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Please Hand In Midterm II Hard Copy of Midterm II Evaluations of Group Members E-mail Electronic Copy to Keven (

[email protected]) Harley-Davidson/Trump Brand Extensions

Beef Jerky and Vodka Good or Bad? Why

Figure V.3

Midtern II…Midtern II…

Midterm IIOverview

Discussion

Difficult Sections

Sections that We Did Well On…

PART FIVEPART FIVE

LAUNCHLAUNCH

McGraw-Hill/Irwin Copyright ©2006 The McGraw-Hill Companies, Inc. All right reserved.

LaunchLaunchFigure V.1

The Five Decision Sets that Lead The Five Decision Sets that Lead to a Marketing Planto a Marketing Plan

Figure V.2

Common Myths About Marketing Common Myths About Marketing Planning for New ProductsPlanning 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 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.

Figure V.3

CHAPTER 16CHAPTER 16

STRATEGIC LAUNCH PLANNINGSTRATEGIC LAUNCH PLANNING


Strategic GivensStrategic 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 GoalsRevision 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 DecisionsStrategic Platform Decisions

Permanence Aggressiveness Type of Demand Sought Competitive Advantage Product Line Replacement Competitive Relationship Scope of Market Entry Image

PermanencePermanence

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 Some Other Strategic Platform DecisionsDecisions

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 Product Line Replacement StrategiesStrategies

Butt-on productreplacement

The existing one is simply dropped when the new one is announced. Example: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. Tourcompanies 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 theChristmas 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 wasintroduced.

Splitting channels Putting the new item in a different channel or diverting the existing product intoanother channel. Example: Old electronic products often end up in discounterchannels.

Figure 16.1

Scope of Market EntryScope 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 DecisionThe 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 Using the Joint Space Map to Identify Benefit SegmentsBenefit Segments

Figure 16.2

Aqualine

Islands

Splash

Molokai

Sunflare

23

1

FashionC

om

fort

Factors Affecting Diffusion of Factors Affecting Diffusion of InnovationInnovation

Relative Advantage Compatibility Complexity Divisibility Communicability

Product PositioningProduct 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?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?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?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 OptionsProduct Positioning Options

Position to an Attribute

Feature Function Benefit (direct or

follow-on)

Position on a Surrogate

Nonpareil Parentage Manufacture Target Rank Endorsement Experience Competitor Predecessor

Figure 16.2

Branding DecisionsBranding 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 Questions and Guidelines in Brand Name SelectionBrand Name Selection

Question GuidelineWhat is the brand's role or purpose? If the brand is to aid in positioning, choose a brand

name with meaning (DieHard, Holiday Inn). Ifpurely for identification, a neologism (made-upword) such as Kodak or Exxon will work.

Will this product be a bridgehead to a line ofproducts?

If so, choose carefully so as not to be a limitation inthe future (Western Hotels changed name toWestern International, then finally to Westin.)

Do you expect a long-term position in the market? If not, a dramatic, novelty name might be useful(such as Screaming Yellow Zonkers).

Is the name irritating or insulting to any marketsegment?

Women found Bic's Fannyhose to be objectionable.

Figure 16.8

Crapsy Fruit French cereal Fduhy Sesane China Airlines snack foodMukk Italian yogurtPschitt French lemonadeAtum Bom Portuguese tunaHappy End German toilet paperPocari Sweat Japanese sport drinkZit German lemonadeCreap Japanese coffee creamerI'm Dripper Japanese instant coffeePolio Czech laundry detergentSit & Smile Thai toilet paperBarf Iranian laundry detergent

Some Brand Names That Didn’t WorkSome Brand Names That Didn’t Work

Figure 16-9

How Brand Equity Provides ValueHow Brand Equity Provides Value

HighBrand

Loyalty

Other BrandAssets

More/BetterBrand

Associations

HighPerceived

Quality

HighBrand

Awareness

Reduced marketing costs

Increased trade leverage

Patents or trademarks

Strong channel relationships

Creates positive image

Helps customer process information

Supports quality positioning

Supports higher-price strategy

Easier to make brand associations

Increased liking and familiarity

Provides value to customer:Assists in customer information processingIncreases confidence in purchaseIncreases satisfaction in product use

Provides value to firm:Increases effectiveness of marketing programsIncreases customer loyalty and trade leverageFacilitates brand extensionsIs a source of competitive advantage

Figure 16-10

Building Brand EquityBuilding 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 CardA Brand Report Card

Characteristic ExamplesDelivers benefits desired by customers. Starbucks offers “coffee house experience,” not just

coffee beans, and monitors bean selection androasting to preserve quality.

Stays relevant. Gillette continuously invests in major productimprovements (MACH3), while using consistentslogan “The best a man can get.”

Prices are based on value. P&G reduced operating costs and passed on savingsas “everyday low pricing,” thus growing margins.

Well positioned relative to competitors. Saturn competes on excellent customer service,Mercedes on product superiority. Visa stressesbeing “everywhere you want to be.”

Is consistent. Michelob tried several different positionings andcampaigns between 1970 and 1995, while watchingsales slip.

The brand portfolio makes sense. The Gap has Gap, Banana Republic, and Old Navystores for different market segments; BMW has the3-, 5-, and 7-series.

Marketing activities are coordinated. Coca-Cola uses ads, promotions, catalogs,sponsorships, and interactive media.

What the brand means to customers is wellunderstood.

Bic couldn’t sell perfume in lighter-shaped bottles;Gillette uses different brand names such as Oral-Bfor toothbrushes to avoid this problem.

Is supported over the long run. Coors cut back promotional support in favor ofCoors Light and Zima, and lost about 50% of itssales over a four-year period.

Sources of brand equity are monitored. Disney studies revealed that its characters werebecoming “overexposed” and sometimes usedinappropriately. They cut back on licensing andother promotional activity as a result.

Figure 16.11

Profitable Brand StrategiesProfitable Brand Strategies

Low Relative Market Share High Relative Market ShareValue Brand Category Dead End

Example: Nine LivesOptimum strategies: Slash costs and prices “Trump” market leader with superpremium brand

Low RoadExample: Oscar MeyerOptimum strategies: Cut costs and reduce prices Build brand equity

Premium Brand Category HitchhikersExample: Neutrogena, PostOptimum strategies: “Don’t rock the boat” Innovate Find a niche market

High RoadExample: Gillette, CloroxOptimum strategies: Value-improving innovations Premium prices

Source: Adapted from Vijay Vishwanath and Jonathan Mark, “Your Brand’s Best Strategy,” HarvardBusiness Review, May-June 1997, pp. 123-129.

Figure 16.12

BA 590BA 590

Break


IMPLEMENTATION OF IMPLEMENTATION OF THE STRATEGIC PLANTHE STRATEGIC PLAN


The Launch CycleThe Launch Cycle

ExpendituresSales

Prelaunch Beachhead Early growth Announcement

Sales andExpenditures

Figure 17.1

Tactical Launch Decisions and Tactical Launch Decisions and Actions, Showing Influences on Actions, Showing Influences on DemandDemand

Launch Tactic Effective For:Promotion Advertising Cases where awareness will stimulate trial Coupons Reinforcing awareness Publicity New and controversial technologies with high perceived usage risk Sampling Cases where product advantages best learned through usage Beta Test Sites Stimulating “sampling” and as a reference for other potential buyersSales and Distribution Shows/Demonstrations Clarifying relative product advantages or where uncertainty exists Technical Support Cases of incompatibility in usage process Distribution Structure Cases where relative advantage strong (direct channels) Intensity of Coverage Cases where warranty/maintenance service needs to be offered easily Distribution Incentives Cases where availability needs to be stimulatedPricing Introductory Pricing High relative advantage and compatibility (skimming policy); early

adoption needs to be stimulated (penetration policy) Price Administration Cases where economic risk needs to be reduced (i.e., through rebates or

money-back guarantees)Product Breadth of Assortment Introducing new product categories with high relative advantageTiming Product Deletion High margin but strong relative advantage (fast deletion); high switching

costs (slow deletion) Preannouncing Building hype for new products; useful if relative advantage is high

Figure 17.2

PreannouncementPreannouncement

Getting to be popular, and very creatively managed.

Far from the old days of “tease the public.”

Preannouncement signaling may be used (“vaporware”).

BeachheadBeachhead

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 StatementCopy 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 market segment targeted The product positioning statement The communications (promotion) mix The major copy points to be communicated.

Typical Examples of Copy Typical Examples of Copy PointsPoints

“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-to-eye 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 A-T-A-R Goals: The New Product Group’s ObligationGroup’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 DistributorsMotivating Distributors

Increase distributor’s unit volume. Increase distributor’s unit margin. Reduce distributor’s cost of doing

business. Change distributor’s attitude

toward the line.

Figure 17.3

Barriers to TrialBarriers 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 Appropriate Launch Tactics Given Relative Advantage and CompatibilityRelative Advantage and Compatibility

A. Low Relative Advantage B. High Relative Advantage1. Low Compatibility Penetration price

Slow deletionRisk-based promotion (leasing,money-back guarantees,equipment allowances)Intensive distribution

PreannounceBroad product assortmentsInformation-based promotion(shows, demonstrations, websites,publicity/education)Selective distribution

2. High Compatibility Secrecy before entryNarrow product assortmentsAwareness promotion (coupons,etc.)Intensive distribution

Skim priceFast deletionUsage-based promotion (samples,beta tests) to clarify benefitsreceivedSelective 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.

Figure 17.4


MARKET TESTINGMARKET TESTING


What Is Market Testing?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 Where We Are Today in Market TestingTesting

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.

Decision Matrix on When to Decision Matrix on When to Market TestMarket Test

Cos

t an

d T

ime

Sav

ings

High

Low

Stages of the product development cycle

High

Low

Scop

e of Learn

ing

and

Accu

racyFigure 18.1

How Market Testing Relates to the How Market Testing Relates to the

Other Testing StepsOther Testing Steps Figure 18.2

Two Key Values Obtained from Two Key Values Obtained from Market TestingMarket 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 TestDeciding 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 Types of Information That May Be LackingLacking

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 Methods of Market Testing, and Where UsedWhere Used

Figure 18.3

Speculative SaleSpeculative 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 Conditions for Speculative SaleSale

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)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 Simulated Test Market ProcedureProcedure

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 STMsPossible 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-the-market products, since no prior data available.

Does not test channel member response to the new product, only the final consumer

Controlled Sale by Informal Controlled Sale by Informal SellingSelling

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 Controlled Sale by Direct MarketingMarketing

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 MinimarketsControlled 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 Controlled Sale by Scanner Market TestingMarket 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: Minimarkets and Scanner Testing: IRI’s BehaviorScan and InfoScanIRI’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 MarketThe 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 Pros and Cons of Test MarketingMarketing

Advantages: Risk Reduction

monetary risk channel

relationships sales force morale

Strategic Improvement

marketing mix production facilities

Disadvantages: Cost ($1 mill+) Time (9-12 months+)

hurt competitive advantage

competitor may monitor test market

competitor may go national

Competitor can disrupt test market

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.

A Risk of Test Marketing: “Showing Your A Risk of Test Marketing: “Showing Your Hand”Hand” Figure 18.5

The RolloutThe 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 RolloutTypes of Rollout

By geography (including international) By application By influence By trade channel

Patterns of Information Gained Patterns of Information Gained During RolloutDuring Rollout Figure 18.7

Risks of RolloutRisks 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 Probable Future for Market Testing MethodsTesting Methods

Test marketing (“dinosaur”)

Pseudo sale (incomplete)

Minimarket (flexibility & variety)

Rollout (small, fast, flexible)

ReviewReview

Lecture on “Launch”… Launch Plan Market Test Launch Management

Next Week… Marketing Planning Book (Chapters 1-3)

Market Plan Competitive Set Industry Analysis

Figure V.3

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