How To Make Sure New Products Don’t Fail

Rick SteinbrennerChief Marketing Officer

Step #1 – Do You Have The Right Product?

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Most New Products Fail

~22,000 new products are launched each year

75% of new products fail to make $7.5MM in sales in year one of launch

Less than 3% of new products fail to make $50MM in sales in year one of launch – long considered to be benchmark for success.

Source: Trout & Ries

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Why Do Most New Products Fail? No competitive point of differentiation – “me too”

Unanticipated competitive response

Poor positioning and/or overextended brand equity

Product fails to deliver promised claims/benefits

Too little/no marketing support – advertising/promo $’s

Bad estimates of market potential/market share penetration

Marketing research mistakes

Launched into wrong channels and/or channel conflicts

Rapid market changes after launchSource: Allen Weiss

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Examples of New Product Failures

Consumers didn’twant Coke to “mess”with their old Coke.

Premier smokeless cigarettes from R.J. Reynolds:tasted awful.

Is UnderwearReally Disposable?

Like Pens & Lighters?Somehow consumers

couldn’t believe Colgate frozen entrees

wouldn’t taste like toothpaste – ugh!

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How Do One Increase Their Chances Of Success?

Make sure your new product idea is truly innovative and differentiated

Make sure your new product performs as promised

Don’t overextend your brand into adjacent categories that don’t make sense

Do your homework!!

Have straight talk about the issues/opportunities as you go through development

Follow a structured process to facilitate cross-functional communication

Staged Tollgate New Product Development Process

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What Is A New Product Development Process?

It’s a structured framework that helps keep the initiative “on-track” and helps minimize “scope creep” and launches as promised.

Facilitates cross-functional communication & Sr. Mgmt. buy-in (e.g. Tollgates)

Insures good work flow, productivity, good quality designs and product performance.

Goals: Speed to Market - don’t keep designing forever

Commercial Success – both distribution and sales velocities meet expectations

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New Product Types

Not all new products are the same. Some are simpler to develop/launch than others.

Type 1: New product technologies and/or new categories – real innovation

Type 2: Existing technology/new designs – product restages or relaunches

Type 3: Existing products with either performance and/or appearance changes – line extensions

Generally, the type of new product will determine the number of steps and programrigor required to bring an idea to market.

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Phase I: Opportunity Identification/Discovery

Consumer Signals Competitive SignalsConsumer &

Technology/Trends

Product Category Identification Process

Brand Equity Filter

Product Identification Process

Branded Product Concept Checks

Alternative Basis of Interest/Business Proposition (s)

Final New Product Design Guide

New Category

Core Category

The Role of Marketing Research in New ProductsDefining the “Fuzzy Front End”

“Who I Am”

“What ISay”

“How IAct”

“What IFeel”

“How I Think”

High

HighLow

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Consumer Behavior Understanding

Demographics and other traditional segmentation methods

Product usage via informal surveys and other qualitative methods

Observing actual usage behaviors

In-depth discussionson emotions/attitudes

Consumer values viacluster analysis

There is a huge difference between what consumers say what they are going to do and how they think throughout the buying process.

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Example: Iron Product Positioning by Attitudinal Segments

Source: 1995 ISS

I Want To Iron

I Have To Iron

Appearance Driven Ironers

Professional Pressing Results

ProFinish

Committed Ironers

Powerful Wrinkle Removal

SurgeXpress

Ironing enhances my appearance

Uninvolved Ironers

Performance Made Simple

Quick ‘N Easy

Ironing is just a task

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Only 5 attitudinal attributes (out of 80) helped to define iron consumer purchase behaviors

Uninvolved Ironers Working couples on the go Time pressed Hate ironing

Appearance Driven Ironers Family’s appearance is key “One Pass” ironing Like to iron

ATTITUDINAL FACTORS NEED GAPS FEATURES

PerformanceMade Simple

ProfessionalPressingResults

Lightweight Sure steam system Auto-clean valve

Maximum steam performance Superior glidability In-use comfort

The study was able to consistently link attitudinal behaviors/thoughts to purchase drivers

Source: 1995 B&D A&U Study12

Committed Ironers Mostly single Personal appearance Ironing is just a task

Powerful Wrinkle Removal

Sleek, lightweight design Maximum steam performance Adjustable steam control

Iron Attitude & Usage Consumer Segmentation

Consumer Segment% of Total Iron

Population% of Ironing“Tonnage”*

Usage Index

Appearance DrivenIroners

19% 40% 211

Committed Ironers 20% 13% 65

Uninvolved Ironers 61% 47% 78

* Ironing tonnage is mean frequency of ironing times # of garments ironed/occasion

Source: 1995 ISS

Iron Consumer Segment Usage Analysis

Appearance driven and committed ironers combined account for 39% of the users, but iron 53% of thetonnage - an usage index of 136!!! These are the heavy users of the category.

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Basis of Interest Example – ProFinish Premium Irons Opportunity: Re-invent Black & Decker household premium irons

Competitive Frame of Reference: Total 1996 Iron Category – 10.5MM units/$240MM in Retail $’s. One of the largest appliance categories. >$30 price point segment – 2.2MM units/$86.4MM in Retails $’s. Higher than average retail prices.

Iron alternative: Dry Cleaners - $10B industry.

Basis of Interest: >$30 segment was fastest growing segment. B&D was #1 brand with almost 50% market share. Black & Decker premium irons had 2X the share of nearest competitor – but losing momentum & distribution. Correctly identified heavy user premium iron consumer segment – “appearance drive ironers”.

ProFinish Concept: Top two box purchase intent score of 62% among target consumers - upper 1/3 ranking.

Barriers to Entry: Black & Decker premium irons had been losing distribution to Rowenta, Sunbeam, Norelco – especially in

higher price points in department stores with better performing products. Black & Decker failed on 4 previous occasions to develop a successful premium iron. CAPEX for developing new tooling was $2MM+ - high risk.

All this & more needs to be translated into a new product design guide

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Phase II: Design/Development Develop capital authorization request: Make vs. Sourcing decisions Launch timelines Profitability/capital/payout projections

Pre-Production Builds/Intellectual Property Protection: Industrial designs/Engineering builds - Prototypes Off-tool prototype confirmation of design Manufacturing scale-up

Consumer in-home use test concept verification:Does the product deliver on product promises with consumers/users?

Develop Marketing Plans: Pricing strategy Distribution strategy/channel management Communications strategy: Advertising/Promotion Public Relations strategy

14%

12%

12%

40%

22%

B&D "ProFinish" Sunbeam Proctor Rowenta Norelco

ProFinish Premium Irons had stronger purchase interest vs. competition (40%).

Source: 1996 BASES Product Designer Study16

Premium Iron Brands Most Likely To Purchase

Q4 Q3Q2Q1Q4Q3Q2Q1

1995 1996 1997

Qual. HomeUse Test:Eng. Build Models$10M

Quant. Home Use Test:Pilot Run Samples$20M

Pro’s Con’s Retain shelf space

7 month advantage over sequential

Address sales oppty. - $22M/day

Launch before Rowenta/Norelco

We can react to poor results

Product not optimized, but wouldbeat competition - parity or better

Research costs still exceedsbudget by $50M

Recommended New Product Launch Critical Path

ID Research U.S./EuropePart II Conjoint Study$11M $55M

Positioning CompetitiveScreener Benchmark$42M Study - $60M

BrandingStudy - $25M

Start 1/96 Ship 7/97

Announce at Housewaresshow in 1/97

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Phase III: Commercialization/Launch Develop packaging: Packaging structure Graphics

Develop/pitch customer presentations/samples:

Production start-up/warehouse builds:

Sales/Customer Service Product feature/benefit briefings Pricing implementation Warehouse availability

Implement Communications Plans: Develop advertising – TV/print Media Website development Public relations – press releases/media events Trade collateral materials – including merchandising/displays

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Maximum Steam Performance:No other premium iron steams more

Professional Pressing Results at Home - just like a dry cleaner!!Professional Pressing Results at Home - just like a dry cleaner!!

Superior Non-Stick Glide:New space age soleplate coatings

Comfortably Designed:Comfort grips & unique control design

(new feature for the category) ProFinish had 21 utility and design patents, the first iron to launch “comfort grips” into the market

Voted a Consumer Digest “best buy”, achieved 100% distribution; $30MM business from zero

Final Premium Iron Product Concept - ProFinish

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“Best Practice” Stage Tollgate New Product Development Process Summary

Phase 1

Business Team

Review/Decision

Phase 2

Business Team

Review/Decision

Phase 3

Opportunity Identification Design/Development Commercialization/Launch

Major Activities:Identify new product concepts (sources):

Consumer/customer ideas New functional technologies Consumer research Competitive product reviews

Brainstorm/develop new concepts

Refine & screen new concepts: Informal customer reviews Qualitative research (focus groups) Quantitative concept screen ranking

Business Proposition Development: New product design guide Technical/engineering feasibility Develop rough prototypes Pricing/volume/profitability analysis Intellectual property reviews Launch timeline - first pass

Major Activities:

Develop capital authorization request: Production make vs. sourcing plan Production tooling plan Finalize launch timeline Profitability/capital financial plan

Pre-production/pilot builds/protection: Off-tool prototype confirmation Advanced manufacturing design/scale-up Intellectual property legal filings

Consumer/In -home use testing Changes to product/positioning as needed

Develop marketing plan/budgets: Communications plans (TV/Print/Online) Distribution strategy Pricing/profitability plans & budgets Final launch timeline – start ship

Major Activities:Final sales/customer presentations:

Customer planogram approvals Confirm year one volumes

Production start/warehouse builds: First piece inspectionsYear one production requirements

Implement pricing – customer service

Implement communication plans: Media placement Press releases/events Packaging structure/graphics Trade marketing collateral

Tollgates

While these steps might look “discrete”; there can be some activity overlaps

Moreover, every company will have their own custom process that fits their business20

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Step #2 – Does The Product Have The “Right” Brand

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What DefinesThe Business:

The DNA

What The ProductsProvide

The Products/Services

The Brand/Sub-Brand Name

What consumers REALLY Buy

The Benefit of What They Sell

What They Sell

The Company

Core Brand DNAUnderstanding How World Class Brands WorkWhat the consumer/customer buys….defines the business(es) the company is in…..

Product Branding ProcessAnalytical Framework

Define Core

Brand DNA

Identify Brand

Potential

Develop Brand Equity Bridges

Marketplace Analysis

Hunting Grounds/New Categories

Who are we? What can we be? Where can we live? How do we get there?

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Branding & Positioning All new products should have a “sustainable competitive advantage” An “SCA” is something:

You exclusively have Your competition doesn’t (or don’t realize they have it) Your consumers/customers want it

However, this is not enough. One needs to make the new product memorable in consumer minds.

Therefore, all new products should have a clear marketplace positioning to create an emotional bond with consumers/customers.

A positioning statement is based on analysis of the competition, consumer problems, product features solving those problems - tying all of this either into a new or existing brand.

A new brand will be harder to establish awareness since there is no prior marketplace equity.

Using an existing brand on a new product is more cost effective, but one must be careful of not over- extending the brand.

Good news is this can be VERY easy assuming you did your brand filtering homework correctly during the NPD process.

How Do You Develop A Positioning Statement?

To target market, X is the brand offrame of reference that benefit/point of

difference.

Support/Reasons Why: #1 #2 #3 etc.

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Positioning Statement Key Elements

1. Target Market: Consumers/customer group(s) having the highest pre-deposition to buy your product. Can be demographic, behavioral, psychographic and attitudinal in nature.

2. Frame of Reference: either the product category or consumer/customer based solution to “THEIR”problems, not yours. (can be direct competitors or non-category substititutes).

3. Benefit/Point of Difference: Single-minded, ownable category benefit relevant to the target market. It’s your product claim or promise to the marketplace – either attribute based or emotional.

4. Support/Reason’s Why: The product based reason to believe and/or claim substantiation.

Remember, the clearer and simpler the positioning, the easier it will be to break through the clutter and become memorable.

The positioning statement is the cornerstone of all your business strategies, it should precede all other strategies (i.e. advertising, pricing, packaging, etc.).

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Actual Positioning Statement

To women and men with busy lives, the Black & Decker line of small household products

offers a better way of doing things because it provides smart, innovative solutions for your

home.

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Successful Examplesof Branding Applications

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What the consumers REALLY Buy

The Benefit of What They Sell

What They Sell

The Company

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Happiness

Refreshment

Soft Drinks

Happiness Machine

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Eliminates speedbumps of everyday

living

Better way of doing things(Innovation Solutions)

Power tools and home products solutions

What consumers REALLY Buy

The Benefit of What They Sell

What They Sell

The Company

Scumbuster Cordless Wet Scrubber – “Splish Splash”

What the consumers REALLY Buy

The Benefit of What They Sell

What They Sell

The Company

4-Time NASCAR ChampionJeff Gordon

Miracles ofScience

Better Way Of DoingThings (Innovation

Solutions)

Residential, Agricultural & Automotive Products

“Trunk Crew” – Featuring 4-Time NASCAR Champion – Jeff Gordon

Summary New product development is an effort to better understand fundamental consumer “need

gaps” and then marry those needs with innovative functional technologies resulting in new innovations and marketplace uniqueness.

The “staged tollgate” new product development process aids cross-functional communication due to it’s discipline and structure.

Branding helps distinguish your new product vs. competition and allows you potentially to create a psychological bond with the consumer.

Branding is the cornerstone of ALL marketing strategies and needs to proceed all other strategies.

However, there are limits to brand equity. Not all brands can readily move to new & different categories. Understanding where your brand equity can go is fundamental.

Branding/positioning dovetails new product development and vice-versa. Two of the 4 “P”s

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