New Product Launches

Bringing a new product to market is both an art and a science. This article describes the types of research required and outlines the steps you can take to make sure the launch goes smoothly.

Launching a new product is one of the most daunting challenges a marketer faces. Even big players often fail here, despite millions spent on research and market testing. Companies are sometimes so enamored of their product concept that they fail to do their homework. Or they engage in wishful thinking, ignoring what the research tells them. Even more significantly, new product introductions involve much more than marketing to the end consumer: Your strategy needs to include your distribution channel, sales, and operations employees. A successful launch strategy is an integrated process that involves many areas of your business as well as critical internal and external marketing issues. A few lucky products succeed despite poor launch strategies, but you'll have a better chance if you follow all of the steps outlined in this article. (For information related to this topic, see Article 6030, Coupons and Rebates.)

CRITICAL ISSUES

Research is key, because without it you're flying blind. It should never be seen as a process of confirming your "good judgment" but as a means of getting at the truth. This can work both ways: You may find that your product isn't viable, or you may discover markets for it that you never imagined.

Timing. Set a time frame for product rollout, and stick to it. Many launches fall behind schedule, causing marketers to miss critical points in a given industry's business cycle. This can mean death for a new product. Create a schedule that reflects the time needed for each element of the launch. Important: Allow for the inevitable foul-ups.

Anticipate success. What happens when your product is a raging success and you don't have enough production capacity to keep pace with the orders? You lose not only sales but credibility in the marketplace as well. Human nature often dictates a wait-and-see attitude, but business doesn't work that way. That holds, especially, for such industries as computer software, where product life cycles are short.

Analysis. The progress of your launch program should be tracked as it unfolds. That way, you can fine tune as you go, devoting more resources to one marketing function and pulling back on others. You can also plan more accurately for manufacturing and distribution and, if the product is doing well, play up the success in your promotions.

GROUNDWORK

Determine the people you'll need to influence. What critical audiences will you need to influence internally and externally?

Research. With a new product, the two main research goals are to find out:

who is likely to buy the product;

what you must tell this potential customer about the product in order to make the sale.

Research should play a part in every area of product development and marketing. It will help you effectively segment the market, position your product, test creative strategy, and schedule the rollout.

Segmentation is the process by which you narrow down the field of potential customers to those most likely to buy your product. The market can be divided into segments based on such factors as age, sex, race, geographic location, household income, spending patterns, and education. Unless you're creating a new product category, there should be information available on what types of people are heavy users of a similar product. By using segmentation techniques, you should be able to identify a core group of likely customers plus a number of secondary targets.

Positioning is the process of creating the right perception of your product in the minds of likely customers. Specifically, this means defining the relationship of the product to its competition and communicating the core attributes that make it stand out.

Distribution analysis involves looking at who will actually present your product to the end-customer: Will this be a direct sale or one made through distributors, agents, retailers, independent representatives, or more than one of the above? You will need a strategy to break through the clutter to engage these people to present your great idea to the customer, including effective communication and incentive or recognition programs.

Employee involvement. Chances are, your product launch will require you to not only get the salespeople revved up but operations and distribution people as well. Does your program include training, communication, and incentives for these key audiences?

TYPES OF RESEARCH

Environmental analysis. The first step in your research is to collect available secondary source data that concerns your product and the potential market. This will provide a perspective upon which to base your marketing plan. Do some digging, and you'll find a wealth of information on everything from industry sales trends, competing products, product launch case studies, consumer trends, and legal and regulatory issues. Sources include industry trade associations, the government, company 10Ks, industry newsletters, private research firms, books, trade publications, and the Internet. Done right, this research will answer immediate questions about the size of the potential market, category growth forecasts, technological trends, and the competitive environment.

Customized surveys. The value of data collected from customers, prospects, and channel participants is not necessarily related to the money spent collecting it. You can spend hundreds of thousands of dollars on such pricey undertakings as direct mail surveys and mall intercepts and wind up with a stack of bogus data. Similarly, you can survey a small sample of participants and get a ton of useful information. The risk is greater with new products, since you're often asking people to evaluate something that, for them, doesn't exist. Human nature creates other problems, because what people say and what they do are often at odds. Given such pitfalls, however, survey data still can be extremely helpful and cost-effective. For instance, you can find out what consumers like or dislike about a competing product, where they purchase it, and how often.

Focus groups. New products often benefit from focus-group evaluation during development, particularly when it comes to fine tuning a product's design. But the great strength of focus groups is also their principal weakness: the group dynamic. The process of listening to a group of core customers discuss your product and competing products is often the first real-world feedback a marketer gets, and, in many cases, it uncovers major problems early in the game. But groups tend to create their own reality. Opinionated participants emerge as leaders, and meeker ones usually go along with what they perceive to be the group's consensus. Also, focus groups are artificial, in that people are paid to focus on matters they might not give a passing thought to in everyday life. Bottom line: Use focus groups wisely; do several, or none at all; expect to spend at least $20,000 apiece.

Testing. This is your way of determining the right marketing strategy in a limited, cost-effective manner. Whatever your budget, you should be doing some form of testing. Here are two common types:

Direct marketing provides some of the simplest, most effective, and cheapest methods of testing. Mailing to a selected list of households or businesses can help you arrive at optimum segmentation and positioning strategies. For instance, when testing different offers in a direct mail campaign, mailing to samples as small as 500 households can provide highly accurate data. When one offer pulls three times more than another, you'll truly appreciate the value of this data.

Test marketing is a good deal more complicated, especially if the test involves multiple price points. Big players choose whole cities for market tests. This is the only way to establish the effectiveness of the complete marketing program, including advertising and promotion, in a limited environment. Even within a city, shoppers from one neighborhood to the next may react differently to an offer or pricing strategy. Because of all the variables, this type of market testing gets expensive.

MARKETING ISSUES

With new products, there is always a process for establishing consumer acceptance, though the time it takes to do this varies widely from industry to industry. For instance, it's hard to introduce new products in the cluttered world of packaged goods, but computer users are always on the lookout for next-generation products. Here are some general considerations that must be addressed when formulating marketing strategy:

• Distribution. How your product reaches customers will determine much about your overall marketing strategy and budget. Direct distribution is the simplest, but many marketers cannot afford the cost of large-scale direct marketing, so they rely on middlemen. If that's your case, your channel distribution strategy should set goals for market coverage and spell out deadlines for each phase of the product launch. Target specific types of channel members, and determine how extensively you will market to distributors and/or retailers, as opposed to consumers. Entering new distribution channels requires building relationships. To get a new product on someone's shelves, you should have a plan for such things as in-store merchandising, advertising support, and delivery capabilities.
  
  
• Budget. Many new products fail simply because their marketing program is undercapitalized. Before you can map out a coherent strategy, you need to establish a realistic budget. First, determine how much product you need to sell during the initial period, typically a year. The rest of your marketing campaign should flow from this projection. Once you know how many people you need to reach, budgeting is a question of choosing the most effective marketing vehicles and calculating the costs (see Creating Demand). With the sales goal in place, you work backwards, in a way, deciding which marketing options will do the job, estimating the costs, and using the result to help set the price of the product.
  
  
• Branding. What you name your product should be determined only after you have a clear sense of your target market and have developed a positioning strategy. Consider a wide range of names, and gather input on the various possibilities from everyone with an interest in the product: employees, customers, vendors, and channel participants. The brand name you choose should reflect product image and positioning, and it should be easily conveyed and remembered. Before you design the product logo, consider the various media where the brand name will appear. Does it look good in print? On TV? On the Internet? Does it sound right when spoken in a voice-over?
  
  
• The message. Above all, you must have a clear and consistent marketing message that reflects your overall positioning strategy. There are two main ways in which the message is expressed:
  The essential selling proposition. This is the core of the sales pitch, describing how product attributes meet customer needs. It tells the consumer "what this product will do for you and why you can't live without it."
  Product image. There's an art to making sure that every aspect of the product's presentation addresses the consumer's tastes and desires. This often happens on a subconscious level, and the message may be conveyed through images as well as words. One common mistake made with new product marketing is to produce a confusing message. Nervous marketers often try to cover all the bases with their message, and they wind up with a bunch of gibberish.

CREATING DEMAND

What motivates people to buy a product? Much research has been devoted to this subject, but there's no simple answer. One thing is certain, however. Success depends heavily on how well you combine the following disciplines:

• Promotion is a short-term tactic for increasing awareness and sales through the use of various incentives. There are many options, including couponing, contests, event sponsorship, sampling, and premiums. In the ideal promotion, some of the marketing message rubs off, even though customers are attracted mainly by the incentive. But the effects of any promotion pass quickly, so be sure that your efforts to build brand image and awareness continue beyond the term of the promotion.
  
  
• Advertising. There are two main types of advertising. Image advertising is used to build awareness, sell benefits, and otherwise create a positive identity for your product. Direct response advertising goes one step further and actually sells the product; there's a specific offer and response mechanism included in the ad. Obviously, the wrong ad can kill a product launch, even when the product is a winner. Follow your research closely when creating the ad, and don't be bullied by your agency. Such elements as art, copy, and sound should reflect the positioning and brand image you have developed so carefully.
  
  
• Media. A strategy that employs several media is usually the best bet, because one advertising impression will strengthen another. For instance, print ads will reinforce a direct mail campaign, and radio spots reinforce TV. Too many marketers put their eggs in one basket, spending their budget on, say, TV commercials when a combination of media might have produced better results. Producing and placing ads involves making deals with printers, mail houses, production companies, voice-over talent, and media salespeople, among others. If you work with an ad agency, let it handle the deal-making.
  
  
• Merchandising is what you do to support certain marketing activities with materials other than media placements. For instance, if your new product is to be sold through retailers, remember that 75 percent of purchasing decisions are made in-store (see Article 6060, Point-of-Purchase Advertising). That should make you spend at least as much time on point-of-purchase promotion as you do on media advertising. Merchandising also involves keeping field sales personnel well-stocked with sales kits, brochures, and other leave-behind materials so that the sales pitch stays focused.
  
  
• Trade shows. There's a reason why so many new products are introduced at trade shows: It's where most of an industry's buyers are together in one place. At some shows, you can rent a booth and walk away with six months' worth of orders. It's also possible to waste a lot of money and get nowhere. Trade shows are hectic places for buyers. Most buyers create an agenda before the show, and, if you're not on it, don't expect them to visit your booth. Doing a lot of preshow promotion will help you get on the buyer's schedule, and advertising in show dailies can boost traffic. Staff the booth with competent people who can talk with buyers about such issues as advertising support and delivery schedules. (See Article 8010, Trade Shows.)
  
  
• Public relations. No launch program should be without a PR strategy, because a new product's success usually requires forging new relationships (and reshaping existing ones) with employees, channel partners, and consumers. Relationship-building is what PR is all about. Don't think of it as simply sending out press releases to various news outlets. Rather, it should be a well-orchestrated process of communication designed to motivate a response. Concentrate especially on areas where your marketing efforts need an extra push, such as channel participants who may be leery of making room on the shelves for your product. For example, provide continual updates on favorable research and test-market results along with lots of personal follow-up by sales reps or others who excel at dealing one-on-one with people.

FINDING SUPPLIERS

Teaming up with the right mix of vendors is critical to the success of any new product launch. Your search should include a review of advertising and promotion agencies to see which ones might bring the right experience, talents, and enthusiasm to your program. Some of the larger agencies can package a number of the services you'll need; sometimes you'll benefit by assembling your own team. Look to trade publications such as Advertising Age and Brandweek for case studies of product introductions, and note which firms were involved. Also, the American Marketing Association's annual Edison Best New Product Awards include categories for agencies. Reviewing the recent winners is a good way to start looking for the agencies that are doing the breakthrough campaigns.

Listed below are the types of players you may want on your team:

• Consultants are often used to ride herd on all the other players. Many are former agency or corporate marketing executives who provide their expertise on a project basis. Consultants usually work on retainer, but some make money by taking commissions from the vendors they recruit for your project. Before you put your trust in someone, make sure they know your industry, and check their references.
  
  
• Advertising agencies. The core of an ad agency is the team of writers and art directors who, hopefully, can create a positive impression of your product. Larger agencies may have in-house research, media planning/buying, or other services. But, in choosing an ad agency, focus on its creative prowess.
  
  
• Media planning firms are used to select the right media options and create a proper schedule of placements.
  
  
• Media buyers buy the advertising space or time. They make their money by charging you a commission, the amount of which you can negotiate.
  
  
• Promotion agencies are often confused with ad agencies, but they are fundamentally different. They specialize in planning and executing complicated promotional campaigns. While their creative capabilities are usually limited, they are adept at tying promotions into existing advertising and promotional themes.
  
  
• Public relations firms range from individuals working out of their homes to large multinational corporations. To get the most publicity for your launch, look for a firm that knows your industry and has worked on similar launches.

To find a supplier, go to #9520, Supplier Finder.

CASE HISTORY: A LOW-BUDGET LAUNCH

Launching a new product and a new company at the same time is a challenge. That was the situation that two brothers found themselves in when they designed a glove that kept sailboarders' hands warm when they sailed in cold water.

Research showed that avid sailboarders typically had high incomes and spent an average of more than $1,500 a year on equipment. They readily embraced new technologies and were willing to pay big bucks for improved performance. Research also revealed that sailboarding equipment is sold mainly through small specialized shops.

To position the product and create an image for it, the two entrepreneurs paid close attention to their research findings. They based their marketing message on the glove's ability to provide maximum dexterity in severe cold. The product's attributes were translated in terms of performance enhancement. Thus the positioning of the product matched the most likely scenario for creating demand in the core market.

The brothers also heeded the research when they devised their marketing strategy. Channel participants were motivated with a classic "pull" strategy that assured them customers would show up in stores after seeing the gloves advertised in specialty magazines. (The ad campaign was the biggest expense of the marketing program.) Retailers were also impressed with the action-oriented packaging and point-of-purchase displays. The company exhibited at a national trade show, using ads in local dailies to promote a discount for buyers who came to its booth and ordered gloves. In addition, samples were sent to professional sailboarders, a move which generated several testimonials.

The marketing strategy worked well. More than 100 stores stocked the gloves by the end of the first year. The mom-and-pop nature of the industry enabled the company to partner with retailers and build a solid foundation for sales growth. By sticking to the basics, the company was able to show a profit within two years.

ASSOCIATIONS

Although there are no organizations devoted specifically to launching new products, two publications by Gale Research (313-961-2242) provide useful contact information:

• Encyclopedia of Associations lists more than 19,000 national industry associations. 4,000 pp. $490.00.
• Trade Shows Worldwide is a guide to trade shows, conferences, merchandising marts, and expositions. 1,743 pp. $277.00.

American Marketing Association (AMA) serves marketing and research executives as well as sales, advertising, and promotion people. It holds conferences and provides information on all aspects of marketing, including new product launches. Call 312-648-0536; go to http://www.ama.org/.

RESEARCH

Two companies provide a wealth of data on demographics, product usage, and brand loyalty for a variety of product categories:

• Mediamark Research Inc. (MRI). Call 212-599-0444; go to http://www.mediamark.com.
• Simmons Market Research Bureau (SMRB). Call 212-373-8900.

Marketing Science Institute publishes a variety of research papers on marketing subjects, including product development and branding. Example: "Advertising Exposure, Loyalty and Brand Purchase: A Two Stage Model of Choice," which compares advertising effectiveness with new vs. established brands. $18 each. Call 617-491-2060; go to http://www.msi.org.

Standard Rate and Data Service (SRDS) publishes demographic research as well as information and rate cards for nearly all published trade and consumer publications. Call 847-375-5000; go to http://www.srds.com.

Dun's Marketing Services has a number of publications and services that are useful for business-to-business marketing, including Dun's Million Dollar Directory and some excellent mailing lists. Some are available on CD-ROM. Call 800-526-0651 or go to http://www.dnb.com.

Nielsen DMA Test Market Profiles include data on such things as demographics, newspaper circulation, and TV audiences. Call 212-708-7500; go to http://www.nielsenmedia.com.

Fairchild Fact Files. Based on U.S. Census data, this series gives sales and buying-habit information by product category. Call 800-247-6622.

Leading National Advertisers (LNA) tracks network TV, spot TV, magazine, newspaper, radio, and outdoor advertising expenditures by brand and industry category. Call 212-789-1400 or go to http://www.cmr.com/.

BOOKS

Winning at New Products, by Robert Gravlin Cooper, provides up-to-date, step-by-step guidelines for conceiving, developing, and successfully launching new consumer products. $20. Perseus Press. Available through Amazon.com, $16.

The Pdma Handbook of New Product Development, by Milton Rosenau (editor), offers contributions from leading product development professionals presenting all aspects of the information needed for effective product development, from creation of concept through development and design to final production, marketing, and service. Discusses fundamental concepts including identifying customer needs, using multifunctional teams, and having an appropriate development procedure as well as important issues emerging in the field such as process ownership, pipeline management, metrics, and product architecture. John Wiley & Sons. Available through Amazon.com, $90.

The 22 Immutable Laws of Marketing, by Al Ries and Jack Trout, summarizes what these two renowned marketing consultants have learned in 40+ years about what makes a few companies hugely successful and most others failures. Hundreds of examples from well-known companies demonstrate the rules of marketing. $12. Harper Business. Available through Amazon.com, $11.20.

Concurrent Marketing, by Frank V. Cespedes, addresses the integration of product, sales, and service, with a new focus on downstream marketing practices. Good treatment of product management. 307 pp. $29.95. Harvard Business School Press. Available through Amazon.com, $20.97.

Creating Demand, by Richard Ott. An analysis of what it takes to exploit the market potential of a product. 258 pp. $30. Irwin/McGraw-Hill. Available through Amazon.com, $30.

Strategic Database Marketing, by Arthur M. Hughes, helps you avoid the pitfalls of databasing when you launch a new product. The author, a direct marketing pro, offers solid advice on setting goals and formulating strategy. 352 pp. $35.00. Irwin/McGraw-Hill. Available through Amazon.com, $24.50.

The New Positioning, by Jack Trout and Steve Rivkin. Vague positioning strategies don't stand a chance in the product-cluttered 1990s. This book offers sharp insights from authors with decades of experience in this area. 173 pp. $21.95. McGraw-Hill. Available through Amazon.com, $10.36.

Market Segmentation, by Art Weinstein, describes how to use niche marketing to predict customer behavior. It takes a thorough look at a critical marketing strategy, complete with case studies. 311 pp. $32.50. Irwin/McGraw-Hill. Available through Amazon.com, $34.95.

The Handbook of Brand Management, by David Arnold. A managerial perspective on how to build and maintain a viable brand identity and a competitive branding strategy. A good overview. 259 pp. $24.95. Addison-Wesley Publishing. Available through Amazon.com, $21.

The Successful Marketing Plan, by Roman G. Hiebing Jr. and Scott W. Cooper, takes a lot of the confusion out of building a marketing plan. It describes what needs to be done and why. 342 pp. $36.95. Available through Amazon.com, $10.36.

PUBLICATIONS

New Product News, a monthly, is devoted to new product introductions in the consumer packaged goods business. Back issues available. $695/year. Call 312-527-3555.

Advertising Age focuses on advertising and brand-management issues. It's an excellent source of information on new product marketing. 52 issues. $119/year or $175/2 years. Call 212-210-0100 for general information, 888-288-5900 for subscriptions; go to http://www.adage.com.

Brandweek, a weekly, bills itself as the publication of brand management. It periodically writes about new product launches. $130/year. Call 800-722-6658; go to http://www.adweek.com.

Potentials in Marketing, a monthly, covers a range of marketing subjects. About half of the publication's editorial is dedicated to photos and descriptions of new products. Free to qualified users, otherwise $24/year. Call 612-333-0471.

Sales & Marketing Management covers a range of issues for executives who manage the sales and marketing functions. If you are launching a product or dealing with test markets, you may find it helpful to consult S&MM's Survey of Buying Power, which uses U.S. Census data to track consumer buying patterns by county and metro area. $48/year. Call 800-821-6897; go to http://www.salesandmarketing.com/.

ONLINE SERVICES

Advertising Research Foundation has a site that provides research on advertising effectiveness. Go to http://www.amic.com.

American Association of Advertising Agencies. Go to http://www.aaaa.org.

A.C. Nielsen is the leading source of data for buying and planning TV campaigns. Go to http://www.nielsenmedia.com.

Adweek/Brandweek/Mediaweek. You can access all three publications at this site. For a small charge, you can download articles from these publications, as well as from New Product News. Go to http://www.adweek.com.

American Demographics. This publication's Web site is a huge resource of demographic information. Go to http://www.marketingtools.com.

http://www.BuildingBrands.com has been set up by a small team of long-term marketing professionals which offers information on building brands that build business. The site covers every aspect of brands and brand building, including: brand strategy, marketing, communications, and customer relationship management.