Traps in new product development

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It is a relatively simple matter to fall into one of the five traps associated with developing new products: competitive delusion, market scope, competence, illusory innovation and marketing analysis and strategy (Figure 8.9). Competitive delusion refers to the situation where companies believe that their approach is right and that they can capture a large share of the market without much opposition. Under such assumptions development launch plans are likely to be much too ambitious. For this reason, to avoid competitive delusion companies may be advised to adopt a roll-out sequence through a series of smaller test markets first before going national or tackling large international markets.

Competitive delusion also arises from corporate pride. On occasion a new product about to be launched is tipped in the trade press to be a loser and market research may have already indicated as much to the company but for reasons of corporate pride the product is launched when it should have been dropped.

The second trap arises when the organization adopts an overly restricted market scope for its new product development. Without being overly ambitious and falling into the competitive delusion trap it may be advisable to design the new product in such a way that, without heavy modification costs, it can be subsequently introduced into wider markets. Organizations attempting to maintain control over market scope tend to carry out product and market tests in a number of markets early in the process to obtain a wider vision of the overall potential for their new product.

The third new product development trap refers to the company's competence in the area and its cost structure. In many markets there are strong competitors who are difficult to dislodge. It may be foolhardy to attack market leaders particularly if the company does not have a distinct competence in a

Figure [8.9] Traps in new product development number of areas. Success may depend on a competence which includes cost leadership, quality or access to distribution outlets.

The most likely trap, however, in new product development is that the innovation is a market illusion. Unfortunately many companies develop products based on technology push which have no real points of superiority. The danger is that technically excellent products may be produced which are perceived as not having any exceptional customer value. An allied danger of this approach is that the product may be matched or rendered obsolete by competitors sooner than expected. There are many examples of products which have fallen into this trap. For example, very soon after the launch of Kodak's failed Photo CD product, doubts were cast on its market viability. For some it was thought that the product was 'over-engineered', too sophisticated and expensive for the task to which it would be devoted, particularly when many more accessible and competitively priced alternatives existed.

The most fundamental trap in new product development arises due to weak marketing analysis and incorrect marketing strategy. Weak marketing in the organization is often the reason why they fall into the traps listed above. In some cases market research is inadequate and sales projections are overly optimistic. In other cases a marketing strategy of aggressive entry level pricing may achieve initially high sales but at the cost of low profits. In general, such organizations do not have adequate marketing know-how or distribution capabilities for the product or fail to implement them properly. Sometimes organizations and even entire industries misjudge trends among customers or misinterpret them so badly as to produce highly sophisticated and technical solutions when customers seek simple solutions to their problems, e.g. mobile telephony.

In summary, many reasons have been cited for product failure. The seven most frequently encountered are:

■ inadequate market research

■ high development costs

■ short life innovation

■ lack of marketing skills

■ high production costs

■ lack of competitive advantage

■ corporate pride.

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