NEW PRODUCT MANAGEMENT

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Chapter 17
Implementation of the Strategic Plan

The Launch Cycle

Expenditures

Sales

Prelaunch Beachhead Early growth

Announcement

Sales and

Expenditures

Figure 17.1

Tactical Launch Decisions and Actions, Showing Influences on Demand

Figure 17.3

Launch Tactic

Effective For:

Promotion

Advertising

Cases where awareness will stimulate trial

Coupons

Reinforcing awareness

Publicity

New and controversial technologies with high perceived usage risk

Sampling

Cases where product advantages best learned through usage

Beta Test Sites

Stimulating “sampling” and as a reference for other potential buyers

Sales and Distribution

Shows/Demonstrations

Clarifying relative product advantages or where uncertainty exists

Technical Support

Cases of incompatibility in usage process

Distribution Structure

Cases where relative advantage strong (direct channels)

Intensity of Coverage

Cases where warranty/maintenance service needs to be offered easily

Distribution Incentives

Cases where availability needs to be stimulated

Pricing

Introductory Pricing

High relative advantage and compatibility (skimming policy); early adoption needs to be stimulated (penetration policy)

Price Administration

Cases where economic risk needs to be reduced (i.e., through rebates or money-back guarantees)

Product

Breadth of Assortment

Introducing new product categories with high relative advantage

Timing

Product Deletion

High margin but strong relative advantage (fast deletion); high switching costs (slow deletion)

Preannouncing

Building hype for new products; useful if relative advantage is high

Preannouncement

  • Getting to be popular, and very creatively managed.
  • Far from the old days of “tease the public.”
  • Preannouncement signaling may be used (“vaporware”).

Beachhead

  • This refers to the heavy expenditure needed to overcome sales inertia (“getting the ball rolling”).
  • Steep rising expenditures curve during this period, up to point where sales are increasing at an increasing rate.
  • Begins with the announcement.
  • Key decision during beachhead: when do you end it? How do you know inertia has been overcome?

Launch Timing and Lean Launch

  • Lean launch: flexible supply chain system allowing the firm to respond rapidly to sales changes.
  • Firm does not commitment to much inventory at first, but can ramp up quickly if sales take off.
  • Requires coordination between sourcing, manufacturing and delivery operations so that the firm can respond to real market needs and minimize unnecessary buildup in inventory (or face stockouts due to high sales levels).
  • Lean launch gives the firm flexibility in launch timing.

Postponement

  • Refers to delaying finalization of product form and identity until last possible moment.
  • This reduces lead times, minimizes uncertainty and increases operational flexibility until demand is more certain.
  • Two categories:
  • Time postponement: deploy inventory as late as possible.
  • Form postponement: lock in product design as late as possible.

Lean Launch Implementation

  • Firm needs good information technology system in place to track sales and replenish raw materials and inventory.

How Lean Launch Supports The Launch Timing Decision

  • Timing is difficult due to differing demands among stakeholders (senior management, manufacturing, marketing, distribution).
  • Late launch leads to missing opportunity window or failing to meet sales potential.
  • Early launch risk includes launching without enough information on customer requirements or recent technology.
  • Lean launch procedures provide an option to launch early or late; if launch is not lean, the option to launch early is lost.

Lean Launch: Two Examples

  • Dell Computer: flexible, lean manufacturing system to build computers to order. Orders parts directly from suppliers when needed for production, based on customer orders. Maintains a stock of one day’s inventory of component parts.
  • Benetton: EDI technology transmits worldwide orders to HQ; company produces only styles, colors, and sizes needed. Garment design to manufacture time is less than a day. Applies postponement to dyeing process, again supported through EDI linkages.

Figure 17.2

Copy Strategy Statement

  • Communications tools used at launch will have certain deliverables.
  • The way in which the firm communicates these deliverables to the advertising and promotion creative people is the copy strategy statement.
  • Typical contents:
  • The market segment targeted
  • The product positioning statement
  • The communications (promotion) mix
  • The major copy points to be communicated.
  • Often stated as attributes (features, functions, benefits) but not limited to these.

Typical Examples of Copy Points

  • “The provider of this insurance policy is the largest in the world.”
  • “This cellular phone has no geographic limitation.”
  • “This new line of housewares is now available at Target.”
  • “Future neurosurgeons benefit from the hand-to-eye skills of computer games like this one.”

There is no limit to the choices here, but there must be a

focus. Only a few copy points are going to be accomplished

at a time.

A-T-A-R Goals: The New Product Group’s Obligation

  • New product group must persuade itself and management that the plan can achieve the necessary awareness, availability, trial, and repeat purchase...
  • and that it can do so in sufficient quantity and at acceptable cost.

Motivating Distributors

  • Increase distributor’s unit volume.
  • Increase distributor’s unit margin.
  • Reduce distributor’s cost of doing business.
  • Change distributor’s attitude toward the line.

Figure 17.4

Barriers to Trial

  • Lack of interest in the claim.
  • Lack of belief in the claim.
  • Rejecting something negative about product.
  • Complacency.
  • Competitive ties.
  • Doubts about trial.
  • Lack of usage opportunity.
  • Cost.
  • Routines.
  • Risk of rejection.

Appropriate Launch Tactics Given Relative Advantage and Compatibility

Figure 17.5

A. Low Relative Advantage

B. High Relative Advantage

1. Low Compatibility

Penetration price

Slow deletion

Risk-based promotion (leasing, money-back guarantees, equipment allowances)

Intensive distribution

Preannounce

Broad product assortments

Information-based promotion (shows, demonstrations, websites, publicity/education)

Selective distribution

2. High Compatibility

Secrecy before entry

Narrow product assortments

Awareness promotion (coupons, etc.)

Intensive distribution

Skim price

Fast deletion

Usage-based promotion (samples, beta tests) to clarify benefits received

Selective distribution

Source: Adapted from Joseph P. Guiltinan, "Launch Strategy, Launch Tactics, and Demand Outcomes," Journal of Product Innovation Management, Vol. 16, No. 6, November 1999, pp. 520-521.

Launch Tactic Effective For:

Promotion

Advertising Cases where awareness will stimulate trial

Coupons Reinforcing awareness

Publicity New and controversial technologies with high perceived usage risk

Sampling Cases where product advantages b est learned through usage

Beta Test Sites Stimulating “sampling” and as a reference for other potential buyers

Sales and Distribution

Shows/Demonstrations Clarifying relative product advantages or where uncertainty exists

Technical Support Cases of incompatibility in usage process

Distribution Structure Cases where relative advantage strong (direct channels)

Intensity of Coverage Cases where warranty/maintenance service needs to be offered easily

Distribution Incentives Cases where availability needs to be stimulated

Pricing

Introductory Pricing High relative advantage and compatibility (skimming policy); early adoption needs

to be stimulated (penetration policy)

Price Administration Cases where economic risk needs to be reduced (i.e., through rebates or money-

back guarantees)

Product

Breadth of Assortment Introducing new product categories with high relative advantage

Timing

Product Deletion High margin but strong relative advantage (fast deletion); high switching cost s (slow

deletion)

Preannouncing Building hype for new products; useful if relative advantage is high

A. Low Relative Advantage B. High Relative Advantage

1. Low Compatibility

Penetration price

Slow deletion

Risk-based promotion

(leasing, money-back

guarantees, equipment

allowances)

Intensive distribution

Preannounce

Broad product assortments

Information-based promotion

(shows, demonstrations,

websites, publicity/education)

Selective distribution

2. High Compatibility

Secrecy before entry

Narrow product assortments

Awareness promotion

(coupons, etc.)

Intensive distribution

Skim price

Fast deletion

Usage-based promotion

(samples, beta tests) to clarify

benefits received

Selective distribution

Source: Adapted from Joseph P. Guiltinan, "Launch Strategy, Launch Tactics, and Demand

Outcomes," Journal of Product Innovation Management , Vol. 16, No. 6, November 1999, pp. 520 -

521.