Transcript New Product Strategies - Southern Methodist University

PHARMASIM
NEW PRODUCTS
Advanced Marketing
Management
Marketing 6202
What Is A New Product?






New to the world
New to the company
Brand extension (Period 6)
Line extension (Period 4)
Repositioning (Period 2)
Model changes
The Risks of New Products

Failure rates
– “…no more than 10% of all new products or
services are successful -- that is, still on the
market and profitable after three years” Marketing Management (2003)
– 95% of new consumer products in US fail;90%
of new consumer products in Europe fail 46% Nielsen BASES and Ernst & Young study (2002)
The Risks of New Products

Costs
– Introducing a new national brand can cost $20
million – Marketing Management
– New Product News – “It probably costs $100
million to introduce a truly new soft drink
nationally and it costs $ 10,000 to introduce a
new flavor of ice cream in Minneapolis.
Somewhere in between is a worthless 'average'
cost to introduce a new product”
Why New Products Fail

Poor planning and strategy
– Market is not attractive
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Poor concept
Poor execution
Poor use of research
Poor technology
Poor timing
– Changes in tastes/environment
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Bad support from channel
Brand Equity

The value your customers perceive to be
uniquely associated with your brand
= Awareness + Associations

Awareness
– Recall
– Recognition

Associations
– Perceived Quality
– Image
The Importance of Brand
Associations
Profitability (ROI):
PERCEIVED RELATIVE QUALITY
inferior moderate superior
RELATIVE
high
26%
29%
37%
MARKET medium
18%
20%
26%
SHARE
low
10%
16%
18%
SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units)
Future Profitability (Stock Price):
Stock Price = f(ROI, perceived quality)
ROI and perceived quality exert approximately equal effects
SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE,
AMEX, and NASDAQ).
Brand Associations and
Line/Brand Extension

Brand associations help determine which line
and brand extensions will be successful
B
8
Close-Up
Cheerios
Crest
C
Froot Loops
6
4
4
2
2
0
REALITY
Breath Mint
Higher income
Toothbrush
2 D
Coors
IBM
Budweiser

E
 
8
Higher price,
6 & benefits
C 
4
0
Moisturizer
Deodorant
8
6
4
2
E
0
Source: Wes Hutchinson
Lollipops
Apple
Segment 2

Waffles
Irish Spring
6
4
0
Camay
8
D
8
Original
6
Market
2
New
Video Market
Games CellularPhone
0
Bottled
Water
Scotch
Brand Associations and
Line/Brand Extension
Close-Up's singles-oriented,
"romantic" image extended best to
breath mints; Crest's family-oriented
"dental health" image extended best
to toothbrushes.
B
8
Close-Up
Cheerios
Crest
C
Froot Loops
6
4
4
2
2
0
REALITY
Breath Mint
2 D
Coors
IBM
Budweiser

E
 
8
Higher price,
6 & benefits
C 
4
0
Moisturizer
Deodorant
8
6
4
2
E
0
Source: Wes Hutchinson
Lollipops
Apple
Segment 2

Waffles
Irish Spring
6
4
0
Higher income
Toothbrush
Camay
8
D
8
Original
6
Market
2
New
Video Market
Games CellularPhone
0
Bottled
Water
Scotch
Apple's "user-friendly" image
extended best to video games; IBM's
"serious business" image extended
best to cellular phones.