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Figure V.3

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


Hard Copy of Midterm II
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PART FIVE
LAUNCH
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.
Launch
Figure V.1
The Five Decision Sets that Lead to a
Marketing Plan
Figure V.2
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.
CHAPTER 16
STRATEGIC LAUNCH PLANNING
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.
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).
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)
Product Line Replacement Strategies
Figure 16.1
Butt-on product
replacement
Low-season switch
High-season switch
Roll-in, roll-out
Downgrading
Splitting channels
The existing one is simply dropped when the new one is announced. Example:
Ford's marketing of Mondeo and dropping of Sierra.
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.
Same as butt-on, but arranging the new item at the top of a season. Example:
Polaroid used this strategy often, putting new replacement items out during the
Christmas season.
Another version of butt-on, but arranged by a sequence of market segments.
Mercedes introduced its C series country by country.
Keeping the earlier product along side the new, but with decreased support.
Example: The 386 chip stayed along side the 486, until the Pentium was
introduced.
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.
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
Using the Joint Space Map to Identify
Benefit Segments
Comfort
Figure 16.2
3
2
Aqualine
Islands
Molokai
1
Fashion
Splash
Sunflare
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).
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
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
Figure 16.8
Question
What is the brand's role or purpose?
Will this product be a bridgehead to a line of
products?
Do you expect a long-term position in the market?
Is the name irritating or insulting to any market
segment?
Guideline
If the brand is to aid in positioning, choose a brand
name with meaning (DieHard, Holiday Inn). If
purely for identification, a neologism (made-up
word) such as Kodak or Exxon will work.
If so, choose carefully so as not to be a limitation in
the future (Western Hotels changed name to
Western International, then finally to Westin.)
If not, a dramatic, novelty name might be useful
(such as Screaming Yellow Zonkers).
Women found Bic's Fannyhose to be objectionable.
Some Brand Names That Didn’t Work
Figure 16-9
Crapsy Fruit
Fduhy Sesane
Mukk
Pschitt
Atum Bom
Happy End
Pocari Sweat
Zit
Creap
I'm Dripper
Polio
Sit & Smile
Barf
French cereal
China Airlines snack food
Italian yogurt
French lemonade
Portuguese tuna
German toilet paper
Japanese sport drink
German lemonade
Japanese coffee creamer
Japanese instant coffee
Czech laundry detergent
Thai toilet paper
Iranian laundry detergent
How Brand Equity Provides Value
Figure 16-10
High
Brand
Loyalty
Reduced
marketing
costs
Increased
trade
leverage
High
Brand
Awareness
High
Perceived
Quality
Easier to
make
brand
associations
Supports
quality
positioning
Creates
positive
image
Patents or
trademarks
Supports
higher-price
strategy
Helps
customer
process
information
Strong
channel
relationships
Increased
liking and
familiarity
More/Better
Brand
Associations
Other Brand
Assets
Provides value to customer:
Provides value to firm:
Assists in customer information processing
Increases confidence in purchase
Increases satisfaction in product use
Increases effectiveness of marketing programs
Increases customer loyalty and trade leverage
Facilitates brand extensions
Is a source of competitive advantage
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
A Brand Report Card
Figure 16.11
Characteristic
Delivers benefits desired by customers.
Stays relevant.
Prices are based on value.
Well positioned relative to competitors.
Is consistent.
The brand portfolio makes sense.
Marketing activities are coordinated.
What the brand means to customers is well
understood.
Is supported over the long run.
Sources of brand equity are monitored.
Examples
Starbucks offers “coffee house experience,” not just
coffee beans, and monitors bean selection and
roasting to preserve quality.
Gillette continuously invests in major product
improvements (MACH3), while using consistent
slogan “The best a man can get.”
P&G reduced operating costs and passed on savings
as “everyday low pricing,” thus growing margins.
Saturn competes on excellent customer service,
Mercedes on product superiority. Visa stresses
being “everywhere you want to be.”
Michelob tried several different positionings and
campaigns between 1970 and 1995, while watching
sales slip.
The Gap has Gap, Banana Republic, and Old Navy
stores for different market segments; BMW has the
3-, 5-, and 7-series.
Coca-Cola uses ads, promotions, catalogs,
sponsorships, and interactive media.
Bic couldn’t sell perfume in lighter-shaped bottles;
Gillette uses different brand names such as Oral-B
for toothbrushes to avoid this problem.
Coors cut back promotional support in favor of
Coors Light and Zima, and lost about 50% of its
sales over a four-year period.
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.
Profitable Brand Strategies
Figure 16.12
Low Relative Market Share
Value Brand Category
Premium Brand Category
High Relative Market Share
Dead End
Low Road
Example: Nine Lives
Optimum strategies:
Slash costs and prices
“Trump” market leader with
superpremium brand
Example: Oscar Meyer
Optimum strategies:
Cut costs and reduce prices
Build brand equity
Hitchhikers
High Road
Example: Neutrogena, Post
Optimum strategies:
“Don’t rock the boat”
Innovate
Find a niche market
Example: Gillette, Clorox
Optimum strategies:
Value-improving innovations
Premium prices
Source: Adapted from Vijay Vishwanath and Jonathan Mark, “Your Brand’s Best Strategy,” Harvard
Business Review, May-June 1997, pp. 123-129.
BA 590
Break
CHAPTER 17
IMPLEMENTATION OF
THE STRATEGIC PLAN
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.
The Launch Cycle
Figure 17.1
Sales and
Expenditures
Expenditures
Prelaunch
Beachhead
Announcement
Sales
Early growth
Tactical Launch Decisions and Actions,
Showing Influences on Demand
Figure 17.2
Launch Tactic
Promotion
Advertising
Coupons
Publicity
Sampling
Beta Test Sites
Sales and Distribution
Shows/Demonstrations
Technical Support
Distribution Structure
Intensity of Coverage
Distribution Incentives
Pricing
Introductory Pricing
Price Administration
Product
Breadth of Assortment
Timing
Product Deletion
Preannouncing
Effective For:
Cases where awareness will stimulate trial
Reinforcing awareness
New and controversial technologies with high perceived usage risk
Cases where product advantages best learned through usage
Stimulating “sampling” and as a reference for other potential buyers
Clarifying relative product advantages or where uncertainty exists
Cases of incompatibility in usage process
Cases where relative advantage strong (direct channels)
Cases where warranty/maintenance service needs to be offered easily
Cases where availability needs to be stimulated
High relative advantage and compatibility (skimming policy); early
adoption needs to be stimulated (penetration policy)
Cases where economic risk needs to be reduced (i.e., through rebates or
money-back guarantees)
Introducing new product categories with high relative advantage
High margin but strong relative advantage (fast deletion); high switching
costs (slow deletion)
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?
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
The
The
The
market segment targeted
product positioning statement
communications (promotion) mix
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-toeye 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
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.
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 17.4
1. Low Compatibility
2. High Compatibility
A. Low Relative Advantage
Penetration price
Slow deletion
Risk-based promotion (leasing,
money-back guarantees,
equipment allowances)
Intensive distribution
Secrecy before entry
Narrow product assortments
Awareness promotion (coupons,
etc.)
Intensive distribution
B. High Relative Advantage
Preannounce
Broad product assortments
Information-based promotion
(shows, demonstrations, websites,
publicity/education)
Selective 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.
CHAPTER 18
MARKET TESTING
McGraw-Hill/Irwin
Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.
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.
Figure 18.1
High
Low
Cost and Time
Savings
Decision Matrix on When to Market
Test
Scope of Learning
and Accuracy
Low
High
Stages of the product development cycle
How Market Testing Relates to the
Other Testing Steps
Figure 18.2
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?
Methods of Market Testing, and Where
Used
Figure 18.3
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.
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.
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.
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.
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-themarket products, since no prior data available.
Does not test channel member response to the
new product, only the final consumer
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.
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.
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.
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.
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.
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.
Pros and Cons of Test Marketing
Advantages:

Risk Reduction




monetary risk
channel
relationships
sales force morale
Disadvantages:



Strategic
Improvement


marketing mix
production
facilities
Cost ($1 mill+)
Time (9-12
months+)



hurt competitive
advantage
competitor may
monitor test market
competitor may go
national
Competitor can
disrupt test market
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.
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.
Types of Rollout




By
By
By
By
geography (including international)
application
influence
trade channel
Patterns of Information Gained
During Rollout
Figure 18.7
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.
Probable Future for Market Testing
Methods

Test marketing

Pseudo sale

Minimarket

Rollout
(“dinosaur”)
(incomplete)
(flexibility & variety)
(small, fast, flexible)
Review
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