A Survey of New Product Evaluation Models

New product development is a dynamic and lengthy process ranging from idea generation through product launch. It is quite important that product managers evaluate the viability of a new product at every stage of its development. Previous literature provides a large number of models that can be used to evaluate new products at different stages of the new product development process. These models vary with respect to their objectives, applicability to different products, data requirements, suitable environments and time frames, and diagnostics. This article presents a critical review of the models with an emphasis on these factors. The article also outlines other emerging methods that companies are using today. It concludes with managerial and research implications. © 1999 Elsevier Science Inc.     

New Industrial Product Design and Evaluation Using Multiattribute Value Analysis

Increasingly, the design of successful new industrial products is related to careful market assessment. Traditionally, managers and researchers have studied their markets by examining a small number of product attributes that are common across a range of informed respondents. In many ways, these techniques fail to meet the challenges posed by today's often heterogeneous, highly competitive, fast moving industrial markets. Ralph Keeney and Gary Lilien introduce us to a technique they call multiattribute value analysis, both describing the procedure and describing a comprehensive example. Their approach introduces considerable flexibility to the process of market assessment. Technically, it permits the evaluation of many more attributes, value tradeoffs, and synergies among attributes than do more traditional methods. In addition, it permits nonlinear evaluation functions that may be idiosyncratic to the individual. Practically, their approach, illustrated with a detailed case application, is shown to have significant potential for aiding product design decisions.     

Industrial Companies' Evaluation Criteria in New Product Development Gates

This article presents the results of a study on the evaluation criteria that companies use at several gates in the NPD process. The findings from 166 managers suggest that companies use different criteria at different NPD evaluation gates. While such criteria as technical feasibility, intuition and market potential are stressed in the early‐screening gates of the NPD process, a focus on product performance, quality, and staying within the development budget are considered of paramount importance after the product has been developed. During and after commercialization, customer acceptance and satisfaction and unit sales are primary considerations. In addition, based on the performance dimensions developed by Griffin and Page (1993), we derive patterns of use of various evaluative dimensions at the NPD gates. Our results show that while the market acceptance dimension permeates evaluation at all the gates in the NPD process, the financial dimension is especially important during the business analysis gate and after‐market launch. The product performance dimension figures strongly in the product and market testing gates. The importance of our additional set of criteria (i.e., product uniqueness, market potential, market chance, technical feasibility, and intuition) decreases as the NPD process unfolds. Overall the above pattern of dimensions' usage holds true for both countries in which we collected our data, and across firms of different sizes, holding different market share positions, with different NPD drivers, following different innovation strategies, and developing different types of new products. The results also are stable for respondents that differ in terms of expertise and functional background. The results of this study provide useful guidelines for project selection and evaluation purposes and therefore can be helpful for effective investment decision‐making at gate‐meetings and for project portfolio management. We elaborate on these guidelines for product developers and marketers wishing to employ evaluation criteria in their NPD gates, and we discuss directions for further research.     

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Industrial New Product Launch Strategies and Product Development Performance

Just as reporters must answer a few fundamental questions in every story they write, decision-makers in the new product development (NPD) process must address five key issues: what to launch, where to launch, when to launch, why to launch, and how to launch. These decisions involve significant commitments of time, money, and resources. They also go a long way toward determining the success or failure of any new product. Deeper insight into the tradeoffs these decisions involve may help to increase the likelihood of success for product launch efforts. Erik Jan Hultink, Abbie Griffin, Susan Hart, and Henry Robben present the results of a study that examines the interplay between these product launch decisions and NPD performance. Noting that previous launch studies focus primarily on the tactical decisions (that is, how to launch) rather than on the strategic decisions (what, where, when, and why to launch), they explore not only which decisions are important to success, but also the associations between the two sets of decisions. Because the strategic launch decisions made early in the NPD process affect the tactical decisions made later in the process, their study emphasizes the importance of launch consistency—that is, the alignment of the strategic and tactical decisions made throughout the process. The survey respondents—managers from marketing, product development, or general management in U.K. firms—provided information about 221 industrial new products launched during the previous five years. The responses identify associations between various sets of strategic and tactical decisions. That is, the responses suggest that the strategic decisions managers make regarding product innovativeness, market targeting, the number of competitors, and whether the product is marketing- or technology-driven are associated with subsequent tactical decisions regarding branding, distribution expenditure and intensity, and pricing. The study also suggests that different sets of launch decisions have differing effects on performance of industrial new products. In this study, the greatest success was enjoyed by a small group of respondents categorized as Niche Innovators. Their launch strategy involves a niche focus, targeting innovative products into markets with few competitors. Tactical decisions made by this group include exclusive distribution, a skimming pricing strategy, and a broad product assortment.     

Attribution Biases in the Evaluation of New Product Development Team Members*

Managers are often concerned with the potential negative reputation impact of being assigned to a new product development project. Social psychology theories, and in particular the group attribution error theory, suggest that their worries might be justified, with individual team members being evaluated on the basis of the overall project performance, without regard for the processes by which the team outcome was reached. The objective of this paper is to empirically test for the existence of such biases in the evaluation of new product development team members. For this purpose, three independent experiments based on scenarios test the extent to which the group attribution error is at play in the evaluation of new product development team members and the extent to which it can be removed. Overall, this paper indicates that this bias does indeed affect the evaluation of new product development team members as well as decisions based on these evaluations. In the studies presented in this paper, analysis of variance showed that subjects inferred that team members' attitudes were consistent with the decision made and failed to adjust adequately for the decision rule used. Subjects then used these summary judgments as the basis for deciding on reward allocations and making competence attributions about the team members. In Study 1 , the decision rule used was either a vote or a team leader decision, and therefore the bias might have been explained by the lack of information available. Study 2 , however, provided unambiguous information about team members' positions, yet subjects did not adequately take this information into account. Study 3 replicated these results with experienced new product team managers, suggesting that theses biases are likely to be at play in the workplace. Moreover, subjects in Studies 2 and 3 felt quite confident that their judgments were being fair, even in the cases where these judgments truly were not, which suggests a lack of awareness of the bias on their part. The robustness of this bias should be cause for concerns for managers working in new product development teams or involved in the evaluation of the performance of such teams. The studies conducted in this paper suggest that team members can get unfairly rewarded or punished for decisions over which they have little or no control and that their reputation can also get affected by these decisions. Moreover, the fact that the group attribution error affected evaluations even in the case where experienced participants had specific information about team members' positions suggests that this bias will not be easy to remove.     

Visualizing the Self: Exploring the Potential Benefits and Drawbacks for New Product Evaluation

This study examines the role of visual processing in new product evaluation. The primary goal of this research was to provide insights into the role of visualization content (self‐related versus others‐related images) in product evaluation as it differentially relates to two separate types of products—incremental products and really new products. This study's results show that for incremental products, visualizing with self‐related images (versus others‐related images) led to higher evaluations. In this context, it seems that familiarity with the product category from which an incremental product extension is generated enables individuals to produce images easily where they can see themselves using the new product. In some sense, self‐related visualization might be thought of as a form of surrogate experience with the new product. The ability to self‐reference during evaluation provides positive benefits to the evaluation outcome. Contrasting this result, this study's findings showed that for really new product introductions the previously identified benefits of self‐visualization were not realized. Confirming this study's prediction, the advantage of self‐visualization over others‐related visualization was lost. This is attributed to consumer difficulty in visualizing the full application of a really new product to their current consumption behavior. Of further interest, this study's results also showed that in the case of really new products others‐related visualization facilitated higher evaluations than self‐visualization. The mediating role of visualization‐based evaluation difficulty provides further explanation for these findings. Self‐related images are shown to be difficult to imagine in a really new product context, whereas imagining others utilizing the really new product is shown to be significantly easier. Perhaps individuals can see the benefits and better understand the novel applications of a really new product when visually simulating someone else using it but have more trouble imagining the applicability of the innovation in their own life. These findings are integrated into a discussion of the managerial implications and the potential avenues for future research in the area.     

Customization of Product Technology and International New Product Success: Mediating Effects of New Product Development and Rollout Timeliness

Offering a standardized product for different country markets may enable companies to accomplish fast product development and multicountry rollout, whereas also enjoying substantial cost benefits. However, not all manufacturers serving multicountry markets can adopt a standardized product strategy. Where technological requirements, standards, and approval procedures vary substantially across countries, manufacturers invariably must adapt the product's technology to fit individual country requirements. Extensive customization may lead to longer new product development and rollout times and increase the likelihood of delays in the entire project, hence adversely affecting overall new product outcome. This study examines the relationships between product technology customization, the timeliness in completion of both the new product development effort and international market launches, and new product success. The study that reports on new product launches across European markets, is based on personal interviews with senior managers in 30 multinational companies. The authors show that timeliness in new product development and timeliness in rolling out the new product into different country markets mediate the link between product technology customization and overall new product success. Customization of product technology increases the likelihood of delays in the completion of new product development projects and multicountry rollout. Additionally, the timeliness in new product development mediates the relationship between product technology customization and timeliness in international new product rollout. This means that if the NPD project runs behind schedule, a fault‐free multicountry rollout program becomes increasingly unlikely, as problems encountered during product development spillover into the rollout program. The results imply that international product managers must assign greater priority to assessing the relative advantages of customizing new product technology and to consider the timing implications for both the NPD effort and subsequent rollout. Managers must set realistic schedules and allocate sufficient resources to ensure both tasks can be accomplished within planned time scales. Finally, managers should not underestimate the complexities and time involved in customizing new product technologies, including the completion of disparate country technical approval procedures.     

New Product Development Processes and New Product Profitability: Exploring the Mediating Role of Speed to Market and Product Quality

In new product development, faster is not always better. Conceptually, being faster to market should improve financial performance by improving product quality and reducing development expenses. Empirical support is mixed, however, demonstrating that higher speed to market exhibits an inverted U‐shaped relationship with product profitability. Conventional wisdom and empirical research suggest managers make speed to market–product quality–development expense trade‐offs. A particular concern regarding speed to market is that extreme speed may jeopardize product quality. Some researchers suggest that speed to market improves product quality while others suggest firms must balance both speed to market and product quality. Also, shorter lead times may be associated with reduced development expenses, but empirical evidence is conflicting. This research attempts to reconcile conflicting results regarding the speed to market–product quality relationship, their joint impact on product profitability, and their mediation role in the effects of development expenses and cross‐functional integration on product profitability. Partial least squares (PLS) is used to analyze multiplexed archival and survey data collected from NPD managers for 1115 different NPD projects in several firms. The results support the hypothesized equations, explaining 27% of speed to market variance, 35% of product quality variance, and 45% of product profitability variance. This study makes two contributions. First, because speed to market and product quality are related, simultaneous consideration of both factors enhances insight into their joint effect. Second, it provides evidence that speed to market and product quality jointly mediate development expense by NPD phase and cross‐functional integration effects on product profitability. Key results from the large sample data analysis include the following. Speed to market and product quality both enhance product profitability, but the impact of speed to market is larger than that of product quality. Speed to market and product quality partially mediate the impact of fuzzy front end phase expenses on product profitability, while expenses in the latter phases exhibit no impact on the mediators or profitability. Thus, the results suggest that trade‐offs are made not only between time, quality, and expense (i.e., if additional expenses are incurred at all), but also that trade‐offs relate to when (i.e., in which NPD phase) additional development expenses are incurred. Finally, cross‐functional integration (both internal and external) substantially impacts product profitability through a mix of direct and mediated effects.     

Decomposing Product Innovativeness and Its Effects on New Product Success

Does product innovativeness affect new product success? The current research proposes that the ambiguity in findings may be due to an overly holistic conceptualization of product innovativeness that has erroneously included the concepts of product advantage and customer familiarity. This article illustrates how the same measures have often been used to assess product advantage with product innovativeness and product innovativeness with customer familiarity. These paired overlaps in measurement use are clarified in this research, which decomposes dimensions of product innovativeness along conceptual lines into distinct product innovativeness, product advantage, and customer familiarity constructs. To further support this decomposition, structural equation modeling is used to empirically test the distinctions. The measurement model supports the conceptual separation, and the path model reveals contingent effects of product innovativeness. Although product innovativeness enhances product advantage, a high level of innovativeness reduces customer familiarity, indicating that product innovativeness can be detrimental to new product success if customers are not sufficiently familiar with the nature of the new product and if innovativeness fails to improve product advantage. This exercise in metric development also reveals that after controlling for product advantage and customer familiarity, product innovativeness has no direct effect on new product profitability. This finding has strong implications for firms that mistakenly pursue innovation for its own sake. Consideration of both distribution and technical synergy as driving antecedents demonstrates how firms can still enhance new product success even if an inappropriate level of innovativeness is present. This leads to a simple but powerful two‐step approach to bringing highly innovative products to market. First, firms should only emphasize product innovativeness when it relates to the market relevant concepts of product advantage and customer familiarity. Second, existing technical and distribution abilities can be used to enhance product quality and customer understanding. Distribution channels in particular should be exploited to counter customer uncertainty toward newly introduced products.     

The Effect of New Product Preannouncements on the Evaluation of Other Brand Products

Some firms preannounce new products long before they are actually available on the market. Previous research has investigated the effects of such new product preannouncements (NPPs) on consumer and competitor responses. This paper examines how NPPs affect consumers' construal of and preferences for the new product and, in turn, how these evaluations influence their preferences for the brands' other products. Specifically, the paper demonstrates that consumers' construal level of NPPs spills over to their construal of other products in the brand family, causing a positive, biased evaluation of these products. Three experimental studies reveal that the mere information about an NPP can shift evaluation of currently available brand products in a positive direction through construal‐level spillover and increased perceptions of similarity. The studies contrast NPPs to new product announcements (NPAs) and consistently find more positive results for the former. Moreover, the studies find that product newness has a moderating effect on the results, such that the positive spillover effects are more pronounced for really new products than for incrementally new products. The results also show that the effects are contingent on the credibility of the NPP: If consumers do not consider the NPPs credible, no positive spillover effects will materialize. Finally, the studies demonstrate that the positive evaluative spillover is specific to the products in the brand family and does not affect consumers' perceptions or choice of competitor products. Consumers actually rate the competing brand's remaining products lower when the focal brand engages in NPPs. The study has important implications for managers regarding how to use NPPs to influence consumers' construal and evaluations of brand products.     

Third-Generation New Product Processes

New product processes—formal "stage-gate" systems for driving new product projects from idea through to launch—have been widely adopted in the last decade, and have generally had a strong and positive impact on firms' new product efforts. While these Second-Generation roadmaps represent a major improvement over the NASA-based first generation process of the 1960s, they too have weaknesses: too time consuming and too many time wasters, too bureaucratic, and no provision for focus. Here, Robert Cooper speculates about the nature of an emerging next generation of new product processes. He proposes fundamental changes to today's "stage-gate" systems that revolve around four Fs: they will be fluid and adaptable; they will incorporate fuzzy gates which are both situational and conditional; they will provide for much sharper focus of resources and management of the portfolio of projects; and they will be much more flexible than today's process. The end results should provide companies with a much more efficient road-map, bringing products to market faster and improving their use of scarce resources. But pitfalls are never far away in our evolution towards these Third-Generation Processes.     

Faster New Product Development

Clearly today's business climate mandates the need for faster development of new products. Drawing upon his experience, Milton Rosenau describes several techniques that have not been mentioned explicitly in recent articles: short, focused development phases; management involvement and support; procurement and use of productivity improvements; multifunctional teamwork; distraction reduction; frozen specifications; and microcomputer-based project management software.     

Autonomous Teams and New Product Development

An autonomous team is an emerging tool for new product development (NPD). With its high degree of autonomy, independence, leadership, dedication, and collocation, the team has more freedom and stronger capabilities to be innovative and entrepreneurial. Several anecdotal cases suggest that autonomous teams are best when applied to highly uncertain, complex, and innovative projects. However, there is no empirical study to test such a notion. Moreover, autonomous teams are not a panacea, and implementing them can be costly and disruptive to their parent organization. When should this powerful, yet costly tool, be pulled out of the new product professional's toolbox? This paper attempts to answer this question. The objective of this study is to explore under which circumstances an autonomous team is the best choice for NPD. Based on contingency and information‐processing theories, autonomous teams are hypothesized to be more effective to address projects with: (1) high technology novelty and (2) radical innovation. To test these hypotheses, the relative effectiveness of four types of team structures: autonomous, functional, lightweight, and heavyweight are compared. The effectiveness measures include development cost, development speed, and overall product success. Vision clarity, resource availability, and team experience are the controlled variables. The empirical results based on the data from 555 NPD projects generally support the research hypotheses. Relative to other team structures, autonomous teams are more effective in addressing projects with high technology novelty or radical innovation. The results also suggest that heavyweight teams perform better than other teams in developing incremental innovation. These results provide some evidence to support contingency and information‐processing theories at the project level. Given the importance of the development of novel technology and radical innovation in establishing new businesses and other strategic initiatives, the findings of this study may not only have some important implications for NPD practices but may also shed some light on other important topics such as disruptive innovation, strategic innovation, new venture, corporate entrepreneurship, and ambidextrous organization.     

Speed-to-Market and New Product Performance Trade-offs

When pressed to accelerate a development effort, more than a few managers have responded in terms such as “Good, fast, cheap … Pick any two.” Time-to-market decisions clearly play an important role in determining the ultimate success or failure of a new product. Just as clearly, however, speed to market is not the sole determinant of success. The seemingly offhanded “Pick any two” response points to the tradeoffs that product development managers must make in their decisions about development time and costs. Barry Bayus discusses the relationship between product development time and costs, and he fomulates a mathematical model that simultaneously considers the decisions regarding time-to-market and product performance levels. He applies the model to two competitive scenarios, and he identifies the optimal entry timing and product performance decisions for various market, demand, and cost conditions. In the first scenario, a firm must decide whether to accelerate development efforts to catch a competitor that has just introduced a new product. Analysis of the tradeoffs among the various parameters in the model suggests that fast development of low-performance products is optimal under the following conditions: a relatively short window of market opportunity, a weak competitor, and relatively high development costs. For example, if the competitor is weak, high performance levels are not necessary and the firm can safely reduce time-to-market. Under the same scenario (that is, accelerating development to catch a competitor), the analysis suggests that fast development of products with high performance levels is optimal under conditions of relatively high sales and relatively flat development costs. In the second scenario, the firm must decide whether to speed development efforts to beat the competition to market. Analysis of the various tradeoffs for this scenario suggests that first-to-market status for a product with a high performnace level is optimal under the following conditions: a relatively long window of market opportunity, relatively high sales, and relatively flat development costs. With a long product lifecycle, stable margins, and high sales, the firm can generate sufficient revenue to offset the increased cost incurred in speeding a high-performance product to market. Beating a competitor to market with a low-performance product is never optimal for the cases considered here.     

Organizational Learning and New Product Introductions

Organizational learning widely is believed to be important to competitive performance of companies. The purpose of this article is to examine how organizations learn from their experiences in new product introductions. Theory suggests that organizations will display a “competency trap” that reduces their ability to learn from organizational experience. Often initial success can cause a firm to rely on a single or a few experiences to develop routines, discounting later experiences. Therefore it is expected that organizations will have trouble learning from experience. The theory was tested by examining all new product introductions in the U.S. shampoo industry from 1974–1987. The dynamic nature of the business—the average brand survives about two years—made this an attractive research venue. Using the econometric technique of survival time modeling, a model was fitted of survival of brands as a function of organizational experience and organizational experience squared. The model also included controls for financial resources available to the firm and the level of first year's advertising. The model confirmed the general hypothesis that firms' brands are less successful the more experience they have. This study interprets this as evidence of a competency trap in new product introductions. The results broadly are supportive of the hypothesis that organizations find it harder to learn from experience as experience grows. Untangling the source of this problem is a goal of further research. For practice, the article suggests caution to brand managers in experienced companies. There is no guarantee that firms grow in their ability to build brands; results here suggest the opposite. Formal reviews of the new product, its process, and its performance by senior managers for lessons learned is desirable. Management of individuals and organizations may facilitate learning from experience. For managing individuals, often product success brings about a reassignment of successful personnel; care should be taken to insure that individuals' learning is captured by the new product organization before reassignment. On the organizational level, formal brand management may be a highly effective method for managing an ongoing stable of long‐lived brands but may be a poor choice in a dynamic market like shampoo. Companies may explore new organizational structures and departments to conceive and to develop new products since the skills required for managing ongoing brands may be different from creating new ones.     

Market Orientation and the New Product Paradox

The extant literature shows that the strength of the market orientation–performance relationship decays as the terminal measure of performance shifts from new product success to profitability to market share. As Day (1999) concluded, a broader nomological inquiry is needed to more fully understand the nature and limits of market orientation's effects. This suggests that a broader nomological inquiry is needed to fully understand the nature and limits of market orientation's effects.
Utilizing a national sample of marketing executives, the present study's purpose is to build a fuller understanding of the effects of market orientation on firm performance. Its structural equations model includes measures of new product success, profitability, and market share.
The research reinforces a strong positive relationship between market orientation and new product success. The expanded nomological network under study, however, implies barriers to market orientation's effectiveness. First, market-orientation-inspired increases in the priority firms place on "breakthrough" learning without commensurate increases in the priority placed on "breakthrough" innovation capabilities can boomerang and negatively impact new product success. Second, market-orientation-inspired new product development programs that are unable to increase market share can negatively impact profitability. These gatekeepers to the success of market orientation underscore the need for firms to coordinate a strong market orientation with resources and capabilities that increase the effectiveness of the marketing function. Without such coordination, the positive effect of market orientation on new product success may be limited to incremental innovations, and the overall effect of successful new products on profitability may be limited.     

Project Management Characteristics and New Product Survival

We develop a conceptual model of new product development (NPD) based on seminal and review articles in order to answer the question, “What project management characteristics will foster the development of new products that are more likely to survive in the marketplace?” Our model adopts Ruekert and Walker's theoretical framework of situational dimensions, structural/process dimensions, and outcome dimensions as an underlying structure. We conceptualize their situational dimensions more narrowly as project management dimensions, allowing us to examine more specifically how project management practices affect the NPD process. In our model, project management dimensions include project manager style, project manager skills, and senior management support. Structural/process dimensions include cross‐functional integration and planning proficiency. Outcome dimensions include process proficiency and new product survival. Our empirical analysis finds support for 20 hypotheses, a reversal of one hypothesis, and nonsignificant results for one hypothesis. These results show that projects are best led by managers with strong technical, marketing, and management skills, using a participative style and enjoying early and continuous support from senior management. These project management dimensions promote cross‐functional integration and planning, which are important to process proficiency and new product survival. Our study suggests two broad conclusions. First, it confirms the links in the extant literature between situational (project management) dimensions, structural/process dimensions, and outcome dimensions in NPD. Second, firms can improve cross‐functional integration and planning through various project management practices. Generally, we find that firms interested in improving both proficiency in their development process and the survival rate of new products should take steps to promote cross‐functional integration and to improve their planning processes. While the linkage between cross‐functional integration and NPD outcomes is well established in the literature, the impact of the planning process on NPD outcomes is a research area ripe with opportunity. Our study highlights three aspects of planning that contribute to NPD outcomes. Plans should be detailed, team members should participate actively in the planning process, and teams should be given flexibility and autonomy to respond to unanticipated issues as they appear.