Critical Marketing Techniques Workshop

Transcription

1 Critical Marketing Techniques Workshop Presented by The Innovation Network Jim Smith P. Eng. Developed by: Doug Gutzmann Altius Technology Marketing, Calgary AB

2 PREFACE / CAUTION: Ó You probably have an IDEA in mind for a product, process, or project that you would be developing. Ó HOWEVER, please recognize that sharing an idea publicly constitutes PUBLIC DISCLOSURE and that SHOULD NOT OCCUR until you have protected your idea. Ó Therefore, we only wish to discuss ideas that have been protected or for which you are not seeking patent protection.

3 Part 1: Workshop Introduction

4 Participant Introductions Your name Your company name and description The IDEA you wish to develop (if appropriate) What you hope to take from this workshop.

5 Workshop Focus Marketing Production (Technical) Ernesto Sirolli Trinity of Management Financial Management

6 Workshop Objectives At the end of this workshop, you will be able to: Ó Understand and use the key terms in Marketing. Ó Identify the key success factors for new products. Ó Identify the main risk indicators of your IDEA. Ó Describe the main components of the marketing plan for your IDEA. Ó Identify the next steps in taking your product to market.

7 Workshop Outline 1. Workshop introduction [BR] 2. Key definitions and terminology 3. New product risks and realities 4. New product success factors 5. Your product marketing plan 6. Next steps feedback and discussion

8 Before we get started! Creativity (Idea) Innovation Implementation In the box thinkers Out of box thinking Early majority Late majority The Marketing Plan increases your success in breaking through the barriers. Early Adopters 5% Laggards Innovators 2.5% Inventors 0.005% c 1 in 20,000 AB #1 Can. c 40% Patent AB Requests from Peace Country

9 Part 2: Key Definitions and Terminology

10 Marketing Terminology is often misused: Components of Marketing include: Public Relations Advertising Positioning Customer Service Commercialization Market Research Selling Market Development Product Development Promotion

11 Marketing Defined: is the discipline of discovering and satisfying customer needs. is a continuous process

12 Marketing Defined: Discovering and Satisfying Customer Needs 1. Market Research: Acquiring information about needs Potential customers: the Market

13 Marketing Defined: Discovering and Satisfying Customer Needs 2. Marketing Plan: Determining which customer needs to address and how 1. Market Research: Acquiring information about needs Potential customers: the Market

14 Market-Product Strategies Alternative strategies to expand a company s sales revenue Existing Markets: New Markets: Existing Products: Market Penetration Selling more existing products in current markets Market Development Selling existing products in new markets New Products: Product Development: Selling new products in current markets Diversification Selling new products in new markets

15 Marketing Defined: Discovering and Satisfying Customer Needs 2. Marketing Plan: Determining which customer needs to address and how Concepts for products 3. Find the best combination of the 4 P s of Marketing: Product Price Promotion (Communications) Place (Distribution) 1. Market Research: Acquiring information about needs Potential customers: the Market

16 The 4 P s of Marketing Product Features Brand name Packaging Service Warranty Price List price Discounts Allowances Payment terms Promotion Advertising Personal selling Sales promotion Public relations Place Outlets Channels Coverage Transportation Stock level Together, the 4 P s of your offering create your Positioning Product Promotion Place Price

17 Marketing Defined: Discovering and Satisfying Customer Needs 2. Marketing Plan: Determining which customer needs to address and how Concepts for products 3. Find the best combination of the 4 P s of Marketing: Product Price Promotion (Communications) Place (Distribution) 1. Market Research: Acquiring information about needs 4. Satisfy customer needs Potential customers: the Market

18 Typical use of Marketing Strategies to drive sales growth The Product Lifecycle Technology Enthusiasts Visionaries Pragmatists Conservatives Idea Development Plan Alpha Prototype Beta Prototype Product Release Release 2 Complete Portfolio Commercialization: launch of a new product into the initial target segment Product Development: expanding sales by adding or improving a product Market Development: expanding sales by addressing new market segments

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20 Part 2: Definitions &Terminology Summary of Key Points Ó Marketing is the ongoing process of discovering and satisfying customer needs Ó Marketing covers all 4 P s Ó Marketing Strategies are used throughout a product s life cycle to help grow sales

21 Part 3: New product risks and realities

22 Robert G. Cooper in Winning at New Products Most new products fail. New product development is one of the riskiest, yet most important, endeavors of the modern corporation.

23 The Probabilities of Product Success Ó Most new products never make it to market. Ó Only 1 out of 7-10 product concepts succeeds. Ó Only 1 out of 4 development projects succeeds. Ó Only 2 out of 3 launched products succeed. Ó Almost half of all resources allocated to product development and commercialization are spent on products that are cancelled or fail to pay out. It is possible to outperform the average: the best 30% of firms spend 80% of their resources on successful products.

24 Most Common Reasons for Failure Better mousetrap no one wanted 28% Me too product meets 24% competitive brick wall Competitive one-up-man-ship 13% Technical dog 15% Price crunch 13% Multiple factors 7% Over half of all failures

25 Part 4 New Product Success Factors

26 Shuttlecraft VIDEO Key Product Success Factors*: 1. Superior product with unique benefits 2. Well-defined product prior to development 3. Quality of execution of technology activities 4. Technological leverage 5. Quality of execution of predevelopment activities 6. Marketing leverage 7. Quality of execution of marketing activities 8. Market attractiveness * Based on studies of 2000 new products, 2/3 successes and 1/3 failures by Cooper & Kleinschmidt Results validated by many other university-, government-, industry-, and company- led studies.

27 Product Success Factors 1. Superior Product with Unique Benefits Impact: Success rate: 5.3 times higher Market share: 41% higher (53% vs 12%) Profitability: 3.2 times as profitable Success Rate (%) 100% 90% 98% What makes a product superior? Meets customer needs better than competitors Has unique features & benefits Innovative, first of its kind on the market Implications: Do market analysis early before starting development to understand customer needs & competitive solutions. Choose to proceed only with products having high, differentiated customer value. 80% 70% 60% 50% 40% 30% 20% 10% 0% 18% "Me Too" Products 58% Products with Moderate Advantage Truly Superior Products

28 Product Success Factors 2. Product well defined before Impact: Success rate: 3.3 times higher Market share: 38% higher Profitability: 2.5 times as profitable What type of definition? Before development begins. Clear & agreed upon definition of Development starts Target market segment Customer needs, wants, preferences Product concept (what product will be & do) Product specifications and requirements Implications: Success Rate (%) Research & write product definition before development starts. Ensure product attributes deliver high customer value. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 26% Poor Definition 64% Moderate Definition 85% Early, Sharp Product Definition

29 Product Success Factors 3. Quality of Execution of Technical Activities Impact: Success rate: 2.5 times higher Market share: 21% higher Most critical technical activities: Preliminary technical assessment Product development designs-in quality Product (Technical) In-house testing validates quality of design and manufacturing Trial production results confirm manufacturing strategy Production start up enables consistently high quality Marketing Sirolli Trinity of Management Financial Management Implications: Ensure new product development process focuses on delivering quality. Build in quality and customer value by design, not by chance.

30 Product Success Factors 4. Technological Leverage Impact: Success rate: 2.8 times higher Technological Leverage Factors: Strong fit between the needs of project and the firm s technical competencies & resources (R&D, product development, and engineering). Production (Technical) Marketing Sirolli Trinity of Management Financial Management Implications: Know company s strengths & weaknesses in terms of technical competencies & resources (SWOT). Attack from position of technological strength. If necessary, outsource technical functions to best-in-class partners.

31 Product Success Factors 5. Quality of Predevelopment Impact: Success rate: 2.3 times higher Market share: 25 points higher Profitability: 1.9 times as profitable Critical predevelopment activities: Initial idea screening Activities Customer and technical assessment of ideas Detailed market studies / market research Business or financial analysis Success Rate (%) 80% 70% 60% 50% 40% 30% 20% 10% 0% 31% Poor homework 68% Moderate homework 75% Excellent upfront homework Implications: Take a ready, aim, fire approach to selecting ideas. Do adequate upfront homework to qualify the concept before starting development.

32 Product Success Factors Impact: Success rate: 2.3 times higher Market share: 14% higher 1.8 times as profitable 6. Marketing Leverage Marketing Leverage Factors: Strong fit between needs of project and firm s: Sales force & distribution system Advertising resources & skills Market research & intelligence sources Customer service capabilities Production (Technical) Marketing Sirolli Trinity of Management Financial Management Implications: Know company s marketing competencies & resources (SWOT). Attack from position of marketing strength. If necessary, outsource or license to partners with the competencies required.

33 Impact: Success rate: 2.2 times higher Market share: 18.5% higher Product Success Factors 7. Quality of Execution of Marketing Activities Critical Marketing Activities: Detailed market research and assessment. Customer tests of alpha & beta prototypes Ongoing customer input and industry research Market launch and ongoing Marketing effort Production (Technical) Marketing Sirolli Trinity of Management Financial Management Implications: Build in the voice of the customer all the way through the project, especially in the upfront, pre-development phases. Provide an adequate budget for the Marketing activities required. May need to hire or outsource Marketing functions and manage them carefully.

34 Product Success Factors 8. Market Attractiveness Impact: Success rate: 1.7 times higher Characteristics of attractive markets: Large markets High market growth rates High need for product Easy to reach (communicate and sell to) Prospects are willing to pay at required price points Implications: Analyze market attractiveness before development begins. Segment and select attractive target markets. Choose to develop products or services with high market attractiveness.

35 Exercise 1 Discussion: 1. Where are the main risk areas of your product concept: which items have you rated lowest and why? 1. Superior product with unique benefits 2. Well-defined product prior to development 3. Quality of execution of technology activities 4. Technological leverage 5. Quality of execution of predevelopment activities (financial assessment) 6. Marketing leverage 7. Quality of execution of marketing activities 8. Market attractiveness 2. Can these risks be adequately mitigated?

36 15 Minute Break

37 Part 5 New Product Marketing

38 Developing the Marketing Plan for your New Product Concept 1. Situation Analysis Internal Assessment Identify Relevant Industry Trends Analyze Competitors Research Customer SWOT Summary 4. Next Steps 2. Goal Setting Set Financial, Market & Product Goals Identify Market Segments & Select Target Markets Position the Product 3. Marketing Plan Dev. Develop the Marketing Mix (4P s) Develop the Marketing Budget

39 1.1 Internal Assessment Business objectives: Business mission and vision Business goals (revenue, profitability, company size, company focus) NEW PRODUCT MARKETING 1. Situation Analysis What are your biggest Strengths & Weaknesses? Product risk areas (from Exercise 1) Key resources and competencies available Existing products/services, pricing, promotion, distribution Existing customer base

40 NEW PRODUCT MARKETING 1. Situation Analysis 1.2 Identify Relevant Industry Trends What Industry or Market trends may present opportunities or threats? Demographic, Social or cultural trends Economic trends Technological trends Political or regulatory trends What are the biggest Opportunities and Threats?

41 NEW PRODUCT MARKETING 1. Situation Analysis 1.3 Analyze Competitors 1. Characterizing the industry: Stage in the Product Life cycle Number of sellers & degree of differentiation Entry, mobility, exit barriers Cost structure Extent of vertical integration and globalization 2. Identifying Competitors: Direct competitors Emerging/new competitors Substitutes & alternatives 3. Analyzing Competitors: Evaluate Strategies, Products, & Positioning Apparent Strengths & Weaknesses What are the biggest competitive threats?

42 1.4 Research Customer Are your customers consumers or businesses? NEW PRODUCT MARKETING 1. Situation Analysis What is their buyer behaviour? What are their needs & wants? How do they make purchasing decisions? How difficult will it be to reach them? What other buyer characteristics are important? What Opportunities (or Threats) do your customers present?

43 1.5 SWOT Summary NEW PRODUCT MARKETING 1. Situation Analysis Positive Factors Negative Factors Internal 3 most important Strengths 3 most important Weaknesses External 3 most important Opportunities 3 most important Threats Review your analysis of your company, industry, competitors, and customer, and identify the 2 or 3 most critical Strengths, Weaknesses, Opportunities, and Threats (SWOT).

44 Developing the Marketing Plan for your New Concept or Product 1. Situation Analysis Internal Assessment Industry Assessment Competitive Analysis Customer Research SWOT Summary 4. Next Steps 2. Goal Setting Set Financial, Market & Product Goals Identify Market Segments & Select Target Markets Position the Product 3. Marketing Plan Dev. Develop the Marketing Mix (4P s) Develop the Marketing Budget

45 Set Financial, Market & Product Goals Company / Financial goals: Revenue, profit, market share, break even, investor commitments Company size and type in 3-5 years Market goals: Sales region, type of customer NEW PRODUCT MARKETING 2. Goal Setting Product goals: Technologies, platforms, types of products, how many products

46 NEW PRODUCT MARKETING 2. Goal Setting Identify Market Segments & Select Target Markets Market Segmentation: Identify & profile distinct types of buyers who might require separate products or marketing mixes. Geographic (regional) segments Consumer Demographic (age, income, occupation) segments Behavioural (needs, product usage) segments Industry segments Business size or type segments Target Market: Focus your efforts on the most attractive market segment(s) based on: Segment size and growth rate Your competitive position The cost to reach the segment Fit with your goals and objectives

47 Position Your Product Your Market Definition (who you are, whom you serve, how you serve them) Examples: Microsoft is the leading software company that develops productivity solutions for businesses and consumers Intuit is a software company that offers professional accounting solutions to small to mid-sized Canadian businesses. Your Value Proposition (the unique value you deliver that positions you beyond the competition) Examples: Maytag Washers: superior reliability. Zellers: guaranteed lowest price, best value. Potential Values and Benefits to develop your positioning around: Product Services Personnel Channel Image Style Ordering ease Competence Coverage Symbols Features Delivery Courtesy Experience Media Performance Installation Credibility Performance Atmosphere Conformance Customer training Reliability Events Durability Customer consulting Responsiveness Reliability Maintenance & repair Communication NEW PRODUCT MARKETING 2. Goal Setting

48 Developing the Marketing Plan for your New Product Concept 1. Situation Analysis Internal Assessment Industry Assessment Competitive Analysis Customer Research SWOT Summary 4. Next Steps 2. Goal Setting Set Financial, Market & Product Goals Identify Market Segments & Select Target Markets Position the Product 3. Marketing Plan Dev. Develop the Marketing Mix (4P s) Develop the Marketing Budget

49 The Marketing Mix NEW PRODUCT MARKETING 3. The Plan Product Features Brand name Packaging Service Warranty Price List price Discounts Allowances Payment terms Promotion Advertising Personal selling Sales promotion Public relations Place Outlets Channels Coverage Transportation Stock level A cohesive marketing mix Product Promotion Place Place Price Source: Berkowitz et al.

50 NEW PRODUCT MARKETING 3. The Plan Product Features Brand name Packaging Service Warranty Develop the Product Plan Product Features and Benefits: Address the needs of the target market. Ensure solid competitive differentiation. Product Portfolio: What product choices are required? Do you provide the whole solution? Product Branding: Ensure branding is clear, memorable, and hits customer needs Support with Packaging, Labeling, Service, Warranty

51 NEW PRODUCT MARKETING 3. The Plan Price List price Discounts Allowances Payment terms Develop Price Plan Clarify Pricing Objectives Support Product Positioning (premium vs value positioning) Market share/penetration Market skimming Survival (cover costs) Determine Demand (Price Ceiling) Demand curve Demand at various prices Competitors / Substitutes Price/value tradeoffs Possible price reactions Estimate Costs (Price Floor) Fixed and Variable costs Volume affects on costs Leave room for discounts Select the Final Price

52 NEW PRODUCT MARKETING 3. The Plan Develop Promotions (MarComm) Plan Determine Communication Objectives Generate Awareness * Differentiate from Competitors * Maintain Brand Loyalty * Generate Leads * Design the Message Convey the Message * Build the Brand Select Communication Channels Marketing communications components Establish the MarComm Budget Advertising Paid nonpersonal presentation by identified sponsor Direct Marketing Use of mail, telephone, fax, , internet to communicate directly with specific customers Public Relations Programs which promote a company s or product s image Sales Promotion Short-term incentives to encourage trial or purchase. Personal Selling Face-to-face interaction with prospective purchasers

53 NEW PRODUCT MARKETING 3. The Plan Develop Distribution (Place) Plan Eg. Direct Distribution Direct sales Mail order Telemarketing Internet selling Channel Intermediaries Industrial distributors Manufacturer s reps Agents Wholesalers / Retailers Licensed Manufacturers Most efficient. Make goods widely available quickly. Pros More control. Best for communicating distinctiveness & positioning of new product. More direct customer contact/info Cons Expensive (direct sales) Less control/focus. Distributors not dedicated to one product. Less info about end users.

54 NEW PRODUCT MARKETING 3. The Plan The Marketing Budget Sales Expense $ 5,000 $ 6,000 $ 6,500 Marcomm Expense $ 3,000 $ 7,000 $ 7,500 Financing $ 500 $ 900 $ 400 R&D $30,000 $ - $ - Total Fixed Costs: $38,500 $13,900 $14,400

55 Bringing it all together: the Business Case NEW PRODUCT MARKETING 3. The Plan Units Unit Price $20.00 $20.00 $20.00 Total Revenue: $40,000 $80,000 $100,000 Unit Materials $10.00 $ 8.00 $ 8.00 Unit Labor $ 3.00 $ 3.25 $ 3.50 Total Cost of Goods Sold: $26,000 $45,000 $57,500 Gross Margin $14,000 $35,000 $42,500 Sales Expense $ 5,000 $ 6,000 $ 6,500 Marcomm Expense $ 3,000 $ 7,000 $ 7,500 Financing $ 500 $ 900 $ 400 R&D $30,000 $ - $ - Total Fixed Costs: $38,500 $13,900 $14,400 Net Income before Taxes: -$24,500 $21,100 $28,100

56 Assess c Plan c Implement c Assess 1. Situation Analysis Internal Assessment Identify Relevant Industry Trends Analyze Competitors Research Customer SWOT Summary 4. Next Steps 2. Goal Setting Set Financial, Market & Product Goals Identify Market Segments & Select Target Markets Position the Product 3. Marketing Plan Dev. Develop the Marketing Mix (4P s) Develop the Marketing Budget

57 New Product Marketing: 4. Next Steps Next Steps Assessment and Discussion A) What are the areas you need to address next? 1. Situation Analysis 2. Goal Setting 3. Marketing Plan Development B) What steps can you take to address these priorities?

58 Wrap-up: Other resources available

59 Recommended Reading Winning at New Products: Accelerating the Process from Idea to Launch, by Robert G. Cooper;; Perseus Publishing, 2001 Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael E. Porter Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, by Geoffrey A. Moore;; Harper Business, 1999 Marketing Management, by Philip Kotler;; Prentice-Hall, 2002 Marketing, by Berkowitz, Crane, Kerin, Hartley, and Tudelius;; McGraw-Hill Ryerson, 1998 The PDMA Handbook of New Product Development, edited by Milton D. Rosenau, Jr.;; John Wiley & Sons, 1996 The Successful Business Plan: Secrets and Strategies, by Rhonda Abrams;; Running R Media, 2000

60 Other Resources Available The Innovation Network New Product Development Services New Product Development Plan Idea & Invention Management (Patents/ trademarks etc.) New Product Market Assessment Workshops Idea to Implementation: the Innovation Workshop Investment Capital Workshop Webtools Altius Technology Marketing Inc., Calgary, AB New Product Marketing expertise on contract Website (

61 Critical Marketing Techniques Workshop Presented by The Innovation Network Jim Smith P. Eng Bruce Rutley PhD PAg Developed by: Doug Gutzmann Altius Technology Marketing, Calgary AB