NEW PRODUCTS

MANAGEMENT
Merle Crawford
Anthony Di Benedetto
10th Edition

McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
PART FIVE

LAUNCH

16-2
Launch

16-3
 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 marketers 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.
16-4
 Chapter 16

Strategic Launch Planning

16-5
 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).

16-6
 Revision of PIC Goals

Customer Acceptance Product Level

Goals Performance Goals
Use Cost
Satisfaction Time to Market
Sales Performance
Market Share Quality
Financial Performance Other
Goals Competitive Effect
Cash-to-cash (Time to Image Change
break even) Morale Change
Margins
IRR, ROI

16-7
Strategic Platform Decisions

Permanence
Aggressiveness
Type of Demand Sought
Competitive Advantage
Product Line Replacement
Competitive Relationship
Scope of Market Entry
Image
16-8
 Permanence
Strategic options:
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
(examples: cereals or snacks tied to recent
childrens movies or TV shows).

16-9
 Type of Demand Sought
Primary demand: for new-to-the-world
product
Replacement demand: for a product
improvement or upgrade (new computer
chip, new compact car)
Selective demand: for an entry into an
established market.

16-10
 Product Line Replacement
Strategies

Butt-on product The existing one is simply dropped when the new one is announced. Example:
replacement Ford's marketing of Mondeo and dropping of Sierra.
Low-season switch 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.
High-season switch 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.
Roll-in, roll-out Another version of butt-on, but arranged by a sequence of market segments.
Mercedes introduced its C series country by country.
Downgrading 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.
Splitting channels 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.

16-11
 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.

16-12
 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)
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 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

16-14
Using the Joint Space Map to
Identify Benefit Segments

3
2

Comfort
Aqualine

Molokai 1
Islands

Fashion
Splash
Sunflare

16-15
 Factors Affecting Diffusion of
Innovation
Derived from classic Rogers model of diffusion
Relative Advantage (Googles rapid acceptance by
computer users)
Compatibility (digital cameras are designed to be used
much as film cameras)
Complexity (Apple Newtons handwriting recognition was
found to be hard to use)
Divisibility (try a new GPS system at low cost as an add-
on with a rental car)
Communicability (long-term benefits of a decay-
preventing toothpaste are impossible to discern at time
of purchase)
16-16
 Another View of Diffusion:
Crossing the Chasm
Two adopter groups:
Visionaries (innovators and early adopters)
Pragmatists (all later categories)
The two groups differ in their expectations of the new
products.
Pragmatists do not use visionaries as their opinion
leaders.
Visionaries might snap up a cool new cell phone while
pragmatists may just be looking for something that works
well and is not too expensive.

16-17
 Crossing the Chasm
A value proposition may attract the
visionaries but may never get acceptance
in the mass market
To cross the chasm, the firm needs to
develop a value proposition that works for
pragmatists and to develop a launch
strategy that is designed to reach
pragmatists.

16-18
 Product Positioning
Who Why How
To whom are we marketing?
Why should they buy it?
How do we best make the claim?

16-19
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 new

product participants and by management

16-20
 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.
16-21
 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).

16-22
 Product Positioning Options
Position to an Attribute
Feature: A dog food that has as much protein as ten pounds of sirloin.
Function: A shampoo that coats your hair with a thin layer of protein.
Benefit: A new toothpaste saves you money (direct) and improves your sex life
(follow-on)
Dranos classic tagline was Thicker, stronger, faster (a feature, a function, a benefit).
Miller Lites is Tastes great, less filling (two benefits).

Position on a Surrogate
Nonpareil: Jaguar cars, Perrier water.
Parentage: A Chanel perfume, a Disney movie, a Ralph Lauren designer suit.
Manufacture: Budweiser (beechwood aging), Audi (renowned engineering).
Target: Airlines designed for the business traveler, Vector tires for use on wet roads.
Rank: Hertz, Blue Cross/Blue Shield, and others who claim to be No. 1.
Endorsement: Doctor recommendation, celebrity spokesperson.
Experience: Stress long use by satisfied customers (Nuprin, Yellow Pages).
Competitor: USPS Express Mail and some Kia autos are just like competitors but cheaper.
Predecessor: You liked Hersheys Kisses so you will also like Hugs.

16-23
 Branding Decisions
What is the brands 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?

16-24
 Categories of Brand Names

Famous Names (Coca-Cola, Disney): protected by Federal Trademark

Dilution Act preventing others from using similar names. (Ex.: Victors Little
Secret)
Fanciful Names (Bluetooth, Kodak, Ameriprise): Distinctive neologisms;
easy to protect but the firm must create a meaning for the word.
Arbitrary Names (Apple, Virgin, http://www.Monster.com): Real words but
unrelated to the nature of the product; again, easy to protect.
Suggestive Names (Coinstar, Quadra Tred tires): Require a little
imagination , but can communicate a product benefits. May be harder to
protect under trademark laws.
Descriptive Names (Lean Cuisine, Hot Jobs): Harder to protect; may go first
onto the Supplemental Register and after five years can get advanced legal
protection (this happened to Rollerblades).
Generic Names (Thermos, Aspirin, Cellophane): The name becomes
synonymous with the product category and the original trademark holder
loses exclusive rights to the name.

16-25
 Trademarks and Registration
Trademark: A word, symbol, logo, word string, sound signature that
identifies a product.
Examples: BMW Z3 or Z4 Roadster, the GE script lettering, Apple
Inc.s multicolored apple, Nikes Just Do It, the three-note NBC
chimes or the Intel Inside sound.
Generally, trademark refers to legal aspects while brand refers to
marketing strategy.
Technically, services have service marks, and businesses have
trade names (not trademarks).
If a trademark is registered, the firm can keep the trademark forever
even if another firm can show prior use.
Trademarks should not be immoral or misleading.
Trademarks should not be too descriptive of a product type (Light
cigarettes).
Should not be confusingly similar to other trademarks (consider
Apple Inc. vs. Apple Corps, McSleep vs. McDonalds).

16-26
 Questions and Guidelines in Brand
Name Selection
Assess the role or purpose of the brand. If the brand is to aid in
positioning, choose a meaningful brand name like DieHard.
Possibility of extension to a line of products. If so, choose carefully so
that it is not a limitation in the future (Allegheny Airlines became US
Airways).
Possibility of long-term position in market. A dramatic novelty name
usually doesnt do as well if a long-term position in the market is sought.
Avoid an irritating or insulting name. Can especially be a problem when
entering foreign markets.
Be careful of regional differences in language. An acceptable name in
some Spanish dialects may be offensive in others.
Allocate enough time to brand selection. The brand name should not be a
last-minute rush job.
Dont choose the wrong comfort level. A provocative and controversial
brand name such as Yahoo! or Bluetooth may be a great strategy,.
Other pitfalls. Not identifying the key decision makers; people involved in
decision dont understand brand naming; getting stuck on a brand name
early in the process; not hiring the best patent attorney.
Source: Lee Schaeffer and Jim Twerdahl, Giving Your Product the Right Name, in A. Griffin and S. M. Somermeyer, The PDMA Toolbook 3 for
New Product Development, Wiley, 2007, Ch. 8.
16-27
Some Brand Names That Didnt 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
Cream Pain Japanese snack cake
Of course this works in both directions: Germans laugh at Mist Stick curling
irons while the French find Mon Cuisine frozen entrees amusing (check your
text to see why). 16-28
 How Brand Equity Provides Value

High High High More/Better

Other Brand
Brand Brand Perceived Brand
Assets
Loyalty Awareness Quality Associations

Reduced Easier to Supports Creates Patents or

marketing make quality positive trademarks
costs brand positioning image
associations
Increased Supports Helps Strong
trade Increased higher-price customer channel
leverage liking and strategy process relationships
familiarity information

Provides value to customer: Provides value to firm:

Assists in customer information processing Increases effectiveness of marketing programs
Increases confidence in purchase Increases customer loyalty and trade leverage
Increases satisfaction in product use Facilitates brand extensions
Is a source of competitive advantage

16-29
 Building Brand Equity
Getting awareness of the brand and the
meaning.
Making brand associations even the
factory location in Saturns case.
Building perceived quality
Loyalty in repurchase locking them in
Getting reseller support

16-30
 A Brand Report Card
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 couldnt 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. 16-31
 Brand Equity and Branding
Strategies
Umbrella branding strategy
Kelloggs uses corporate name as part of all cereal
brands.
Kraft uses Planters, Di Giorno, Maxwell House as
well as Kraft in its brand names.
Individual branding strategy
No P&G cleaning products carry the P&G name
(Tide, Bold, Mr. Clean, etc.).
Clorox does not use the Clorox name on many of its
cleaning products (409, SOS) and does not use it at
all on non-cleaning products (Hidden Valley, KC
Masterpiece).
16-32
 Other Options in Branding
Strategy
ConAgra Foods used individual branding
for years on its products (Orville
Redenbacher, Reddi-Wip, Healthy Choice,
Peter Pan) but now uses a unifying logo
(smiling plate with spoon) and slogan
(Food You Love).

16-33
Global Branding and Positioning
Standardization: Gillette uses the same brand
name and positioning worldwide (The Best A
Man Can Get).
Adaptation of Positioning: Canon sells the same
camera worldwide but uses the So Advanced,
Its Simple positioning in North America.
Adaptation of Brands: General Mills cereals are
marketed in Europe through a joint venture with
Nestle and are sold under the Nestle corporate
name there.
16-34
 Extreme Brand Adaptation:
Unilever
Several Unilever brands are sold under the
same name worldwide (Lipton, Bertolli, Knorr,
Dove, Vaseline).
A household cleaner is known as Cif in Italy and
France but Viss in Germany, and Vim in
Canada.
The fabric softener Snuggle goes under many
different names throughout Europe.
Unilever has acquired several ice cream brands
worldwide and continues to use the local name
in every market. 16-35
 Global Brand Leadership
The examples show that the goal is not
necessarily to pursue a single global brand, but
to create a strong presence in every market
through global brand leadership.
Consistent brand management: develop brand
manuals, set up workshops, train brand
managers, consider intangibles such as quality
reputation.
Frito-Lay runs a market university three times a
year to encourage sharing of successful
practices among managers worldwide.
16-36
 Packaging
The role of packaging: containment,
protection, safety, display, and
information/persuasion.
Packaging can assist the user, permit
reusability, meet environmental needs,
carry warnings, meet legal requirements,
aid in disposability.
Packaging as a competitive tool:
recognizability, convenience, customer
attraction, etc.
16-37