Product Launch

Value Proposition

May 2009

1
Table of Content

Table of Content

1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

2
1. Concept Definition & Key Challenges
Companies seek out new product launch opportunities for strategic,
commercial and operational reasons
Typical reasons for launching new products:
Value-generation Commercial Operational
• Additional revenue streams, • Erosion of margins due to competition • Technology exploitation
reduction & diversification of risk
• Changing market conditions or opportunities on
growing markets • Capitalise on skills base
• Organic expansion
• Emerging markets
• Value of company, share price
• Employee motivation and
• Address changing customer needs retention
• Opportunity for exponential and
not just incremental sales • Retaining leadership position/ be perceived as an
industry shaper/ innovator

• Copying innovators

Generate additional revenue and margin

3
1. Concept Definition & Key Challenges
Not all launches meet expectations. To be successful, 'classic'
product launch pitfalls need to be avoided
External
• The product or service should be launched to address customer needs. This is obvious, but is probably the biggest cause of launch failures. In today's competitive world, there is a
shortage of customers, not of products or capacity.

• The company launching the product should know what specific needs its product will address. Which customers (target)? What offering (position)? Why is it better (differentiate)? It's not
only because it works that customers will pay for it.

• Companies tend to overestimate revenue forecasts for the new product. They have not fully understood the market they are addressing, their ability to deliver and provide service, and
how their current situation may hinder the launch process.

• A product launch should be executed by a clearly defined, cross-functional Launch Team, integrating key members of Corporate Management, R&D, Sales, Service, Supply Chain. It is not
just the job of Marketing.

• A product launch process should be supported by a clearly defined Launch Plan: objectives, goals, timelines, toll gates, tasks, responsibilities, report lines, performance measurements.

• A product launch is a process, not an event.

Internal

4
1. Concept Definition & Key Challenges
NPL is the 2nd step of Product Lifecycle Management and it
determines the business success of the new product

Scope: New Product Launch in the Product Lifecycle

Sales
Value

0
Profit/ loss

New Product New Product Product

Development Launch Management

5
Table of Content

1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

6
2. Our Focus & Value Proposition
Frost & Sullivan gives equal importance to building the fact
foundation, marketing planning and implementation
Product Lifecycle & New Product Launch scope

Sales
Value

0
Profit/ loss

New Product New Product Product

Development Launch Management

Capability
Assessment Marketing Launch
Marketing
Operations Monitoring &
Strategy Plan
Plan Adjustments
Market
Assessment

7
2. Our Focus & Value Proposition
Frost & Sullivan focuses on fact-based and actionable analysis and
recommendations
Capability Assessment Market Assessment
• Working value proposition summary • Segments:
• Resource analysis • Rank target markets & segments
• HR • Addressable market
• Production Assets • Customers:
• Sourcing & Suppliers • Needs/ unmet needs
• Logistics • Price points, elasticity
• Sales & Marketing Network • External factors (regulation, etc.)
• Budget analysis • Competition
• Pricing, Positioning
• Distribution
• Differentiation strategies
• Adjustment by country/ region

Launch Monitoring &

Marketing Strategy
• Value proposition confirmation
• Distribution strategies
• Draft critical pathway for launch
• Sales and margins forecasts, KPI's
• Impact of new product upon existing
product portfolio
Marketing Operations Plan
Adjustments
• Product & packaging adjustments • Performance dashboards
• Price levels • Operation monitoring
• Customer value • Product performance tracking
• Promotion plan • Post launch product fine-tuning (bugs,
• Support tools to effective launch (sales, customisation, targeting…)
logistics, provisioning, crm, • Marketing plan adjustments
management)

8
Table of Content

1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

9
 3. Our Approach
The New Product Launch best practice programme is organised in 3
complementary and successive steps

Step 1: Create a strong

Step 2: Confirm new product launch strategy Step 3: Implement the strategy
fact foundation

Capability
. Assessment
Output: Opportunity
validation Marketing Conclusions & Marketing
. Strategy Recommendations Operations
Market Output: Value Base case scenario Output: Marketing
proposition + business (launch) plan
. Assessment case
GO/NO GO decision
Implementation plan
Output: Opportunity
validation Launch Monitoring
& Adjustments
.
Output:
Implementation roll
out & impact
measurement

Using the components of this framework, careful diagnosis of client challenges and opportunities
allows a tailor-made approach to be recommended

10
3. Our Approach
Capability Assessment (1)

Capability Assessment Key drivers Key questions

• What expectations are common

• Cross-functional stakeholder buy-in to key stakeholders?
• Working version of value proposition • Priorities for validation and planning • What are key challenges and
• Assign Launch team opportunities?
• Who is on steering committee?

• Manufacturing needed
• Partner network, suppliers & • What are our capability & expertise
• Capability gap analysis:
platform needed gaps to target these product and
• Production, Sourcing &
• Organisation structure & RACI customer segments?
Suppliers
• Investment needed (human capital, • What are the required changes?
• Sales & Marketing, other HR
financial, technologies, assets) • What are the key success factors?
• Promotion resources required

• What are ROI scenarios?

• Key financials:
• How do we manage the risks?
• Revenue streams
• Budget Analysis • What are the key milestones?
• CAPEX, OPEX, margins
• What are the critical success
factors?

11
3. Our Approach
Capability Assessment (2) - Budget Analysis, illustrative

Question: What levels of ROI can be expected and when?

Return on Investment
An estimate of implementation costs suggests
$35m Cumulative Revenue payback could begin after 24 months
$30m Highest negative in
investment cycle
$25m $2.6m Key Assumptions
$20m -Transitional costs tail off after 24 months
$15m Quarterly Revenue -Ongoing costs after change remain the same
$10m as now. Any cost savings taken as benefit,
any new staff taken on through restructuring
$5m
-Average total cost to employ project team is
0
$1,200 per day during implementation
-$5m
Year 1 Year 2 Year 3 Year 4 Year 5

Benefits of the proposed changes will come from six areas and Incremental revenue p.a.
initial forecasts suggest they are significant: by year 5
1. Increased stand alone Solution XYZ sales $800k-$1m

2. Increased XYZ sales to current customers $480k-$600k

3. Increased XYZ and technology sales to high-end customers $5m-$7.5m (IT $1m-$1.5m)

4. Increased XYZ and technology sales to following market by

$5-$6m (IT $500k-$600k)
developing a targeted proposition

5. Improved margin Currently unquantified

6. Protection from business erosion $1.24m in lost IT share

12
3. Our Approach
Market Assessment
Market Assessment
• Segments:
• Rank target markets &
segments
• Addressable market
• Customers:
• Needs/ unmet needs
• Price points, elasticity
• External factors (regulation,
etc.)
• Competition
• Pricing, Positioning
• Distribution
• Differentiation strategies
• Adjustment by country/ region
Key drivers
• Segmentation
• Size & growth; forecast
• Market penetration
• Product switch
• Regulatory & certifications
• Characteristics (intrinsic
environment)
• Features/ technologies required
• Existing technologies & limits
• Decision making
• Usage trends; sensitivity
• Key players, offering
• Distinctive advantages, barriers
• Best practices
• Economics
• Go-to market routes
• Features
• Segments
• Distribution
Key issues and questions
• How is the market segmented?
• What are the opportunities?
• Which ones should be captured?
• What share can be reached?
• What are the trends/ behaviours/
expectations? Interests in new
approach?
• What are the opportunities?
• What are the key success factors?
• Key competitors SWOT
• Most likely scenarios for
supply/demand balance,
implications
• Transferable best practices?
• Does the product need to be
adjusted to local specificities?
• What’s the impact?
13
3. Our Approach
Market Assessment (2) - Competitive Analysis, Illustrative

Question: How does breadth of portfolio translate into revenues and revenue growth?

Revenue Company C
growth Company B

Company D Company F
Company G
Company H
Revenue
from
segment
(000's)
Company A
(US only)
Company E

Size of the bubble: relative breadth of portfolio

14
3. Our Approach
Marketing Strategy
Marketing Strategy Plan
• Validation of value proposition
• Distribution strategy
• Draft critical pathway for launch
• Sales and margins forecasts, KPI's
• Impact of new product on existing
product portfolio
Key drivers
• Segment to be targeted
• Product characteristics
• Unmet needs to be covered by the
new product
• Distinctive advantage
• Strategic fit with portfolio
• Distribution and channel model
• Roadmap (short, mid, long term)
• Action plan (quarterly plan for the
first year)
• Sales scenarios
• Margin scenarios
• KPIs relevant to the business
(NPV)
• Cannibalisation/ substitution
• Existing product/ project lifecycle
• Impact over current investments
Key questions
• How is the market segmented?
• What is the proposition to
customers?
• What is the unique selling point?
• How can the product best
complement the portfolio?
• What is most effective way to
reach, sell to and retain
customers?
• What adjustments are needed to
current model?
• What are the pitfalls to avoid?
• What are the key actions to be
launched?
• What is the business scenario?
• What are the key assumptions?
• What are the key success
indicators to monitor?
• Fit with current strategy,
objectives and projects?
• Impact on existing projects?
15
3. Our Approach
Marketing Strategy (2) - Value Proposition, Illustrative

Question: what set of features and benefits are most likely to lead to purchase?
Conjoint Analysis of Customer Priorities, Medical Technologies
Q
Category Utility/Score Category Utility/Score

Q Top long term complications 100

Top short term side effects 85
Quality of
Top target values
48
62
! Treatment 100
Middle long term complications
47
Middle short term side effects
26 Total Cost 27
C Top cost of disposables 23
Top machine purchase cost 20
Ease of 15
E Standard size 19
Use/Ergonomics
Top learning time 17
C 14
Top staffing time Customers overwhelmingly traded Cost and Ease of
14 E
Middle cost of disposables Use for Quality of Treatment. The ranking of sub-
14 levels showed meaningful variations per country.
E Middle learning time
13 Conjoint analysis tests the criteria buyers use to
C Middle machine purchase cost Q make purchase decisions by forcing them to make
6 Quality
trade-offs between different features/benefits.
E Small size C
Cost
Top integration
E
Ease of Use

16
3. Our Approach
Marketing Operations

Marketing Operations Plan Key drivers Key questions

• Local Product usage & preferences • What product adjustments are

• Product features specific to required to adapt locally?
• Product & packaging adjustments targeted local market • Any certification required?
• Packaging specific to targeted local • What are local regulatory
market requirements?

• Competitor price • How price sensitive are

• Churn rate customers?
• Price levels
• Production costs • What’s the price elasticity?
• Customer price acceptance • Do we target premium position?

• Brand • What is our unique selling point?

• Product features & quality level • What are the priorities of our target
• Customer value
• Warranty customer?
• Packaging • Do we target premium position?

• Promotional mix: advertising, sales, • Which message will resonate best

promotions, PR with the customer segment?
• Promotion plan • Budget • Which media provide optimal
• Program & targeted impact access to our target?
• CRM model • How do we roll it out over time?

• Support tools for effective launch
• Sales force, tools & training
• Distribution & logistics
• CRM tools
• Product management tools & KPIs
• Who will sell/ distribute and how?
• What are the tangible/ intangible
assets needed?
• What are the projected results &
boundaries?

17
3. Our Approach
Launch Monitoring & Adjustments
Launch Monitoring &
Adjustments
• Post-launch product fine-tuning
• Post-launch product tracking
• Post-launch product operation
monitoring
• Post-launch product marketing plan
adjustment
Key drivers Key questions
• Product features & quality level • Is product delivering as expected?
• Packaging • What adjustments are required?
• Is product delivering as expected?
• Market penetration
• Are we progressing according to
• Customer satisfaction
plan?
• Actual sales, costs & margin
• Which KPIs need strengthening?
• Promotion • Is performance in line with
forecasts?
• Distribution
• Have unforeseen external factors
• Price levels
impacted progression?
• What adjustment are required?
• What evidence is available to
• Sales, costs and margin forecast
• support marketing and promotional
Targeted customer segment
• efficacy?
Promotion
• How do we address the weakest
• Distribution
• links?
Price levels
• Any adjustment required to our
forecast plan as a result?
18
Table of Content

1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

19
Why Frost & Sullivan?
Frost & Sullivan assets for a successful new product launch project :
 Frost & Sullivan is the Growth
strategy consulting firm
 Frost & Sullivan combines
both Consulting and Research
expertise
 Frost & Sullivan offers both
global and local perspectives
 Frost & Sullivan generates
synergies across different
sectors and markets
 Dedicated focus on growth and how new
product launches contribute to growth.
 Track record of successful new product launch
consulting projects over 45 years.
 Industry expertise supported by an international
pool of functional experts
 Best-in-class consulting methodologies proven
to be effective through experience in multiple
new product launch projects
 International organisation with 32 offices across
all key regional markets
 Strong understanding of the local issues
which underpin the success of new product
launch strategies and roll-out
 Experience gained across a complete range of
industries and services used to advantage in
product launch projects
 Capability to identify new product launch
opportunities across different industries and
markets
20
Table of Content

1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

21
5. Case Studies & Key References
Develop Value Proposition - Medical Technology

The client:
The Objectives
• A global medical technology and healthcare company with
• Develop a market-entry/ development
leading positions in renal care markets
roadmap
The challenge
• Steady decline in market share of a core revenue- • Undertake end-user analysis to support
generator the value proposition
• Product perceived as less reliable than competition • Complement its business planning with a
• Gaps in their product line and pipeline robust business case
• Hence a need to redefine the product portfolio and
establish the value proposition for new products due for
launch mid-term.
Our approach & work
• Stage 1 - Validate the existing processes and assumptions
• Stage 2 - Define the Value Proposition by understanding user requirements and perceptions (Conjoint &
Qualitative Analyses).
• Stage3 - Develop a business case to define the product mix, generate addressable market plan, identify
risks and generate input for making business plan.

Outcome & business impact

• Clear value proposition to focus all pre-launch initiatives • Cross-functional team alignment
• Shift in focus from product to market around market needs
• Market-driven business case for Board • and client value proposition
• Investment in key product features to support the value • ‘Best practice’ precedent for ongoing
proposition product portfolio assessments

22
5. Case Studies & Key References
International launch, innovative ultrasound system, market potential
assessment

The Client The Objectives

• Our client was created in 2005 by ultrasound medical imaging • Validate key points of client’s
experts. Funded by venture capital firms, our client had already business case for EU and US:
performed early-stage clinical studies which demonstrated • Validate price points for novel
significant improvements in diagnostic specificity. system across 6 countries
The Challenge • Validate volume and value market
• They were about to launch their first system for use in breast potential and estimate five-year
cancer diagnosis. To support further investment decisions and adoption curve
attract further investors, the client and their key VC partner • Identify distributor remuneration
needed to validate both the price premium for the new models
technology and their corresponding business case for launch.

Our approach & work

Supported with secondary research, markets were modelled based on information gathered from key
opinion leaders in leading breast centres, ultrasound manufacturers and distributors. Market models
were drafted for multifunction, breast-dedicated and the client ultrasound system. Market penetration
scenarios were drafted based on weighted competitive, quantitative and qualitative factors

Outcome & business impact

Key success factors were identified for our client and price premium ranges were validated. The detailed
market scenarios highlighted the impact of validated clinical evidence short-term and of price pressures
long-term. The improved understanding of regional variants helped validate go-to-market strategy.
The client will use the assessment as objective, third-party validation when raising further capital and during
marketing launch at the RSNA annual congress.

23