Traditional Product Launch Strategy

• Skim the market with premium prices (lead users, technophiles)

• Establish first-mover advantage

• Descend learning curve with volume increases

• Reach broad market later with lower prices

What Are First-Mover Advantages?

• Brand loyalty

• Preempt capacity

• Preempt shelf space

• Head-start on learning

• Network externalities\

Question: Have first mover advantages disappeared?

The Survival Zone

Price Point Quality

Features

        

         

•Product: Sony Cyber-shot DSC-T1 •Specs: 5.0 megapixels, 3X optical zoom •Price: $550 list •Company Info: Sony Electronics Inc., www.sonystyle.com •Ease of use:          •Power:          •Performance:          •Image quality:         

Editor Rating:          

Calculating Target Cost

Price Point

- dealer margin

- import costs

- margin requirement

Target Cost

What If Estimated Costs AreHigher Than Target Costs?

• Reduce features and lower price point

• Enhance features and raise price point

• Redesign the product or component

• Reexamine conditions (launch date, volume)

• Consider life cycle cost

Managing the Product Development Process

• If you can’t meet the target, don’t launch the product

• Tip-toe objectives

• Cost target is a unifying metric