Innovation Management 2012 Stefan Wuyts Launch Innovation Management 2012 Stefan Wuyts

Agenda Strategic launch decisions Product life cycle and launch cycle Tactical launch decisions

Strategic Givens Corporate strategy, decisions made earlier, 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 Margins IRR, ROI Product Level Performance Goals Cost Time to Market Performance Quality Other Competitive Effect Image Change

Note: goal versus objective Characteristics of a “good” objective: Dimension of success or performance Measure for evaluation Level to pursue Specification of time Goal Compaq in 1990s: “to become a major competitor in the worldwide computer industry while regaining historical levels of profitability and returns to shareholders”

Objective Compaq: “Annual growth of 20-25% by 2000; best in class return on assets by 2000 in each division” Objective McDonalds: “We plan to add between 2500 and 3200 restaurants next year, with about two thirds outside of the US. In other words, we opened more than 6 restaurants per day last year, and in the next year, we plan to open up 8 per day”

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

Scope of Market Entry 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.

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

Who? The Target Market Decision Alternative ways to segment a market end-use, geographic/demographic, behavioral/psychographic, benefit segmentation Micromarketing (small targets) and mass customization (tailoring the good or service to the unique specifications of individual customers)

Using the Joint Space Map to Identify Benefit Segments in the Swimsuit Market 3 2 Aqualine Comfort 1 Molokai Islands Fashion Splash Sunflare

Why Should They Buy It? See concept statement; core benefit proposition; the needs in HOQ; 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 – but metaphor). Features: calories Function: not often seen Benefits: saves money, derived benefits Surrogate: experts say, no equal, who makes it or sells it

Trademarks & Registration Trademark: A word, symbol, logo, word string, sound signature that identifies a product. Examples: the GE script lettering, Apple Inc.’s multicolored apple, Nike’s “Just Do It,” the “Intel Inside” sound. Generally, “trademark” refers to legal aspects while “brand” refers to marketing strategy. If a trademark is registered, the firm can keep the trademark forever even if another firm can show prior use. 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. McDonald’s). http://www.youtube.com/watch?v=QRLyMjvug1M

Product life cycle Sales product class Profit margin Maturity Shake-out Growth Introduction Decline Time

The Launch Cycle Sales Expenditures Sales and Expenditures Prelaunch Beachhead Early growth Announcement Pre-announcements: good or bad? “Getting the ball rolling” 17-16

Tactical Launch Decisions and Actions, Showing Influences on Demand 17-17

Appropriate Launch Tactics Given Relative Advantage and Compatibility 17-18

Copy Strategy Statement Communication 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.

Motivating 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.

Price determination The difficulty of pricing (see work by Dutta, Zbaracki & Bergen on pricing as a capability) Price should be a function of: Your marketing strategy (consistency! E.g., price discrimination ~ target markets) Competition (make cost estimates, reverse engineering, etc.) Your costs (development costs, overhead costs, direct fixed costs, variable costs). Too often: markup pricing! Value to the customer

Perceived value > Price > Cost Reservation price = max. willingness to pay (derived from perceived value) Perceived value > Price > Cost Price > Perceived value > Cost Price > Cost > Perceived value Customer Value (ceiling) gap Price elasticity of demand (absolute value) Cost (floor)

Reference price: standard of comparison (e. g. , 0 Reference price: standard of comparison (e.g., 0.99 € for songs; expected future price; changed by price promotions)