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Innovation Management

Innovation Management. Kevin O’Brien. Launching New Products. 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?. Stage 1: Preliminary Investigation Market size/growth Competitive environment

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Innovation Management

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  1. Innovation Management Kevin O’Brien Launching New Products

  2. Launching New Products

  3. Questions What decisions do we need to make when launching a new product? Are there models and frameworks that can help us?

  4. Stage 1: Preliminary Investigation • Market size/growth • Competitive environment • General technological feasibility • Legal/regulatory constraints • Resources required Technical development Marketing development 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 Marketing Activities in NPD (Adapted from Cooper, 1993)

  5. 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

  6. 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)

  7. 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 Tactical Launch Decisions (Adapted from Guiltinan, 1999; Hultink et al., 1997, 1999)

  8. Organisation’s New product driver: Technical vs. market Degree of newness Desired type of demand outcome Product-market characteristics Strategic launch variables • Tactical launch variables • Promotion • Pricing • Product • Sales & distribution • Announcement • Deletion Lead vs. follow Target market Technical environment Design features & innovativeness Firm’s resources Perceived relative advantage & compatibility Realized demand outcomes Launch Planning (Guiltinan, 1999)

  9. 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)

  10. 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)

  11. 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 Pioneers and Followers

  12. Innovativeness & Buyer Behaviour Degrees of innovativeness of new products & desired buying behaviours New entry or line addition in existing market Product improvement New to the world Emphasis on Selective demand Emphasis on Replacement demand Emphasis on Primary demand Trial & repeat Migration Adoption & diffusion (Guiltinan, 1999)

  13. 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)

  14. Organisation’s New product driver: Technical vs. market Degree of newness Desired type of demand outcome Product-market characteristics Strategic launch variables • Tactical launch variables • Promotion • Pricing • Product • Sales & distribution • Announcement • Deletion Lead vs. follow Target market Technical environment Design features & innovativeness Firm’s resources Perceived relative advantage & compatibility Realized demand outcomes Launch Planning (Guiltinan, 1999)

  15. Sales Pre- launch Introduction Growth Maturity Decline The Launch Cycle The Launch Cycle Sales & Expenditures Expenditures Sales Early Growth Pre-launch Beachhead Announcement

  16. 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

  17. Low advantage/low compatibility • Penetration pricing • Slow deletion • Risk-based promotion • (leasing, money-back etc.) • Intensive distribution • High advantage/low compatibility • Pre-announce • Broad product assortments • Information-based promotion • (shows, demonstrations etc.) • Selective distribution • Low advantage/high compatibility • Secrecy before entry • Narrow product assortments • Awareness promotion • (coupons etc) • Intensive distribution • High advantage/high compatibility • Skimming pricing • Fast deletion • Usage-based promotion • (samples, beta-tests) • Selective distribution Launch Tactics A typology of launch tactics based upon relative advantage and compatibility (Guiltinan, 1999)

  18. Airbus A380 ‘Super-jumbo’

  19. TalkTalk (or WaitWait!)

  20. 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.

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