1. PHARMASIM NEW PRODUCTS Advanced Marketing Management Marketing 6202

2. What Is A New Product? New to the world New to the world New to the company New to the company Brand extension (Period 6) Brand extension (Period 6) Line extension (Period 4) Line extension (Period 4) Repositioning (Period 2) Repositioning (Period 2) Model changes Model changes

3. The Risks of New Products Failure rates Failure rates –“…no more than 10% of all new products or services are successful -- that is, still on the market and profitable after three years” - Marketing Management (2003) –95% of new consumer products in US fail;90% of new consumer products in Europe fail 46% - Nielsen BASES and Ernst & Young study (2002)

4. The Risks of New Products Costs Costs –Introducing a new national brand can cost $20 million – Marketing Management –New Product News – “It probably costs $100 million to introduce a truly new soft drink nationally and it costs $ 10,000 to introduce a new flavor of ice cream in Minneapolis. Somewhere in between is a worthless 'average' cost to introduce a new product”

5. Why New Products Fail Poor planning and strategy Poor planning and strategy –Market is not attractive Poor concept Poor concept Poor execution Poor execution Poor use of research Poor use of research Poor technology Poor technology Poor timing Poor timing –Changes in tastes/environment Bad support from channel Bad support from channel

6. Brand Equity The value your customers perceive to be uniquely associated with your brand The value your customers perceive to be uniquely associated with your brand = Awareness + Associations = Awareness + Associations Awareness Awareness –Recall –Recognition Associations Associations –Perceived Quality –Image

7. The Importance of Brand Associations Profitability (ROI): PERCEIVED RELATIVE QUALITY inferiormoderatesuperior RELATIVEhigh26%29%37% MARKETmedium18%20%26% SHARE low10%16%18% SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units) Future Profitability (Stock Price): Stock Price = f(ROI, perceived quality) ROI and perceived quality exert approximately equal effects SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE, AMEX, and NASDAQ).

8. Brand Associations and Line/Brand Extension Brand associations help determine which line and brand extensions will be successful Brand associations help determine which line and brand extensions will be successful Source: Wes Hutchinson

9. Brand Associations and Line/Brand Extension Apple's "user-friendly" image extended best to video games; IBM's "serious business" image extended best to cellular phones. Close-Up's singles-oriented, "romantic" image extended best to breath mints; Crest's family-oriented "dental health" image extended best to toothbrushes. Source: Wes Hutchinson