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 marketing plan. The task should be easy if the new item is (_______________) new. If the product is (_____________) new, the challenge facing the firm is more substantial. Really New Products (New-to-the-world products) The firm must develop an entry strategy with the emphasis on stimulating primary demand for the product category. The product launch plan must stimulate adoption of the new product category and lead to diffusion through the market place. Incrementally New Products The launch should stimulate replacement demand. Existing customers should be encouraged to migrate to the new product.


STRATEGIC LAUNCH PLAN 1. Segmentation and Targeting Geographic and Demographic Behavioral and Psychographic Benefit (___________) segments are great interest in new product development. (___________) segment information in combination with brand perceptions can be very helpful in developing a positioning strategy. (___________) segments help advertising communication strategy.


Targeting May Also Use Diffusion of Innovation

(_______________) are venturesome; they are willing to try new ideas at some risk. (_______________) are guided by respect; they are opinion leaders and adopt new ideas early but carefully. (_______________) are deliberate; they adopt new ideas before the average person, although they rarely are leaders. (_______________) are skeptical; they adopt an innovation only after a majority of people have tried it. (_______________) adopt the innovation only when it takes on a measure of tradition itself. How can we speed up the adoption process?



2. Product Positioning New products managers have a big advantage on positioning – the end-user’s memory slate is clean; potential buyers have no previous positioning in mind for a new item. There are two broad ways for positioning a new product: Attribute (Feature, Function, or Benefit) “The one with as much protein as 10 pounds of sirloin” “Coats your hair with a thin layer of protein” “Cleaner teeth and cleaner breath” Surrogates “Use our dietary product because it was created by a leading health expert” Note if you are one of followers, then product positioning is a statement of how “our” product will differ from competitive products, i.e., our point of differentiation. ____________________is __________________________ Our Product/Brand (single most important claim) among all because ______________________________ (competitive frame) ______________________________. (single most important support)


3. Marketing Mix

Marketing mix refers to a unique blend of product, place (distribution), promotion, and pricing policies (the four P’s). – An effective marketing mix must be carefully tailored to satisfy the desires of the selected target market.

Product Product planning entails deciding upon: Quality; Features & Options; Brand Name; Services; Warranties. Good Brand Name • Suggests something about the products’ benefits

Customer Benefits Strong Reliable Easy to use

Descriptive Words Durable, Strength, Metal Dependable, Lasting, Tested Simple, Quick, Fast

Brand name => Quick Metal

• Easy to pronounce, recognize, and remember – Tide, Aim, Puffs, – I Can’t Believe It’s Not Butter • Distinctive – Kodak, Exxon • Be capable of registration and legal protection • (A global brand) should translate easily into foreign languages.

Place (Distribution) A channel of distribution is the set of wholesalers and retailers that a manufacturer uses to distribute products to end users.

Promotion Promotion refers to communication by marketers 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 exchange. – The combination of the 3 P’s – product, place (channel), and promotion (communication mix) – determines the target customer’s perception of the value of the firm’s product in a given competitive context. Conceptually, this perceived value represents the maximum price, which the customer is willing to pay. – Therefore, in setting a price, costs form the floor, “value-in-use” is the ceiling, and competitive prices provide reference levels.


Skimming: set high initial price to profit off those initially willing to pay. Lower price over time to attract new customers. Penetration: set low initial price to attract the whole market. Price elasticity Costs Economies Competitive Entry Customer knowledge Rate of Customer Acceptance Capacity Skimming Inelastic High Low Difficult New idea Slow Restricted Penetration Elastic Low High Easy Know Fast Large


Sample Problem Titanic Products, manufacturer of kitchen gadgetry, makes two models of crock pots, the Standard and the Deluxe. Standard is priced at $35 to retailers (manufacturer’s selling price), and Deluxe at $40. Manufacturer’s variable costs are $25 and $28 per unit respectively, and fixed costs directly attributed to each model are $1 million and $1.4 million respectively. Last year, Titanic sold 350,000 Standard and 300,000 Deluxe models. The company is thinking of launching a new top-of-the-line model, the Stupendous, featuring super-quality pottery liner and designer colors. It projects variable and direct fixed costs at $35 per unit and $1.2 million respectively. Most retailers always add on the same dollar margin on this item, so a price increase to retailer is passed on to the consumers. Assume 50% retailer margins. Indirect overheads for the crock pot line are $4.2 million. Through extensive consumer testing, it found the following demand estimates of the Stupendous. Suggested Retail Price $90 $100 Estimated Demand 180,000 units 150,000 units



What was the profit (before tax) of Titanic last year?

b. What is the projected profit impact of the new product if suggested retail price for the Stupendous is $100 and there is no cannibalization effect on the existing product lines?


c. Managers think there is cannibalization effect of the new product only on the Deluxe. Specifically, they believe 20% of the Stupendous sales will come from substituting for the Deluxe. If so, what is the expected profit impact of introducing new product? Assume $100 retail price.


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