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

1. New-to-the-world products: New, innovative products that create an entirely new market, such as the Palm Pilot handheld computerized organizer.

2. 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.

3. Additions to existing product lines: New products that supplement a company's established product lines (package sizes, flavors, and so on), such as Amazon.com's auctions and e-mail greeting cards.

4. Improvements and revisions of existing products: New products that provide improved performance or greater perceived value and replace existing products, such as Microsoft Office 2000.

5. Repositionings: Existing products that are targeted to new markets or market segments, such as repositioning Johnson & Johnson's Baby Shampoo for adults as well as youngsters.

6. 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.

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