Bob Caspe

The International Entrepreneurship Center

Entrepreneurial Action

4

Would you like one?

Building a New Category

Pre Existing

Category

New

CategoryInnovation LevelInnovationPre Existing

Category

Product Introduction Cycle

-80

-60

-40

-20

0

20

40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Marketing Cost

Net Profit

Accumulated Profit

P&G Swiffer Mop

String Mop Sponge Mop ?

Launch Alternatives

Problem – How does one sustain the early large losses associated with product marketing when introducing LARGE incremental value1. Use only small incremental Value

2. Raise capital

3. Introduce the product as a new category with direct marketing where each transaction pays for the media cost immediately.

4. Limit the targeted demographic so that the cost starts within budget and then increase the demographic as accumulated profit allows additional media to be purchased.

Direct Marketing Product

Introduction

Goals:

Teach the Customer the value

system

Establish the Category

Once the Category is Established

then introduction through normal

channels is possible

B2B New Category Launch

The Main Problem is one of Education

Proper use of PR

Write a Testimonial Use Article for one of

your customers

Place it in a trade journal

Trade Shows

Conventional Outbound Direct

Marketing

Email, Telephone,…

Typical Direct Marketing Ad

Define the Pain

Offer the Solution

Provide Testimonial

Define the Transaction

Call to action

Media Efficiency

Number of Likely Prospects / Total Audience

The Media Efficiency is the MOST important factor in determining whether a Campaign will be cost effective.

FDA Consulting

FDA Testing Data Analysis

FDA process extends over years

Tried Advertising in trade magazine

All Readers of the Magazine

Not in the business

Of making an FDA

ProductNot Looking

At this time

For help

Better Strategy

How to find potential customers at the

unique moment when they are considering a

selection process?

○ Ad-words

○ Trade show

○ Reference

How to decide?

New Category Marketing Costs

The Media Cost is Expensive

because the information content is

high

Typical ratios of

[7 : 1] for [Selling Price : COGS]

If it’s not really a new category then

you can’t compete on price!

Designing an Ad

First define your Goal For example: Drive sale to retail

Or, Generate a lead by telephone…

Don’t try to do accomplish much!

Define your call-to-action (CTA) Applies to package design too

Define your Value Message

Use a Testimonial if it’s a new category

Define your Tracking Mechanism

Create an appealing design

Call to Action (CTA)

Why the customer should move at this

moment

Price reduction

Free shipping

Free extra item

Most manufacturers build in the CTA

cost into their standard cost model

Dell Example

Tracking Mechanisms

Goal – Measure the Campaign

Effectiveness

Unique Telephone Number

Unique URL

Coupon

Discount Code

Observe a “bump” in sales

Analysis

For each campaign

Assemble the Media Costs

Assemble the Selling Costs

Assemble the Product Costs

Calculate the Contributed Margin

○ Cost per Lead (media effectiveness)

○ Closing ratio (sales effectiveness)

Direct Marketing Examples

Liberty Medical Supply

Diabetic Supplies for Seniors

who are on Medicare

Grew from 10M to 450M in just

a few years.

Liberty Medical Supplies

Example Mailer

Very low Cost – Postage paid by Fast

Lane

Fast Lane Statement

Example Bose Mailer

Bose back

Finding Success

Successful campaigns are not

created instantaneously, they need to

be tuned over many experiments.

It takes patience to create a working

campaign.

Tuning a campaign never stops.

15% of the media budget is used for tests

New Category Examples

BOWFLEX

IPOD

TV-Picshare

IPOD

Preexisting or new

category?

Ad 2001

IPOD 2003 Ad Campaign

Let’s take a break