NEW PRODUCTS

MANAGEMENT
Merle Crawford
Anthony Di Benedetto
10th edition

Instructor : Dr. Sayed Hassan

Teaching Assistant : Dr. Giovanna Gamal

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
PART Five
Launch
 Chapter 16

Strategic Launch Planning

Launc
h
 Common Myths About Marketing Planning for New
Products
- Marketing people make the decisions that constitute a marketing plan.
- The technical work is essentially complete when the new item hits the shipping dock. Marketing
people take over.
- It’s important that marketing people be required to use strategy-tactics paradigms. Clear thinking
helps rein in their excess exuberance and excitement.
- The marketer’s task is to persuade the end-user to use our new product.
- The more sales potential there is in a market segment, the better that segment is as a target
candidate.
- The PIC guides the development stage and the marketing plan guides the launch stage.
- The pioneer wins control of a new market.
- A new product’s goals are of two general types: sales (dollars or shares) and profits (dollars or ROls).
- People generally are pretty smart buyers—they will not be influenced by meaningless package
designs.
- A launch is no game—when we say go, that’s it, sink or swim, and it had better be swim.
- As with Broadway shows, opening night is the culmination of everything we have been working for.
 Launch
- At this point in the new products process, the team is ready to build the actual marketing plan.
- If the product is “really new” (to the world or to the firm), the challenge facing the firm is more
substantial, as it may need to rely on new communication or distribution strategies in order to sell
unfamiliar products.
- Strategic launch decisions include both strategic platform decisions that set overall tones and
directions, and strategic action decisions that define to whom we are going to sell and how.
- Tactical launch decisions are marketing mix decisions such as communication and promotion,
distribution, and pricing that are typically made after the strategic launch decisions and define
how the strategic decisions will be implemented.
For example, one platform decision that often gets overlooked is the level of aggressiveness. If it is
decided to be very aggressive (a platform decision), the target market (an action decision) must be
rather broad, and the introductory advertising plan (a tactical decision) will probably call for mass
media and a strong attention-getting campaign.
- strategic launch decisions include the desired innovativeness of the product, the time to market,
the competitive stance or positioning, the driver of new product development (market,
technology, or both), and many others.
 Launch
- Researchers that study launch tend to find that most of the factors contributing to new product
success are controllable—that is, rather than taking a “hope for the best” attitude, managers can
achieve better success rates by improving product launch practice
- To improve practice at the launch phase, it is important to have heavy marketing input, primarily
because marketing will guide the implementation of the plan.
- The launch plan itself may be called a business plan, but more commonly it is the marketing plan
or marketing program.
- In today’s business, the marketing plan is recognized as a plan for the full business activity of
launch; that’s why full function teams are essential.
 The Strategic Givens
- strategic givens are “decisions” that are already made for us, They cover the full range of the
organization’s operations.
- They’re decisions made earlier and often found in the PIC Guidelines or product protocol.
- They’re affecting the Tactical launch decisions :
For example :
• A specified gross margin : affects funding.
• Speed-to-market : affects promotional outlays and schedules.
• Commitment to a given channel : affects distribution plan.
• Advertising policy : affects promotion decisions.
• Pricing policy : affects decision to use penetration or skimming pricing.
 Revisiting the Strategic Goals
- Early in the new products process, when the product innovation charter (PIC) was being
developed, a basic set of strategic goals was outlined, and these goals have led the new products
team up to this point.
- competitive conditions may have changed, and customer or management needs may have
changed. Therefore, at this early point in the launch planning process, the goals should be
revisited and updated.
- firms use a complex set of measures as goals, and there is no one universally accepted set. The
most used set of measures for individual products is as follows:
 Customer Acceptance Measures
 Product Level Performance
 Financial Performance
 Other
 measure
s for
individu
al

products

ROI : Return On Investment

IRR : Internal Rate of Return
 measures for individual products
- The cash-to-cash metric, sometimes called the time-to-break-even metric, is simply the
time between the initial cash investment and the time of payment for the finished
product, and it is becoming increasingly popular.
- The cash-to-cash metric is improved by using suppliers that efficiently achieve order
fulfillment, practice effective inventory management, and successfully collect accounts
receivable.
For example,
Toyota uses lean manufacturing techniques in its Japanese manufacturing plants and has
applied these same techniques in its U.S. plants. These techniques focus on just-in-time
delivery of parts from suppliers, reducing inventory levels at parts distribution centers,
increasing supplier on-time delivery, and improving inventory turnover.
 Strategic Platform Decisions
- Each launch planning team will want to make up its own list of platform decisions and
the start point is considering just how new the product is to the world and to the firm.
The strategic platform decisions will be related to :
 Type of Demand Sought
 Permanence
 Aggressiveness
 Competitive Advantage
 Product Line Replacement
 Competitive Relationship
 Scope of Market Entry
 Image
 Strategic Platform Decisions
 Type of Demand Sought : Different levels of product newness require different kinds of impact the
launch activities must have on demand:
• For a new-to-the-world product: The firm must develop an entry strategy with the emphasis on
stimulating primary demand for the product category. The launch plan must stimulate adoption of
the new product category and lead to diffusion through the marketplace.
For example : Ford recently released MyKey, a system for parents to monitor and control teen driving via
a computer chip in the key (it can limit speed, limit the volume of the sound system, and give off a signal
if the driver is not wearing a seat belt).
• For a product improvement or upgrade to existing product (such as the newest release of Windows):
The launch is expected to achieve customer migration (that is, existing customers should be encouraged
to migrate to the new product), with switch-in from competitors’ customers where possible. We could
say that the goal here is to stimulate replacement demand.
• For a new entry or line addition in an established market (such as a new soft drink by Pepsi): The
emphasis is on stimulation of selective demand (drawing market share away from competition).
The launch plan must stimulate trial purchase, which is a precursor to adoption. Pepsi’s objective is to
get loyal Coca-Cola drinkers to break their habit at least once to try the newcomer brand.
 Strategic Platform Decisions
 Permanence: On permanence, there are three options:
• The first is the usual one—we are in to stay, and no thought is given to getting out.
• The second is in to stay if we meet our goals.
it is especially useful when a firm is using the new product to enter another sphere of
activity , try to make it winner but pull out if competitive capability is inadequate.
• The third option is temporary.
Think of how many new toys and games, frozen yogurt flavors, diet products, and exercise
programs seem to appear every year.
Customers like variety and are more willing than ever to try something new, especially if it
seems fashionable, youthful, or modern.
Baskin-Robbins, for example, has a basic range of ice cream flavors but runs others in and
out to give variety.
 Strategic Platform Decisions
 Aggressiveness : There’re three types :
• An aggressive entry seeks lots of attention early on, so most of the promotional dollars are
spent early, and most of the resources go to getting early trial.
• In contrast, some firms will slink into the market with a cautious entry. The third option is
temporary.
some firms like to enter a new market cautiously so as not to alarm the leaders in that market.
• The aggressiveness can be balanced :
This simply means the firm is not trying to be pugnacious or slinking. The average of all new
product introductions in a given industry would be balanced

 Competitive Advantage :
Another decision that tends to come up early concerns the basic offer we make to the
marketplace: Will our product lower end-user costs by virtue of its price, or will our product offer
new benefits by virtue of its differentiation?
 Strategic Platform Decisions
 Product Line Replacement: Product Line Replacement Strategies
 Strategic Platform Decisions
 Product Line Replacement:
- The technologically strongest firms cannibalize their own products (and production processes) with
newer, higher-performance versions
- Other firms, the imitators, succeed by following the leader firms and making incremental
improvements to their products.
- In other words, imitators move up the performance curve, while the innovators create whole new
curves with higher performance limits.
- The decision on when to launch the next generation of product is a tricky one, but is likely to
depend on at least three important forces: the competitive environment, customer expectations,
and profit margins.
For example of a firm that considers each of these when planning a launch. When the competitive
environment for chip manufacture heated up in the mid-1980s, Intel realized it was time to become
its own producer (rather than relying on secondary chip suppliers). By 1990, it was focusing on
increased chip performance and shorter development cycles and was able to maintain its competitive
lead.
 Strategic Platform Decisions
 Competitive Relationship:
- Sometimes a product innovation charter will have a statement something like this: “The product(s) that
will come from this program will not be aimed at XYZ Company, nor threaten a piece of business that is
important to that firm.” , Other firms do just the opposite, shooting their new item directly at a specific
competitor.
- The practices lead to a three-option set: Make no reference to specific competitors, aim directly at a
specific competitor, and avoid a specific competitor.
 Scope of Market Entry:
This issue relates to a firm’s desire to do market testing. Some introduce their new items into part of a
market, watch what happens, and then roll them out to the entire market as they overcome any problems.
 Image :
The issue here is: Will the new product need an entirely new image, a major change in an existing image, a
tweaking of an existing image, or no change whatsoever in an image?
For example, the butt-on strategy of market replacement can destroy the prior brand if necessary to
properly position the new.
 The Target Market Decisions
- once these higher-order decisions are made, the rest are easier. So we now turn our attention to what
you may think of as the real marketing planning decisions: target market, product positioning
statement, and creating unique value for the chosen target.
- Competition today forces the overwhelming majority of companies to market new items to specific
target groups. Markets are so complex that one product cannot come close to meeting all needs and
desires.
The Target market decisions will be related to :
 Alternative Ways to Segment a Market
 Micromarketing and mass customization
 Also consider the diffusion of innovation
 The Target Market Decisions
 Alternative Ways to Segment a Market :
There may be thousands of ways that new product marketers use to target a specific market segment. Yet
each of these can be classified into one of several categories.
- End Use:
- Geographic and Demographic
- Behavioral and Psychographic (Markets can be segmented according to psychographic variables:
values, activities, and lifestyles ).
- Beneflt Segmentation : (Through surveys of customers and potential customers, we can identify
segments based on benefits sought and develop products to satisfy the needs of one or more of these
segments )
 Micromarketing and Mass Customization :
- Retail scanners and sales information systems yield the databases that display very small targets
(neighborhoods or industrial subsets) with unique purchase patterns. These clusters have been labeled
micromarkets.
 The Target Market Decisions
- David Olson, new product researcher at the Leo Burnett advertising agency, uses scanner data to cluster
food buyers into six groups:
1- Loyalists, who buy one brand at all times, like it, and don’t use deals.
2- Rotators, who have a 2- or 3-product set, move around in that set, and don’t use deals.
3- Deal-selectives, rotators whose movement is determined by presence of deals.
4- Price-driven, who buy all major brands, always on deals.
5- Store brand buyers, who do as their name implies.
6- Light users, who buy too little for a pattern to show. Light users comprise the biggest group in most
categories.
- The ultimate smallness, and the ultimate building customer value, is mass customization (tailoring a
good or service to the unique specifications of individual customers).
- Great advances in information technology and changes in work processes make mass customization
feasible for many products
 The Target Market Decisions
 Targeting May Also Use Diffusion of Innovation:
- New products are innovations, and we call the spreading of their usage the diffusion of
innovation.
Product Characteristics:
According to the classic diffusion theory of Everett Rogers, there are five factors that measure how
soon a new product will diffuse into the marketplace :
1- The relative advantage of the new product.
How superior is the innovation to the product or other problem-solving methods it was designed to
compete against? Google spread rapidly through the Internet community as the preferred search
Web site, as it was seen to offer better search capability than other available alternatives.
2- Compatibility.
Does it fit with current product usage and end-user activity?
the more discontinuous the innovation, the more learning is required. Microwave ovens were slow to
be adopted initially, due to the perceived differences in cooking com- pared to conventional methods
 The Target Market Decisions
3- Complexity.
Will frustration or confusion arise in understanding the innovation’s basic idea?
Many people gave up on the Apple Newton, perceiving that it was too hard to make its handwriting
recognition feature work; several years later, they adopted Apple’s iPod rapidly for many reasons, one
of which was certainly its ease of use.
4- Divisibility (also called trialability).
How easily can trial portions of the product be purchased and used?
Foods and beverages are quite divisible, but new homes and word processing systems are much less
so.
5- Communicability (also called observability).
How easy is it for the user to see the benefits of using the product?
The benefits of a new cologne with a nice scent are immediately noticed by the user; the benefits of
using a new decay-preventing toothpaste are, by contrast, more difficult for the user to discern.
 The Target Market Decisions
- An innovation can be scored on these five factors, using primarily personal judgment plus the
findings from market testing during earlier phases of the development. Launch plans can then be
laid accordingly.
- Next is the degree to which early users actively or passively encourage others to adopt a new
product; if they do, its spread will be rapid.
- So interest has focused on the innovators (the first 5 to 10 percent of those who adopt the
product) and on the early adopters (the next 10 to 15 percent of adopters). The theory of
innovation diffusion states that, if we could just market our new product to those innovators and
early adopters, we could then sit back and let them spread the word to the others. Other
categories of adopters include the early majority (perhaps the next 30 percent), the late majority
(perhaps another 30 percent), and the laggards (the remaining 20 percent).
- Another View of Diffusion : Crossing the Chasm model , provides an extension to the Rogers
model. Briefly, Moore suggests thinking of the innovators and early adopters as the visionaries
and later categories as the pragmatists.
- The obvious question is, “Who will be the innovators and early adopters?” Can we identify them
in advance so as to focus our early marketing on them? Not always, but several traits have often
emerged from the studies, and they apply to business firms as well as to individuals.
Traits of
Innovators
and Early
Adopters
 Product Positioning
- A product positioning statement is created by completing this sentence: Buyers in the target
market should buy our product rather than others being offered and used because: ……………..
- Positioning alternatives fall into two broad categories:
 1- To position to an attribute (a feature, a function, or a benefit).
 a dog food may be positioned by a feature as “the one with as much protein as 10 pounds of
sirloin.”
 the shampoo may be positioned by a function that “coats your hair with a thin layer of protein.”
 Miller’s tag line for years has been a simple statement of one direct benefit and one follow-on:
“Tastes great, less filling.”
 2- To use surrogates (or metaphors).
For example, “Use our dietary product because it was created by a leading health expert.” This says
the product differs because of its designer.
Surrogate
Positionin
g-
Alternativ
es and
Examples
Thank You