2. Open Floor Please Hand In Midterm II
Figure V.3
Please Hand In Midterm II
Hard Copy of Midterm II
Evaluations of Group Members
Electronic Copy to Keven
Harley-Davidson/Trump Brand Extensions
Beef Jerky and Vodka
Good or Bad?
Why

3. Midtern II… Midterm II Overview Discussion Difficult Sections
Sections that We Did Well On…

4. PART FIVE LAUNCH McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.

5. Launch
Figure V.1

6. The Five Decision Sets that Lead to a Marketing Plan
Figure V.2

7. Common Myths About Marketing Planning for New Products
Figure V.3
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.

8. CHAPTER 16 STRATEGIC LAUNCH PLANNING
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.

9. Strategic Givens
Corporate, some team decisions made earlier. Often found in the Product Innovation Charter (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).

10. 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

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

12. 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.

13. 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)

14. Product Line Replacement Strategies
Figure 16.1

15. 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.

16. 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

17. Using the Joint Space Map to Identify Benefit Segments
Figure 16.2
Aqualine
Islands
Splash
Molokai
Sunflare 2 3 1
Fashion
Comfort

18. Factors Affecting Diffusion of Innovation
Relative Advantage
Compatibility
Complexity
Divisibility
Communicability

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

20. 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

21. 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.

22. 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).

23. Product Positioning Options
Figure 16.2
Position to an Attribute
Feature
Function
Benefit (direct or follow-on)
Position on a Surrogate
Nonpareil
Parentage
Manufacture
Target
Rank
Endorsement
Experience
Competitor
Predecessor

24. 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?

25. Questions and Guidelines in Brand Name Selection
Figure 16.8

26. Some Brand Names That Didn’t Work
Figure 16-9
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

27. How Brand Equity Provides Value
Figure 16-10
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

28. 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

29. A Brand Report Card
Figure 16.11

30. Profitable Brand Strategies
Figure 16.12

31. BA 590
Break

33. CHAPTER 17 IMPLEMENTATION OF THE STRATEGIC PLAN
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.

34. The Launch Cycle Sales Expenditures Sales and Expenditures
Figure 17.1
Sales and
Expenditures
Sales
Expenditures
Prelaunch Beachhead Early growth
Announcement

35. Tactical Launch Decisions and Actions, Showing Influences on Demand
Figure 17.2

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

37. 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?

38. 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.

39. 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.

40. 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.

41. Motivating Distributors
Figure 17.3
Increase distributor’s unit volume.
Increase distributor’s unit margin.
Reduce distributor’s cost of doing business.
Change distributor’s attitude toward the line.

42. 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.

43. Appropriate Launch Tactics Given Relative Advantage and Compatibility
Figure 17.4

45. CHAPTER 18 MARKET TESTING
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.

46. 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.

47. 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.

48. Decision Matrix on When to Market Test
Figure 18.1
High
Low
Cost and Time
Savings
Scope of Learning
and Accuracy
High
Low
Stages of the product development cycle

49. How Market Testing Relates to the Other Testing Steps
Figure 18.2

50. 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.

51. 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)

52. 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?

53. Methods of Market Testing, and Where Used
Figure 18.3

54. Speculative Sale
Often used in business-to-business and consumer durables, similar to concept and product use tests.
Give full pitch on product, answer questions, discuss pricing, and ask:
“If we make this product available as I have described it, would you buy it?”
Often conducted by regular salespeople calling on real target customers.

55. Conditions for Speculative Sale
Where industrial firms have very close downstream relationships with key buyers.
Where new product work is technical, entrenched within a firm's expertise, and only little reaction is needed from the marketplace.
Where the adventure has very little risk, and thus a costlier method is not defendable.
Where the item is new (say, a new material or a completely new product type) and key diagnostics are needed. For example, what set of alternatives does the potential buyer see, or what possible applications come to mind first.

56. Simulated Test Market (STM)
Create a false buying situation and observe what the customer does.
Follow-up with customer later to assess likely repeat sales.
Often used for consumer nondurables.

57. Simulated Test Market Procedure
Mall intercept.
Self-administered questionnaire.
Advertising stimuli.
Mini-store shopping experience.
Post-exposure questionnaire.
Receive trial package.
Phone followup and offer to buy more.

58. Possible Drawbacks to STMs
Mathematical complexity
False conditions
Possibly faulty assumptions on data, such as number of stores that will make the product available
May not be applicable to totally new-to-the-market products, since no prior data available.
Does not test channel member response to the new product, only the final consumer

59. Controlled Sale by Informal Selling
Used for business-to-business products, also consumer products sold directly to end users.
Train salespeople, give them the product and the selling materials, and have them make calls (in the field, or at trade shows).
Real presentations, and real sales, take place.

60. Controlled Sale by Direct Marketing
More secrecy than by any other controlled sale method.
The feedback is almost instant.
Positioning and image development are easier because more information can be sent and more variations can be tested easily.
It is cheaper than the other techniques.
The technique matches today's growing technologies of credit card financing, telephone ordering, and database compilation.

61. Controlled Sale by Minimarkets
Select a limited number of outlets -- each store is a minicity or “minimarket.”
Do not use regular local TV or newspaper advertising, but chosen outlets can advertise it in its own flyers.
Can do shelf displays, demonstrations.
Use rebate, mail-in premium, or some other method to get names of purchasers for later follow-up.

62. Controlled Sale by Scanner Market Testing
Audit sales from grocery stores with scanner systems -- over a few markets or national system.
Sample uses:
Can use the data as a mini-market test.
Can compare cities where differing levels of sales support are provided.
Can monitor a rollout from one region to the next.

63. Minimarkets and Scanner Testing: IRI’s BehaviorScan and InfoScan
Cable TV interrupt privileges
Full record of what other media (such as magazines) go into each household
Family-by-family purchasing
Full record of 95 percent of all store sales of tested items from the check-out scanners
Immediate stocking/distribution in almost every store is assured by the research firm.
Result: IRI knows almost every stimulus that hits each individual family, and it knows almost every change that takes place in each family's purchase habits.

64. The Test Market Several test market cities are selected.
Product is sold into those cities in the regular channels and advertised at representative levels in local media.
Once used to support the decision whether to launch a product, now more frequently used to determine how best to do so.

65. Pros and Cons of Test Marketing
Advantages:
Risk Reduction
monetary risk
channel relationships
sales force morale
Strategic Improvement
marketing mix
production facilities
Disadvantages:
Cost ($1 mill+)
Time (9-12 months+)
hurt competitive advantage
competitor may monitor test market
competitor may go national
Competitor can disrupt test market

66. A Risk of Test Marketing: “Showing Your Hand”
Figure 18.5
Kellogg tracked the sale of General Foods' Toast-Ems while they were in test market. Noting they were becoming popular, they went national quickly with Pop-Tarts before the General Foods' test market was over.
After having invented freeze-dried coffee, General Foods was test-marketing its own Maxim brand when Nestle bypassed them with Taster's Choice, which went on to be the leading brand.
While Procter & Gamble were busy test-marketing their soft chocolate chip cookies, both Nabisco and Keebler rolled out similar cookies nationwide.
The same thing happened with P&G’s Brigade toilet-bowl cleaner. It was in test marketing for three years, during which time both Vanish and Ty-D-Bol became established in the market.
General Foods' test market results for a new frozen baby food were very encouraging, until it was learned that most of the purchases were being made by competitors Gerber, Libby, and Heinz.

67. The Rollout
Select a limited area of the country (one or several cities or states, 25% of the market, etc.) and monitor sales of product there.
Starting areas are not necessarily representative
The company may be able to get the ball rolling more easily there
The company may deliberately choose a hard area to sell in, to learn the pitfalls and what really drives success.
Decision point: when to switch to the full national launch.

68. Types of Rollout By geography (including international) By application
By influence
By trade channel

69. Patterns of Information Gained During Rollout
Figure 18.7

70. Risks of Rollout
May need to invest in full-scale production facility early.
Competitors may move fast enough to go national while the rollout is still underway.
Problems getting into the distribution channel.
Lacks national publicity that a full-scale launch may generate.

71. Probable Future for Market Testing Methods
Test marketing (“dinosaur”)
Pseudo sale (incomplete)
Minimarket (flexibility & variety)
Rollout (small, fast, flexible)

72. Review Lecture on “Launch”… Next Week… Launch Plan Market Test
Figure V.3
Lecture on “Launch”…
Launch Plan
Market Test
Launch Management
Next Week…
Marketing Planning Book (Chapters 1-3)
Market Plan
Competitive Set
Industry Analysis