MKTG 492

Professor Sam Min

Lecture 5
Product Launch Plan
At this point in the new products process, the
team is ready to build the actual maretin! plan" The tas should
be easy if the new item is #$$$$$$$$$$$$$$$% new" &f the
product is #$$$$$$$$$$$$$% new, the challen!e facin! the firm
is more substantial"
Really New Products (New-to-the-world products)
The firm must de'elop an entry strate!y with the emphasis on
stimulatin! primary demand for the product cate!ory" The
product launch plan must stimulate adoption of the new product
cate!ory and lead to diffusion throu!h the maret place"
Incrementally New Products
The launch should stimulate replacement demand" ()istin!
customers should be encoura!ed to mi!rate to the new product"
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STRATEGIC LAUNCH PLAN
1. Segmentation and Targeting
Geo!raphic and +emo!raphic
,eha'ioral and Psycho!raphic
,enefit
#$$$$$$$$$$$% se!ments are !reat interest in new product
de'elopment"
#$$$$$$$$$$$% se!ment information in combination with brand
perceptions can be 'ery helpful in de'elopin! a positionin!
strate!y"
#$$$$$$$$$$$% se!ments help ad'ertisin! communication
strate!y"
2
Targeting May Also Use Diusion o Inno!ation
(! are 'enturesome- they are willin! to try
new ideas at some ris"
(! are !uided by respect- they are opinion
leaders and adopt new ideas early but carefully"
(! are deliberate- they adopt new ideas
before the a'era!e person, althou!h they rarely are leaders"
(! are septical- they adopt an inno'ation
only after a ma.ority of people ha'e tried it"
(! adopt the inno'ation only when it taes on
a measure of tradition itself"
/ow can we speed up the adoption process0
1
2. Product Positioning
2ew products mana!ers ha'e a bi! ad'anta!e on positionin! 3
the end-user"s memory slate is clean# potential buyers ha'e no
pre'ious positionin! in mind for a new item"
There are two broad ways for positionin! a new product4
Attri"ute #5eature, 5unction, or ,enefit%
6The one with as much protein as *7 pounds of sirloin8
69oats your hair with a thin layer of protein8
69leaner teeth and cleaner breath8
Surro#ate$
6:se our dietary product because it was created by a leadin!
health e)pert8
2ote if you are one of followers, then product positionin! is a
statement of how 6our8 product will differ from competiti'e
products, i"e", our point of differentiation"
$$$$$$$$$$$$$$$$$$$$is $$$$$$$$$$$$$$$$$$$$$$$$$$
;ur Product<,rand #sin!le most important claim%
amon! all $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
#competiti'e frame%
because $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$"
#sin!le most important support%
4
3. Marketing Mix
Mar$eting mi% refers to a uni=ue blend of product, place
#distribution%, promotion, and pricin! policies #the four P>s%"
An effecti'e maretin! mi) must be carefully tailored to
satisfy the desires of the selected tar!et maret"
Product
Product plannin! entails decidin! upon4 &uality# 'eatures (
)ptions# *rand Name# +er!ices# ,arranties-
.ood *rand Name
? Su!!ests somethin! about the products> benefits
/ustomer
*eneits Descripti!e ,ords
01
*rand name
Stron! +urable, Stren!th, %etal
&uic' %etal @eliable +ependable, Aastin!, Tested
(asy to use Simple, &uic', 5ast
? (asy to pronounce, reco!niBe, and remember
3 Tide, Aim, Puffs,
3 & 9an>t ,elie'e &t>s 2ot ,utter
? +istincti'e
3 Koda, ())on
? ,e capable of re!istration and le!al protection
? #A !lobal brand% should translate easily into forei!n
lan!ua!es"
C
Place #+istribution%
A channel o distri2ution is the set of wholesalers and retailers
that a manufacturer uses to distribute products to end users"
Promotion
Promotion refers to communication by mareters that
informs, persuades, or reminds potential customers in order to
influence their opinion or elicit a desired response"
Price
Price refers to what a buyer must forfeit in an e)chan!e"
The combination of the 1 P>s 3 product, place #channel%,
and promotion #communication mi)% 3 determines the
tar!et customer>s perception of the 'alue of the firm>s
product in a !i'en competiti'e conte)t" 9onceptually, this
percei'ed 'alue represents the ma)imum price, which the
customer is willin! to pay"
Therefore, in settin! a price, costs form the floor, 6'alueDinD
use8 is the ceilin!, and competiti'e prices pro'ide reference
le'els"
E
Skimming4 set hi!h initial price to profit off those
initially willin! to pay" Aower price o'er time to attract new
customers"
Penetration4 set low initial price to attract the whole maret"
+$imming Penetration
Price elasticity &nelastic (lastic
9osts /i!h Aow
(conomies Aow /i!h
9ompetiti'e (ntry +ifficult (asy
9ustomer
nowled!e
2ew idea Know
@ate of 9ustomer
Acceptance
Slow 5ast
9apacity @estricted Aar!e
F
+ample Pro2lem
Titanic Products, manufacturer of itchen !ad!etry, maes two
models of croc pots, the Standard and the +elu)e" Standard is
priced at G1C to retailers #manufacturer>s sellin! price%, and
+elu)e at G47" Manufacturer>s 'ariable costs are G2C and G2H
per unit respecti'ely, and fi)ed costs directly attributed to each
model are G* million and G*"4 million respecti'ely" Aast year,
Titanic sold 1C7,777 Standard and 177,777 +elu)e models" The
company is thinin! of launchin! a new topDofDtheDline model,
the Stupendou$, featurin! superD=uality pottery liner and
desi!ner colors" &t pro.ects 'ariable and direct fi)ed costs at G1C
per unit and G*"2 million respecti'ely" Most retailers always add
on the same dollar mar!in on this item, so a price increase to
retailer is passed on to the consumers" Assume C7I retailer
mar!ins" &ndirect o'erheads for the croc pot line are G4"2
million"
Throu!h e)tensi'e consumer testin!, it found the followin!
demand estimates of the Stupendous"
Su!!ested @etail
Price
(stimated +emand
G97 *H7,777 units
G*77 *C7,777 units
H
a" Jhat was the profit #before ta)% of Titanic last year0
b" Jhat is the pro.ected profit impact of the new product if
su!!ested retail price for the Stupendous is G*77 and
there is no cannibaliBation effect on the e)istin! product
lines0
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c" Mana!ers thin there is cannibaliBation effect of the new
product only on the +elu)e" Specifically, they belie'e 27I of
the Stupendous sales will come from substitutin! for the
+elu)e" &f so, what is the e)pected profit impact of
introducin! new product0 Assume G*77 retail price"
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