NEW PRODUCT MANAGEMENT

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PART FIVE
LAUNCH

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Launch

Figure V.1

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Common Myths About Marketing Planning for New Products

  • Marketing people make the decisions that constitute a marketing plan.
  • The technical work is complete when the new item hits the shipping dock. Marketing people take over.
  • The marketer’s task is to persuade the end user to use the new product.
  • The more sales potential there is in a market segment, the better that segment is as a target candidate.
  • The pioneer wins control of a new market.
  • As with Broadway shows, opening night is the culmination of everything we have been working for.

Figure V.2

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Chapter 16
Strategic Launch Planning

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Strategic Givens

Corporate, some team decisions made earlier. Often found in the PIC Guidelines.

  • 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 (slide down demand curve).

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Revision of PIC Goals

  • Customer Acceptance Goals
  • Use
  • Satisfaction
  • Sales
  • Market Share
  • Financial Performance Goals
  • Cash-to-cash (Time to break even)
  • Margins
  • IRR, ROI
  • Product Level Performance Goals
  • Cost
  • Time to Market
  • Performance
  • Quality
  • Other
  • Competitive Effect
  • Image Change
  • Morale Change

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Strategic Platform Decisions

  • Permanence
  • Aggressiveness
  • Type of Demand Sought
  • Competitive Advantage
  • Product Line Replacement
  • Competitive Relationship
  • Scope of Market Entry
  • Image

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Permanence

  • Strategic options:
  • Permanent, stand-alone.
  • Permanent, but as a bridge to other items -- e.g., platform strategy.
  • Temporary: Given firms’ tendency to develop streams of products, more and more new products are actually only temporary (examples: cereals or snacks tied to recent children’s movies or TV shows).

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Type of Demand Sought

  • Primary demand: for new-to-the-world product
  • Replacement demand: for a product improvement or upgrade (new computer chip, new compact car)
  • Selective demand: for an entry into an established market.

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Product Line Replacement Strategies

Figure 16.1

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Butt-on product replacement

The existing one is simply dropped when the new one is announced. Example: Gillette's marketing of Fusion and dropping of Mach3.

Low-season switch

Same as butt-on, but arranging the switch at a low point between seasons. Tour companies use this switch when they develop their new catalogs.

High-season switch

Same as butt-on, but arranging the new item at the top of a season. Example: Video game manufacturers use this strategy often, putting new replacement items out during the holiday buying season.

Roll-in, roll-out

Another version of butt-on, but arranged by a sequence of market segments. Fiat launched the new 500 in Italy first, then rest of Europe, then North America.

Downgrading

Keeping the earlier product alongside the new, but with decreased support. Example: Older computer chips are marketed alongside newer ones but with less channel support.

Splitting channels

Putting the new item in a different channel or diverting the existing product into another channel. Example: Old electronic products often end up in discounter channels.

Scope of Market Entry

This is not test marketing. This is launch. All forces in place and working.

  • Roll out slowly -- checking product, trade and service capabilities, manufacturing fulfillment, promotion communication, etc.
  • Roll out moderately, but go to full market as soon as volume success seems assured.
  • Roll out rapidly -- full commitment to total market, restricted only by capacity.

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Some Other Strategic Platform Decisions

  • Aggressiveness (aggressive versus cautious attitude at entry)
  • Type of demand sought (primary versus selective)
  • Competitive advantage sought (differentiation, price leadership, or both)
  • Competitive relationship (aim at a competitor, avoid a competitor)
  • Image (create a new image, tweak an existing image, use the already-existing image)

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The Target Market Decision

  • Alternative ways to segment a market
  • end-use, geographic/demographic, behavioral/psychographic, benefit segmentation
  • Micromarketing and mass customization
  • Also consider the diffusion of innovation

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Aqualine

Islands

Splash

Molokai

Sunflare

2

3

1

Fashion

Comfort

Using the Joint Space Map to Identify Benefit Segments

Figure 16.2

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Factors Affecting Diffusion of Innovation

Derived from classic Rogers model of diffusion

  • Relative Advantage (Google’s rapid acceptance by computer users)
  • Compatibility (digital cameras are designed to be used much as film cameras)
  • Complexity (Apple Newton’s handwriting recognition was found to be hard to use)
  • Divisibility (try a new GPS system at low cost as an add-on with a rental car)
  • Communicability (long-term benefits of a decay-preventing toothpaste are impossible to discern at time of purchase)

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Traits of Innovators and Early Adopters

Figure 16.4

Another View of Diffusion: Crossing the Chasm

  • Two adopter groups:
  • Visionaries (innovators and early adopters)
  • Pragmatists (all later categories)
  • The two groups differ in their expectations of the new products.
  • Pragmatists do not use visionaries as their opinion leaders.
  • Visionaries might snap up a cool new cell phone while pragmatists may just be looking for something that works well and is not too expensive.

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Crossing the Chasm

  • A value proposition may attract the visionaries but may never get acceptance in the mass market.
  • To “cross the chasm,” the firm needs to develop a value proposition that works for pragmatists and to develop a launch strategy that is designed to reach pragmatists.

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Product Positioning

  • Who -- Why -- How
  • To whom are we marketing?
  • Why should they buy it?
  • How do we best make the claim?

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To Whom Are We Marketing?

  • Users vs. non-users (primary vs. selective demand)
  • Target market criteria (demographic, geographic, psychographic, benefit segmentation)
  • Everybody -- no narrowing down (mass customization, Post-It notes)

The real issue here is commitment -- by all new product participants and by management

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Why Should They Buy It?

  • This too we have been testing -- basic concept statement used for testing and for guiding technical (e.g., QFD “Whats”), and the key reason on the “How likely would you be to buy this if we marketed it?” (product use test)
  • Formatted in three ways:
  • Solves major problem current products do not.
  • Better meet needs and preferences.
  • Lower price than current items.

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How Do We Make the Claim?

  • Product positioning statement is a strategic driver --a core item -- not a list of advantages. Some new products get one short sentence -- technical items more.
  • Can be stated as one or more features (what it is).
  • Can be stated as a function (how it works).
  • Can be stated as one or more benefits (how the user gains).
  • Can be stated as a surrogate (no features, functions, benefits).

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Product Positioning Options

Position to an Attribute

  • Feature: A dog food that has “as much protein as ten pounds of sirloin.”
  • Function: A shampoo that “coats your hair with a thin layer of protein.”
  • Benefit: A new toothpaste “saves you money” (direct) and “improves your sex life (follow-on)

Drano’s classic tagline was “Thicker, stronger, faster” (a feature, a function, a benefit).

Miller Lite’s is “Tastes great, less filling” (two benefits).

Position on a Surrogate

  • Nonpareil: Jaguar cars, Perrier water.
  • Parentage: A Chanel perfume, a Disney movie, a Ralph Lauren designer suit.
  • Manufacture: Budweiser (beechwood aging), Audi (renowned engineering).
  • Target: Airlines designed for the business traveler, Vector tires for use on wet roads.
  • Rank: Hertz, Blue Cross/Blue Shield, and others who claim to be No. 1.
  • Endorsement: Doctor recommendation, celebrity spokesperson.
  • Experience: Stress long use by satisfied customers (Nuprin, Yellow Pages).
  • Competitor: USPS Express Mail and some Kia autos are just like competitors but cheaper.
  • Predecessor: You liked Hershey’s Kisses so you will also like Hugs.

Figure 16.5

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Branding Decisions

  • What is the brand’s role or purpose?
  • Are you planning a line of products?
  • Do you expect a long-term position in the market?
  • How good is your budget?
  • Physical/sensory qualities of brand considered?
  • Message clear and relevant?
  • Insulting or irritating to anyone?

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Categories of Brand Names

  • Famous Names (Coca-Cola, Disney): protected by Federal Trademark Dilution Act preventing others from using similar names. (Ex.: “Victor’s Little Secret”)
  • Fanciful Names (Bluetooth, Kodak, Ameriprise): Distinctive neologisms; easy to protect but the firm must create a meaning for the word.
  • Arbitrary Names (Apple, Virgin, Monster.com): Real words but unrelated to the nature of the product; again, easy to protect.
  • Suggestive Names (Coinstar, Quadra Tred tires): Require a little imagination, but can communicate a product benefits. May be harder to protect under trademark laws.
  • Descriptive Names (Lean Cuisine, Hot Jobs): Harder to protect; may go first onto the Supplemental Register and after five years can get advanced legal protection (this happened to Rollerblades).
  • Generic Names (Thermos, Aspirin, Cellophane): The name becomes synonymous with the product category and the original trademark holder loses exclusive rights to the name.

Figure 16.7

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Trademarks and Registration

  • Trademark: A word, symbol, logo, word string, sound signature that identifies a product.
  • Examples: BMW Z3 or Z4 Roadster, the GE script lettering, Apple Inc.’s multicolored apple, Nike’s “Just Do It,” the three-note NBC chimes or the “Intel Inside” sound.
  • Generally, “trademark” refers to legal aspects while “brand” refers to marketing strategy.
  • Technically, services have service marks, and businesses have trade names (not trademarks).
  • If a trademark is registered, the firm can keep the trademark forever even if another firm can show prior use.
  • Trademarks should not be immoral or misleading.
  • Trademarks should not be too descriptive of a product type (Light cigarettes).
  • Should not be confusingly similar to other trademarks (consider Apple Inc. vs. Apple Corps, McSleep vs. McDonald’s).

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Questions and Guidelines in Brand Name Selection

Figure 16.8

  • Assess the role or purpose of the brand. If the brand is to aid in positioning, choose a meaningful brand name like DieHard.
  • Possibility of extension to a line of products. If so, choose carefully so that it is not a limitation in the future (Allegheny Airlines became US Airways).
  • Possibility of long-term position in market. A dramatic novelty name usually doesn’t do as well if a long-term position in the market is sought.
  • Avoid an irritating or insulting name. Can especially be a problem when entering foreign markets.
  • Be careful of regional differences in language. An acceptable name in some Spanish dialects may be offensive in others.
  • Allocate enough time to brand selection. The brand name should not be a last-minute rush job.
  • Don’t choose the wrong comfort level. A provocative and controversial brand name such as Yahoo! or Bluetooth may be a great strategy,.
  • Other pitfalls. Not identifying the key decision makers; people involved in decision don’t understand brand naming; getting “stuck” on a brand name early in the process; not hiring the best patent attorney.

Source: Lee Schaeffer and Jim Twerdahl, “Giving Your Product the Right Name,” in A. Griffin and S. M. Somermeyer, The PDMA Toolbook 3 for New Product Development, Wiley, 2007, Ch. 8.

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Crapsy Fruit French cereal

Fduhy Sesane China Airlines snack food

Mukk Italian yogurt

Pschitt French lemonade

Atum Bom Portuguese tuna

Happy End German toilet paper

Pocari Sweat Japanese sport drink

Zit German lemonade

Creap Japanese coffee creamer

I'm Dripper Japanese instant coffee

Polio Czech laundry detergent

Sit & Smile Thai toilet paper

Barf Iranian laundry detergent

Cream Pain Japanese snack cake

Of course this works in both directions: Germans laugh at Mist Stick curling irons while the French find Mon Cuisine frozen entrees amusing (check your text to see why).

Some Brand Names That Didn’t Work

Figure 16-9

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Building Brand Equity

  • Getting awareness of the brand and the meaning.
  • Making brand associations -- even the factory location in Saturn’s case.
  • Building perceived quality
  • Loyalty in repurchase -- locking them in
  • Getting reseller support

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A Brand Report Card

Figure 16.10

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Characteristic

Examples

Delivers benefits desired by customers.

Starbucks offers “coffee house experience,” not just coffee beans, and monitors bean selection and roasting to preserve quality.

Stays relevant.

Gillette continuously invests in major product improvements (MACH3), while using consistent slogan “The best a man can get.”

Prices are based on value.

P&G reduced operating costs and passed on savings as “everyday low pricing,” thus growing margins.

Well positioned relative to competitors.

Saturn competes on excellent customer service, Mercedes on product superiority. Visa stresses being “everywhere you want to be.”

Is consistent.

Michelob tried several different positionings and campaigns between 1970 and 1995, while watching sales slip.

The brand portfolio makes sense.

The Gap has Gap, Banana Republic, and Old Navy stores for different market segments; BMW has the 3-, 5-, and 7-series.

Marketing activities are coordinated.

Coca-Cola uses ads, promotions, catalogs, sponsorships, and interactive media.

What the brand means to customers is well understood.

Bic couldn’t sell perfume in lighter-shaped bottles; Gillette uses different brand names such as Oral-B for toothbrushes to avoid this problem.

Is supported over the long run.

Coors cut back promotional support in favor of Coors Light and Zima, and lost about 50% of its sales over a four-year period.

Sources of brand equity are monitored.

Disney studies revealed that its characters were becoming “overexposed” and sometimes used inappropriately. They cut back on licensing and other promotional activity as a result.

Brand Equity and Branding Strategies

  • Umbrella branding strategy
  • Kellogg’s uses corporate name as part of all cereal brands.
  • Kraft uses Planters, Di Giorno, Maxwell House as well as Kraft in its brand names.
  • Individual branding strategy
  • No P&G cleaning products carry the P&G name (Tide, Bold, Mr. Clean, etc.).
  • Clorox does not use the Clorox name on many of its cleaning products (409, SOS) and does not use it at all on non-cleaning products (Hidden Valley, KC Masterpiece).

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Other Options in Branding Strategy

  • ConAgra Foods used individual branding for years on its products (Orville Redenbacher, Reddi-Wip, Healthy Choice, Peter Pan) but now uses a unifying logo (smiling plate with spoon) and slogan (“Food You Love”).

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Global Branding and Positioning

  • Standardization: Gillette uses the same brand name and positioning worldwide (“The Best A Man Can Get”).
  • Adaptation of Positioning: Canon sells the same camera worldwide but uses the “So Advanced, It’s Simple” positioning in North America.
  • Adaptation of Brands: General Mills cereals are marketed in Europe through a joint venture with Nestle and are sold under the Nestle corporate name there.

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Extreme Brand Adaptation: Unilever

  • Several Unilever brands are sold under the same name worldwide (Lipton, Bertolli, Knorr, Dove, Vaseline).
  • A household cleaner is known as Cif in Italy and France but Viss in Germany, and Vim in Canada.
  • The fabric softener Snuggle goes under many different names throughout Europe.
  • Unilever has acquired several ice cream brands worldwide and continues to use the local name in every market.

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Global Brand Leadership

  • The examples show that the goal is not necessarily to pursue a single global brand, but to create a strong presence in every market through global brand leadership.
  • Consistent brand management: develop brand manuals, set up workshops, train brand managers, consider intangibles such as quality reputation.
  • Frito-Lay runs a “market university” three times a year to encourage sharing of successful practices among managers worldwide.

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Packaging

  • The role of packaging: containment, protection, safety, display, and information/persuasion.
  • Packaging can assist the user, permit reusability, meet environmental needs, carry warnings, meet legal requirements, aid in disposability.
  • Packaging as a competitive tool: recognizability, convenience, customer attraction, etc.

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Butt-on product

replacement

The existing one is simply dropped when the new one is announced.

Example: Gillette's marketing of Fusion and dropping of Mach3 .

Low-season switch Same as butt-on, but arranging the switch at a low point between

seasons. Tour companies use this switch when they develop their new

catalogs.

High-season switch Same as butt-on, but arranging the new item at the top of a season.

Example: Video game manufacturers use this strategy often, putting new

replacement items out during the holiday buying season.

Roll-in, roll-out Another version of butt-on, but arranged by a sequence of market

segments. Fiat launched the new 500 in Italy first, then rest of Europe,

then North America.

Downgrading Keeping the earlier product along side the new, but with decreased

support. Example: Older computer chips are marketed alongside newer

ones but with less channel support.

Splitting channels Putting the new item in a different channel or diverting the existing

product into another channel. Example : Old electronic products often end

up in discounter channels.

Characteristic Examples

Delivers benefits desired by customers. Starbucks offers “coffee house experience,” not just

coffee beans, and monitors bean selection and

roasting to preserve quality.

Stays relevant. Gillette continuously invests in major prod uct

improvements (MACH3), while using consistent

slogan “The best a man can get.”

Prices are based on value. P&G reduced operating costs and passed on

savings as “everyday low pricing,” thus growing

margins.

Well positioned relative to competitors. Saturn competes on excellent customer service,

Mercedes on product superiority. Visa stresses

being “everywhere you want to be.”

Is consistent. Michelob tried several different positionings and

campaigns between 1970 and 1995, while watching

sales slip.

The brand portfolio makes sense. The Gap has Gap, Banana Republic, and Old Navy

stores for different market segments; BMW has the

3-, 5-, and 7-series.

Marketing activities are coordinated. Coca-Cola uses ads, promotions, catalogs,

sponsorships, and interactive media.

What the brand means to customers is well

understood.

Bic couldn’t sell perfume in lighter -shaped bottles;

Gillette uses different brand names such as Oral -B

for toothbrushes to avoid this problem.

Is supported over the long run. Coors cut back promotional support in favor of Coors

Light and Zima, and lost about 50% of its sales over

a four-year period.

Sources of brand equity are monitored. Disney studies revealed that its characters were

becoming “overexposed” and sometimes used

inappropriately. They cut back on licensing and

other promotional activity as a result.