New Product Development
The Integrating and Focusing Role of
Purposes of Protocol
• To determine what marketing and R&D groups need to
do their work.
– Think concept life cycle: this is more than a simple
concept statement, yet less than we will have when
the first prototype is available.
– Try to identify the key deliverables at this point.
• To communicate essential to all players and integrate
their actions, directing outcomes consistent with the full
screen and financials.
• To set boundaries on development process or cycle
• To permit the development process to be managed (i.e.,
what needs to be done, when, why, how, by whom,
Contents of a Product Protocol
• Target market
• Product positioning
• Product attributes (benefits)
• Competitive comparison
• Augmentation dimensions
• Marketing requirements
• Financial requirements
• Production requirements
• Regulatory requirements
• Corporate strategy
A Sample Protocol: Trash Disposal
• Must automate trash disposal at factory cost not to exceed
• Clean, ventilated, odor-free, no chance of combustion.
• Must be safe enough to be operated by children; outside
storage safeguards against children and animals.
• Size must be small enough to work as kitchen appliance, to
provide easy access and eliminate need for double handling of
• Simple installation
• Decor adaptable to different user tastes.
• If design requires opening of exterior walls, structural integrity
and insulation against elements must be maintained.
• User-friendly, automatic operation, easy to maintain by
QFD and Its House of Quality
Tradeoffs in QFD Example
• Improving resolution slows down text
printing and really slows down graphics
• Increasing edge sharpness slows down
both text and graphics printing.
• Duplex printing speeds up text and
• Postscript compatibility improves
resolution and edge sharpness.
Moving to Later Stages of QFD
House of Quality:
Customer Attributes Engineering Characteristics
Engineering Characteristics Parts Characteristics
Parts Characteristics Process Operations
Process Operations Production Requirements
Source: Adapted from John R. Hauser and Don Clausing, “The House of Quality,” Harvard Business
Review, May-June, 1988.
What Is Design?
• Has been defined as “the synthesis of
technology and human needs into
• In practice, design can mean many things,
ranging from styling to ergonomics to setting
final product specifications.
• Design has been successfully used in a variety
of ways to help achieve new product objectives.
• One thing it is not: “prettying up” a product that is
about to manufactured!
Contributions of Design to the New
Range of Leading Design Applications
Purpose of Design Item Being Designed
Manufacturability Graphic arts
• The process by which a customer need is
developed into a product design.
• Solid architecture improves speed to
market, and reduces the cost of changing
the product once it is in production.
• Product components are combined into
“chunks,” functional elements are
assigned to the chunks, and the chunks
are interrelated with each other.
Product Architecture Illustration
Product Architecture and
• Product architecture development is
related to establishing a product platform.
• If chunks or modules can be replaced
easily within the product architecture,
“derivative products” can be made from
the same basic platform as technology,
market tastes, or manufacturing skills
• Examples: 200 versions of the Sony
Walkman from four platforms.
Assessment Factors for an
• Comprehensive Prototype: complete, fully-
functioning, full-size product ready to be
examined by customers.
• Focused Prototype: not fully functioning or
developed, but designed to examine a
limited number of performance attributes
– Examples: a crude, working prototype of an
electric bicycle; a foam or wood bicycle to
determine customers’ reactions to the
proposed shape and form.
Model of the Product Design
Improving the Interfaces in the
• Digital co-location
• Global teams
• Produceability engineer
• Upstream partnering with vendors
Computer-Aided Design (CAD)
• Greatly accelerates the design step and allows
assessment of multiple possible designs without
building expensive prototypes.
• Design for Manufacturability (DFM): search for
ways to minimize manufacturing costs.
• Design for Assembly (DFA): search for ways to
ease assembly and manufacture.
• Rational for DFM: A seemingly trivial detail in
design phase might have huge manufacturing
cost consequences later on!
Some of the Uses of CAD in Auto
• Determining fit of subassemblies: does the
radio/CD player protrude too far into the engine
• Facilitating “decking” of cars (attaching the
powertrain to the upper body): do all the pieces
fit together perfectly?
• Crashworthiness: can we modify any aspects of
the car’s design to improve its ability to protect
the passengers in a crash?
Development Structure and
Some Terms in New Products
• Functional: People in business departments or
functional areas are involved, and product
development activity must mesh with their work.
• Project: The product innovation activity requires
people who think first of the project.
• Matrix: Two people are likely to be involved in
any piece of work: project manager and line
Options in New Products
2. Functional Matrix
3. Balanced Matrix
4. Project Matrix
These are listed in increasing projectization, defined as
the extent to which participants see themselves as
independent from the project or committed to it.
Performance Success of the
Five Organizational Options
Similar results found for the teams’ ability to: meet schedule;
control cost; achieve technical performance
Operating Characteristics of the
Characteristic Functional <------------->Venture
Decision Power of Leader Low High
Independence of Group Low High
% of time spent on project by member Low High
Importance of Project Low High
Degree of risk of project to firm Low High
Disruptiveness of project Low High
Degree of uncertainty Low High
Ability of team to violate
company policy Low High
Independent funding Low High
Decision Rules for Choosing Among
Score each on a scale of 1 (low) to 5 (high):
1. How difficult is it to get new products in the firm?
2. How critical is it for the firm to have new products at this time?
3. How much risk to personnel is involved?
4. How important is speed of development?
5. Will the products be using new procedures in their
6. In their marketing?
7. What will be the $ profit contribution from each new item?
8. How much training do our functional people need in the markets
represented by the new products we want?
Rating: Below 15: functional matrix will likely work.
15-30: a balanced matrix will probably work.
Over 30: You need a project matrix or even a venture!
Considerations when Selecting an
• High projectization encourages cross-functional integration.
• If state-of-the-art functional expertise is critical to project
success (e.g., in a scientific specialty such as fluid dynamics),
a functional organization might be better, as it encourages the
development of high-level technical expertise.
• If individuals will be part of the project for only a short time, it
might make more efficient use of their time if they were
organized functionally. Industrial designers may be involved in
any given project for only a short time, so different projects
can simply draw on their expertise when needed.
• If speed to market is critical, higher projectization is preferred
as project teams are usually able to coordinate their activities
and resolve conflicts more quickly and with less bureaucracy.
PC makers often use project teams, as they are under severe
Who Are the Team Members?
• Core Team: manage functional clusters
(e.g., marketing, R&D, manufacturing)
– Are active throughout the NPD process.
• Ad Hoc Group: support the core team
(e.g., packaging, legal, logistics)
– Are important at intervals during the NPD
• Extended Team Members: less critical
members (e.g., from other divisions)
Participants in the Product
• Project Manager
– Leader, integrator, mediator, judge
– Translator, coordinator
• Project Champion
– Supporter and spokesperson
– May be the project manager
– Enthusiastic but play within the rules
– Senior executive who lends encouragement and
endorsement to the champion
– The “show-me” person
Participants in the Product
– Managerial -- often the CEO
– Spelled out the Product Innovation Charter
– Creative scientist
– “Basement inventor” -- may be a customer, ad agency
– Idea source
– Enhance team’s productivity and output
Techniques for Attaining Speed in a New
Accelerating Product Development through
Managing the Organization:
• Use projectization: project matrix and venture teams.
• Use small groups to thwart bureaucracy.
• Empower, motivate, and protect the team.
• Destroy turf and territory.
• Make sure supporting departments are ready.
• Clear the tracks in shared departments.
Techniques for Attaining Speed
Other Techniques for Accelerating Product
• Intensify resource commitments (integrate channel
members; parallel or concurrent engineering)
• Design for speed (CAD design, common components,
design for easy testing, design in qualities that lead to
• Prepare for rapid manufacturing.
• Prepare for rapid marketing.
Guiding Principles in New Product Process
Clarity of Goals and Objectives
Leadership, at both senior and team levels
Integration with business processes
Issues in Team Management
• Team compensation and motivation
– Monetary vs. non-monetary rewards?
– Process-based vs. outcome-based rewards?
• Closing the team down
What is Product Use Testing?
Product use under normal operating
– Alpha testing: done in-house.
– Beta testing: done at the customer site.
Typical goals of beta testing: to determine if
the product works and is free of “bugs.”
Knowledge Gained From
Product Use Testing
• Pre-use sense reactions.
• Early use experiences ("Does it work?").
• Major benefits results (beta tests).
• Diagnostic information.
Common Pitfalls of
• Beta test site firm has no internal capacity to test the performance of
the product at the required level and lacks the funding to hire an
outside firm to do the test.
• Developer puts in a wishy-washy performance requirement like
"user-friendly" which is meaningless without a measurable
• Testing is done too late in the NPD process, which almost ensures
that development time will be extended and production delays will
occur. Doing testing in increments throughout the process can
avoid this pitfall.
• Developers attempt to beta-test their own products. By definition
they are too close to the product to critically test it and find
• Developers ignore early negative results, hoping that the product will
improve by itself during the NPD process. All beta test results,
whether positive or negative, need to be honestly evaluated.
• Beta testing may not meet all the product
– Does the new product meet customers’
– Is it cost-effective for them?
• Gamma testing involves thorough use and
evaluation of the new product by the end
• It’s an ideal product use test -- but in many
cases firms go with beta testing.
– Cost and time considerations
Some Key Testing Dimensions
• User groups to contact (lab personnel, experts,
• Mode of contact (mail vs. personal, individual vs. group,
point of use vs. central location).
• Identity disclosure (avoid halo-image effects).
• Degree of use explanation (no comment, some, full
• Degree of control over use (supervised vs.
• Singularity (monadic usually less sensitive than paired or
More Key Testing Dimensions
• Duration of use (single use vs. extended periods).
• Source of product (batch, pilot plant, final production).
• Product form (single product vs. variants).
• Mode of recording reaction (like/dislike, preference,
• Source of norms (past experience, market research
• Research service (internal vs. outside personnel).
Types of Product Use Tests
Type Products Instructions
Monadic The new product alone. "Try this new toothbrush, and tell
me how you like it."
Paired comparison The new product and another "Try these, and tell me how you
one: the market leader, the leader like them and which you prefer."
in a key segment, the "best."
Triangular The new product and two others, Same as above.
or two variants of the new
product and one other.
Multiple-product techniques can use side-by-side or staggered (sequential monadic) product-use
The Five Decision Sets that
Lead to a Marketing Plan
Corporate, some team decisions made earlier.
Often found in the PIC Guidelines.
• A specified gross margin: affects funding.
• Speed-to-market: affects promotional outlays and
• 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 • Product Level
Goals Performance Goals
– Use – Cost
– Satisfaction – Time to Market
– Sales – Performance
– Market Share – Quality
• Financial Performance • Other
Goals – Competitive Effect
– Time to break even – Image Change
– Margins – Morale Change
– IRR, ROI
Strategic Platform Decisions
• Type of Demand Sought
• Competitive Advantage
• Product Line Replacement
• Competitive Relationship
• Scope of Market Entry
• Permanent, stand-alone.
• Permanent, but as a bridge to other items
-- e.g., platform strategy.
• Temporary. Given firms’ tendency to
develop streams of products, more and
more new products are actually only
Some Other Strategic Platform
• Aggressiveness (aggressive versus cautious
attitude at entry)
• Type of demand sought (primary versus
• Competitive advantage sought (differentiation,
price leadership, or both)
• Competitive relationship (aim at a competitor,
avoid a competitor)
• Image (create a new image, tweak an existing
image, use the already-existing image)
Scope of Market Entry
This is not test marketing. This is launch.
All forces in place and working.
• 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.
The Target Market Decision
• Alternative ways to segment a market
– end-use, geographic/demographic,
• Micromarketing and mass customization
• Also consider the diffusion of innovation
To Whom Are We Marketing?
• Users vs. non-users (primary vs. selective
• Target market criteria (demographic,
geographic, psychographic, benefit
• Everybody -- no narrowing down (mass
customization, Post-It notes)
The real issue here is commitment -- by all
NPD participants and by management
Why Should They Buy It?
• This too we have been testing -- basic concept
statement used for testing and for guiding
technical (e.g., QFD “Whats”), and 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
– Better meet needs and preferences.
– Lower price than current items.
Product Positioning Options
Position to an Attribute Position on a Surrogate
• Feature • Nonpareil
• Function • Parentage
• Benefit (direct or follow- • Manufacture
on) • Target
• What is the brand’s role or purpose?
• Are you planning a line of products?
• Do you expect a long-term position in the
• How good is your budget?
• Physical/sensory qualities of brand
• Message clear and relevant?
• Insulting or irritating to anyone?
Questions and Guidelines in Brand
What is the brand's role or purpose? If the brand is to aid in positioning, choose
a brand name with meaning (DieHard,
Holiday Inn). If purely for identification, a
neologism (made-up word) such as Kodak
or Exxon will work.
Will this product be a bridgehead to a line of If so, choose carefully so as not to be a
products? limitation in the future (Western Hotels
changed name to Western International,
then finally to Westin.)
Do you expect a long-term position in the If not, a dramatic, novelty name might be
market? useful (such as Screaming Yellow Zonkers).
Is the name irritating or insulting to any Women found Bic's Fannyhose to be
market segment? objectionable.
Some Brand Names That Didn’t Work Figure 17-9
Crapsy Fruit French cereal
Fduhy Sesane China Airlines snack food
Mukk Italian yogurt
Pschitt French lemonade
Atum Bom Portuguese tuna
Happy End German toilet paper
Pocari Sweat Japanese sport drink
Zit German lemonade
Creap Japanese coffee creamer
I'm Dripper Japanese instant coffee
Polio Czech laundry detergent
Sit & Smile Thai toilet paper
Barf Iranian laundry detergent
How Brand Equity Provides Value
High High High More/Better
Brand Brand Perceived Brand
Loyalty Awareness Quality Associations
Reduced Easier to Supports Creates Patents or
marketing make quality positive trademarks
costs brand positioning image
Increased Supports Helps Strong
trade Increased higher-price customer channel
leverage liking and strategy process relationships
Provides value to customer: Provides value to firm:
Assists in customer information Increases effectiveness of marketing
Increases confidence in purchase Increases customer loyalty and trade
Increases satisfaction in product use leverage
Facilitates brand extensions
Is a source of competitive advantage
Building Brand Equity
• Getting awareness of the brand and the
• Making brand associations -- even the
factory location in Saturn’s case.
• Building perceived quality
• Loyalty in repurchase -- locking them in
• Getting reseller support
A Brand Report Card
Delivers benefits desired by customers. Starbucks offers “coffee house experience,” not just
coffee beans, and monitors bean selection and roasting
to preserve quality.
Stays relevant. Gillette continuously invests in major product
improvements (MACH3), while using consistent slogan
“The best a man can get.”
Prices are based on value. P&G reduced operating costs and passed on savings as
“everyday low pricing,” thus growing margins.
Well positioned relative to competitors. Saturn competes on excellent customer service,
Mercedes on product superiority. Visa stresses being
“everywhere you want to be.”
Is consistent. Michelob tried several different positionings and
campaigns between 1970 and 1995, while watching
The brand portfolio makes sense. The Gap has Gap, Banana Republic, and Old Navy
stores for different market segments; BMW has the 3-,
5-, and 7-series.
Marketing activities are coordinated. Coca-Cola uses ads, promotions, catalogs,
sponsorships, and interactive media.
What the brand means to customers is Bic couldn’t sell perfume in lighter-shaped bottles;
well understood. Gillette uses different brand names such as Oral-B for
toothbrushes to avoid this problem.
Is supported over the long run. Coors cut back promotional support in favor of Coors
Light and Zima, and lost about 50% of its sales over a
Sources of brand equity are monitored. Disney studies revealed that its characters were
becoming “overexposed” and sometimes used
inappropriately. They cut back on licensing and other
Profitable Brand Strategies
Low Relative Market Share High Relative Market Share
Value Brand Category Dead End Low Road
Example: Nine Lives Example: Oscar Meyer
Optimum strategies: Optimum strategies:
Slash costs and prices Cut costs and reduce prices
“Trump” market leader with Build brand equity
Premium Brand Category Hitchhikers High Road
Example: Neutrogena, Post Example: Gillette, Clorox
Optimum strategies: Optimum strategies:
“Don’t rock the boat” Value-improving innovations
Innovate Premium prices
Find a niche market
Source: Adapted from Vijay Vishwanath and Jonathan Mark, “Your Brand’s Best Strategy,” Harvard
Business Review, May-June 1997, pp. 123-129.
The Launch Cycle
Prelaunch Beachhead Early growth
Tactical Launch Decisions and Actions, Showing Influences on
Launch Tactic Effective For:
Advertising Cases where awareness will stimulate trial
Coupons Reinforcing awareness
Publicity New and controversial technologies with high perceived usage risk
Sampling Cases where product advantages best learned through usage
Beta Test Sites Stimulating “sampling” and as a reference for other potential buyers
Clarifying relative product advantages or where uncertainty exists
Technical Support Cases of incompatibility in usage process
Distribution Cases where relative advantage strong (direct channels)
Intensity of Cases where warranty/maintenance service needs to be offered easily
Distribution Cases where availability needs to be stimulated
Introductory Pricing High relative advantage and compatibility (skimming policy); early
adoption needs to be stimulated (penetration policy)
Price Cases where economic risk needs to be reduced (i.e., through rebates
Administration or money-back guarantees)
Breadth of Introducing new product categories with high relative advantage
Product Deletion High margin but strong relative advantage (fast deletion); high
switching costs (slow deletion)
Preannouncing Building hype for new products; useful if relative advantage is high
• This refers to the heavy expenditure needed to
overcome sales inertia (“getting the ball rolling”).
• Steep rising expenditures curve during this
period, up to point where sales are increasing at
an increasing rate.
• Begins with the announcement.
• Key decision during beachhead: when do you
end it? How do you know inertia has been
Copy Strategy Statement
• Communications tools used at launch will have
• 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.
Typical Examples of Copy Points
• “The provider of this insurance policy is the
largest in the world.”
• “This cellular phone has no geographic
• “Dockers are available at JCPenney.”
• “Future neurosurgeons benefit from the hand-to-
eye skills of computer games like this one.”
There is no limit to the choices here, but there must be a
focus. Only a few copy points are going to be accomplished
at a time.
A-T-A-R Goals: The New Product
• New product group must persuade itself and
management that the plan can achieve the
necessary awareness, availability, trial, and
• and that it can do so in sufficient quantity and at
• Awareness: measuring awareness/methods for
Stocking and availability
Resellers Role: prestocking activities such as training and
installing equipment/stocking of new item/preparation for promotion
And actual promotion
• Increase distributor’s unit volume.-outstanding product/use pull
techniques/monopoly/merchandise assistance ie pop’s
• Increase distributor’s unit margin.-% margin, special
discounts/allowances and special payments/prepay allowances to
• Reduce distributor’s cost of doing business-managerial
training/returned goods policy/drop-ship delivery/tray pack the
• Change distributor’s attitude toward the line.-by
encouragement/discouragement/rap sessions/better product
Getting Trial: Barriers to Trial
•Trial may be personal/vicarious/virtual
•Trial must have some cost associated
with it for learning to take place
• Lack of interest in the claim.
• Lack of belief in the claim.
• Rejecting something negative about product.
• Competitive ties.
• Doubts about trial.
• Lack of usage opportunity.
• Risk of rejection.
Appropriate Launch Tactics Given
Relative Advantage and Compatibility
A. Low Relative Advantage B. High Relative Advantage
1. Low Compatibility Penetration price Preannounce
Slow deletion Broad product assortments
Risk-based promotion (leasing, Information-based promotion
money-back guarantees, (shows, demonstrations, websites,
equipment allowances) publicity/education)
Intensive distribution Selective distribution
2. High Compatibility Secrecy before entry Skim price
Narrow product assortments Fast deletion
Awareness promotion (coupons, Usage-based promotion (samples,
etc.) beta tests) to clarify benefits
Intensive distribution received
Source: Adapted from Joseph P. Guiltinan, "Launch Strategy, Launch Tactics, and Demand Outcomes,"
Journal of Product Innovation Management, Vol. 16, No. 6, November 1999, pp. 520-521.
What Is Market Testing?
• Market testing is not test marketing!
• Test marketing is one of many forms of
market testing -- others include simulated
test market, informal sale, minimarket,
• Test marketing is also a much less
common form now due to cost and time
commitments and other drawbacks.
Decision Matrix on When to Market
Scope of Learning
Cost and Time
Stages of the product development cycle
How Market Testing Relates to the
Other Testing Steps
Two Key Values Obtained from Market
• Solid forecasts of dollar and unit sales volume.
• Diagnostic information to allow for revising and
refining any aspect of the launch.
Deciding Whether to Market Test
• Any special twists on the launch? (limited time
or budget, need to make high volume quickly)
• What information is needed? (expected sales
volumes, unknowns in manufacturing process,
• Costs (direct cost of test, cost of launch, lost
revenue that an immediate national launch
would have brought)
• Nature of marketplace (competitive retaliation,
• Capability of testing methodologies (do they fit
the managerial situation at hand)
Types of Information That May Be
• Manufacturing process: can we ramp-up from
pilot production to full scale easily?
• Vendors and resellers: will they do as they have
promised in supporting the launch?
• Servicing infrastructure: adequate?
• Customers: will they buy and use the product as
• Cannibalization: what will be the extent?
Methods of Market Testing, and Where
• Often used in business-to-business and
consumer durables, similar to concept and
product use tests.
• Give full pitch on product, answer
questions, discuss pricing, and ask:
– “If we make this product available as I have
described it, would you buy it?”
• Often conducted by regular salespeople
calling on real target customers.
Conditions for Speculative Sale
• Where industrial firms have very close downstream
relationships with key buyers.
• Where new product work is technical, entrenched
within a firm's expertise, and only little reaction is
needed from the marketplace.
• Where the adventure has very little risk, and thus a
costlier method is not defendable.
• Where the item is new (say, a new material or a
completely new product type) and key diagnostics are
needed. For example, what set of alternatives does
the potential buyer see, or what possible applications
come to mind first.
Simulated Test Market (STM)
• Create a false buying situation and observe what the
• Follow-up with customer later to assess likely repeat
• Often used for consumer non durables.
• Purpose is to get estimates of ATAR
• Usually involve 300-600 people, 8-14 weeks.
• Prominent suppliers of STMs are BASES and
• Key purpose is to estimate how well the product will sell
so the various services offer trial and repeat rates with
the clients assumptions on awareness, retail
availability, competitive actions
Simulated Test Market
• Mall intercept.
• Self-administered questionnaire.
• Advertising stimuli.
• Mini-store shopping experience.
• Post-exposure questionnaire.
• Receive trial package.
• Phone followup and offer to buy more.
Possible Drawbacks to STMs
• Mathematical complexity
• False conditions
• Possibly faulty assumptions on data, such as
number of stores that will make the product
• May not be applicable to totally new-to-the-
market products, since no prior data available.
• Does not test channel member response to the
new product, only the final consumer
A-T-A-R and the
Market Testing Methods
Controlled Sale by Informal Selling
• Used for business-to-business products,
also consumer products sold directly to
• Train salespeople, give them the product
and the selling materials, and have them
make calls (in the field, or at trade shows).
• Real presentations, and real sales, take
Controlled Sale by Direct Marketing
More secrecy than by any other controlled sale
The feedback is almost instant.
Positioning and image development are easier
because more information can be sent and
more variations can be tested easily.
It is cheaper than the other techniques.
The technique matches today's growing
technologies of credit card financing, telephone
ordering, and database compilation.
Controlled Sale by Minimarkets
• Select a limited number of outlets -- each store is a
minicity or “minimarket.”
• Do not use regular local TV or newspaper advertising, but
chosen outlets can advertise it in its own flyers.
• Can do shelf displays, demonstrations.
• Use rebate, mail-in premium, or some other method to
get names of purchasers for later follow-up.
• More realistic, actual buying situation, great flexibility in
changing price and other variables
• Helps to work on problems like brand confusion, price,
package instructions, product misuse, or different
Controlled Sale by Scanner Market Testing
• Audit sales from grocery stores with scanner systems --
over a few markets or national system and two panels of
1000 families in each city to have electronic technology
installed in their TV sets, report their exposure to print
media and make all their purchases from the listed
grocery stores, use a special card to identify their family
• Sample uses:
– Can use the data as a mini-market test.
– Can compare cities where differing levels of sales
support are provided.
– Can monitor a rollout from one region to the next.
Minimarkets and Scanner Testing: IRI’s
BehaviorScan and InfoScan
• Cable TV interrupt privileges
• Full record of what other media (such as magazines) go
into each household
• Family-by-family purchasing
• Full record of 95 percent of all store sales of tested items
from the check-out scanners
• Immediate stocking/distribution in almost every store is
assured by the research firm.
Result: IRI knows almost every stimulus that hits each
individual family, and it knows almost every change that
takes place in each family's purchase habits.
Full scale methods: The Test Market
• REPRESENTATIVE PIECE OF THE MARKET IS
SELECTED FOR DRESS REHEARSAL
• Several test market cities are selected.
• Product is sold into those cities in the regular channels
and advertised at representative levels in local media.
• Once used to support the decision whether to launch a
product, now more frequently used to determine how
best to do so.
Pros and Cons of Test Marketing
• abundant supply of • Cost ($1 mill+)
information such as sales • Time (9-12 months+)
usage, prices, reseller – hurt competitive
reaction, publicity and advantage
competitive reaction – competitor may
• Risk Reduction monitor test market
– monetary risk – competitor may go
– channel relationships national
– sales force morale • Competitor can disrupt
• Strategic Improvement test market
– marketing mix
– production facilities
A Risk of Test Marketing:
“Showing Your Hand”
•Kellogg tracked the sale of General Foods' Toast-Ems while they were in test
market. Noting they were becoming popular, they went national quickly with Pop-
Tarts before the General Foods' test market was over.
•After having invented freeze-dried coffee, General Foods was test-marketing its
own Maxim brand when Nestle bypassed them with Taster's Choice, which went on
to be the leading brand.
•While Procter & Gamble were busy test-marketing their soft chocolate chip
cookies, both Nabisco and Keebler rolled out similar cookies nationwide.
•The same thing happened with P&G’s Brigade toilet-bowl cleaner. It was in test
marketing for three years, during which time both Vanish and Ty-D-Bol became
established in the market.
•General Foods' test market results for a new frozen baby food were very
encouraging, until it was learned that most of the purchases were being made by
competitors Gerber, Libby, and Heinz.
• Select a limited area of the country (one or
several cities or states, 25% of the market, etc.)
and monitor sales of product there.
• Starting areas are not necessarily representative
– The company may be able to get the ball
rolling more easily there
– The company may deliberately choose a hard
area to sell in, to learn the pitfalls and what
really drives success.
• Decision point: when to switch to the full national
Types of Rollout
• By geography (including international)
• By application
• By influence
• By trade channel
Patterns of Information Gained
Risks of Rollout
• May need to invest in full-scale production
• Competitors may move fast enough to go
national while the rollout is still underway.
• Problems getting into the distribution
• Lacks national publicity that a full-scale
launch may generate.
Probable Future for Market
• Test marketing (“dinosaur”)
• Pseudo sale (incomplete)
• Minimarket (flexibility & variety)
• Rollout (small, fast, flexible)
Launch Management Concept Showing
% aware who As of now Goal
Plan Without action
Launch Now 6 months
The Launch Management System
• Spot potential problems.
• Select those to control.
– Consider expected impact/damage.
• Develop contingency plans for the management of
• Design the tracking system.
– Select variables.
– Devise measuring system.
– Select trigger points.
Adage: in driving a car, it is the potholes you don’t know
about (or forget about) that cause you damage.
Spotting Potential Problems
• Problems section from the situation analysis.
• Role-play what competitors will do.
• Look back over all the data in the new product's
• Consider hierarchy of effects needed to result in
a satisfied customer (A-T-A-R).
A-T-A-R Hierarchy: Where Does
the Problem Lie?
Tried Not R.
Unaware Does the problem lie in awareness,
trial, or repeat?
Decision Model for Building Launch
Select the Control Events
Of all potential problems,
• Which have enough impact to warrant investigation?
• Which of these ought to be given special consideration?*
• Which of these should be given contingency planning?
• And which of these need to be tracked?
*Basis: Consider potential damage and likelihood
Develop Contingency Plans
• "Is there anything we can do?"
– E.g.: competitive price cut or product
• Base contingency plan on type of problem:
– 1. A company failure (e.g., inadequate
– 2. A consumer failure (e.g., low awareness
Designing the Tracking System
• Select the tracking variables
– Relevant, measurable, predictable
• Select the trigger points
• Consider the non trackable problems
Questions from New Product
Category Usage Questions
In the past six months, how many times have you bought (product
What brands of (product category) have you ever heard of?
Have you ever heard of (brand)? (Ask for 4 to 6 brands)
Have you ever bought (brand)? (Ask for 4 to 6 brands)
About how many times have you bought (brand) in the past six
Advertising Awareness Questions
Do you recall seeing any advertising for (brand)? (ask all brands
respondent is aware of)
Describe the advertising for (brand).
Where did you see the advertising for (brand)?
Questions from New Product
Tracking Study (continued)
Have you ever bought (brand)?
If "Yes": If "No":
How many times have you bought it? Did you look for (brand) in the
How likely are you to buy (brand) again? store?
What did you like/dislike about (brand)? Why didn't you try (brand)?
What do you think of the price of How likely are you to try (brand)
(brand)? in the future?
A Sample Launch Management Plan
Salespeople fail to contact general-purpose market at
Track weekly sales call reports (plan is for at least 10
general-purpose calls per week per rep).
If activity falls below this level for three weeks running, a
remedial program of one-day district sales meetings will
Another Problem Illustrated
Potential customers are not making trial purchases
of the product.
Begin a series of 10 follow-up calls a week to
There must be 25% agreement on product's main
feature and trial orders from 30% of those
prospects that agree on the feature.
Special follow-up phone sales calls to all prospects
by reps, offering a 50% discount on all first-time
A Stepwise Product Deletion
Recognition of the product to
Analysis and revitalization stage
Evaluation and decision formulation stage
Source: George J. Avlonitis, Susan J. Hart, and Nikolaos X. Tzokas, “An Analysis of Product Deletion
Scenarios,” Journal of Product Innovation Management, Vol. 17, No. 1, January 2000, pp. 41-56.