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.

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).

Revision of PIC Goals Customer Acceptance Goals Use Satisfaction Sales Market Share Financial Performance Goals Time to break even Margins IRR, ROI Product Level Performance Goals Cost Time to Market Performance Quality Other Competitive Effect Image Change Morale Change

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

Permanence 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.

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)

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.

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

Factors Affecting Diffusion of Innovation Relative Advantage Compatibility Complexity Divisibility Communicability

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

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 NPD participants and by management

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.

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).

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?

Questions and Guidelines in Brand Name Selection

Some Brand Names That Didn’t Work 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

How Brand Equity Provides Value High Brand Loyalty Other Brand Assets More/Better Associations Perceived Quality Awareness Reduced marketing costs Increased trade leverage Patents or trademarks Strong channel relationships Creates positive image Helps customer process information Supports quality positioning higher-price strategy Easier to make brand associations liking and familiarity Provides value to customer: Assists in customer information processing Increases confidence in purchase Increases satisfaction in product use Provides value to firm: Increases effectiveness of marketing programs Increases customer loyalty and trade leverage Facilitates brand extensions Is a source of competitive advantage

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?

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.

Typical Examples of Copy Points “The provider of this insurance policy is the largest in the world.” “This cellular phone has no geographic limitation.” “Dockers are available at JCPenney.” “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.

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

What Is Market Testing? Market testing is not test marketing! Test marketing is one of many forms of market testing -- others include simulated test market, informal sale, minimarket, rollout. Test marketing is also a much less common form now due to cost and time commitments and other drawbacks.

Where We Are Today in Market Testing Scanner systems allow for immediate collection of product sales data. Mathematical sales forecasting models are readily available that can run on a relatively limited amount of data. We are “building quality in,” testing the marketing components of the product at early stages (ads, selling visuals, service contracts, package designs, etc.) rather than testing the whole product at the end. Increased competition puts greater pressure on managers to accelerate product cycle time. Market testing is a team issue, not solely in the province of the market research department.

How Market Testing Relates to the Other Testing Steps

Two Key Values Obtained from Market Testing Solid forecasts of dollar and unit sales volume. Diagnostic information to allow for revising and refining any aspect of the launch.

Deciding Whether to Market Test Any special twists on the launch? (limited time or budget, need to make high volume quickly) What information is needed? (expected sales volumes, unknowns in manufacturing process, etc.) Costs (direct cost of test, cost of launch, lost revenue that an immediate national launch would have brought) Nature of marketplace (competitive retaliation, customer demand) Capability of testing methodologies (do they fit the managerial situation at hand)

Types of Information That May Be Lacking Manufacturing process: can we ramp-up from pilot production to full scale easily? Vendors and resellers: will they do as they have promised in supporting the launch? Servicing infrastructure: adequate? Customers: will they buy and use the product as expected? Cannibalization: what will be the extent?

The Launch Management System Spot potential problems. Select those to control. Consider expected impact/damage. Develop contingency plans for the management of problems. Design the tracking system. Select variables. Devise measuring system. Select trigger points. Adage: in driving a car, it is the potholes you don’t know about (or forget about) that cause you damage.

Spotting Potential Problems Problems section from the situation analysis. Role-play what competitors will do. Look back over all the data in the new product's "file." Consider hierarchy of effects needed to result in a satisfied customer (A-T-A-R).

A-T-A-R Hierarchy: Where Does the Problem Lie? Aware Unaware Tried Not Reused Not R. Does the problem lie in awareness, trial, or repeat?

Designing the Tracking System Select the tracking variables Relevant, measurable, predictable Select the trigger points Consider the nontrackable problems

Questions from New Product Tracking Study Category Usage Questions In the past six months, how many times have you bought (product category)? What brands of (product category) have you ever heard of? Have you ever heard of (brand)? (Ask for 4 to 6 brands) Have you ever bought (brand)? (Ask for 4 to 6 brands) About how many times have you bought (brand) in the past six months? Advertising Awareness Questions Do you recall seeing any advertising for (brand)? (ask all brands respondent is aware of) Describe the advertising for (brand). Where did you see the advertising for (brand)?

Questions from New Product Tracking Study (continued) Purchase Questions Have you ever bought (brand)? If "Yes": How many times have you bought it? How likely are you to buy (brand) again? What did you like/dislike about (brand)? What do you think of the price of (brand)? If "No": Did you look for (brand) in the store? Why didn't you try (brand)? How likely are you to try (brand) in the future?

A Sample Launch Management Plan Potential Problem Salespeople fail to contact general-purpose market at prescribed rate. Tracking Track weekly sales call reports (plan is for at least 10 general-purpose calls per week per rep). Contingency Plan If activity falls below this level for three weeks running, a remedial program of one-day district sales meetings will be held.

Another Problem Illustrated Potential Problem Potential customers are not making trial purchases of the product. Tracking Begin a series of 10 follow-up calls a week to prospects. There must be 25% agreement on product's main feature and trial orders from 30% of those prospects that agree on the feature. Contingency Plan Special follow-up phone sales calls to all prospects by reps, offering a 50% discount on all first-time purchases.

A Stepwise Product Deletion Process Recognition of the product to be deleted Analysis and revitalization stage Evaluation and decision formulation stage Implementation stage

Product Liability: Typology of Injury Sources Inherent Risk in Product Design Defects Dangerous Condition No Safety Device Inadequate Materials Defects in Manufacture Inadequate Instructions or Warnings Dangers After Use

Four Legal Bases for Product Liability Negligence Manufacturer let the product be injurious Warranty A promise Express warranty: a statement of fact about a product Implied warranty: arises when product is made available for a given use

Four Legal Bases for Product Liability (continued) Strict Liability Seller is responsible for not putting a defective product on the market Defenses: assumption of risk; unforeseeable misuse; not defective Misrepresentation Implied use of product, even if not defective Other Legislation Consumer Product Safety Act/Safety Commission

Which Are the Real Product Warning Labels? 1. On a disposable razor: “Do not use this product during an earthquake.” 2. On a rock garden: “Eating rocks may lead to broken teeth.” 3. On a roll of Life Savers: “Not for use as a flotation device.” 4. On a hair dryer: “Do not use while sleeping.” 5. On a piano: “Harmful or fatal if swallowed.” 6. On a cardboard windshield sun shade: “Warning: Do not drive with sun shield in place.” 7. On shin guards: “Shin guards cannot protect any part of the body they do not cover.” 8. On syrup of ipecac: “Caution: may induce vomiting.” 9. On an iron: “Do not iron clothes while being worn.” 10. On a plastic sled: “Not to be eaten or burned.” 11. On work gloves: “For best results, do not leave at crime scene.” 12. On a jet ski: “Riders may suffer injury due to forceful entry of water into body cavities while falling off this craft.” 13. On a carpenter’s router: “This product not intended for use as a dentist’s drill.” 14. On a blender: “Not for use as an aquarium.” 15. On a stroller: "Always remove child from stroller before folding."

Other Areas of Public Policy Debate Environmental Needs Worthy Products Morality Monopoly Personal Ethics (what would you do?)

Environmental Needs A new product is said to hurt the environment if: Its raw materials are scarce or hard to get to. Its design or manufacture causes pollution or excess power usage. Its use causes pollution. Its disposal cannot be handled by recycling. Some companies test market their products in Germany and Scandinavia, because of the strict greenness tests there.

Worthy Products Coffee manufacturers agreed to produce some brands containing no beans from El Salvador. Manufacturers have been asked to produce special exercise equipment for the handicapped or modified products for the elderly. Orphan drugs supported by the federal government; otherwise would not be commercially feasible due to few users.

What Can the New Product Manager Do? Include in Strategy and Policy Consider public policy implications in PIC Control Systems Product Testing Marketing Prepares Warnings/Labels Adequate Market Testing (to identify miscommunications) Education (to company personnel and customers) External Affairs