New Product Development (NDP)

Due to the rapid changes in consumer tastes, technology, and competition, companies
must develop a steady stream of new products and services.

A firm can obtain new products in two ways:

 acquisition—by buying a whole company, a patent, or a license to produce

someone else's product.
 new-product development in the company's own research and development
department.

By new products we mean original products, product improvements, product

modifications, and new brands that the firm develops through its own research and
development efforts.

Innovation can be very risky. Ford lost $350 million on its Edsel automobile; RCA
lost $580 million on its SelectaVision videodisc player; and Texas Instruments lost a
staggering $660 million before withdrawing from the home computer business. Other
costly product failures from sophisticated companies include New Coke (Coca-Cola
Company), Eagle Snacks (Anheuser-Busch), Zap Mail electronic mail (Federal
Express), Polarvision instant movies (Polaroid), Premier "smokeless" cigarettes (R.J.
Reynolds), Clorox detergent (Clorox Company), and Arch Deluxe sandwiches
(McDonald's).

Why do so many new products fail? …

There are several reasons, like:

 the market size may have been overestimated.

 the actual product was not designed as well as it should have been.
 the products are incorrectly positioned in the market
 the products may be priced too high, or advertised poorly.

Because so many new products fail, companies are anxious to learn how to improve
their odds of new-product success. One way is to identify successful new products
and find out what they have in common. Another is to study new-product failures to
see what lessons can be learned. In all, to create successful new products, a company
must understand its consumers, markets, and competitors and develop products that
deliver superior value to customers.
New Product Development process...

Throughout the previous 8 steps all new products or improved existing products will be created.

Step.I: Idea Generation

New-product development starts with idea generation—the systematic search for
new-product ideas. A company typically has to generate many ideas in order to find a
few good ones. At Gillette, of every 45 carefully developed new-product ideas, 3
make it into the development stage and only 1 eventually reaches the marketplace.
DuPont has found that it can take as many as 3,000 raw ideas to produce just 2
winning commercial products, and pharmaceutical companies may require 6,000 to
8,000 starting ideas for every successful commercial new product.

Major sources of new-product ideas include:

 internal sources, the company can find new ideas through formal research and
development. It can pick the brains of its executives, scientists, engineers,
manufacturing, and salespeople. Some companies have developed successful
"intrapreneurial" programs that encourage employees to think up and develop
new-product ideas. For example, 3M's well-known "15 percent rule" allows
employees to spend 15 percent of their time "bootlegging"—working on
projects of personal interest whether or not those projects directly benefit the
company. The spectacularly successful Post-it notes evolved out of this
program. Similarly, Texas Instruments's IDEA program provides funds for
employees who pursue their own ideas. Among the successful new products to
come out of the IDEA program was TI's Speak 'n' Spell, the first children's toy
to contain a microchip. Many other speaking toys followed, ultimately
generating several hundred million dollars for TI.
 External sources, since new-product ideas also come from watching and
listening to customers. The company can analyze customer questions and
 complaints to find new products that better solve consumer problems. The
company can conduct surveys or focus groups to learn about consumer needs
and wants. Or company engineers or salespeople can meet with and work
alongside customers to get suggestions and ideas.

For example, United States Surgical Corporation (USSC) has developed most of its
surgical instruments byworking closely with surgeons. The company was quick to
pick up on early experiments in laparoscopy—surgery performed by inserting a tiny
TV camera into the body along with slim, long-handled instruments. USSC now
captures about 58 percent of the single-use laparoscopy market.

Finally, consumers often create new products and uses on their own, and companies
can benefit by finding these products and putting them on the market. Customers can
also be a good source of ideas for new product uses that can expand the market for
and extend the life of current products.

Competitors are another good source of new-product ideas. Companies watch

competitors' ads and other communications to get clues about their new products.
They buy competing new products, take them apart to see how they work, analyze
their sales, and decide whether they should bring out a new product of their own.

Distributors and suppliers contribute many good new-product ideas. Resellers are
close to the market and can pass along information about consumer problems and
new-product possibilities. Suppliers can tell the company about new concepts,
techniques, and materials that can be used to develop new products. Other idea
sources include trade magazines, shows, and seminars; government agencies; new-
product consultants; advertising agencies; marketing research firms; university and
commercial laboratories; and inventors.

The search for new-product ideas should be systematic rather than haphazard.
Otherwise, few new ideas will surface and many good ideas will sputter in and die.
Top management can avoid these problems by installing an idea management system
that directs the flow of new ideas to a central point where they can be collected,
reviewed, and evaluated. In setting up such a system, the company can do any or all
of the following:

 Appoint a respected senior person to be the company's idea manager.

 Create a multidisciplinary idea management committee consisting of people
from R&D, engineering, purchasing, operations, finance, and sales and
marketing to meet regularly and evaluate proposed new-product and service
ideas.
 Set up a toll-free number for anyone who wants to send a new idea to the idea
manager.
 Encourage all company stakeholders—employees, suppliers, distributors,
dealers— to send their ideas to the idea manager.
 Set up formal recognition programs to reward those who contribute the best
new ideas.

The idea manager approach yields two favorable outcomes. First, it helps create an
innovation-oriented company culture. It shows that top management supports,
encourages, and rewards innovation. Second, it will yield a larger number of ideas
among which will be found some especially good ones.

Step.II: Idea Screening

The purpose of idea generation is to create a large number of ideas while The purpose
of screening stage is to reduce that number.

Many companies require their executives to write up new-product ideas on a standard

form that can be reviewed by a new-product committee. The committee then
evaluates the idea against a set of general criteria as follows:
• Fit within existing product mix
• Patentability
• Risk of competitive entry
• Ability to sell through existing distribution
• Compatibility with strategic plan
• Acceptable payback period
• Growth potential
• Cost of tooling and machinery
• Compatibility with core technologies

For example, at Kao Company, the large Japanese consumer-products company, the
committee asks questions such as these: Is the product truly useful to consumers and
society? Is it good for our particular company? Does it mesh well with the company's
objectives and strategies? Do we have the people, skills, and resources to make it
succeed? Does it deliver more value to customers than do competing products? Is it
easy to advertise and distribute?

Another way of screening is to use “Product- Screening Checklist” as follows:

The most important screening criterion was “compatibility with strategic plan” as
designed by the weight of 0.20. The committee rated this particular idea 0.7 for
“compatibility with strategic plan,” yielding a rating of 0.20 × 0.70 = 0.01 (rounded
from 0.014). Each row is calculated this way, then added together to arrive at the
weighted rating. Note that the product idea being evaluated obtained a weighted score
of 0.44. If several other ideas being evaluated
simultaneously obtained scores of 0.56, 0.62, and 0.70, the relative priorities would
become clear. The real value of these priorities is the ability to decide how to best
allocate developmental resources

Step.III: Concept Development & Testing

An attractive idea must be developed into a product concept. It is important to
distinguish between a product idea, a product concept, and a product image.

 A product idea is an idea for a possible product that the company can see
itself offering to the market.
 A product concept is a detailed version of the idea stated in meaningful
consumer terms.
 A product image is the way consumers perceive an actual or potential product.

May be after developing the product concept, the input from key customers who are
knowledgeable and cooperative is needed to suggest improvements and modifications
to the initial concept.
This will be done by Probing for specific modifications that could affect the sales
potential of the product. What if certain features were enlarged? Minimized? What if
the product was harder? Softer? What if the dimensions were more standardized?
More customized? Is color important? How about location? Get as much input from
these key informants as possible.

In some cases, this type of qualitative research with a small sample

is sufficient to develop the concept. In other cases, a larger sample
is required to fully understand needs. When the Oldsmobile Aurora
was being developed, the project team used focus groups extensively
even before the first designs were drawn.

Once the concept is more fully developed, it is important to test it

among a large group of customers. This group will be more representative of
the target market. The concepts may be presented to consumers symbolically
or physically.

For some concept tests, a word or picture description might be sufficient.

However, a more concrete and physical presentation of the concept will
increase the reliability of the concept test.

Today, some marketers are finding innovative ways to make product concepts
more real to consumer subjects. For example, some are using virtual reality to
test product concepts. Virtual reality programs use computers to simulate
reality.

For example, a designer of kitchen cabinets can use a virtual reality program
to help a customer "see" how her kitchen would look and work if remodeled
with the company's products. Although virtual reality is still in its infancy, its
applications are increasing daily.

There is no one best approach to concept testing, but most are variations of
qualitative research and focus-group discussions. Generally, several versions
of a concept (possibly including competitors or placebo concepts) or several
different product concepts that address the same need (i.e., substitutes) are
explored in one concept test. This is because people usually provide better
information when comparing alternatives, and the resulting information is
more reliable than absolute evaluation.

Some of the questions to be addressed during the concept test

include the following: Does the proposed concept make sense to the
customers? Is it preferred over what is currently available? How much value
do the improvements have over existing alternatives available to the customer?
Is the product consistent with the way customers currently perform the
function, or will it require a change in mind-set? Would they be willing to pay
more? What are the flaws? Are there changes that would make the product
viable (or more viable)? What is the basic need that this product would
satisfy? Has the brand name or trademark been included in the concept test?
The concept tests usually include some indication of intent to buy
at some specified price. “Intent to buy” refers to the respondents’ indication of
 the probability they would buy the product if it existed, usually expressed
along a scale (e.g., 1 = “definitely would not buy” to 5 = “definitely would
buy”).

This is an important component of the concept test but should not be projected
literally as the actual sales potential. Customers will almost always
overestimate their willingness to buy in an artificial setting such as a focus
group. Obtaining pricing information is difficult at best. However, determining
a target price is critical for establishing a target cost for the product-
development process. Although no research method is infallible, there are a
few techniques that are worth trying.

 One approach is to ask customers to supply a price range: What is

the highest price you’d pay, above which you’d feel you were being
gouged? What is the lowest price you’d pay, below which you’d question the
quality of the product?
 Another approach is to split the concept test groups into experimental and
control groups. Give each group a different price for the same described
concept and determine whether there are differences in the willingness to buy
at the stated prices.
 A third strategy is to ask customers what value (in monetary terms) the new
product would have over what they are currently using. A final approach is to
ask customers what they would be willing to pay for the product and what
features they would be willing to give up to attain that price. In each case, an
intent-to-buy question should be included.

At this point, the product team should attempt to establish a target

price. The target price is necessary to estimate target costs for the
developmental process. “Design by price” is an approach used by several
companies in industries with rapidly changing technologies, short life cycles,
and pressure on pricing.

The target price depends on the value perceived by the market.

Determining value will be different for low-unit-value, frequently purchased
items (e.g., consumer packaged goods) than for high-priced, infrequently
purchased goods (e.g., capital equipment). The purchase of consumer
packaged goods has an element of habit and inertia in the decision process.
Higher-priced products may have groups or committees involved in the
process. The differences in decision making, as well as the different decision
makers, need to be included in the analysis.

Case Study for Concept Development & Testing

DaimlerChrysler is getting ready to commercialize its experimental fuel-cell-powered

electric car. This car's low-polluting fuel-cell system runs directly off liquid hydrogen.
It is highly fuel efficient (75 percent more efficient than gasoline engines) and gives
the new car an environmental advantage over standard internal combustion engine
cars. DaimlerChrysler is currently road testing its NECAR 4 (New Electric Car)
subcompact prototype and plans to deliver the first fuel-cell cars to customers in 2004.
Based on the tiny Mercedes A-Class, the car accelerates quickly, reaches speeds of 90
miles per hour, and has a 280-mile driving range, giving it a huge edge over battery-
powered electric cars that travel only about 80 miles before needing 3 to 12 hours of
recharging.

DaimlerChrysler's task is to develop its fuel-cell powered electric car into alternative
product concepts, find out how attractive each is to customers, and choose the best
one.

Stage.I : Concept Testing

DaimlerChrysler's task is to develop this new product into alternative product

concepts, find out how attractive each concept is to customers, and choose the best
one. It might create the following product concepts for the fuel-cell electric car:

Concept 1 A moderately priced subcompact designed as a second family car to be

used around town. The car is ideal for running errands and visiting
friends.
Concept 2 A medium-cost sporty compact appealing to young people.
Concept 3 An inexpensive subcompact "green" car appealing to environmentally
conscious people who want practical transportation and low pollution.

Stage.II: Concept Testing

Here, in words, is concept 3 which will be tested with the target segment:

An efficient, fun-to-drive, fuel-cell-powered electric subcompact car that seats four.

This high-tech wonder runs on liquid hydrogen, providing practical and reliable
transportation with almost no pollution. It goes up to 90 miles per hour and, unlike
battery-powered electric cars, it never needs recharging… so what do you think about
this car?…

After being exposed to the concept, consumers then may be asked to react to it by
answering questions such as those in the following Table. The answers will help the
company decide which concept has the strongest appeal. For example, the last
question asks about the consumer's intention to buy. Suppose 10 percent of the
consumers said they "definitely" would buy and another 5 percent said "probably."
The company could project these figures to the full population in this target group to
estimate sales volume. Even then, the estimate is uncertain because people do not
always carry out their stated intentions.

1. Do you understand the concept of a fuel-cell-powered electric car?

2. Do you believe the claims about the car's performance?
3. What are the major benefits of the fuel-cell-powered electric car compared with a
conventional car?
4. What are its advantages compared with a batter-powered electric car?
5. What improvements in the car's features would you suggest?
6. For what uses would you prefer a fuel-cell-powered electric car to a conventional
car?
7. What would be a reasonable price to charge for the car?
8. Who would be involved in your decision to buy such a car? Who would drive it?
9. Would you buy such a car? (Definitely, probably, probably not, definitely not)

Step.IV: Marketing Strategy Development

Suppose DaimlerChrysler finds that concept 3 for the fuel-cell-powered electric car
tests best. The next step is marketing strategy development, designing an initial
marketing strategy for introducing this car to the market.

The marketing strategy statement consists of three parts:

 the target market, the product Differentiation & positioning, the sales, market
share, and profit goals for the first few years.
 the product's planned price, distribution, and marketing budget for the first
year.
 the planned long-run sales, profit goals, and marketing mix strategy.

Thus for Daimler Chrysler :

The 1st Part:

The target market is younger, well-educated, moderate-to-high-income individuals,

couples, or small families seeking practical, environmentally responsible
transportation. The car will be positioned as more economical to operate, more fun to
drive, and less polluting than today's internal combustion engine cars, and as less
restricting than battery-powered electric cars, which must be recharged regularly. The
company will aim to sell 100,000 cars in the first year, at a loss of not more than $15
million. In the second year, the company will aim for sales of 120,000 cars and a
profit of $25 million.

The 2nd part:

The fuel-cell-powered electric car will be offered in three colors—red, white, and blue
—and will have optional air-conditioning and power-drive features. It will sell at a
retail price of $20,000—with 15 percent off the list price to dealers. Dealers who sell
more than 10 cars per month will get an additional discount of 5 percent on each car
sold that month. An advertising budget of $20 million will be split 50–50 between
national and local advertising. Advertising will emphasize the car's fun and low
emissions. During the first year, $100,000 will be spent on marketing research to find
out who is buying the car and their satisfaction levels.

The 3rd part:

DaimlerChrysler intends to capture a 3 percent long-run share of the total auto market
and realize an after-tax return on investment of 15 percent. To achieve this, product
quality will start high and be improved over time. Price will be raised in the second
and third years if competition permits. The total advertising budget will be raised each
year by about 10 percent.Marketing research will be reduced to $60,000 per year after
the first year.

Stage.V: Business Analysis

Once management has decided on its product concept and marketing strategy, it can
evaluate the business attractiveness of the proposal. Business analysis involves a
review of the sales, costs, and profit projections for a new product to find out
whether they satisfy the company's objectives. If they do, the product can move to
the product development stage.

To estimate sales, the company might look at the sales history of similar products and
conduct surveys of market opinion. It can then estimate minimum and maximum sales
to assess the range of risk. After preparing the sales forecast, management can
estimate the expected costs and profits for the product, including marketing, R&D,
operations, accounting, and finance costs. The company then uses the sales and costs
figures to analyze the new product's financial attractiveness.
 Stage.VI: Product Development
So far, for many new-product concepts, the product may have existed only as a word
description or a drawing. If the product concept passes the business test, it moves into
product development. Here, R&D or engineering develops the product concept into a
physical product. The product development step, however, now calls for a large
jump in investment. It will show whether the product idea can be turned into a
workable product.

The R&D department will develop and test one or more physical versions of the
product concept. R&D hopes to design a prototype that will satisfy and excite
consumers and that can be produced quickly and at budgeted costs. Developing a
successful prototype can take days, weeks, months, or even years. Often, products
undergo rigorous functional tests to make sure that they perform safely and
effectively. Here are some examples of such functional tests:

 A scuba-diving Barbie doll must swim and kick for 15 straight hours to satisfy
Mattel that she will last at least one year. But because Barbie may find her feet
in small owners' mouths rather than in the bathtub, Mattel has devised another,
more torturous test: Barbie's feet are clamped by two steel jaws to make sure
that her skin doesn't crack—and choke—potential owners.

The prototype must have the required functional features and also convey the intended
psychological characteristics. The electric car, for example, should strike consumers
as being well built, comfortable, and safe. Management must learn what makes
consumers decide that a car is well built. To some consumers, this means that the car
has "solid-sounding" doors. To others, it means that the car is able to withstand heavy
impact in crash tests. Consumer tests are conducted in which consumers test-drive the
car and rate its attributes.
 Stage.VII: Test Marketing
If the product passes functional and consumer tests, the next step is test marketing, the
stage at which the product and marketing program are introduced into more realistic
market settings. Test marketing gives the marketer experience with marketing the
product before going to the great expense of full introduction. It lets the company test
the product and its entire marketing program—positioning strategy, advertising,
distribution, pricing, branding and packaging, and budget levels.

The amount of test marketing needed varies with each new product. Test marketing
costs can be enormous, and it takes time that may allow competitors to gain
advantages. When the costs of developing and introducing the product are low, or
when management is already confident about the new product, the company may do
little or no test marketing. Companies often do not test-market simple line extensions
or copies of successful competitor products.

For example, Procter & Gamble introduced its Folger's decaffeinated coffee crystals
without test marketing, and Pillsbury rolled out Chewy granola bars and chocolate-
covered Granola Dipps with no standard test market. However, when introducing a
new product requires a big investment, or when management is not sure of the
product or marketing program, a company may do a lot of test marketing. For
instance, Lever USA spent two years testing its highly successful Lever 2000 bar soap
in Atlanta before introducing it internationally. Frito-Lay did eighteen months of
testing in three markets on at least five formulations before introducing its Baked
Lays line of low-fat snacks.

The costs of test marketing can be high, but they are often small when compared with
the costs of making a major mistake. For example, Nabisco's launch of one new
product without testing had disastrous—and soggy—results:

Nabisco hit a marketing home run with its Teddy Grahams, teddy-bear-shaped
graham crackers in several different flavors. So, the company decided to extend
Teddy Grahams into a new area. In 1989, it introduced chocolate, cinnamon, and
honey versions of Breakfast Bears Graham Cereal. When the product came out,
however, consumers didn't like the taste enough, so the product developers went back
to the kitchen and modified the formula. But they didn't test it. The result was a
disaster. Although the cereal may have tasted better, it no longer stayed crunchy in
milk, as the advertising on the box promised. Instead, it left a gooey mess of graham
mush on the bottom of cereal bowls. Supermarket managers soon refused to restock
the cereal, and Nabisco executives decided it was too late to reformulate the product
again. So a promising new product was killed through haste to get it to market.

When using test marketing, consumer products companies usually choose one of three
approaches—standard test markets, controlled test markets, or simulated test markets.

Standard Test Markets

Using standard test markets, the company finds a small number of representative test
cities, conducts a full marketing campaign in these cities, and uses store audits,
consumer and distributor surveys, and other measures to gauge product performance.
The results are used to forecast national sales and profits, discover potential product
problems, and fine-tune the marketing program.

Standard test markets have some drawbacks:

 They can be very costly and they may take a long time—some last as long as
three years.
 Competitors can monitor test market results or even interfere with them by
cutting their prices in test cities, increasing their promotion, or even buying up
the product being tested.
 Competitors may have time to develop defensive strategies, and may even beat
the company's product to the market.

For example, while Clorox was still test marketing its new detergent with bleach in
selected markets, P&G launched Tide with Bleach nationally. Tide with Bleach
quickly became the segment leader; Clorox later withdrew its detergent.

Despite these disadvantages, standard test markets are still the most widely used
approach for major market testing. However, many companies today are shifting
toward quicker and cheaper controlled and simulated test marketing methods.

Controlled Test Markets

Several research firms keep controlled panels of stores that have agreed to carry new
products for a fee.

Controlled test marketing systems like Nielsen's Scantrack and Information

Resources, Inc.'s (IRI) BehaviorScan track individual behavior from the television set
to the checkout counter. IRI keeps panels of 2,000 to 3,000 shoppers in 6 carefully
selected markets.

It measures TV viewing in each panel household and can send special commercials to
panel member television sets. Panel consumers buy from cooperating stores and show
identification cards when making purchases.

Within test stores, IRI controls such factors as shelf placement, price, and in-store
promotions. Detailed electronic scanner information on each consumer's purchases is
fed into a central computer, where it is combined with the consumer's demographic
and TV viewing information and reported daily. Thus, BehaviorScan can provide
store-by-store, week-by-week reports on the sales of new products being tested.
Because the scanners record the specific purchases of individual consumers, the
system also can provide information on repeat purchases and the ways that different
types of consumers are reacting to the new product, its advertising, and various other
elements of the marketing program.

Controlled test markets usually cost less than standard test markets and take less time
(6 months to a year). A typical BehaviorScan test takes 16 to 24 months to complete.
However, some companies are concerned that the limited number of small cities and
panel consumers used by the research services may not be representative of their
products' markets or target consumers. As in standard test markets, controlled test
markets allow competitors to get a look at the company's new product.

Simulated Test Markets

Companies can also test new products in a simulated shopping environment. The
company or research firm shows ads and promotions for a variety of products,
including the new product being tested, to a sample of consumers. It gives consumers
a small amount of money and invites them to a real or laboratory store where they
may keep the money or use it to buy items.

The researchers note how many consumers buy the new product and competing
brands. This simulation provides a measure of trial and the commercial's effectiveness
against competing commercials.

The researchers then ask consumers the reasons for their purchase or nonpurchase.
Some weeks later, they interview the consumers by phone to determine product
attitudes, usage, satisfaction, and repurchase intentions. Using sophisticated computer
models, the researchers then project national sales from results of the simulated test
market. Recently, some marketers have begun to use interesting new high-tech
approaches to simulated test market research, such as virtual reality and the Internet.

Simulated test markets overcome some of the disadvantages of standard and

controlled test markets. They usually cost much less, can be run in eight weeks, and
keep the new product out of competitors' view. Yet, because of their small samples
and simulated shopping environments, many marketers do not think that simulated
test markets are as accurate or reliable as larger, real-world tests. Still, simulated test
markets are used widely, often as "pretest" markets. Because they are fast and
inexpensive, they can be run to quickly assess a new product or its marketing
program. If the pretest results are strongly positive, the product might be introduced
without further testing. If the results are very poor, the product might be dropped or
substantially redesigned and retested. If the results are promising but indefinite, the
product and marketing program can be tested further in controlled or standard test
markets.

Stage.VIII: Commercialization
Test marketing gives management the information needed to make a final decision
about whether to launch the new product. If the company goes ahead with
commercialization—introducing the new product into the market—it will face high
costs. The company will have to build or rent a manufacturing facility. It may have to
spend, in the case of a new consumer packaged good, between $10 million and $200
million for advertising, sales promotion, and other marketing efforts in the first year.

 The company launching a new product must first decide on introduction

timing (When?).

If DaimlerChrysler's new fuel-cell electric car will eat into the sales of the company's
other cars, its introduction may be delayed. If the car can be improved further, or if
the economy is down, the company may wait until the following year to launch it.
  Next, the company must decide (where?) to launch the new product—in a
single location, a region, the national market, or the international market.

Few companies have the confidence, capital, and capacity to launch new products into
full national or international distribution. They will develop a planned market rollout
over time.

In particular, small companies may enter attractive cities or regions one at a time.
Larger companies, however, may quickly introduce new models into several regions
or into the full national market.

Companies with international distribution systems may introduce new products

through global rollouts.

Colgate-Palmolive uses a "lead-country" strategy. For example, it launched its

Palmolive Optims shampoo and conditioner first in Australia, the Philippines, Hong
Kong, and Mexico, then rapidly rolled it out into Europe, Asia, Latin America, and
Africa. However, international companies are increasingly introducing their new
products in swift global assaults. Procter & Gamble did this with its Pampers Phases
line of disposable diapers, which it had on the shelf in 90 countries within just 12
months of introduction. Such rapid worldwide expansion solidified the brand's market
position before foreign competitors could react. P&G has since mounted worldwide
introductions of several other new products.

Colgate-Palmolive introduces its new products internationally using a "lead country"

strategy, launching the product first in a few important regions, followed by a swift
global rollout.
 Then, the company must decided the target customer (To Whom?) Within the
roll-out markets, the company must target its distribution and promotion to
customer groups who represent the best prospects. These prime prospects
should have been profiled by the firm in earlier research and test marketing.

For instance, When The European newspaper launched a multimedia version of the
paper, it was initially targeted at professionals, who were sent an electronic version of
the paper via telephone to personal computers at work.
Generally, firms must fine-tune their targeting efforts, starting with the innovators,
then looking especially for early adopters, heavy users and opinion leaders. Opinion
leaders are particularly important as their endorsement of the new product has a
powerful impact upon adoption by other buyers in the marketplace.

 The company also must develop an action plan for introducing the new
product into the selected markets (How?). It must spend the marketing budget
on the marketing mix and various other activities.

For example, in August 1995, Microsoft introduced its Windows 95 operating system
for personal computers in a fanfare of publicity. Observers estimated that the
company spent some §1 billion, one of the biggest ever blitzes in advertising. The
company paid up to $600,000 to fund 1.5 million copies of the software for The
Times newspaper in London on the day of the product's launch. The soundtrack to the
campaign was the Rolling Stones song, 'Start me up', for which the company had to
pay $8 million. The first European markets to get Windows 95 were Benelux, France,
Ireland and the United Kingdom, followed immediately by Denmark, Finland,
Germany, Norway, Portugal, Spain and Sweden, and then Greece. Distributors the
world over wanted to be the first to sell a copy of the software. Thousands queued late
at night
outside stores for the first copies. The world's first buyer was a business student in
New Zealand, 12 hours ahead of the European launch!

====================