Week 5 Discussion

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Applications

“Several of our divisions have lately been using this so-called minimarket testing method. We had some shaving products use BehaviorScan, and a new upscale bandage line used a somewhat similar service from ACNielsen. But I am increasingly concerned about the panel members in those test cities. My concern is not that the people become accustomed to the testing or that they overreact to stimuli. These are valid concerns, but there’s not much I can do about them. I am concerned, however, that our people do not know the effect of these things on the data we get. How would the results of our tests be affected if people like the testing too much? Or if they tend to become professional test participants and begin thinking like judges?” “You know, we recently had a soft drink product (an exotic berry seltzer line) go through one of those simulated test markets, and it was a disaster. The new products people forgot completely about the possibility that the customers who bought the product in the shopping center pseudo stores might not actually get around to trying it. But it happened. Based on in-store purchases, everything was okay, but a good percentage of the purchasers changed their minds later; and, if they used the product at all, it was a limited trial by just one person. Solution, of course: A sales wave test added to the end of the store test. But that increases the cost considerably. Could you tell me when we should use the added sales wave and when we shouldn’t?” “I really was confused by something a corporate market researcher said in a seminar we held last week. It concerned our industrial tubing division, which sells extruded aluminum tubing of various smaller sizes for encasing wiring in commercial buildings. She was recommending that they market test their new items by going out to the customers and making what she called fakes— pretending to sell something they wouldn’t have yet. This was so silly. Surely you don’t agree with her, do you? Besides, it sounds dishonest to deceive potential buyers that way.”

Case: PepsiCo—Pepsi-Kona and Pepsi One26

Pepsi-Cola’s famed “Cola Wars” advertising, aggressively pitting Pepsi against arch-rival Coca Cola, seems symbolic of the competitive style of the beverage, snack, and fast-food corporation. In a competitive industry like soft drinks, new products that satisfy rapidly changing consumer demands are critical to sales growth and success. PepsiCo has had remarkable success with new product introductions such as Diet Pepsi (first launched in 1964) and has successfully repositioned Mountain Dew to the twentysomething market. Not all new product launches have been successful, however. Crystal Pepsi was launched in the midst of the “clear products” craze of the early 1990s. Its appearance and taste did not match customer expectations, and as a result it experienced very low repeat purchase rates and was soon withdrawn.

In the mid-1990s, highly caffeinated soft drink products (such as Coca Cola’s Surge and Jolt Cola) were booming in popularity among the youth market, as were Starbucks and other coffee chains. Competitors such as Arizona Iced Tea were adding ginseng, another energy booster, to some of their products. Pepsi already had a working relationship with Starbucks, having produced and marketed Frap-puccino as a joint venture. Based on these environmental trends, Pepsi decided the time was right for a coffee-flavored cola, to be known as Pepsi-Kona.

Technical development of Pepsi-Kona went successfully, thanks to PepsiCo’s core competencies in soft drink development and its knowledge of the coffee business gained through its relationship with Starbucks. A coffee-brown label, prominently displaying the Pepsi logo and the Kona name in script, was prepared, and the decision was made to package the product in 20-ounce bottles and 12- ounce cans.

In May 1996, Pepsi-Kona was put into test market in Philadelphia. A full-scale promotional assault was readied. Several weeks before the launch, Philadelphia television stations began airing 15- second teaser spots with the themes “Spank Your Senses” and “Grab Life by the Konas.” Once Pepsi- Kona was launched, it was on sale virtually everywhere, from the supermarket, to the 7-11, to street

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vendors (who had Pepsi-Kona posters prominently displayed on their trucks). A very entertaining full- length TV commercial was aired in which singer Tom Jones stood on a table in a crowded cafeteria and belted out “It’s Not Unusual” while sipping Pepsi-Kona. Consumers kept their eyes peeled for the “Kona Hummer,” a large vehicle from which samples of Pepsi-Kona were distributed.

The Philadelphia test market went poorly. While brewed coffee continued to be popular, the ready- to-drink coffee market (i.e., soft drinks containing coffee) was leveling off and actually declined during the mid-1990s. Some observers commented that the Kona Hummer and the TV spots were rarely seen. Furthermore, many consumers stated that they just didn’t like the flavor combination of Pepsi-Cola and coffee. Pepsi-Kona was withdrawn from Philadelphia and never went into national distribution.

The clock rolls forward to October 1998, when Pepsi-Cola announced it was launching its newest product, Pepsi One. Pepsi One contains Sunett (otherwise known as Ace-K), a sweetener that had just been approved by the FDA, and thus contains only one calorie per serving. Interestingly, Pepsi One was not promoted specifically as a diet drink, nor was Diet Pepsi withdrawn from the market. Males in the 20–39-year-old age group were the primary target market. The advertising campaign for Pepsi One avoided mentioning “diet” (an unpopular word among that target group) and stressed that “Only One Has It All.” Actor Cuba Gooding Jr. (who had just starred in Jerry Maguire, a movie about athletes and sports agents that was popular with the young male market) was chosen as the spokesperson. Sports tie-ins and other complimentary promotional activities (such as handing out Pepsi One at Walmart stores) were also undertaken. An important facet of Pepsi One’s introduction was that there was no time for test marketing: In fact, Sunett (Ace-K) was approved by the FDA in June 1998, and Pepsi announced its intentions to develop Pepsi One on the same day.

What could be learned from the Pepsi-Kona failure that could help PepsiCo successfully launch Pepsi One? Specifically, consider the following issues. What might have been the PIC for Pepsi-Kona? What do you suppose happened in early concept testing? Why, after careful product development, did Pepsi-Kona do so poorly in the test market? Now, Pepsi One needs to be launched with virtually no test market. Given the prior experiences with Pepsi-Kona, should Pepsi One managers be worried? How might they lessen the risks of Pepsi One’s launch?

1When in m arket testing, Nair for Men was featured on the “Hits or Misses” page of the www.newproductworks.com Web site, and scored reasonably well on the online survey. 2The Zim a story is sum m arized in Richard Melcher, “Why Zim a Faded So Fast,” BusinessWeek, March 10, 1997, pp. 110–114. 3Robert E. Davis, “The Role of Market Research in the Developm ent of New Consum er Products,” Journal of Product Innovation Management, 10(4), Septem ber 1993, pp. 309–317. 4John Gaffney, “How Do You Feel about a $44 Tooth-Bleaching Kit?” Business 2.0, October 2001, p. 46. 5A check of ACNielsen’s or IRI’s Web sites, www.acnielsen.com and www.infores.com , respectively, will show which countries they do scanner-based m arket testing in: North Am erica and Western Europe are well covered. Nielsen, for exam ple, provides consum er purchase decisions in over 60 countries. 6Don’t confuse these STM m odels with other m odels, such as TRACKER, that are used for interpreting early results in test m arketing cities. Marketing scientists have m odels to cover alm ost every step in the new product developm ent and m arketing process, but here we can cover only the usage leaders. 7Check out both of these sources’ Web sites, www.acnielsen.com and www.infores.com (the latter is IRI’s site). Other notable providers include the NPD Group at www.npd.com , Sim m ons Market Research Bureau at www.sm rb.com , and TNS at www.tns-global.com . 8An excellent (though dated) evaluation of these STM m odels can be found in Allan D. Shocker and William G. Hall, “Pretest Market Models: A Critical Evaluation,” Journal of Product Innovation Management, 3(3), Septem ber 1986, pp. 86–107. 9The ASSESSOR m odel is described in A. J. Silk and G. L. Urban, “Pre-Test-Market Evaluation of New Packaged Goods: A Model and Measurem ent Methodology,” Journal of Marketing Research, 15(2), May 1978, pp. 171–191; also see G. L. Urban and G. M. Katz, “Pre-Test-Market Models: Validation and Managerial Im plications,” Journal of Marketing Research, 20(3), August 1983, pp. 221–234. 10Gary L. Lilien, Arvind Rangaswam y, and Tim othy Matanovich, “The Age of Marketing Engineering,” Marketing Management, Spring 1998, pp. 48–50. 11For a discussion of the use of virtual stores in sales forecasting, see Raym ond R. Burke, “Virtual Shopping: Breakthrough in Marketing Research,” Harvard Business Review, March–April 1996, pp. 120–131. This technique is also

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presented in Phillip J. Rosenberger III and Leslie de Chernatony, “Virtual Reality Techniques in NPD Research,” Journal of the Market Research Society, October 1995, pp. 345–355. 12For a good list of pros and cons of STMs, see Muam m er Ozer, “A Survey of New Product Evaluation Models,” Journal of Product Innovation Management, 16(1), January 1999, pp. 77–94. 13Bruce D. Weinberg, Roles for Research and Models in Improving New Product Development. Cam bridge, MA: Marketing Science Institute, 1990, p. 8. 14Steve Blount, “It’s Just a Matter of Tim e,” Sales & Marketing Management, March 1992, pp. 32–43. 15For m ore inform ation, check out the IRI and Nielsen Web sites: www.infores.com and www.acnielsen.com . 16IRI goes m uch further in designing variations on the basic service. For exam ple, besides the controlled market testing just described, they also offer controlled store testing where activities in one chain are studied. 17Check the two firm s’ Web sites for the m ost up-to-date inform ation. 18Gary S. Lynn, Mario Mazzuca, Joseph G. Morone, and Albert S. Paulson, “Learning Is the Critical Success Factor in Developing Truly New Products,” Research-Technology Management, May–June 1998, pp. 45–51. 19Anonym ous, “Odor Rem oval Spray Introduced,” Supermarket News, July 13, 1998, p. 44; and Jack Neff, “P&G Shifts Ad Focus for Rollout of Febreze,” Advertising Age, April 6, 1998, p. 16. 20Masaaki Kotabe and Kristiaan Helsen, Global Marketing Management, Update 2000 (New York: John Wiley & Sons, 1998), pp. 324–325. 21Julie Jargon, “Starbucks Takes New Road with Instant Coffee: Com pany Launches Marketing Cam paign and Taste Challenge to Tout Its Portable, Less Expensive Product Via,” The Wall Street Journal, Septem ber 29, 2009, p. A29. 22This technique is still being used, this tim e in the book industry, where som e authors have m ade purchases in those stores whose sales are being audited for inclusion in national bestseller lists. Most firm s have urged salespeople to recruit neighbors to m ake purchases and spur stocking by stores. 23Leslie Brennan, “Meeting the Test,” Sales and Marketing Management, March 1990, p. 60. 24Wendy Bounds, “Cam era System Is Developed but Not Delivered,” The Wall Street Journal, August 7, 1996, pp. B1, B6. 25Jim Carlton, “Sega Leaps Ahead by Shipping New Player Early,” The Wall Street Journal, May 11, 1995, p. B1. 26This case was developed from several published sources, including the Pepsi Web site (www.pepsico.com ); “The Best and Worst of the New Food Products of 1996,” Orange County Register, January 2, 1997, p. 8; Bruce Horovitz, “Pepsi’s One for All: One-Calorie Product May Spell Sweet Success,” USA Today, October 6, 1998, p. B-1; Nikhil Deogun, “Pepsi Takes Aim at Coke with New One-Calorie Drink: Beveragem aker Plans Heavy-Duty Marketing Attack with Its Num ber-One Cola,” The Wall Street Journal, October 5, 1998, p. B4.

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CHAPTER NINETEEN

Launch Management

Setting

Once the new product is ready to market, the long trek through the development process may appear to be ended. The people involved in the program are happy, satisfied, and anxious for a well-earned rest.

But the group was charged with launching a winning product. Just as managerial control over the development process was needed (checking actual progress against the plan and making adjustments where it appeared there would be trouble meeting the schedule), control over the marketing of the new product is needed. Launch management lasts until the new product has finished its assault on given objectives, which may take as long as six months to a year for industrial goods and commercial services or as little as a few weeks for some consumer packaged goods.

What We Mean by Launch Management

Comparing a NASA space capsule to a youngster’s slingshot will explain the subject of this chapter. After firing at a crow in the upper branches of a tree, the youngster quickly panics and runs if the rock sails well over the crow and heads directly for the kitchen window in the neighbor’s house. That’s when the youngster would rather be in the NASA control headquarters in Houston, Texas, because NASA scientists launch guided space capsules, not unguided slingshot rocks. NASA would have anticipated that an in-flight directional problem might occur and thus would simply make an in-flight correction, allowing the space capsule to continue its controlled flight. Not having in-flight corrective powers, the youngster simply runs. In short, good tracking systems make successful launching of new products more likely.1

Whether it is a NASA rocket launch or a new product launch, the post-launch assessment has the same basic purpose: to learn from the experience, and to correct mistakes. To adapt the NASA analogy to the product launch situation, one can