B2B_49

Clustering product launches by price andlaunch strategy

Roger J. Calantone

Department of Marketing and Supply Chain Management, Michigan State University, East Lansing, Michigan, USA, and

C. Anthony Di BenedettoFox School of Business and Management, Temple University, Philadelphia, Pennsylvania, USA

AbstractPurpose – The purpose of this paper is to examine the interaction of pricing strategies with other aspects of launch, in particular, timing, logistics/inventory strategy, and coordination with support organizations, and the effect on profit and competitive performance.Design/methodology/approach – The paper presents an empirical study of 215 recent new product launches, focusing on pricing and other strategicand tactical launch decisions and the resulting profitability and competitive performance. Clusters of new product launches are identified and theprofitability and competitiveness of each cluster are discussed.Findings – The paper finds that some clusters are related to greater success than others. The most profitable and competitively successful clustercontained launches supported by solid market research and marked by good timing decisions. By contrast, the least profitable/successful cluster werehigher price launches unsupported by adequate research.Research limitations/implications – The study is limited by the fact that the sampling frame is made up of members of a professional association ofproduct development and management, and may therefore be more representative of “best practice” in new product development (NPD) than of NPDin general. The authors believe the use of the key informant method is justified in this study, however this method has been criticized in the past.Originality/value – The pricing decision for a new product is sometimes oversimplified as a “high-low” or “skimming versus penetration” choice. Thestudy finds that the actual effect of pricing on ultimate success is much more complex, and that one must consider not only price level, but also thetiming of the launch, the logistics and inventory strategy, the extent of market research, testing, and planning, and so forth.

Keywords Product launch, Pricing policy, Distribution management, Inventory management

Paper type Research paper

An executive summary for managers and executive

readers can be found at the end of this article.

Introduction

The best firms at new product development (NPD) dependheavily on new products for continued sales revenues, andeffective product launch greatly improves the overall chancesof new product success (Maidique and Zirger, 1984;Calantone and Di Benedetto, 1988; Cooper, 1979; Cooperand Kleinschmidt, 1987, 1990; Griffin, 1997; Di Benedetto,1999). Product launch is also financially risky, and in fact isoften the most costly stage in the NPD process (Booz, Allenand Hamilton, 1982; Calantone and Montoya-Weiss, 1994;Cooper and Kleinschmidt, 1987; Hultink, Griffin, Hart andRobben, 1997; Guiltinan, 1999).In spite of its managerial importance, launch has only

recently begun to attract much academic research attention.Table I presents the most prominent empirical and reviewarticles on the subject of launch from the early 1990s to thepresent day. Surprisingly, little empirical research had focused

on product launch until the early 1990s, as reported by

Calantone and Montoya-Weiss (1994). Soon after, the

Product Development & Management Association (PDMA)

published its Handbook of New Product Development, which

included review articles on consumer (Ottum, 1996) and

industrial (Stryker, 1996) product launch. About this time,

several research studies into product launch were initiated in

the USA, the UK, and The Netherlands, as shown in Table I.

An important research milestone was the special issue on new

product launch, published by the Journal of Product Innovation

Management in November 1999. Empirical studies up until

this time focused on strategic and tactical launch decisions

and their effects on performance (e.g. Hultink, Griffin, Hart

and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997;

Hultink and Hart, 1998). Later studies expanded on this

literature base to investigate related issues such as the role of

logistics and supply chain relationships in successful launch

(Bowersox et al., 1999), differences in competitive reactions

to launches of radical and incremental new products

(DeBruyne et al., 2002), launch signaling (Hultink and

Langerak, 2002), the moderating role of product

innovativeness (Lee and O’Connor, 2003), and the role of

market orientation (Langerak et al., 2004).

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0885-8624.htm

Journal of Business & Industrial Marketing

22/1 (2007) 4–19

q Emerald Group Publishing Limited [ISSN 0885-8624]

[DOI 10.1108/08858620710722789]

A research grant from the Product Development & ManagementAssociation funded this research. The authors would like to thankWesley Johnston and two anonymous reviewers for their insightfulcomments on an earlier draft.

4

Most of the empirical and conceptual studies of product

launch in Table I distinguish two groups of launch decisions:

strategic and tactical launch decisions (Hultink, Griffin, Hart

and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997;

Hultink and Robben, 1999; Guiltinan, 1999). Strategic

decisions are those that are concerned with product and

market issues, and are often finalized early in the NPD

process, perhaps in the Product Innovation Charter or at

product protocol specification. Strategic decisions target

market decisions (niche versus mass market), leader vs

follower decisions, and decisions on relative innovativeness

(Guiltinan, 1999; Di Benedetto, 1999; Calantone and

Montoya-Weiss, 1994). Tactical decisions include familiar

marketing mix decisions such as product branding, sales and

distribution support, promotion activities, timing decisions,

and pricing decisions. These decisions are usually made after

the launch strategy has been decided, and may be influenced

by strategic decisions already taken (Guiltinan, 1987;

Di Benedetto, 1999; Calantone and Montoya-Weiss, 1994).Launch management is often ignored in the handoff of

products between the team developing the commercial entity

and the consumer product brand managers or business-to-

business (B2B) product sales managers. Despite much

literature showing benefits of speed to market and early

entry advantage (see Lieberman and Montgomery, 1988,

1998), many firms do not develop pragmatic, heavily

monitored, and flexible launch programs. In this article, we

focus on a narrow perspective of the launch management

Table I Product launch literature summary

Author and year Type of publication Major topic

Calantone and Montoya-Weiss

(1994)

Review article The launch plan, launch timing, launch strategies, control of launch process

Saunders and Jobber (1994) Empirical study (US and UK)a Launch of replacement products and comparison of successful to unsuccessful

launches

Hultink and Schoormans (1995) Empirical study (The Netherlands) Analysis of high-tech product launch decisions

Ottum (1996) Review article Issues and procedures for launching a consumer product

Stryker (1996) Review article Issues and procedures for launching a business product

Hultink, Griffin, Hart and Robben

(1997)

Empirical study (UK) Interactions between product launch decisions and performance outcomes;

differentiates strategic and tactical launch decisions

Hultink, Hart, Robben and Griffith

(1997)

Empirical study (The Netherlands) Relationship between launch strategies and performance outcomes;

differentiates strategic and tactical launch decisions

Hultink et al. (1998) Empirical study (UK) Categorization of generic new product launch strategies

Hultink and Hart (1998) Empirical study (UK) Comparison of launch strategies for high and low advantage new products

Robben (1998) Empirical study (UK) Categorization of generic new product launch strategies

Guiltinan (1999) Conceptual paper Launch tactics need to be aligned with perceptions of new product relative

advantage and compatibility; relationship between strategy and tactics

Di Benedetto (1999) Empirical study (North America) Successful launches related to good execution of strategic, tactical, and

information-gathering activities

Hultink and Robben (1999) Empirical study (The Netherlands) Relationship between launch strategy and market acceptance as well as product

performance for both consumer and industrial products

Bowersox et al. (1999) Conceptual paper Importance of logistics and supply chain relationships to successful launch; lean

launch strategies based on response-based logistics

Hultink et al. (1999) Empirical study (UK) Consumer product launch decisions; relationship between launch decisions and

performance outcomes

Hultink et al. (2000) Empirical study (UK) Comparison of consumer and industrial new product launch decisions;

examined launch support program (e.g. advertising media)

Thoelke et al. (2001) Case study (eight Dutch companies) Strengths and weaknesses of launch strategies (differentiation, make-or-buy

decision, launch of new feature, etc.)

DeBruyne et al. (2002) Empirical study (USA, UK, The

Netherlands)

Competitive reactions to radical versus incremental new products are different;

discusses in which situations competitors are likely to react or not

Hultink and Langerak (2002) Empirical study (The Netherlands) Investigates launch signals such as hostility, commitment, and consequences,

and the impact of these on strength and speed of competitive reaction

Lee and O’Connor (2003) Empirical study (USA) Relationship between communication strategy and new product performance is

moderated by the product’s innovativeness

Langerak et al. (2004) Empirical study (The Netherlands) Market orientation is related to product advantage and to launch strategies and

tactics

Nagle (2005) Review article The launch plan, launch phases, the launch team and manager selection, launch

and continuous improvement

Calantone et al. (2005) Review article Launch strategy, flexible supply chain, benefits of a lean launch, illustrations in

two industries

Note: a All empirical studies are cross-sectional surveys unless otherwise noted

Clustering product launches by price and launch strategy

Roger J. Calantone and C. Anthony Di Benedetto


Volume 22 · Number 1 · 2007 · 4–19

5

process – pricing and its relationship to overall launch

management – in order to dredge up patterns of good andpoor approaches to launch management.Pricing decisions are always at the crux of the management

dilemma. Falling prices generally stimulate demand and drive

the volume cost decreases that most new product programsdepend on to realize and capitalize on the advantages of early

market entry; yet falling prices reduce revenues and marginsfor all concerned in the new product commercial enterprise,

unless costs fall even faster. The payoff to betterunderstanding of past launch behaviors is to develop anapproach to shorten breakeven times and to understand and

control new product launch programs better.The established marketing literature is quite clear about the

need to coordinate pricing decisions with all other elements ofthe marketing mix. A firm may choose to set a premium price

on its product in order to skim the market (maximize revenueobtained by different price segments), or to establish the

product as a quality leader. In each case, the product quality,distribution channel, and promotion strategy must be

consistent with and supportive of the higher price so that itis justified. Similarly, if production and distribution costs can

be contained, a penetration price strategy would be effective.In addition, managers must take cost-volume-profitconsiderations into account when making the skim vs

penetration price decision (for a thorough discussion of allthese issues, see Kotler (2003, pp. 473-7); see also Guiltinan

(1999)). Skimming or penetration pricing will not necessarilylead to good performance; proper execution of the price

strategy, made in coordination with the rest of the marketingmix, is essential.Some academic research has recently focused on the

interactions among the various activities conducted at the

time of the launch stage (Guiltinan, 1999; Ottum, 1996;Hultink, Griffin, Hart and Robben, 1997; Hultink and

Robben, 1999). In this study, we examine the interactionsbetween pricing and other marketing-mix elements, and alsostudy the roles of launch timing, logistics, and the

coordination with support organizations throughout thedistribution channel (Calantone and Montoya-Weiss, 1994;

Ottum, 1996) as well as the effect of industry structure andenvironment. Despite the evidence of the need to coordinate

price with other marketing mix elements, managers still willmake faulty pricing decisions, focusing only on the revenues

generated by high prices (Calantone and Montoya-Weiss,1994; Stryker, 1996). The effects of other variables included

in this study, such as launch timing, logistics decisions, anddistribution channel decisions, have received relatively lessresearch and are relatively less understood.In this study, we explore the combined effects of pricing

and non-pricing strategic and tactical decisions made by firms

at the time of launch. We review the literature on productlaunch to identify strategic and tactical variables thought to

affect launch success. We collect data from 215 recent newB2B and consumer product launches. Respondents provided

information on price decisions made at the time of launch,and we empirically identify three clusters of pricing strategies.

We also gather information on how well the strategic andtactical variables related to launch were carried out, as well as

on industry structure, environment, and overall profitabilityand competitive performance of the new product. From thisanalysis we identify constellations of new product launches in

terms of pricing and related launch strategies, and discuss the

success outcomes of each. These constellations can be related

to “pure” skimming and penetration strategies, but with

shades of difference in terms of the corresponding strategic

and tactical variables that suggest reasons for better or poorer

performance. We conclude by deriving and discussing

managerial recommendations, and outlining future research

directions.

Overview of variables affecting launch

Pricing and marketing mix strategy

The skim versus penetration price decision is closely linked

with the new product’s marketing mix strategy. A

differentiated product with a perceived relative advantage

over competitors can be supported with an extensive

promotional program, selection of exclusive distribution

channels, and a skimming pricing strategy (Kotler, 2003,

pp. 473-5). A skimming strategy is most effective where the

product is perceived to have a relative competitive advantage,

and is highly compatible with the buyer’s experiences and

values (Guiltinan, 1999). Penetration pricing may be

appropriate in situations where the manufacturer can reduce

production and distribution costs sufficiently and capture a

price leadership position, or if low price is needed to

overcome adoption barriers and speed diffusion (Guiltinan,

1999; Kotler, 2003, p. 473). Skimming and penetration

pricing are both sound strategies, the choice between them

being a managerial decision made in consideration with

marketing mix strategy.Price is an important factor at the time of launch as barriers

to adoption may exist: the new product is incompatible with

the buyer’s experiences or values, is perceived to be overly

complex or offers no relative advantage (Rogers, 1995,

pp. 212-44). A price discount rewards the buyer for bearing

the risk of trial (Crawford and Di Benedetto, 2003, p. 424).

Furthermore, the pricing decision is not restricted to the skim

versus penetration decision. The firm must also consider

demand sensitivity to price, and existing cost-volume-profit

relationships, to determine the net profit impact of reducing

price and stimulating demand.

Firm resources, skills, and NPD activities

Many empirical studies (Cooper, 1979; Cooper and

Kleinschmidt, 1987, 1990, 1993; Calantone and Di

Benedetto, 1988; Song and Parry, 1997a) demonstrated

that, for new B2B products, adequate marketing and

technical resources and skills are precursors of new product

success. Cooper (1979) found that two critical factors leading

to new product success were marketing and technical

synergies and proficiencies. This research stream also

investigated the effects of carrying out specific activities

related to the marketing and launch of new B2B products,

including customer selection, in-use testing with customers,

test marketing, finalizing marketing and manufacturing plans,

sales force training, and executing advertising and distribution

strategy. A firm possessing key marketing skills is more

capable of conducting the specific marketing and launch

activities for NPD projects, and that better performance of

marketing and launch activities were tied to ultimate success

(Calantone and Di Benedetto, 1988; Song and Parry, 1997a).




Volume 22 · Number 1 · 2007 · 4–19

6

Work group structure

Cross-functional team activity is important throughout the

new product development process; firms that actively

incorporate mechanisms for stimulating interfunctional

coordination should perform better at launch (Gupta et al.,1986; Ruekert and Walker, 1987; Gupta et al., 1988; Griffin,

1992; Griffin and Hauser, 1992, 1993; Towner, 1994; Song

and Dyer, 1995; Song and Parry, 1997a). If cross-functional

teams have significant input in manufacturing, distribution,

logistics, or marketing and sales strategy, the ultimate success

of the launch should be positively influenced, in terms of both

higher quality products and speedier development (Millson

et al., 1992; Moenaert and Souder, 1996; Nijssen et al., 1995;Sherman et al., 2000). Manufacturing-marketing integration

is especially critical to success at the time of launch (Song

et al., 1998). Interdepartmental committees, task forces and

other temporary groups, and liaison personnel specifically

assigned to interdepartmental coordination are all

mechanisms that have been successfully employed in

increasing cross-functionality (Bingham, 2003).

Logistics and inventory strategy

In cases where there are uncertainties in new product

demand, the firm must be prepared to make quick

adjustments whenever necessary. This requires excellent

integration of the logistics function with marketing,

manufacturing, and operations (Petersen et al., 2003). The

likelihood of successful product launch should increase if the

logistics strategy seeks to become more efficient in terms of

logistics facilities, number of suppliers, and number of

products and stockkeeping units, and if “lean launch,” quick-

response programs, and flexible manufacturing techniques are

used (Stryker, 1996; Bowersox et al., 1999).

Market orientation

The firm’s market orientation should also have an impact on

its execution of launch tactics and on ultimate performance

(Kahn, 2001). Market orientation has been defined as

organization-wide generation and dissemination of market

information on customer needs and wants, and organizational

response to this information (Jaworski and Kohli, 1993). A

market orientation will be manifested in several ways with

respect to product development and launch activities: the firm

will conduct more frequent meetings with customers, hold

more interdepartmental meetings to discuss market trends,

periodically check new product development against changing

customer needs, take quicker corrective action to satisfy

customers, and so on (Di Benedetto, 1999).

Launch timing

The timing of the launch also critically affects new product

success. Earlier launch helps a new product build a

reputation, especially if it has a substantial relative

advantage and there are switchout costs due to learning of

new systems or technology on the part of buyers (Guiltinan,

1999). Empirical research suggests a close relationship

between product performance, delivered customer value,

launch timing, and success rate (Cooper and Kleinschmidt,

1990; Zirger and Maidique, 1990; Lilien and Yoon, 1990).

The appropriateness of launch timing can be assessed on

several dimensions: relative to firm goals, competitors,

customers, channel promotions, and so on.

Industry structure and environment

Managers must consider industry structure and environment

when planning a product launch strategy. The intensity of the

competition, bargaining power of suppliers and customers,

threat of product substitution, and entry/exit barriers, all

affect firm performance (Porter, 1980, 1985; Chakravarthy,

1997). Uncertainties in the market environment can arise

from several sources. Technology, market demands, and

competitive strategies and actions can all be relatively

unpredictable, leading to high uncertainty (Khandawalla,

1977; Covin and Slevin, 1989; Rosenberg, 1994). These

sources of uncertainty must be taken into account when

developing launch strategies, including marketing mix

decisions (Dess and Beard, 1984; Bourgeois and Eisenhardt,

1988).

Method

Data collection

We used a retrospective methodology in this study, in which

managers were asked to give their perceptions regarding

launch decisions and product performance. While there are

some limitations inherent in this methodology (Montoya-

Weiss and Calantone, 1994; Brown and Eisenhardt, 1995)

that will be discussed later, it is relatively common in NPD

research (e.g. Cooper and Kleinschmidt, 1987, 1993). A mail

survey was developed for data collection (details on scales

included appear below).Respondents were requested to provide detailed

information on one of their company’s most recent new

product launches. They chose a single product launched no

more than five years ago, that could be considered to be

“characteristic” of their firm at the time of launch. A

“characteristic” new product was defined for the respondents

as one that is typical in that it required no unusual or new-to-

the-firm skills or resources.The survey was mailed to all practitioner members of the

PDMA. PDMA practitioner members were chosen as the

sampling frame, since they are representative of the most

knowledgeable managers active in new product development

and management. A follow-up telephone call and second

mailing were used to increase response rates. A key informant

method was used for data collection; this procedure is

frequently used in NPD research (e.g. Cooper, 1979; Cooper

and Kleinschmidt, 1987). Respondents were experienced

practicing managers in the area of product development, and

were the most knowledgeable sources of information on the

NPD project and on its launch (Phillips, 1981). Consumer as

well as B2B products (goods and services) were included

among the respondents. A total of 215 usable questionnaires

were returned, which represented a response rate of 13.4

percent. Demographics (functional area and job title/level) of

the sample were compared to the demographics of the PDMA

membership and the sample was very representative of the

sampling frame (details available from the authors on

request).Split-half reliability was assessed by splitting the sample into

early versus late respondents, and the means of all variables

were calculated for each half. The two halves were found not

to be significantly different from one another.




Volume 22 · Number 1 · 2007 · 4–19

7

Scales

Except where noted, all scale items are measured on 0-10Likert-type scales. The full set of all scale items contained ineach scale is provided in the Appendix.

Pricing strategyBased on the pricing-related literature cited above, a five-itemscale of Likert-type questions was developed to measurepricing strategy and pretested (see pretesting procedurebelow). This scale required respondents to state level ofagreement with statements regarding penetration pricing,skimming pricing, pricing to encourage early adoption,pricing to encourage channel acceptance, and alignment ofprice with a differentiation strategy.

Marketing mix strategyA set of seven scale items relating to marketing mix strategy atthe time of launch, originally validated and used in the ProjectNewprod studies (Cooper and Kleinschmidt, 1987, 1993),was used in this study. This scale asked respondents to ratethe quality of several elements of marketing mix strategy at thetime of launch: selling effort, advertising, promotion, serviceand technical support, product availability, productdistribution, and price levels.

Firm resources and skillsSeven scale items on firm resources and skills pertaining toproduct launch, used in the Project Newprod studies, wasused in this study. Respondents were asked whether thefollowing resources and skills were more than adequate for theselected product launch: marketing research, sales force,distribution, advertising and promotion, R&D, engineering,and manufacturing.

Work group structureA six-item scale was developed from the literature andpretested. This scale required respondents to state the extentto which cross-functional teams made decisions concerningmanufacturing, logistics, and marketing strategies, and theextent to which mechanisms were set in place to encouragecross-functional integration.

Logistics and inventory strategyA new scale was developed and pretested based on therelevant literature. It contained 16 scale items. Some of theserequired respondents to assess the extent to which logisticsstrategy focused on reducing the number of facilities,suppliers, products, stockkeeping units, and so on, with theobjective of increasing efficiency. Other questions probed theuse of sales forecasting, “lean launch” or “low inventorylaunch” techniques, quick-response or efficient customerresponse programs, flexible manufacturing, and integration oflogistics with other functional areas.

Market research, testing, and planningThis 15-item scale was taken from the Project Newprodstudies and assesses how well several market-related activitieswere undertaken. These included: customer selection, in-usetesting with customers, test marketing, finalizing marketingand manufacturing plans, delegating research work to outsidecontractors, studying customer feedback, sales force training,planning and testing advertising, executing advertisingstrategy, and managing distribution channel activities.

Market orientationA 14-item scale of market orientation was adapted from thescales used by Narver and Slater (1990) in their research into

market orientation, and further validated in studies by Songand Parry (Song and Parry, 1992, 1994, 1996, 1997a, b;Parry and Song, 1994). Respondents were asked severalquestions about the extent of interaction with customers andwith other departments and functional areas when developingthe new product. The speed with which the firm was preparedto respond to competitive changes or to satisfy unhappycustomers was also assessed.

Launch timingBased on the literature review, a fourteen-item scale of launchtiming was developed and pretested. Again using 0-to-10Likert-type scales, respondents were asked to state the extentto which they believed the timing was on target with respect tobusiness-unit goals, the competition, customers, topmanagement objectives, the distribution channel’srequirements, channel coordination considerations, servicepolicies and training, and so on.

Industry structureA 24-item scale of industry structure previously used instudies of NPD by Song and Parry (Song and Parry, 1992,1994, 1996, 1997a, b; Parry and Song, 1994) was used.Respondents were asked several questions about thebargaining power of suppliers and customers, the extent ofentry and exit barriers, the hostility of industry competition,the sophistication of customers, the predictability oftechnological, market, and competitive strategy changes,and several other descriptors of industry structure andenvironment.

PerformanceA seven-item scale of performance was adapted from theProject Newprod studies of Cooper and Kleinschmidt (1987,1993). While overall profitability is an extremely importantmeasure of new product performance, a single-item scale ofperformance is probably an oversimplification for most firms(Cooper and Kleinschmidt, 1987, 1990; Griffin and Page,1993; Hultink and Robben, 1995). A firm may consider anew product a success if it, say, captures significant marketshare even if it is not highly profitable. Therefore, seven itemscapturing several dimensions of success (in terms of profit,sales and market share) relative to the business unit’sobjectives and other new product launches were developed.These were measured on Likert-type scales ranging from 25(far below objective) to þ5 (far exceeded objective).

Pretesting

The questionnaire was pretested by practicing managersparticipating in a university executive training program, andby classes of evening MBA students. The pretest ensured thatall questions were clear and that the scale items adequatelyrepresented the desired constructs. Only minor correctionswere made to the questionnaire based on the debriefing doneafter the pretests.

Results

Identification of price strategy clusters

The SPSS based K-means clustering procedure was used togroup the new product launches into clusters, according totheir responses to the five scale items on strategic pricing,which are:1 Our firm launched the new product with a low

introductory (penetration) price.




Volume 22 · Number 1 · 2007 · 4–19

8

2 We priced the product, at launch, to encourage early

adoption.3 We priced the new product with great attention to channel

acceptance.4 Differentiation strategy was a prime motivator in setting

price.5 We charged a premium price for our new product.

As shown in Table II, three distinct clusters emerged, whichare briefly described below. The three clusters contained 70,49, and 96 cases respectively: all 215 usable cases wereclassified into one of the three clusters.The three clusters are then compared to determine if there

are significant differences on any of the other scale items(related to performance, marketing mix, resources and skills,etc.). Analysis of variance was used on the cluster means,

followed by post hoc multiple range tests. Table II presents alltest results. The last column in Table II shows all cases inwhich multiple range tests indicated significant differencesbetween clusters.

Cluster 1 (the “low price/poor timing” cluster)These products were launched at low introductory(penetration) prices, with the objective of encouraging earlyadoption. The low-price strategy was selected with greatattention to channel acceptance. (Cluster 1 means aresignificantly higher than those of the other two clusters onthe first three scale items, and its mean on the fifth scale item

is the lowest of all three clusters.) Cluster 1 is conscientiousabout market research, testing, and planning activities (it andCluster 3 are consistently better at these activities thanCluster 2), and could have been called “good research/lowprice/poor timing” (but we chose short, concise, descriptivecluster names). However, it is outperformed in terms ofseveral timing variables by Cluster 1.

Cluster 2 (the “high price/poor support” cluster)These products were launched with premium prices(skimming strategy). Little consideration was placed,

however, on the likely acceptance of the new product by thechannel, or on encouragement of early adoption. (Cluster 2means are significantly lower than those of the other twoclusters on the first three scale items, and its mean on the fifthscale item is the highest of all three clusters.) Note that therewere no significant differences among the clusters in terms ofdifferentiation strategy (the fourth scale item): one might have

expected Cluster 2 to be more likely to set premium prices inorder to pursue a differentiation strategy.

Cluster 3 (the “good research/good timing” cluster)This cluster uses a pricing strategy intermediate to that of

Clusters 1 and 2. It is less likely than Cluster 1 to set apenetration price to encourage early adoption, however it isless likely than Cluster 2 to set a premium price. Interestingly,though, Cluster 3 sets price with attention to channelacceptance: the difference between Clusters 1 and 3 on thisscale item is only significant at the 0.10 level. Cluster 1 is verysimilar to Cluster 3 in performing market research, testing,

and planning activities, but outperforms Cluster 3 on severaltiming variables.A preliminary interpretation of the three clusters

suggests that Cluster 1 comprises low-introductory-price

launches, Cluster 2 comprises launches where premium,skimming prices are used but with little concern for earlyadoption or channel acceptance, and Cluster 3 comprises

moderately-high-price launches which account for likelychannel acceptance. Since, for Cluster 2, neither channelacceptance nor differentiation are strong motivators in settingthehighprice,possiblyCluster2firmsareseekingtorecouplargeexpenses quickly through a high price without consideration ofthe effects on demand or through the channel. For a fullerunderstanding of the firms’ launch strategies, the clusters werethen compared on all other scale items.

Inter-cluster differences

Cluster means were found for each of the individual scaleitems included in the questionnaire (see the Appendix), andanalysis of variance and multiple range tests were used to findsignificant differences among them. Table II shows the resultsonly for cases where significant differences (at the 0.05 levelexcept where indicated) across the cluster means were found.

Performance differencesSome significant performance differences between the threeclusters were found. In particular, Cluster 3 (“good research/good timing”) rated its new product launch significantly moresuccessful than that of Cluster 2 in terms of market sharerelative to objective (Cluster 3 and 2 means ¼ 1:439 and0.356 respectively, significant at 0.05 level). Cluster 3launches were also rated higher than those of Cluster 2 interms of sales relative to other new product launches(means ¼ 1:899 and 0.978 respectively, significant at 0.10level). No other significant differences in performance werefound. The results suggest the importance of consideringchannel acceptance when setting a premium launch price: thecluster that sets the highest price (Cluster 2) is significantlyless likely to consider channel acceptance when doing so, andits launches are rated significantly lower in performance.The inadequacy of launch strategies for the Cluster 2

(“high price/poor support”) launches is further confirmed byconsideration of the other variables in the analysis. In fact, themost obvious result in Table II is that Cluster 2 is repeatedlyoutperformed by Clusters 1 and 3 (“low price/poor timing”and “good research/good timing”) in almost every case wherethere are significant differences in means. These differencesare briefly summarized below.

Marketing mix strategy differencesCluster 3 (the best performing cluster) outperformed Cluster2 in terms of advertising appropriateness, while Cluster 1outperformed Cluster 2 in terms of product availability(differences significant at 0.05 level). For example, in the caseof advertising appropriateness, the Cluster 3 mean was 5.620,significantly higher than Cluster 2 (4.681) at the 0.05 level.Cluster 2 (6.213) was also outperformed by both Clusters 1and 3 on appropriateness of pricing level (7.892 and 7.676respectively).

Work group structureCluster 1 outperformed Cluster 2 on three scale items relatedto work group structure: interdepartmental committeesfacilitate joint decision-making (Cluster 1 and 2 means ¼6:839 and 5.804 respectively, significant at 0.10 level), liaisonpersonnel exist who coordinate the efforts of severaldepartments for purposes of a project (Cluster 1 and 2means ¼ 6:712 and 5.478, significant at 0.05 level), andcross-functional teams made decisions on distribution orlogistics strategy (Cluster 1 and 2 means ¼ 5:803 and 4.385,significant at 0.05 level). On the last of these scale items,Cluster 3 also outperformed Cluster 2.




Volume 22 · Number 1 · 2007 · 4–19

9

Table

IIC

lust

erin

gan

dm

ultip

lera

nge

test

resu

lts

Cluster

1Cluster

2Cluster

3

“Low

price/

poortiming”

“Highprice/

poorsupport”

“Goodresearch/

goodtiming”

n5

70

n5

49

n5

96

Significantdifferences*

Strategicpricing

facet

Ourfirm

launched

thenew

product

withalow

introductory

(pen

etration)price

7.00

00.

766

2.25

41.

3,3.

2,1.

2

Wepricedtheproduct,at

launch,to

encourageea

rlyad

option

7.28

11.

213

4.29

91.

3,3.

2,1.

2

Wepricedthenew

product

withgreat

attentionto

chan

nel

acceptance

6.85

91.

652

6.25

01.

3*,

3.

2,1.

2

Differentiationstrategywas

aprimemotivatorin

settingprice

5.61

55.

596

6.38

3

Wecharged

apremium

price

forournew

product

3.43

18.

404

7.10

32.

3,3.

1,2.

1

Perform

ance

Relativeto

yourbusinessunit’sother

new

product

launches,how

successfulwas

thismarke

ten

tryin

term

sofsales?

1.26

60.

978

1.89

93.

2**

Relativeto

yourbusinessunit’sobjectives

forthis

product

launch,how

successfulwas

this

marke

t

entryin

term

sofmarke

tshare?

0.68

80.

356

1.43

93.

2

Marke

ting

mix

support

Advertising

4.87

14.

681

5.62

03.

2,3.

1**

Product

availability:

sufficien

tinventory

available

7.93

77.

044

7.17

11.

2,1.

3**

Pricing:ap

propriaten

essofpricinglevel(s)

7.89

26.

213

7.67

61.

2,3.

2

Resourcesan

dskills

Ouren

ginee

ringskillsan

dresources

weremore

than

adeq

uate

6.57

87.

043

7.25

73.

1

Work

group

structure

Interdep

artm

entalcommittees

aresetupto

allow

dep

artm

ents

toen

gag

ein

jointdecisionmak

ing

6.83

95.

804

6.63

81.

2*

Liaisonpersonnel

existwhose

specificjobitisto

coordinatetheeffortsofseveraldep

artm

ents

for

purposesofaproject

6.71

25.

478

5.94

31.

2

Cross-functional

team

smak

edecisionsconcerningdistributionorlogistics

strategy

5.80

34.

386

6.36

61.

2,3.

2

Logistics

andinventory

strategy

Oursalesforecastshelped

keep

man

power

andtrainingcostsreasonab

le(noexcess

inhiring,training,

plantsw

itchovers

oflabor,etc.)

5.96

94.

476

4.92

11.

2,1.

3

Quickresponse

(QR)orefficien

tcustomer

response

(ECR)programswerein

force.

4.60

33.

857

4.89

13.

2**

Updates

toproductdesignwerenee

ded

afterthefirstseveralm

anufacturingrunswereaccomplished

.7.

000

5.97

85.

688

1.

3

When

wewen

tto

national

launch

withthis

product/service,logistics

personnel

wereinvo

lved

in

planningmarke

tingprograms

4.95

13.

727

3.64

11.

2,1.

3

When

wewen

tto

national

launch

withthis


personnel

wereinvo

lved

in

form

ulatingourdistributionstrategies

5.93

44.

409

5.31

21.

2

When

wewen

tto

national

launch

withthis


personnel

wereinvo

lved

in

coordinatingwithsalesman

agem

ent

6.04

94.

795

5.57

81.

2

When

wewen

tto

national

launch

withthisproduct/service,logistics

personnel

wereinvo

lved

inlean

inventory

strategies

6.01

74.

326

5.35

51.

2,3.

2**

When

wewen

tto

national

launch

withthis


personnel

wereinvo

lved

in

serviceplanning(after

sale)

5.47

53.

791

4.61

31.

2,1.

3**

Marke

tresearch,testing,an

dplann

ing

(con

tinue

d)




Volume 22 · Number 1 · 2007 · 4–19

10

Table

II

Cluster

1Cluster

2Cluster

3

“Low

price/

poortiming”

“Highprice/

poorsupport”

“Goodresearch/

goodtiming”

n5

70

n5

49

n5

96

Significantdifferences*

Deleg

atingorcontractingspecializedresearch

work

tooutsidecontractors

5.55

73.

689

4.96

91.

2,3.

2

Studyingfeed

backfrom

customersregardingthisproduct

duringlaunch

6.76

95.

617

6.57

11.

2,3.

2

Studyingfeed

backfrom

customersregardingthisproduct

afterlaunch

6.74

25.

717

6.65

71.

2,3.

2

Planningan

dtestingthead

vertisingforthisproduct

5.01

63.

543

4.92

61.

2,3.

2

Executingthead

vertisingstrategyforthisproduct

(e.g.goodcopyplacemen

t,ad

equatenumber

of

insertions)

5.44

44.

087

5.56

51.

2,3.

2

Man

agingdistributionchan

nel

activities

forthisproduct.

5.55

45.

696

6.75

73.

1,3.

2

Marke

torien

tation

Severalofourdep

artm

ents

gen

erated

competitiveintelligen

ceindep

enden

tly

4.71

23.

644

4.96

73.

2,1.

2**

Weperiodicallyreview

edthelike

lyeffect

ofchan

ges

inourbusinessen

vironmen

t(e.g.reg

ulation)on

customers

5.81

84.

391

5.81

43.

2,1.

2

Wehad

freq

uen

tinterdep

artm

entalmee

tingsto

discuss

marke

ttren

dsan

ddevelopmen

ts.

5.21

24.

311

4.87

11.

2**

Weperiodicallyreview

edourproduct

developmen

teffortsto

ensure

that

they

werein

linewithwhat

customerswan

t6.

523

5.84

86.

739

3.

2**

Ifamajorcompetitorhad

launched

anintensive

campaigntargeted

atourcustomers,wewould

have

implemen

tedaresponse

immed

iately

6.06

14.

848

5.81

21.

2,3.

2**

Wewerequickto

respondto

significantchan

ges

inourcompetitors’pricingstructures

6.01

54.

422

5.79

11.

2,3.

2

Timingoflaun

chFrom

thepointofview

ofourmajorcustomers,thetimingorourlaunch

was

excellen

t5.

621

5.89

46.

478

3.

1

Thetimingofourlaunch

helped

usachieve

acompetitivead

vantage

5.68

25.

702

6.75

43.

1,3.

2

Topman

agem

entbelievedthetimingofourmarke

ten

trywas

excellen

t5.

242

6.10

66.

116

3.

1**

Chan

nel

cooperationwas

welldeveloped

ahea

doftime

5.47

75.

304

6.56

13.

1,3.

2

Chan

nel

coordinationwas

accomplished

asplanned

5.75

45.

457

6.55

23.

2,3.

1**

Weachievedrapid

dep

loym

entofourproduct

into

thedistributionchan

nel

6.23

15.

511

6.65

73.

2

Chan

nel/tradepromotionwas

executedontime

6.32

35.

822

7.01

53.

2,3.

1**

Industrystructurean

den

vironm

ent

Competitionin

ourmarke

tsisgen

erally

very

intensive

andhostile

7.31

28.

617

6.72

52.

3**

Theen

trybarriersto

theindustry

arevery

high

5.93

86.

681

6.91

33.

1

Theexitbarriersarevery

high

5.13

84.

277

5.67

13.

2

Customersin

thesemarke

tsaretechnologically

sophisticated

6.29

25.

872

5.56

51.

3**

Ourcompetitors’product

designchan

ges

arehighly

predictable

5.80

06.

000

5.24

62.

3**

Accessto

distributionchan

nelsblocksnew

entran

ts4.

576

5.63

05.

134

2.

1

Note:*

Sig.

at0.

05le

vel

exce

ptth

ose

mar

ked;

**

are

sig.

at0.

10le

vel




Volume 22 · Number 1 · 2007 · 4–19

11

Logistics and inventory strategyCluster 1 outperformed Cluster 2 on six scale items related tologistics and inventory strategy: sales forecasts helped keepmanpower and training costs reasonable, and logisticspersonnel were involved in planning marketing programs,

formulating distribution strategies, coordinating with salesmanagement, planning lean inventory strategies, and planningafter-sale service. Cluster 1 also outperformed Cluster 3 onthree scale items: sales forecasts helped to keep manpowerand training costs reasonable, updates to product design wereneeded after initial manufacturing runs, and logisticspersonnel were involved in planning marketing programs.

For example, regarding forecasts for manpower and trainingcosts, the means for Clusters 1, 3, and 2 were 5.969, 4.921,and 4.476 (Cluster 1 mean significantly higher than each ofthe other two means at the 0.05 level). As shown in Table II, afew additional differences were significant only at the 0.10level.

Market research, testing, and planningCluster 2 was significantly outperformed by both Clusters 1and 3 (at the 0.05 level) on five of the market research andtesting-related scale items, including: delegating specialized

research work to contractors, studying feedback fromcustomers during and after launch, training the sales force,planning the advertising, and executing advertising strategy.For example, regarding delegating specialized research workto outside contractors, Cluster 1 and 3 means were 5.557 and4.969 (not significantly different), while the Cluster 2 meanwas 3.689 (significantly different at 0.05 level). In addition,

Cluster 3 was significantly higher than both other clusters onmanaging distribution channel activities for the product.

Market orientationClusters 1 and/or 3 significantly outperformed Cluster 2 interms of market orientation on several scale items, including:multiple departments generating competitive intelligenceindependently, conducting regular effects of businessenvironment on customers, having interdepartmentalmeetings to discuss market trends, reviewing productdevelopment efforts, implementing a competitive response

quickly, and responding quickly to competitors’ pricingstructures. Most of these differences were significant at the0.05 level. For example, on periodic review of the effect ofbusiness environment changes on customers, the Cluster 2mean was 4.391, significantly lower than both Cluster 1(5.818) and Cluster 3 (5.814) at the 0.05 level.

Launch timingCluster 3 scored significantly higher than Clusters 1 and/or 2on seven launch-timing-related scale items: timing wasexcellent from the viewpoint of major customers, timing of

launch helped achieve a competitive advantage, topmanagement believed that timing was excellent, and channelcooperation was well developed ahead of time andaccomplished as planned, rapid deployment into thedistribution channel was achieved, and channel promotionwas executed on time. For example, on achievement of

competitive advantage, Cluster 3’s mean (6.754) wassignificantly higher than that of Cluster 1 (5.682) andCluster 2 (5.702) at the 0.05 level.

Industry structure and environmentThe industry structures characterizing the three clusters wererather different. Cluster 1 respondents characterized their

industry as having lower entry barriers, as new entrants were

not blocked by lack of access to distribution channels. Cluster

2 respondents characterized their industries as havingintensive, hostile competition, yet competitors’ product

design changes were judged to be relatively predictable.Cluster 3 respondents noted the high entry and exit barriers

in their industries, but also felt that their customers wererather less technologically sophisticated than those of

Cluster 1.With the additional information obtained from these scales,

we now have a more complete picture of each of the three

clusters.Cluster 1 (“low price/poor timing”) launches are relatively

successful low-introductory-price launches, supported bycareful selection of inventory and pricing levels, and

attention to cross-functional teaming and work groupstructure. Sales forecasts are useful in logistics applications,

and the logistics personnel are involved in most facets ofstrategic planning. Importantly, most of the market research

and testing activities are carried out well, and market

orientation is comparatively high. Nevertheless, this clusteris outperformed on most measures of launch timing.Cluster 2 (“high price/poor support”) launches are less-

successful high-introductory-price launches. Firms in this

cluster tend to be significantly less market oriented than theother firms, and in general, the marketing research and testing

activities are not well done. There is less cross-functionalteaming, and less involvement of logistics personnel in

inventory strategy development. Cluster 2 launches are not as

well timed as are those in other clusters. Cluster 2’s difficultyin timing launches, and their lower performance levels, might

be to some extent explained by an intensive, hostilecompetitive environment marked by unpredictable product

design changes.Cluster 3 (“good research/good timing”) launches are the

most successful in terms of sales relative to other business-unit launches, and market share relative to objective. These

are relatively high-introductory-price launches, supported by

a high degree of marketing orientation and solid marketresearch and testing. The firm supports the launch with

careful selection of advertising and pricing levels, and cross-functional involvement in distribution strategy. Sales forecasts

are useful in logistics applications. Cluster 3 excelled on alldimensions of launch timing. In contrast to Cluster 2, Cluster

3 faces a less hostile competitive environment and morepredictable product design changes, and also a more stable

competitive environment in that entry and exit barriers are

high.

Discussion and managerial implications

Summary of findings

This study used a retrospective methodology to gather

information about 215 recent new B2B and consumerproduct launches. We clustered the launches into three

groups according to the characteristics of the pricingstrategies selected at launch, and discovered patterns among

the pricing as well as non-pricing launch strategies and tactics.

The three clusters represent three approaches to pricingstrategy within a new product launch context.There are some parallels between the familiar “pure”

skimming and penetration pricing strategies and the three

clusters we derived empirically: the first cluster comprises




Volume 22 · Number 1 · 2007 · 4–19

12

mostly instances of penetration pricing, the second and third

mostly skimming pricing. Our results underline theimportance of proper execution of all aspects of the launch

strategy. For example, though both Clusters 2 and 3 includeinstances of price skimming, Cluster 3 outperforms Cluster 2

– there is “good” and “bad” skimming (to be summarizedbelow). Our findings support the notion of penetration versus

skimming pricing, and also suggest that neither skimming norpenetration pricing necessarily leads to superior performance,

especially if the pricing decision is poorly coordinated with therest of the launch strategy.The three clusters have very distinctive models of behavior.

Firms in the first cluster of pricing approaches employ a

penetration launch price. Generally, the cost and quick

market share gains theoretically predicted for this strategywere obtained, and a position to defend the market gains

prevailed. The second cluster of pricing approaches can becharacterized as premium launch prices, but lacking in

support (i.e. “bad” skimming). The supplier believes that itsproduct should demand a premium price, but has not

invested in the requisite marketing research, testing, andplanning to correctly align the market entry with the value

proposition sought by the customer. There is also poorintegration of logistics personnel into strategic decisions, and

a low degree of market orientation. Because of this lack ofmarket orientation and the lack of sufficient investment in

research to calibrate product deliverables with customerneeds, the launch effort is less successful. The supplier is too

cheap with the market research investment, too cheap withthe time necessary for good customer calibration, or forced

into an originally unplanned high price by cost overrunsthrough mismanagement of the NPD process or wild

forecasting at the business case set at the start of the NPDprocess.Finally, in the third cluster, a relatively high price is sought,

but only after sufficient market research, testing, and planning

is invested to assure an excellent calibration betweencustomer needs and supplier deliverables, and also to assure

that the timing of the launch is correct from the viewpoint ofcustomers and channel members (“good” skimming). One

should expect that customers will demand extra well doneperformance on a variety of product and service dimensions if

they will invest in a high priced substitute for the product thatcurrently meets their requirements. The risk to a potential

customer is multiplied if they must switch to a new product ata high price; thus excellent customer calibration is the only

prudent path for the high priced market launch entry. Ourfindings show that this third cluster significantly outperforms

the second cluster, which also uses a premium price strategybut, as noted above, lacks the requisite support. Thus, our

findings suggest that all aspects of the launch strategy,including timing and logistics, must be in place in order for

the skim price to be successful.

Managerial implications

Proper coordination of all elements of launch (strategies and

tactics) is required to mitigate the risks of NPD. Price level atthe time of launch is clearly important, but launch pricing

decisions are often made simplistically set a low penetrationprice or a high skimming price to achieve goals such as quick

payback or market share increase. Our findings show thatlaunch pricing decisions cannot be made separately from

other strategic and tactical decisions. Rather, they need to be

made in light of the product’s perceived advantages relative to

competition and its marketing mix strategy.Timing, logistics, and channel issues are relatively less-

studied elements of the launch strategy, though our resultsshow that they can have a significant impact on whether a

price strategy succeeds or fails. These variables deservegreater attention from both academics and practitioners, and

recent research has begun to address them (Bowersox et al.,1999; Calantone et al., 2005). Furthermore, much previous

research has shown the importance of cross-functional teamsthroughout the NPD process, up to and through the launch

phase. Management must consider all of these elements, andthe interactions among them, when planning the launch of its

new products (e.g. Nagle, 2005). As seen in Cluster 3, good

understanding of customer need and excellent market timingare necessary to support a skimming price strategy. Poor

execution on these points is associated with lowerperformance in Cluster 2 even though a skimming price is

used there as well. The reason for the difference, we infer, isthat Cluster 3 is better at executing other activities, that are

consistent with and support a skimming strategy, leading upto launch. To summarize, management needs to think in

terms of constellations of marketing mix and launch timingdecisions that support, and are consistent with, one another.

Limitations and directions for future research

We note several limitations of the present study. The responserate is relatively low. Comparison of the sample to the PDMA

practitioner sampling frame, however, suggests that thesample is representative of the PDMA practitioner

membership. One may question whether the PDMAmembership is representative of product managers in

general. Companies that are PDMA members may includea high proportion of firms that are actively involved in

improving their NPD processes, or may over-represent the“best” new product firms. The sample may be more

representative of “best practice” in NPD than of NPD ingeneral, and these firms might, on average, be better at

making pricing and related decisions to support productlaunch. A logical next step would be to determine launch

practices across a wide spectrum of firms, including PDMAnon-members as well as members. Also, the PDMA sample

contains several industries, potentially obscuring between-industry differences in launch strategy. Further research could

specifically examine a given industry (for example, chemical,automotive, or software) to determine if there are industry-

specific pricing and related launch strategies that tend to berelated to success.Second and third limitations of the study are the use of the

retrospective methodology and the key informant method. As

noted earlier, these are methods commonly used in recentNPD research studies. The retrospective methodology

requires respondents to provide their perceptions on each ofthe scale items, including those on performance. Since the

data are collected retrospectively, some halo effect bias mayexist, since the true outcome of each NPD project (i.e. its

success or failure) was known prior to filling out thequestionnaire. Some respondents may have biased their

responses upward (for example, to make their product lookmore successful than it really was), though in our pretests this

was generally not found to be a problem. The key informantmethod has occasionally been criticized as information is

obtained from only a single individual, who might be




Volume 22 · Number 1 · 2007 · 4–19

13

insufficiently knowledgeable (Phillips, 1981). We believe we

have minimized the possible drawbacks of the key informant

method by carefully selecting respondents who were highly

involved in new product launch and therefore were very

knowledgeable sources of information on launch and all other

aspects of the NPD process. Furthermore, some recent

studies of senior managers have found that the key informant

method provides reliable and valid data on strategic decisions

and performance (Kumar et al., 1993; Zahra and Covin,

1993; Menon et al., 1996). The study is also limited by the

nature of the sample: non-US managers are not well

represented, nor are managers involved in consumer

product development. Future studies can seek to better

understand the complex set of decisions involved at the time

of product launch in these different launch settings.

References

Bingham, P. (2003), “Pursuing innovation in a big

organization”, Research-Technology Management, Vol. 46

No. 4, pp. 52-8.Booz, Allen and Hamilton (1982), New Product Management

for the 1980s, Booz, Allen and Hamilton, New York, NY.Bourgeois, L.J. and Eisenhardt, K.M. (1988), “Strategic

decision processes in high velocity environment: four cases

in the microcomputer industry”, Management Science,

Vol. 34 No. 7, pp. 816-35.Bowersox, D.J., Stank, T.P. and Daugherty, P.J. (1999),

“Lean launch: managing product introduction risk through

response-based logistics”, Journal of Product Innovation

Management, Vol. 16 No. 6, pp. 557-68.Brown, S.L. and Eisenhardt, K.M. (1995), “Product

development: past research, present findings and future

directions”, Academy of Management Review, Vol. 29,

pp. 343-78.Calantone, R. and Montoya-Weiss, M. (1994), “Product

launch and follow-on”, in Souder, W.E. and Sherman, J.D.

(Eds), Managing New Technology Development, McGraw-

Hill, New York, NY, pp. 217-48.Calantone, R.J. and Di Benedetto, C.A. (1988), “An

integrative model of the new product development

process: an empirical validation”, Journal of Product

Innovation Management, Vol. 5 No. 3, pp. 201-15.Calantone, R.J., Di Benedetto, C.A. and Stank, T.P. (2005),

“Managing the supply chain implications of launch”, in

Kahn, K.B., Castellion, G. and Griffin, A. (Eds), The

PDMA Handbook of New Product Development, 2nd ed.,

Wiley, Hoboken, NJ, pp. 466-78.Chakravarthy, B. (1997), “A new strategy framework for

coping with turbulence”, Sloan Management Review, Vol. 38

No. 2, pp. 69-82.Cooper, R.G. (1979), “Identifying industrial new product

success: Project NewProd”, Industrial Marketing

Management, Vol. 8 No. 2, pp. 124-35.Cooper, R.G. and Kleinschmidt, E.J. (1987), “New products:

what separates winners from losers?”, Journal of Product

Innovation Management, Vol. 4 No. 2, pp. 169-84.Cooper, R.G. and Kleinschmidt, E.J. (1990), New Products:

The Key Factors in Success, American Marketing

Association, Chicago, IL.Cooper, R.G. and Kleinschmidt, E.J. (1993), “Major new

products: what distinguishes the winners in the chemical

industry?”, Journal of Product Innovation Management,

Vol. 10 No. 2, pp. 240-51.Covin, J. and Slevin, D.P. (1989), “Strategic management of

small firms in hostile and benign environments”, Strategic

Management Journal, Vol. 10 No. 1, pp. 75-87.Crawford, C.M. and Di Benedetto, C.A. (2003), New

Products Management, 7th ed., Irwin/McGraw-Hill, Burr

Ridge, IL.DeBruyne, M., Moenaert, R., Griffin, A., Hart, S.,

Hultink, E.J. and Robben, H.S.J. (2002), “The impact of

new product launch strategies on competitive reaction in

industrial markets”, Journal of Product Innovation

Management, Vol. 19 No. 2, pp. 159-70.Dess, G.D. and Beard, D.W. (1984), “Dimensions of

organizational task environments”, Administrative Science

Quarterly, Vol. 29 No. 1, pp. 52-73.Di Benedetto, C.A. (1999), “Identifying the key factors in

new product launch”, Journal of Product Innovation

Management, Vol. 16 No. 6, pp. 530-44.Griffin, A. (1992), “Evaluating QFD’s use in US firms as a

process for developing products”, Journal of Product

Innovation Management, Vol. 9 No. 3, pp. 171-82.Griffin, A. (1997), Drivers of NPD Success: The 1997 PDMA

Report, Product Development & Management Association,

Chicago, IL.Griffin, A. and Hauser, J.R. (1992), “Patterns of

communication among marketing, engineering, and

manufacturing: a comparison between two new product

teams”, Management Science, Vol. 38 No. 3, pp. 360-73.Griffin, A. and Hauser, J.R. (1993), “The voice of the

customer”, Marketing Science, Vol. 12 No. 1, pp. 1-27.Griffin, A. and Page, A.L. (1993), “An interim report on

measuring product development success and failure”,

Journal of Product Innovation Management, Vol. 10 No. 4,

pp. 291-308.Guiltinan, J.P. (1987), “The price bundling of services: a

normative framework”, Journal Marketing, Vol. 51 No. 2,

pp. 74-85.Guiltinan, J.P. (1999), “Launch strategy, launch tactics, and

demand outcomes”, Journal of Product Innovation

Management, Vol. 16 No. 4, pp. 502-29.Gupta, A.K., Raj, S.P. and Wilemon, D.L. (1986), “A model

for studying R&D-marketing interface in the product

innovation process”, Journal of Marketing, Vol. 50 No. 2,

pp. 7-17.Gupta, A., Raj, S.P. and Wilemon, D. (1988), “The

credibility-co-operation connection at the R&D-marketing

interface”, Journal of Product Innovation Management, Vol. 5

No. 1, pp. 20-31.Hultink, E.J. and Hart, S. (1998), “The world’s path to the

better mousetrap, myth or reality? An empirical

investigation into the launch strategies of high and low

advantage new products”, European Journal of Innovation

Management, Vol. 1 No. 3, pp. 106-22.Hultink, E.J. and Langerak, F. (2002), “Launch decisions and

competitive reactions: an exploratory market signaling

study”, Journal of Product Innovation Management, Vol. 19

No. 3, pp. 199-212.Hultink, E.J. and Robben, H.S.J. (1995), “Measuring new

product success: the difference that time perspective

makes”, Journal of Product Innovation Management, Vol. 12

No. 5, pp. 392-405.




Volume 22 · Number 1 · 2007 · 4–19

14

Hultink, E.J. and Robben, H.S.J. (1999), “Launch strategy

and new product performance: an empirical examination in

The Netherlands”, Journal of Product Innovation

Management, Vol. 16 No. 6, pp. 545-56.Hultink, E.J. and Schoormans, J.P.L. (1995), “How to launch

a high-tech product successfully: an analysis of marketing

managers’ strategy choices”, Journal of High Technology

Management Research, Vol. 6 No. 2, pp. 229-42.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, Vol. 14 No. 3, pp. 243-57.Hultink, E.J., Griffin, A., Robben, H.S.J. and Hart, S. (1998),

“In search of generic launch strategies for new products”,

International Journal of Research in Marketing, Vol. 15,

pp. 269-85.Hultink, E.J., Hart, S., Robben, H.S.J. and Griffin, A. (1997),

“Launching new products in consumer and industrial

markets: a multi-country empirical international

comparison”, in Murray, L.W. (Ed.), Maximizing the

Return on Product Development. Proceedings of the Research

Conference of the Product Development & Management

Association, Monterey, CA, October, pp. 93-126.Hultink, E.J., Hart, S., Robben, H.S.J. and Griffin, A. (1999),

“New consumer product launch: strategies and

performance”, Journal of Strategic Marketing, Vol. 7 No. 3,

pp. 153-74.Hultink, E.J., Hart, S., Robben, H.S.J. and Griffin, A. (2000),

“Launch decisions and new product success: an empirical

comparison of consumer and industrial products”, Journal

of Product Innovation Management, Vol. 17 No. 1, pp. 5-23.Jaworski, B.J. and Kohli, A.K. (1993), “Market orientation:

antecedents and consequences”, Journal Marketing, Vol. 57

3, July, pp. 53-70.Kahn, K.B. (2001), “Market orientation, interdepartmental

integration, and product development performance”,


pp. 314-23.Khandawalla, P.N. (1977), The Design of Organizations,

Harcourt Brace Jovanovich, New York, NY.Kotler, P. (2003), Marketing Management, 11th ed., Prentice-

Hall, Upper Saddle River, NJ.Kumar, N., Stern, L.W. and Anderson, J.C. (1993),

“Conducting interorganizational research using key

informants”, Academy of Management Journal, Vol. 36,

pp. 1633-51.Langerak, F., Hultink, E.J. and Robben, H.S.J. (2004), “The

impact of market orientation, product advantage, and

launch proficiency on new product performance and

organizational performance”, Journal of Product Innovation

Management, Vol. 21 No. 2, pp. 79-94.Lee, Y. and O’Connor, G.C. (2003), “The impact of

communication strategy on launching new products: the

moderating role of product innovativeness”, Journal of

Product Innovation Management, Vol. 20 No. 1, pp. 4-21.Leiberman, M.B. and Montgomery, D.B. (1988), “First-

mover advantages”, Strategic Management Journal, Vol. 9,

pp. 41-58.Lieberman, M.B. and Montgomery, D.B. (1998), “First-

mover (dis)advantages: retrospective and link with the

resource-based view”, Strategic Management Journal,

Vol. 19, pp. 1111-25.

Lilien, G.L. and Yoon, E. (1990), “The timing of competitive

market entry: an exploratory study of new industrial

practices”, Management Science, Vol. 36 No. 5, pp. 568-85.Maidique, M. and Zirger, B.J. (1984), “A study of success

and failure in product innovation: The case of the US

electronics industry”, IEEE Transactions on EngineeringManagement, Vol. EM-31 No. 4, pp. 192-203.

Menon, A., Bharadwaj, S.G. and Howell, R. (1996), “The

quality and effectiveness of marketing strategy: effects of

functional and dysfunctional conflict in interorganizationalrelationships”, Journal of the Academy of Marketing Science,Vol. 24, pp. 299-313.

Millson, M.R., Raj, S.P. and Wilemon, D. (1992), “A survey

of major approaches for accelerating new product

development”, Journal of Product Innovation Management,Vol. 9 No. 1, pp. 53-69.

Moenaert, R.K. and Souder, W.E. (1996), “Context and

antecedents of information utility at the R&D/marketing

interface”, Management Science, Vol. 42 No. 11,pp. 1592-610.

Montoya-Weiss, M.M. and Calantone, R.J. (1994),

“Determinants of new product performance: a review andmeta-analysis”, Journal of Product Innovation Management,Vol. 11 No. 5, pp. 397-418.

Nagle, S. (2005), “Managing new product and servicelaunch”, in Kahn, K.B., Castellion, G. and Griffin, A.

(Eds), The PDMA Handbook of New Product Development,2nd ed., Wiley, Hoboken, NJ, pp. 455-65.

Narver, J.C. and Slater, S.F. (1990), “The effect of a market

orientation on business profitability”, Journal of Marketing,Vol. 54 No. 4, pp. 80-93.

Nijssen, E.J., Arbouw, A.R.L. and Commandeur, H.R.

(1995), “Accelerating NPD: a preliminary empirical test

of a hierarchy of implementation”, Journal of ProductInnovation Management, Vol. 12 No. 2, pp. 99-109.

Ottum, B.D. (1996), “Launching a new consumer product”,

in Rosenau, M.D., Griffin, A., Castellion, G. andAnscheutz, N. (Eds), The PDMA Handbook of NewProduct Development, Wiley, New York, NY, pp. 381-94.

Parry, M.E. and Song, X.M. (1994), “Identifying newproduct success in China”, Journal of Product InnovationManagement, Vol. 11 No. 1, pp. 15-30.

Petersen, K.J., Handfield, R.B. and Ragatz, G.L. (2003),“A model of supplier integration into new product

development”, Journal of Product Innovation Management,Vol. 20 No. 4, pp. 284-99.

Phillips, L. (1981), “Assessing measurement error in key

informant reports: a methodological note on organizational

analysis in marketing”, Journal of Marketing Research,Vol. 18 No. 4, pp. 395-415.

Porter, M.E. (1980), Competitive Strategy, The Free Press,

New York, NY.Porter, M.E. (1985), Competitive Advantage: Creating and

Sustaining Superior Performance, The Free Press, New York,

NY.Robben, H.S.J. (1998), “In search of generic launch strategies

of new products”, International Journal of Research inMarketing, Vol. 15, pp. 269-86.

Rogers, E. (1995), Diffusion of Innovation, 4th ed., Free Press,

New York, NY.Rosenberg, N. (1994), Exploring the Black Box: Technology,

Economics, and History, Cambridge University Press,

New York, NY.




Volume 22 · Number 1 · 2007 · 4–19

15

Ruekert, R.W. and Walker, O.C. Jr (1987), “Marketing’s

interaction with other functional units: a conceptual

framework and empirical evidence”, Journal of Marketing,

Vol. 51 No. 1, pp. 1-19.Saunders, J. and Jobber, D. (1994), “Product replacement:

strategies for simultaneous product deletion and launch”,


pp. 433-50.Sherman, J.D., Souder, W.E. and Jenssen, S.A. (2000),

“Differential effects of the primary forms of cross-

functional integration on product development cycle

time”, Journal of Product Innovation Management, Vol. 17

No. 4, pp. 257-67.Song, X.M. and Dyer, B. (1995), “Innovation strategy and

the R&D-marketing interface in Japanese firms: a

contingency perspective”, IEEE Transactions on Engineering

Management, Vol. 42 No. 4, pp. 360-71.Song, X.M. and Parry, M.E. (1992), “The R&D-marketing

interface in Japanese high-technology firms”, Journal of

Product Innovation Management, Vol. 9 No. 2, pp. 91-112.Song, X.M. and Parry, M.E. (1994), “The dimensions of

industrial new product success and failure in state

enterprises in the People’s Republic of China”, Journal of

Product Innovation Management, Vol. 11 No. 2, pp. 105-18.Song, X.M. and Parry, M.E. (1996), “What separates

Japanese new product winners from losers”, Journal of

Product Innovation Management, Vol. 13 No. 1, pp. 1-14.Song, X.M. and Parry, M.E. (1997a), “The determinants of

Japanese new product successes”, Journal of Marketing

Research, Vol. 34 No. 2, pp. 64-76.Song, X.M. and Parry, M.E. (1997b), “A cross-national

comparative study of new product development processes:

Japan and the United States”, Journal of Marketing, Vol. 61

No. 2, pp. 1-18.Song, X.M., Thieme, R.J. and Xie, J. (1998), “The impact of

cross-functional joint involvement across product

development stages: an exploratory study”, Journal of

Product Innovation Management, Vol. 15 No. 4, pp. 289-303.Stryker, J.D. (1996), “Launching a new business-to-business

product”, in Rosenau, M.D., Griffin, A., Castellion, G. and

Anscheutz, N. (Eds), The PDMA Handbook of New Product

Development, Wiley, New York, NY, pp. 363-80.Thoelke, J.M., Hultink, E.J. and Robben, H.S.J. (2001),

“Launching new product features: a multiple case

examination”, Journal of Product Innovation Management,

Vol. 18 No. 1, pp. 3-14.Towner, S.J. (1994), “Four ways to accelerate new product

development”, Long Range Planning, Vol. 27 No. 2,

pp. 57-65.Zahra, S.J. and Covin, J.G. (1993), “Business strategy,

technology policy and firm performance”, Strategic

Management Journal, Vol. 14, pp. 451-78.Zirger, B.J. and Maidique, M.A. (1990), “A model of new

product development: an empirical test”, Management

Science, Vol. 36 No. 7, pp. 867-83.

Further reading

Gupta, A.K. and Wilemon, D.L. (1986), “The credibility-

cooperation connection at the R&D-marketing interface”,


pp. 20-31.

Page, A.L. (1993), “Assessing new product developmentpractices and performance: establishing crucial norms”,Journal of Product Innovation Management, Vol. 10 No. 4,pp. 273-90.

Appendix. The questionnaire

Pricing strategy

State your level of agreement with each of the following(0 ¼ disagree strongly, 10 ¼ agree strongly):

Our firm launched the new product with a lowintroductory (penetration) price.We priced the product, at launch, to encourage earlyadoption.We priced the new product with great attention to channelacceptance.Differentiation strategy was a prime motivator in settingprice.We charged a premium price for our new product.

Marketing mix support

Rate the quality of each of the following elements in thelaunch of this product. (0 ¼ poor, 10 ¼ excellent):

Selling effort, e.g. the right people, properly trained, etc.Advertising.Promotion, e.g. discounts, trade shows, events.Services and technical support for the customer, e.g. rightpeople, qualified, responsive.Product availability: sufficient inventory available.Product distribution: on-time delivery, quick response.Pricing: appropriateness of pricing level(s).

Resources and skills

To what extent does each statement correctly describe thisselected product launch? (0 ¼ strongly disagree, 10 ¼strongly agree).For the selected product launch:Our marketing research skills and resources were morethan adequate.Our sales force skills and resources were more thanadequate.Our distribution skills and resources were more thanadequate.Our advertising and promotion skills and resources weremore than adequate.Our R&D skills and resources were more than adequate.Our engineering skills and resources were more thanadequate.Our manufacturing skills and resources were more thanadequate.

Work group structure

Please indicate the extent to which the following are used.(0 ¼ strongly disagree, 10 ¼ strongly agree).For the selected product launch;Interdepartmental committees are set up to allowdepartments to engage in joint decision-making.Task forces or temporary groups are set up to facilitateinterdepartmental collaboration on a specific project.Liaison personnel exist whose specific job it is tocoordinate the efforts of several departments forpurposes of a project.




Volume 22 · Number 1 · 2007 · 4–19

16

Cross-functional teams make decisions concerning

manufacturing strategy.Cross-functional teams make decisions concerning

distribution or logistics strategy.Cross-functional teams make decisions concerning

marketing or sales strategy.

Logistics and inventory strategy

All items are scaled: 0 ¼ stronglydisagree, 10 ¼ strongly

agree.Logistics strategy includes a priority to reduce:The number of logistics facilities.The number of product/material suppliers.The number of logistics service providers.The number of marginal customers.The number of products or UPCs.The number of stockkeeping units (SKUs).

Our logistics operations, from the manufacturing facility

to the customer, are highly integrated with marketing.Our logistics operations, from the manufacturing facility

to the customer, are highly integrated with manufacturing

and production operations.This product launch was considered a “lean” or “low

inventory” launch.Our sales forecasts were really helpful in calibrating plant

size.Our sales forecasts helped keep manpower and training

costs reasonable (no excess in hiring, training, plant

switchovers of labor, etc.).Work-in-process inventories were well controlled.QR (Quick Response) or ECR (Efficient Customer

Response) programs were in force.Channel inventories were kept to a minimum.Flexible manufacturing techniques were used on this

project.Updates to product design were needed after the first

several manufacturing runs were accomplished.When we went to national launch with this product/

service, logistics personnel were involved in:Planning marketing programs.Formulating our distribution strategies.Coordinating with sales management.Lean inventory strategies.Service planning (after sale).Setting return or replacement policies.

Market research, testing, and planning

Please indicate how well your business unit undertook each of

these activities (0 ¼ poorly, 10 ¼ excellently):Selecting customers for testing market acceptance.Submitting products to customers for in-use testing.Executing test marketing programs.Interpreting the findings of the market testing.Finalizing plans for manufacturing.Finalizing plans for marketing.Establishing overall direction of this product launch.Delegating or contracting specialized research work to

outside contractors.Launching this product into the marketplace.Studying feedback from customers regarding this product

during launch.Studying feedback from customers regarding this product

after launch.

Training the sales force.Planning and testing the advertising for this product.Executing the advertising strategy for this product (e.g.

good copy placement, adequate number of insertions).Managing distribution channel activities for this product.

Performance

Please indicate how successful this market entry was or has

been. (25 ¼ far less than the objectives, þ5 ¼ far exceeded

the objectives):How successful was this market entry from an overall

profitability standpoint?Relative to your business unit’s other new product

launches, how successful was this market entry in terms

of profit?Relative to your business unit’s other new product


of sales?Relative to your business unit’s other new product


of market share?Relative to your business unit’s objectives for this product

launch, how successful was this market entry in terms of

profit?Relative to your business unit’s objectives for this product


sales?Relative to your business unit’s objectives for this product


market share?

Market orientation

All items are scaled: 0 ¼ stronglydisagree, 10 ¼ strongly

agree.When developing this new product:Our marketing people met with customers frequently to

find out what products or services they needed.Individuals from our manufacturing department

interacted directly with customers to learn how to serve

them better.Several of our departments generated competitive

intelligence independently.We periodically reviewed the likely effect of changes in our

business environment (e.g. regulation) on customers.A lot of informal “hall talk” in our business unit

concerned out competitors’ tactics or strategies.We had frequent interdepartmental meetings to discuss

market trends and developments.Marketing personnel in our business unit spent time

discussing customers’ future needs with other functional

departments.Data on customer satisfaction were disseminated at all

levels in this business unit frequently.We tended to ignore changes in our customer’s product or

service needs for one reason or another.We periodically reviewed our product development efforts

to ensure that they were in line with what customers want.If a major competitor had launched an intensive campaign

targeted at our customers, we would have implemented a

response immediately.We were quick to respond to significant changes in our

competitors’ pricing structures.




Volume 22 · Number 1 · 2007 · 4–19

17

If we found that customers were unhappy with the quality

of our service, we would have taken corrective action

immediately.If we found that customers would like us to modify a

product or service, the departments involved would have

made concerted efforts to do so.

Timing of launch

All items are scaled: 0 ¼ strongly disagree, 10 ¼ strongly

agree:Relative to our business unit’s goals, the timing of our

launch was on target.Relative to our direct competition, the timing or our

launch was perfect.From the point of view of our major customers, the timing

or our launch was excellent.The timing of our launch helped us achieve a competitive

advantage.The product went from development to launch with no

delays.The product was launched at the appropriate time.Top management believed the timing of our market entry

was excellent.From the distribution channel’s point of view, the product

was launched at the right time.Channel cooperation was well developed ahead of time.Channel coordination was accomplished as planned.We achieved rapid deployment of our product into the

distribution channel.Service policies were in place prior to launch.Service training was timely with respect to launch.Channel/trade promotion was executed on time.

Industry structure and environment

All items are scaled: 0 ¼ strongly disagree, 10 ¼ strongly

agree.In general, how much do you agree with each of the

following statements characterizing the business environment

in the primary markets your business unit currently serves?Competition in our markets is generally very intensive and

hostile.Our major suppliers have substantial bargaining power.Our major customers have substantial bargaining power.The threat of product substitution is very high.The entry barriers to the industry are very high.The exit barriers are very high.New market entrants can expect a high level of retaliation

from existing firms.The markets are very homogeneous (undifferentiated

markets and very similar customers).Customers in these markets are technologically

sophisticated.Our business unit can strongly affect competitive

situations.We are very familiar with the market.Customers’ needs can be easily translated into product

specifications.Joint R&D/research efforts among firms in our industry

are frequent.Technological changes are highly predictable.Market demands are highly predictable.Our competitors’ marketing changes are highly

predictable.

Our competitors’ product design changes are highly

predictable.Our competitors’ timing of the new product introductions

are highly predictable.Cost advantages of incumbents block new competitors.Product differentiation of incumbents deters the entry ofnew competitors.Capital requirements prevent new competition.High customer switching costs discourage new

competitive entry.Access to distribution channels blocks new entrants.Technology of distribution channel (i.e. electronic dataintegration) blocks new entrants.

About the authors

Roger J. Calantone is Eli Broad Professor of BusinessAdministration at Michigan State University. His researchinterests include the study of the new product development

process, the management of technology, and themanufacturing and engineering interface. He has published

in several journals including the Journal of Marketing, theJournal of Marketing Research, the Journal of Product InnovationManagement, Management Science, and Marketing Science.C. Anthony Di Benedetto is Editor of the Journal of Product

Innovation Management, and Professor of Marketing, FoxSchool of Business and Management, Temple University. Heearned a BSc. in Chemistry, an MBA, and a PhD in

Marketing and Management Science from McGill University.His research interests include new product launch, and

international marketing strategy. He previously served as VicePresident of Publications for PDMA, Editor of the PDMA

newsletter Visions, and as Abstracts Editor for the Journal ofProduct Innovation Management. C. Anthony Di Benedetto isthe corresponding author and can be contacted at:

[email protected]

Executive summary and implications formanagers and executives

This summary has been provided to allow managers and executivesa rapid appreciation of the content of this article. Those with aparticular interest in the topic covered may then read the articlein toto to take advantage of the more comprehensive description ofthe research undertaken and its results to get the full benefit of thematerial present.

Clustering product launches by price and launch

strategy

When Oscar Wilde spoke of people who know the price ofeverything and the value of nothing, he was not talking aboutmarketers of new products but of cynics. Nevertheless, those

involved in putting new products or services on the marketwho might think they know all there is to know about where

to pitch the price, need to be aware that pricing strategy isonly one aspect of a new product launch. Merely focusing on

price and neglecting other strategic and tactical launchdecisions can deny a company the profitability and

competitive performance it seeks.In an exploration of the combined effects of pricing and

non-pricing strategic and tactical decisions made by firms at

the time of launch, Calantone and Di Benedetto recognize




Volume 22 · Number 1 · 2007 · 4–19

18

that pricing decisions are always at the crux of themanagement dilemma. Falling prices generally stimulatedemand and drive the volume cost decreases that most newproduct programs depend on to realize and capitalize on theadvantages of early market entry.Yet falling prices reduce revenues and margins for all

concerned in the new product commercial enterprise, unlesscosts fall even faster. The payoff to better understanding ofpast launch behaviors, the authors say, is to develop anapproach to shorten breakeven times and to betterunderstand and control launch programs.However, despite the evidence of the need to coordinate

price with other marketing mix elements, some managers canbe tempted to turn a blind eye to anything other than therevenues generated by the pricing decision. Furthermore,launch management is often ignored in the handoff ofproducts between the team developing the commercial entityand the consumer product brand managers or B2B productsales managers. Effective managers should avoid these pitfallsand consider the possible effects of variables other than price,such as launch timing, logistics decisions and distributionchannel decisions.In this study, which focuses on pricing and its relationship

to overall launch management, the authors considered 215recent new business-to-business and consumer productlaunches, grouping them in clusters representing threeapproaches to pricing strategy, which highlighted:1 low price/poor timing;2 high price/poor support; and3 good research/good timing.

Their findings supported the notion of penetration pricing(setting a relatively low initial price) versus skimming pricing(setting a relatively high price which can allow costs to berecouped before any competition sets in), but neitherskimming nor penetration pricing necessarily leading togood performance. Proper execution of the price strategy,made in coordination with the rest of the marketing mix, isessential.The three clusters had very distinctive models of behavior.

Firms in the first cluster of pricing approaches employed apenetration launch price. Generally, the cost and quickmarket share gains theoretically predicted for this strategy

were obtained, and a position to defend the market gains

prevailed. The second cluster of pricing approaches can be

characterized as premium launch prices, but lacking in

support (i.e. “bad” skimming). The supplier believes that its

product should demand a premium price but has not invested

in the requisite marketing research, testing and planning to

correctly align the market entry with the value proposition

sought by the customer.There is also poor integration of logistics personnel into

strategic decisions and a low degree of market orientation.

Because of this lack of market orientation and the lack of

sufficient investment in research to calibrate product

deliverables with customer needs, the launch effort is less

successful. The supplier is too cheap with the market research

investment, too cheap with the time necessary for good

customer calibration, or forced into an originally unplanned

high price by cost overruns through mismanagement of the

new product development process, or wild forecasting at the

business case set at the start of the NPD process.Finally, in the third cluster, a relatively high price is sought,

but only after sufficient market research, testing and planning

is invested to assure an excellent calibration between

customer needs and supplier deliverables, and also to assure

that the timing of the launch is correct from the viewpoint of

customers and channel members (“good” skimming).The authors note: “One should expect that customers will

demand extra well done performance on a variety of product

and service dimensions if they will invest in a high-priced

substitute for the product that currently meets their

requirements. The risk to a potential customer is multiplied

if they must switch to a new product at a high price; thus

excellent customer calibration is the only product path for the

high-priced market launch entry.”The conclusion is that all aspects of the launch strategy,

including timing and logistics, must be in place in order for a

skim price to be successful. Management needs to think in

terms of constellations of marketing mix and launch timing

decisions that support, and are consistent with, one another.

(A precis of the article “Clustering product launches by price andlaunch strategy”. Supplied by Marketing Consultants forEmerald.)




Volume 22 · Number 1 · 2007 · 4–19

19

To purchase reprints of this article please e-mail: [email protected]

Or visit our web site for further details: www.emeraldinsight.com/reprints

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

B2B_49

Documents

Transcript of B2B_49