Enterprise 2004Enterprise 2004March 23, 2004

AgendaAgenda Product DevelopmentProduct Development Market ResearchMarket Research Concept TestingConcept Testing Prototype DevelopmentPrototype Development Market TestingMarket Testing Product LaunchProduct Launch DiscussionDiscussion

Why New Products?Why New Products? New product development is critical to New product development is critical to

long-term successlong-term success Approximately one-third of the Approximately one-third of the

revenue a business generates is revenue a business generates is coming from products they did not sell coming from products they did not sell five years agofive years ago

Changing environment creates new Changing environment creates new demands and needsdemands and needs

Product DevelopmentProduct Development Must be alert to quickly develop Must be alert to quickly develop

opportunitiesopportunities Focus on markets or product Focus on markets or product

categories consistent with categories consistent with organization’s objectives, resources, organization’s objectives, resources, capabilities and strengthscapabilities and strengths

Securing a competitive advantageSecuring a competitive advantage

Industrial New Product IdeasIndustrial New Product Ideas Company sources other than R&D 36.2%Company sources other than R&D 36.2% Analysis of the competition 27.0%Analysis of the competition 27.0% Research & Development 24.3%Research & Development 24.3% Product users 15.8%Product users 15.8% Supplier suggestions 12.5%Supplier suggestions 12.5% Product user research 10.5%Product user research 10.5% Published information 7.9%Published information 7.9%

New ProductsNew Products A way of getting new and keeping old A way of getting new and keeping old

customerscustomers Effective way of obtaining a Effective way of obtaining a

competitive advantagecompetitive advantage Source of growth and excitementSource of growth and excitement

New Product CategoriesNew Product Categories New to the world productsNew to the world products New product linesNew product lines Product line extensionsProduct line extensions Improvements and revisions to Improvements and revisions to

existing productsexisting products RepositioningsRepositionings Cost reductionsCost reductions

Product Development Product Development ProcessProcess

Market researchand

Opportunity scan

ConceptTesting

PrototypeDevelopment

TestMarketing

Product Launch

MarketingMarketing Very important to product development Very important to product development

success success Key to successful marketing is imaginative, Key to successful marketing is imaginative,

effective, creative communicationeffective, creative communication Find a need and fill it.Find a need and fill it. Mutually beneficial exchange relationshipsMutually beneficial exchange relationships Non-profit organizations have sometimes Non-profit organizations have sometimes

difficult taskdifficult task

Marketing StrategiesMarketing Strategies

Increase the number of customersIncrease the number of customers Increase the average transactionIncrease the average transaction Increase the frequency of repurchaseIncrease the frequency of repurchase

Marketing ConceptsMarketing Concepts

Consumer orientationConsumer orientation Customer service orientationCustomer service orientation Profit orientationProfit orientation SocietySociety

Marketing MixMarketing Mix

Product

Price

Promotion

Placement

Market ResearchMarket Research Who is my target audience?Who is my target audience? Are there enough members of this target Are there enough members of this target

group to make the business worthwhile?group to make the business worthwhile? How large is the potential market and how How large is the potential market and how

much of that potential market can I much of that potential market can I capture?capture?

Who is my competition and what would Who is my competition and what would make someone choose my product over make someone choose my product over their current?their current?

Market Opportunity and Market Opportunity and ThreatsThreats

Economic Realities•GNP•Disposable Income•Discretionary Income

Legal & Regulatory Condition•Laws•Regulations

Societal Focus•Population Shifts•Values•Attitudes•Competition•Trends

Technological Development•Advance in technology•Market receptiveness to technology

Market PlacementMarket Placement

Identify target marketsIdentify target markets Size and growth potentialSize and growth potential Ability and ease of reaching segmentAbility and ease of reaching segment Good fit with organizational objectivesGood fit with organizational objectives Greatest revenue generation with least Greatest revenue generation with least

investmentinvestment

Market PlacementMarket PlacementDetermine opportunityDetermine opportunity

Segment sizeSegment size Annual usage potentialAnnual usage potential Anticipated annual growth rateAnticipated annual growth rate MarginMargin Value in useValue in use

Evaluate competitionEvaluate competition Strengths/LimitationsStrengths/Limitations ImplicationsImplications

Market Research – Pricing Market Research – Pricing StrategiesStrategies

Goal is to achieve a target profitGoal is to achieve a target profit Can you hold a product’s Can you hold a product’s

manufacturing costs down to less manufacturing costs down to less than 25% of its perceived value?than 25% of its perceived value?

Estimating manufacturing costsEstimating manufacturing costs Obtain price quotes from several Obtain price quotes from several

supplierssuppliers

Concept TestingConcept Testing

DetermineDetermine Critical success factorsCritical success factors Financial objectivesFinancial objectives Marketing mix strategiesMarketing mix strategies

Product, Pricing, Promotion, PlacementProduct, Pricing, Promotion, Placement Marketing plan initiativesMarketing plan initiatives

Activity, Budget, TimingActivity, Budget, Timing

Prototype and Test Prototype and Test MarketingMarketing

Survey end-usersSurvey end-users Do you prefer this product over your Do you prefer this product over your

current product?current product? Does this product meet the need you Does this product meet the need you

thought it would?thought it would? Does the way the product works provide Does the way the product works provide

an important benefit?an important benefit?

Promotion and Product Promotion and Product LaunchLaunch

PublicityPublicity Trade journalsTrade journals ConferencesConferences

Personal sellingPersonal selling Word of mouthWord of mouth

Reasons For New Product Reasons For New Product FailuresFailures

Poor marketing researchPoor marketing research Technical problemsTechnical problems Insufficient marketing effortInsufficient marketing effort Bad timingBad timing

Marketing PlanMarketing PlanAudit Audit

Challenge and refine assumptions from Challenge and refine assumptions from current plancurrent plan

Evaluate success for input into next Evaluate success for input into next year’s planyear’s plan

Revise plan for new year incorporating Revise plan for new year incorporating marketplace learnings, marketing marketplace learnings, marketing insights and current plan successesinsights and current plan successes

SummarySummary New product development drives New product development drives

growthgrowth Market research is critical to the Market research is critical to the

success of a new product launchsuccess of a new product launch Market research is a continuous Market research is a continuous

process as customer needs, your process as customer needs, your business and the environment business and the environment changeschanges