Launching New Products

Innovation Management

Kevin O’Brien

Launching New Products

Questions

What decisions do we need to make when launching a new product?

Are there models and frameworks that can help us?

Marketing Activities in NPD

(Adapted from Cooper, 1993)

Stage 1: Preliminary Investigation•Market size/growth

•Competitive environment•General technological feasibility

•Legal/regulatory constraints•Resources required

Assessments of product-company fit & market opportunity

Stage 2: Detailed Investigation•User needs & wants studies

•Competitor analysis•Detailed technical assessments

•Detailed market forecasts•Concept tests

Marketing Strategy•Target market/positioning

•Product design

Stage 3: Development•Product development/testing•Development of launch plan

Final Launch Plan

Marketingdevelopment

Technicaldevelopment

Launching New Products

Decisions about when, where and how to enter the market have a major impact on subsequent product performance

Strategic launch decisions may be taken long before time of market entry (e.g. product features, target market)

Tactical launch activities (e.g. advertising, promotion, customer service, product delivery) are unlikely to compensate for a poorly developed product/service

Strategic and tactical launch decisions need to be properly aligned

Strategic Launch Decisions

Target market/segment Niche or mass market?

Market entry timing Lead or follow?

Relative innovativeness Incremental or radical?

Magnitude of investment R&D advertising, promotion, sales force, distribution

Positioning Avoid or attack the competition?

Unique value proposition Core benefit, physical product, packaging, service,

branding?(Adapted from Green et al., 1995; Guiltinan, 1999; Hultink et al., 1997, 1999)

Tactical Launch Decisions

Promotion Advertising Price promotions Publicity/education

campaigns Free samples Reference test sites

Sales & distribution Events Technical support Distribution structure Intensity of coverage Distribution incentives

Pricing Introductory price

Skimming or penetration pricing

Price administration Product

Branding Breadth of product

assortment Timing

Fast or slow deletion of existing products

Whether (or when) to pre-announce

(Adapted from Guiltinan, 1999; Hultink et al., 1997, 1999)

Launch Planning

Degree of newness

Desired type of demand outcome

Product-marketcharacteristics

Technicalenvironment

Firm’sresources

Perceived relative advantage& compatibility

Realized demand outcomes

Strategic launch variables

Lead vs.follow

Targetmarket

Design features& innovativeness

Tactical launch variables•Promotion•Pricing•Product•Sales & distribution•Announcement•Deletion

Organisation’sNew product driver:Technical vs. market

(Guiltinan, 1999)

First Mover Advantage

Competitive advantage resulting from market entry timing consumer-based

brand preference, standard for product category, positioning in centre of market, customer lock-in, price premiums, higher profits

producer-based economies of scale, learning effects technological leadership scarce resources (e.g. locations, supplier contracts)

Favours those with distinctive capabilities in new product development

Firms with strong marketing and manufacturing capabilities may be better as followers.

(Lieberman & Montgomery, 1988, 1998)

First Mover (Dis)Advantage

Advantages enjoyed by later entrants: ‘free-riding’

imitation costs lower than innovation costs leverage pioneer’s investment in R&D, market

education, infrastructure development reduced technological/market uncertainty

emergence of a ‘dominant design’ technological/market discontinuities ‘incumbent inertia’

fixed assets, cannibalisation of existing products, organisational inflexibility

(Lieberman & Montgomery, 1988, 1998)

Pioneers and Followers

Sony: aggressive pursuit of

first-mover advantages from new product innovation

forced to follow in some areas in order to maintain full product line

Matsushita: ‘manashita denki’

‘electronics that have been copied’

lets others innovate positions based on

manufacturing and marketing capabilities

invests in R&D but waits until market begins rapid growth

Innovativeness & Buyer Behaviour

New entry orline addition inexisting market

Productimprovement

New to the world

Emphasis on Primarydemand

Emphasis onReplacement

demand

Emphasis onSelectivedemand

Adoption &diffusion

MigrationTrial & repeat

Degrees of innovativeness of new products & desired buying behaviours

(Guiltinan, 1999)

Adoption of New Products

The decision to adopt a new product is influenced (in part) by the characteristics of the product itself, in terms of: Relative advantage Compatibility with values & experiences Complexity in use or understanding Trialability Observability

(Rogers, 1995)

Launch Planning

Degree of newness

Desired type of demand outcome

Product-marketcharacteristics

Technicalenvironment

Firm’sresources

Perceived relative advantage& compatibility

Realized demand outcomes

Strategic launch variables

Lead vs.follow

Targetmarket

Design features& innovativeness

Tactical launch variables•Promotion•Pricing•Product•Sales & distribution•Announcement•Deletion

Organisation’sNew product driver:Technical vs. market

(Guiltinan, 1999)

The Launch Cycle

Pre-launch

Introduction Growth Maturity Decline

Sales

Pre-launch

Announcement

Beachhead Early Growth

The Launch Cycle

Sales &Expenditures

SalesExpenditures

Pre-launch Activities

Training of sales/marketing staff Building service capability Pre-announcements/market signalling Pre-stocking Product listings, price lists etc. Market access

Legal, regulatory, purchasers Cultivating opinion leaders

Launch Tactics

Low advantage/low compatibility

•Penetration pricing•Slow deletion

•Risk-based promotion(leasing, money-back etc.)

•Intensive distribution

Low advantage/high compatibility

•Secrecy before entry•Narrow product assortments

•Awareness promotion(coupons etc)

•Intensive distribution

High advantage/low compatibility

•Pre-announce•Broad product assortments

•Information-based promotion(shows, demonstrations etc.)

•Selective distribution

High advantage/high compatibility

•Skimming pricing•Fast deletion

•Usage-based promotion(samples, beta-tests)•Selective distribution

A typology of launch tactics based upon relative advantage and compatibility

(Guiltinan, 1999)

Airbus A380 ‘Super-jumbo’

TalkTalk (or WaitWait!)

References

Cooper, R. (1993) Winning at New Products, 2nd Edn., Reading MA: Addison-Wesley.

Green, D.H., Barclay, D.W. and Ryans, A.D. (1995) Entry strategy and long-term performance: conceptualization and empirical examination, Journal of Marketing, 59 (Oct), 1-16.

Guiltinan, J.P. (1999) Launch strategy, launch tactics, and demand outcomes, Journal of Product Innovation Management, 16, 509-529.

Hultink, E.J., Griffin, A., Hart, S. and Robben, H.S.J. (1997) Industrial new product launch strategies and product development performance, Journal of Product Innovation Management, 14(4), 243-257.

Hultink, E.J., Hart, S.J., Robben, H.S.J. and Griffin, A.J. (1999) New consumer product launch: strategies and performance, Journal of Strategic Marketing, 7, 153-174.

Rogers, E.M. (1995) Diffusion of Innovations, 4th Edn., New York: Free Press.