Product Strategy Exam #1

Pocket price waterfall

'gross to net' on P&L the revenue that are actually left in a company's pocket from a transaction to cover costs and contribute to profit.

Apple - Economic Logic

-High development cost markup -Outsourced manufacturing for higher production -High quality/brand image justifies high price -New generation products saves time and money -Brand loyalty -Must buy subproducts with along with large products (headphones, chargers)

Apple - Arenas

-Product category: develop new categories (second but better), innovate current products, consumer electronics -Market segments: innovators of technology, early adopters, people not as tech savvy -Geographic: global company -Value creation stages: really focused on building the brand of Apple and making each product LOOK good, ease of use for consumer

Underlying motivators for a business to innovate

-To grow (organic, adjacency, breakthrough) -To meet shareholder expectations -Consumer need/complaint -Emerging technology competencies -Scarce supply -Market shifts -Regulation -To survive -Industry leaders -Stay relevant

• Be familiar with the various types of product tests

1) Monadic - Most valid (most closely replicates normal usage) • Testing a single product 2) Sequential monadic • Back to back monadic tests with same respondent 3) Paired comparison • Test product interspersed with a competitive product 4) Triangular comparison • Test product interspersed with two competitive products Which types of product test most-closely replicates normal usage? • Monadic

• Be familiar with the 4 different types of consumer research touchpoints used during this stage

1) Prototype testing • Unfinished prototype, working or non-functional • Goal: Refine/improve product design 2) Product usage testing • Working prototype , near final design • Goal: Refine/improve product functionality 3) Simulated test market • Rendered or real; packaging mockup and product prototype • Goal: Confirm sales forecast , inform marketing plan (i.e. packaging communication, placement decisions, etc.) 4) Market testing • Finished product • Goal: Final confirmation of sales forecast; determine breadth of market rollout

4R's Method of Portfolio Analysis -What is it? -How it used to analyze product portfolios -If given a set of information about a product portfolio, be able to categorize products as 'reinforce', 'renew', 'resurrect', and 'retire' products. -Based on its 4R classification, be able to select the best course of action to optimize sales for a given product

4Rs 1) reinforce-maintain: this product is in a relatively secure position, but is strategically important (big sales driver) and warrants protection and steady resource employment. Ex: the iPod-cash cow, supporting it to keep it at its #1 stage 2) renew-invest: this product isn't living up to its full potential, you think investment can make all the difference getting it up to speed to prolong the sales cycle. Ex: sales are low, but category sales are high (ex: Olay) 3) resurrect-revitalize: this is a "tired" or "discontinued" product that now has relevance in changing mkt conditions Ex: no longer part of the product portfolio today, but we want to bring it back. Scrunchies aren't selling but promise to sell, maybe match a current trend 4) retire-kill and move on: this product is more trouble than it's worth-a bottom performer with declining sales and relevance to your consumer. Better to "abandon ship" than try to "course correct" Ex: sky mall, other magazines. A lot of print publications are moving to digital and retiring print

Define SKU

A SKU or stock-keeping unit is an individual unit or product which is typically associated with a unique barcode or UPC label

Define Product Portfolio

A brand's mix of existing and in-process product innovation. Ex: hot pockets=breakfast, lean, griddle, rotational, etc.

What is an 'innovation tournament' and how do companies use this methodology in the NPD process?

A competition among opportunities, embodying the Darwinian principle of survival of the fittest -Similar to 'phase gate' NPD process (concept → develop → test → launch)

What is innovation?

A new match between a need and a solution - leading to the creation of a viable new offering o Few innovations are truly new o Successful product innovations address meaningful unmet needs o Viable: longevity, profitability, risk=reward? o Innovation can be more than just new products o Ex: Keurig

What is strategy?

An integrated, overarching concept of how the business will achieve its object. Isn't a catchall for every important choice. Defines direction through clearly defined goals.

5 key elements of strategy

Arenas: where will we be active (product categories, market segments, geographic areas, core technologies, value-creation stages)? •Narrow enough for focus but not constricting growth Differentiators: how will we win in the marketplace? What unique value do we add? How do we sustain our ability to add value? •I.e. cost, quality, experience, customer service Vehicles: how will we get there? What internal (business owned) and external (relationships) resources will we use to get there? •Enablers that help us get our business done Staging & Pacing: what will be our speed & sequence of moves? In what sequence, and how quickly? Economic Logic: how will we obtain our returns? How will we make money?

What is a business' overarching goal when performing portfolio management reviews?

Balance risk through diversification. Drive LT profitability. Diversify: think of them as a set of investments. Don't want to rely on just one product. To optimize LT investment...in terms of reflecting the mkt, my product portfolio should look like: -Today (current mkt) -> early adopters -Tomorrow (future mkt) -> high tech innovators *depends on company, environment, product, customers, etc Want mix of new and old products

o Switching costs

Cost to consumer to switch to new brand

Know the difference between 'extreme users' 'lead users' and 'issue experts' and how you might exploit the insights offered by these groups when developing new product ideas

Lead users • Leading edge of consumption (innovators/early adopters) Extreme users • Push your product to the limit Issue experts • Don't just think direct 'experts' - outside frame of reference

• Be familiar with the pricing options shown in the "pricing toolkit" in your textbook

One-size-fits-all • Dollar shave club • $1 per month, $6 per month, $9 per month o Incentive pricing • Coupons, special details, markdowns, by one get one o Ownership variations • Contract vs. no contract • Rent vs. own o Consumption pricing • Uber → Based on mileage o Dynamic pricing (real-time price variations) • Southwest • Priceline o Product line variations • Old navy and banana republic

Equation: Financial business cases

ROI = (total gross profit $ - cost of investment)/cost of investment Breakeven units = FC/(Price-VC per unit)

Equation: Sales forecasting using scenario plan analysis

Unit sales forecast = (unit sales for scenario A * probability % for scenario A) + (unit sales for scenario B * probability % for scenario B) + ...

Ansoff's growth opportunities matrix

Upper left: existing products & existing markets = market penetration (i.e. big mac, super bowl multi-pack promo) Upper right: new products & existing markets = product development (i.e. shamrock shake, mighty kids meal for teens) Bottom left: existing products & new markets = market development (i.e. mcdonalds india) Bottom right: new products & new markets = diversification (i.e. mccafe)

Stratfix: United way

What can charitable giving do for you? -increase employee retention and satisfaction

Sales Forecasts using ATAR Method

What it stands for: • Awareness = someone in the buying unit hears about the existence of the new product and know what differentiates it • Trial = the % of all buyers who will ultimately try the product at least once • Availability = chance that if the buyer wants to buy it, it will be available • Repeat = for consumer goods, percentage of people who will buy again after the first purchase... ...A x T x A x R = Projected market share ← Percentages ACV = All commodities volume % of places that sell this product @ launch • Step 1: Determine your inputs 1) A o Sources: Advertising testing and projections, company benchmarks 2) T o Sources: consumer concept testing (purchase intent question) o Use Top 2 Box Score and reduce inflation by doing • Top Box x .75 + Second Box x 50% = _________ 3) A o Sources: % ACV, retailer pre-sell meetings, sales distribution estimates 4) R o Sources: Industry standards, pre-launch consumer trials, consumer concept testing (Switching question), switching model - The Switching Model • Long-Term Repeat = Rs / (1+Rs-Rr) o From in-home usage test → Rs = 70% Top 2 Box (=Fqcy of switching or repeat) o From industry analysis → Rr = Traditional repeat purchase rates are 59% --> Will always be provided o LT Repeat = .70 / (1+.70-.59)=63% • Step 2: Determine market share Multiply four factors together • Step 3: Quantify unit and $$ sales • Take total market size and retail price • Total unit sales = Mkt share * total mkt units • Total dollar sales = Total unit sales * retail price

Sirloin case from stratfix

Why? -Americans love beef -data said sirloin was going to work, but that's not enough -weak idea perfectly executed will out perform a great idea poorly executed Strategy is excellent and simple -gain awareness -sell quality Challenged the ad agency: -need creative that works harder -the ad's premise=music works, why? (Enters brain in a different way, not blocked or screened like the spoken word, vehicle for entertainment) Leverage each mediums strength -gain awareness: tv -sell quality: print pop

Understand the benefits and drawbacks of testing in-home vs. in-laboratory

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Using the "consumer touchpoints model sheet" provided in lecture slides, be familiar with some of the tactics commonly used for each touch point.

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Be familiar with alpha and beta testing

o Alpha • Internal Testing (engineers, quality control, internal consumers) • Goal: Work out "bugs" internally before proceeding with consumer testing o Beta • External testing (with external "real-world" consumers) • Goal: understand and fix key issues with performance and design

• Formula: Sales Forecasting Using ATAR Method

o Awareness % * Trial % * Availability % * Repeat % o Be sure that you are familiar with how to use the 'switching model' to calculate repeat purchase percent. And, understand how to derive discounted purchase intent to use as the trial percent in your calculations.

• Formula: P&L

o Be sure that you have downloaded the financial modeling formula sheet (available under "Readings / Videos" under "Course Content" on D2L) and are VERY familiar with how to calculate each element of a product P&L statement.

Understand the benefits and drawbacks of patents.

o Benefits • Competitive advantage • Helps you get investors • Protection • Can sell the idea (asset) o Drawbacks • Costs • Disclosure • Not easy to renew

• Understand the various elements which may require us to modify the suggested retail price (or SRP) to meet marketing goals and deal with competitive pricing

o Causes: • Based on your consumer concept test, you believe your product will command a price of $39.99. But... What stage in the product lifecycle is the market? What about the competition? What if you want to discount to incetnify trial or to encourage switching? o Approaches and Examples 1) Geographical Pricing: Pricing products for different customers in different locations/countries • International customers pay an extra fee to shop at gap.com 2) Channel Pricing: Pricing varies based on the channel of purchase • Coca-Cola is priced differently at a restaurant, movie, vending machine, and gas station 3) Customer-segment pricing: Charging a different price to different consumer groups • Student admissions rates at museums 4) Time prices: Prices vary by season, day or hour • Matinee movie pricing, "early bird" dinner options 5) Loss-leader pricing: Dropping the price on well-known brands to stimulate additional store traffic • Eggs are priced lowest at King Soopers 6) Special event pricing: Special prices in certain seasons to draw in more customers • Back to school Sales in August 7) Cash rebates: consumer receives a portion of the price back after the sale • A $20 gift card is given to anyone who purchases a new Canon camera 8) Psychological discounting: Setting a higher price, knowing the plan to discount at a substantial savings "Was $359 instead of "299"

What factors should be considered when deciding on testing and validation

o How long should the test period be? o Should the test be "blind" or "branded"? • Blind: Test gives more accurate info on the actual product • Branded: test offers true marketing test o Will you provide instructions, or not?

• Know what an "IHUT" is, and how it is used by companies in Stage IV

o In-home usage test o Open beta testing o Used in Google Glass • Used contest-like testing program • People applied to be testers, those who were bold and creative were accepted • Explorers provide feedback to Google for product improvements

• Understand the purpose of Stage IV (Testing and Validation)

o Mitigate risk; pinpoint MAJOR issues prior to launch o Predict launch success o Final check of in-market viability and sales forecasts

• BE familiar with the 7-step consumer touchpoints model for prioritizing tactical selections. Understand how different purchase dynamics (frequency of purchase, level of involvement, stage in lifecycle) and category dynamics (competitive loyalty) affect a marketer's choice of priority touchpoints and tactics

o Need identification • Consumer identifies need; comes into category for first time Tactics to consider: • Life even market programs • Sampling • Banner ads o Search for information • Consumer begins to explore category options Tactics to consider: • Seeding to key influencers • Search optimization • Consumer reports • Event marketing o Brand Awareness • Consumer is aware of brand options Tactics to consider: • Mass media advertising • PR • Grassroots/social • Direct mail o Consideration and Trial • Consumers narrow "consideration set" and may try Tactics to consider • Couponing • Free trials/freebates • Website • Sampling • Online user reviews o Shopping and purchase • Consumers make a purchase Tactics to consider: • packaging • in-store demos • POP displays • Merchandising • Customer service at point of sales o Usage • After the purchase, consumers try the product Tactics to consider: • Enhance the "unpack" experience • Packaging • Product performance • Customer service o Loyalty • Repeated positive usage occasions lead to brand preference, recos &/or loyalty Tactics to consider: • WOM • Social media • Relationship marketing • Loyalty programs • Testimonial Viral videos

• Be familiar with the US patent and Trademark Office 3-question litmus test for patents

o Novel/unique? o Non-obvious? --> Avg Joe wouldn't figure out on his own (very subjective) o Useful?

• Understand the difference between design and utility patents. Which type of patent is considered "Stronger" (i.e. easier to defend and protect)?

o Patent - Buys you a 20 year monopoly to be exclusive owner and producer of this idea (Cost = $20,000) • Right to protect your product • You must sue, there are no patent police that regulate, you don't actually own anything besides the right • To infringe on a claim, a device must include each and every element named in the claim o Design • Patent on how It's used, how it functions o Utility • Shape, color, thumb print to allow for easier opening • Usually stronger

• Understand the drawbacks of the "peanut-butter spread" method for marketing plan budgets

o Problem with this approach is that you are only partially funding each marketing tactic, which means that nothing will be completely finished and everything will be of poorer quality when product is launched o May result in losing sales and Negative WOM o Remember: You don't need to fund everything!

• Know the definition of "scope creep" as it relates to product development, and be familiar with the legitimate and non-legitimate excuses to scope creep

o Scope Creep = refers to uncontrolled changes in a project's scope, such as additional functions, feature enhancements (featurists), more expensive components, or other modifications to the initial business cases o Causes • Lack of clear product definition early in the process; lack of discipline in following through on the initial definition and unanticipated market shifts o Legitimate and non-legit reasons for scope-creeping Legit • Specifications must be adaptable to account for unforeseeable shifts o What if competitors launch something similar? o What if the market shifts rapidly? o What if consumer's preferences change? o If you can anticipate, try not to scope creep!

• Packaging: What were the outcomes for Tropicana and Coke packaging changes? For Tropicana, understand the specific packaging element changes that drove a decline in sales for the brand.

o Tropicana • Very negative, caused decline in sales • Changes included: • Text was lightened, went from horizontal to vertical (harder to read) • Portrayed a message with words over pics o 100% orange juice over orange with straw • People said it looked generic and it was hard to distinguish from among the rest o Coke • Increase in sales in a category that is struggling

Factors that can affect forecast accuracy

• Consumer receptiveness to the product • Product performance (has bugs, works well) • Competitive reaction (pricing, promotion, their own new products) • Regulation (FDA changes regulations on claims) • Weather (Ski resort-no snow) • Crisis (travel-terrorism) • Marketing communications effectiveness (i.e. social media going "Viral," or a celebrity starts using and endorsing your product) • Wavering retailer support

• For what types of inventions/companies does it NOT make sense to pursue a patent application?

• Fast paced industry • Fast planned obsolescence • Stuff that's obsoleted quickly • Some small startups

o Purpose of Sales Forecasting

• Helps you predict how many you will sell • Helps determine the associated costs • How should we budget? How much can we put towards advertising, etc.

o How sales forecasting is used within the NPD process

• It will be wrong! Trick is utilizing best inputs and thinking to make the best assumption to generate more accurate forecasts • Usually you under- or over forecast • Under forecasting o Shortage → Out of stock o May lose business o Makes a barrier to purchase • Over forecasting o Higher cost o Cost of holding inventory/having it spoil o Misallocation of budget o Could lead to having to sell to wholesalers @ a discount, hurts brand

Ilya Minkin

• Reasons why sales weren't growing: weird product → perception of physical weakness and price point Overview of L6: solution to the lack of sales growth • More durable • Replaceable • Different styles for different purposes • Wide variety of aesthetics w/ different price points o Regardless of price point diffs, durability does not play a role in changing prices • As scale grew, began to focus on the end user and taking this info to the brand and saying "this is what your customer wants" • Want to bring true user benefit in whatever they are doing → Reason why they haven't moved into bags yet • Most companies want exclusivity, but in this case more companies in a category w/ BOA makes adoption by new companies better b/c they view it as being less weird

Bottom-Up Forecasting

• Sales are projected by building "up", aggregating individual SKU sales projections • Look at individual points of sales (Individual people) → $$ Sales Potential • Methods: 1) Looks-Like Analysis o Involves forecasting based on similar item sales 2) NAP Forecasting 3) Sales Force Composite 4) Diffusion of Innovation 5) Regression Analysis o *Best forecasts are built both top-down and bottom-up for most accuracy

o Top-Down Forecasting

• Sales are projected by drilling "down" from a total market view, using key assumptions • Total mkt potential → $$ Sales potential Methods: 1) Assumption-based modeling (ATAR Model) 2) Jury of Executive Opinion o Get total market potential in units o Executive assumptions • Successful launches usually capture at least 8% of the total mkt • Novelty cereal purchases are about 5% of the total cereal market, but are projected to grow around 10% next year • Calculate the sales potential • Pros: Building on exec expertise to build the forecast, Fast method, back of an envelope • Cons: Trusts the exec maybe more than they should, Not using any grounded mkt research, Scenario Planning

Leslie Prevish

• Stock tanked in March '09 • Women's team • $7 million • 25,000 women to garage parties • launched products, gear, services • transformational experiences 3-step strategic process 1. Discover and define o Must be strategic → Does every company have millions of dollars to target ALL types of women? No. o Cost of non-strategy • Brand launching product = $1,000,000 + • Product development • Marketing and retail costs • Cost of product itself • Retail marketing = $150,000+ • Marketing salary • Marketing budget • Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before the defeat. Need both strategy and tactics! o Research • Info from POS (Point of Sale), CRM (customer relationship management)< dealers/retailers, industry • Qualitative and quantitative; focus groups, one-on-one, surveys • Not just "research" at events wearing staff shirt o Lifetime value of a customer? • Earn her at 35, keep her until 75 • $220,000-240,000 o Clear focus • Who is current customer NOW? • Target in FUTURE, New to Brand • Single Boomer women? • Middle-aged Moms? • Thrill seeking women? o Profile → Ex: Adventurous Women and Motorcycles • Aim for 3-4 strategies; process to develop 1 • Top reasons YES • Freedom and confidence • Top reasons NO • Lack of skills • Want community • Translate ^ into Message (come learn with us) → Strategy (provide experiences to learn and connect) → Tactics (Host fun "intro event, ask current customers to invite new ones, partner with gyms and salons 2. Plan o Promote via targeted and integrated marketing avenues...not necessarily ALL • Adds • PR → Underutilized • Web • Social • Email • Event → Underutilized • Influencers/partnerships → underutilized 3. Act and track o Specific and measurable goals • Write down and post in office • Tout team success, own up to failures • Expertise in CRM • Pilot, test, adjust o Set goals • Engagement, sales, referrals • How to get a mktg job • Internship, networking, industry job boards • Highlight your unique talent; social, email, youth connecting? • Be concise and use spellcheck • Agency vs. Brand? • Agency: Sales and variety • Brand: room to grow, broaden experience • Big vs. Little: Specialist vs. Generalist • Environment and leaders are KEY • Respect and learn; ask for feedback • Be confident, not arrogant • Marketing is personal, promote the positive

o Methods to enhance or increase forecast accuracy

• Survey consumers (to gauge interest) • Base forecasts on "In-Market" Tests • Retailer pre-self meetings (to gauge interest and establish partnership) • Monitor external variables (i.e. regulations, competitive reaction)

Sales Forecasts using Scenario Planning Technique

• Using weighted probability to mitigate uncertain circumstances • Account for probability of the unknown • Incorporates all scenarios • Cons: It's an average (either too high or too low) See slides to practice calculating

Establishing the Sales Forecasting Parameters

• When forecasting sales for new products we must define: o Market vs. company projections --> Are we projecting the entire market or our potential sales of that market? o Optimistic vs. conservative-->Do we need to know the total potential sales possibility, or a more realistic estimate? o Form: $$ vs. Value-->Should we project detailed product-level estimates, or will over-arching program estimates suffice? o Level: SKU vs. Program-->Should we project detailed individual product-level estimates, or will over-arching program estimates suffice o Time Horizon: 1-2 years vs. LT-->Should we project detailed individual product-level estimates, or will over-arching program estimates suffice? o Answers to these questions depend on-->Time horizon and proximity to launch (earlier = market potential, closer = more detailed SKU level detail) • Launch risk (higher risk = more detailed) • Individual company culture (conservative vs. optimistic) • When building forecasts: Always keep track of your assumptions

Understand the definition for, and be able to identify behaviors as 'explicit' 'latent' or 'compensatory' behaviors when conducting ethnographic observations and interviews

-Explicit: needs expressly stated by the consumer -Latent: the need is observed, but is not expressly articulated by the consumer. Look for the 'non-verbals' -Compensatory: the consumer uses the product in an unintended way

Be familiar with the 'man who said no to walmart', and Snapper's motivations for saying 'no' to the world's largest retailer.

-Snapper thought Walmart was not compatible with its brand and strategy -incompatible with the company's future -Thought to be hazardous to Snapper's health -known for quality, reliability and durability over quantity -not cheap, value in the performance and longevity -Porter analysis indicates that presence of powerful buyers makes an industry less attractive

BCG Matrix -What is it? -How it used to analyze product portfolios

- BCG matrix aims to identify high-growth prospects by categorizing the company's products according to growth rate and market share. By optimizing positive cash flows in high-potential products, a company can capitalize on market-share growth opportunities. - left (mkt growth rate with low at the bottom) and right (relative mkt share with high at the left) -high/high=stars -high/low=question marks -low/high=cash cows -low/low=dogs

What is the attrition rate for new products from idea to development to success in the NPD pipeline?

-55-65% of all new products fail -7 new product ideas → 4 enter development → 1 succeeds

What types of products most commonly comprise product portfolios for an average company? How does this typical portfolio differ from IDEAL portfolio, from risk management perspective? According to Cooper, what types of products are becoming increasingly common for companies vs less common?

-A lot of new products that fall under the brand extensions, refreshes, line extensions, cost reductions, and repositioning classifications -No breakthrough products (high risk=high reward) -Most companies are risk adverse and play it safe - most typical product portfolios are not taking enough risk!

Be familiar with some of the brainstorming techniques used in this session to generate ideas for your unmet need or opportunity

-Any ideas over $1 million -Any ideas under $1 -All group ideas -Individual ideas

What are the 4 'best practice' tips for appropriately articulating consumer needs? Be able to transform consumer comments into fully articulated consumer needs using the needs hierarchy reading

-Be specific -Positive, not negative -Attribute based -Avoid 'must' and 'should'

7 classifications for new products and understand the risk profile for each type

-Breakthrough * : new to world or 'moonshot;' 75-95% risk - iTunes • High external newness to customer, high internal newness to company -Line extensions: slight models of existing product; 60-75% risk - Chobani • Mid external newness to customer, mid internal newness to company -Refresh: enhancement, evolutionary changes; 40-60% risk - 7UP • Low external newness to customer, mid internal newness to company -Brand extensions: brand moves to new category; 45-60% risk - OxiClean detergent • Low external newness to customer, high internal newness to company -Me-too or Derivative: 'knockoff,' moderately innovative (second but better falls into this category, usually); 60-75% risk - Swiffer sweeper • Mid external newness to customer, high internal newness to company -Repositioning: existing product...new market; 45-75% risk - arm & hammer for fridge • Mid external newness to customer, low internal newness to company -Cost reduction * : driving cost out of product; 25-50% risk - plastic comb • Low external newness to customer, low internal newness to company - * Really productive from profitability standpoint -Going to be overlap

New product concept & how they're used

-Clear, concise statement that effectively communicates an idea to consumers -Prioritize concepts in our new product pipeline -Refine concepts -Communication optimization -Forecast sales for new products

In addition to 'needs research' what are other sources for uncovering new product opportunities?

-Company strategy -Advanced concepts or 'blue sky' teams (i.e. Google X) -Competitive activity -External mandates (regulations) -Global market (reverse innovation) -Trends (demographic, consumption, etc) -Fringe markets -Bottlenecks -Unmet needs → voice of customer methods -Non-product innovation (10 types of innovation)

Understand the term 'sku rationalization' (Ch. 10, pg. 278-279).

-Def: the systematic analysis and modificaiton of product lines to better align them with LT goals -examine existing product lines and products for pruning opportunities -criteria for review and consolidation: 1) sales and volume 2) Sales revenue 3) Part commonality 4) Cost of variety 5) True profitability 6)polls and surveys 7) factory processing 8) Functionality 9) customer needs 10) core competencies 11) Clean sheet of paper scenario 12) future potential -Then PM must make decuiosns or recommendations about what to do with the product -develop appropriate strategies and processes to carry out the decision

Why are risk and failure important in a product portfolio? (Understand methods employed by Google X to process failure in productive manner)

-Failures are incubated -'Unlearn' dislike for failure -Rapid prototyping -If we can get a 'no' quickly on an idea...it's almost as good as getting to a 'yes' -Try a bunch of different methods at the same time to see if one person can get the intended results. If no one is able to achieve it, then know that making these things is harder than thought (go back to the beginning and check prior understanding) or may be that they're just difficult things to make and therefore may not be the right tool

Understand 'journey mapping' as a tool for understanding a consumer's purchase or usage process

-Get together with full 4-5 person team -Journey map • The first part of the exercise is understanding needs. If you have a solution to these needs, put it in an idea 'parking lot' (yellow) • What they do: map the consumer's process from start to finish (blue) • Pain points/frustrations: capture key pain points throughout the process (red) • Delight points: where is the consumer most satisfied in the process (green) -Circle top 5 opportunities -Pick one opportunity for brainstorming - opportunity=industry, target market, unmet need

Apple - Vehicles

-Internal: retail Apple stores, product design, Pixar, software systems, delegation of duties, intellectual property -External: acquisitions (beats), joint ventures, partnerships (AT&T, Verizon), manufacturing plants (Foxconn)

Apple - Differentiators

-Keep it simple -Create own software -Brick & mortar stores to create better customer service and experience -Have intellectual property (patents) -Great brand equity -Digital marketplace to sell software

Define 'disruptive innovation.' Provide examples

-Not necessary breakthrough innovation -Transforms expensive and complicated products for smaller markets, into affordable and accessible products for larger markets -Often 'missed' by major players: they're focused on what they're producing so it's not on their radar -Disruptive products have initially lower performance than that historically demanded by the mainstream; provide new performance attributes -Eventually displaces former technology -Reduce cost -More accessible -New TM -Less complex Ex: digital camera -Disrupted film photos -Decreased functionality (can't adjust settings, lose printed photography (usually)) -Gain: cost savings, time, instant gratification, compact, edit

Apple - Staging & Pacing

-No restrictive systems, but guidelines in place -Low priced devices every 1-2 years, high priced devices every 3-4 years -Secrecy -Exclusivity with fewer products that are high in value -March/September release dates -'Upgrades' in product line

Understand how businesses use 'open innovation' 'crowdsourcing' and 'crowdfunding' to generate ideas and funds for new product projects. Also, understand the benefits and drawbacks of using open innovation

-Open innovation: 'the purposeful inflows and outflows of knowledge and ideas to accelerate innovation, and expand your market. It assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to grow' • Benefits? • Drawbacks? -Crowdsourcing: the process of outsourcing tasks to a distributed group of external people -Crowdfunding: pooled monies to fund new product development ideas

What is an 'empathy map' and how is it used to synthesize ethnographic research?

-Say: relevant verbatim quotes from your interviews that capture what your consumers said -Think: what your customers think about this experience. This can be in the form of verbatim quotes, or your inferred observations -Do: important observations of your consumers -Feel: what your consumers feel about this experience. This can be in the form of verbatim quotes, or your inferred observations

Top 7 reasons for new product failures, and how to prevent these from occurring

-Undifferentiated, no competitive advantage, no compelling value proposition • Me too, ho hum, tired, trivial products -Weak front-end due diligence • Weak front end homework -Lack of consumer insights • Customer is not an integral part of development process -Unstable product specs; project scope creep • #1 cause o delays later in the project -Dysfunctional project teams • Effective cross functional team is #1 key to driving cycle time down -No focus • Overloading the development pipeline -Lack of competencies, skills, and knowledge • Never should've been approved in the first place

Define 'voice of the customer' (VOC) research and 'ethnographic' research

-VOC: The systematic process of gathering and prioritizing consumer preferences, needs, and wants -Ethnographic: going into TM's natural environment, exhibiting consumer, and beginning to ask them a series of questions in an interview

How does an 'entrepreneurial mindset' come into play during the NPD process within major organizations?

-View themselves as being owners of their products and their own success, some firms expect PMs to use board as angel investors -Do not have direct authority over those making the decision to invest -Must use their skills of persuasion and diplomacy to make things happen -Must empathize with the needs of salespeople to advance the sales process -both share need for clarity of customer need -strong PMs know the profiles, needs, emotions, and purchase drivers for their customers. Don't think exculsively in terms of product features or benefit, but rather how these features or benefits align with customemer goals better than competing offerings, as well was what it might take to sell them. They have a strong command of mktg and customer-focused competencies -Strong product managers have traits of risk-taking, passion, focus, product/customer knowledge, and tolerance failure. Influence their decision making process -PMs can restore the passion, focus, and connectedness with the product/customer for their areas of responsibility. They carry on the role (and spirt) of the original entrepreneur.

Be familiar with how portfolio management decisions can impact the broader product line. Here, you'll want to review Business Brief 10.1 (pages 258-263).

-core products are the key to product turnover -When product extensions were produced, sales of the core products when up as well -filler products cannot be substituted for core products -brand extensions can weaken brand equity -brand extensions can be easily matched by competitors and can be costly -line extensions can help protect shelf space -be careful not to use too many extensions, because they will become unproductive

Be familiar with the key learnings and takeaways offered by this case study

-goal was to become relevant to older mkts -decided to use product development to achieve this -wet goods was appealing but they knew they couldn't compete -kept logo the Same to maintain positive associations with the goody brand -vision: good heat will be the number 2 brand offering category growing innovation via brilliantly simple and demonstrable solutions -category was going to give lower margins, but did increase top line sales -did all development internally -purchase intent is a very important metric. Used a five point likely scale. Tested against a competitive bench mark -why do customers come back for the same style after the first one broke? Because they trust it, won't want to risk getting different results. Awareness of new products is super Important -the design was supposed to be associate with fast - $600,000=cost to do tv promo -budget cut from $8m to $200k. Doesn't allow for national ad campaign. Chose corporate headquarters locations for target and Walmart -offered premium pricing and low cost production -generated a sales forecast based off of purchase intent Emily's key takeaways: Develop strong contingency plans - for advertising spend, for product development, for competitive activities / reactions Don't be afraid to "throw a flag" if resources are mis-matched to your strategy. Define the business model up-front, and match team structure and planned investment. Don't breeze-over "deal-breakers" for your consumer (i.e. the size of the dryer) Don't under-estimate the importance of continuous category due diligence (margins, competitive activity, etc.) Make sure your project has buy-in at all levels of the organization

Stratfix: what do you need to win?

-train the crews, get them motivated (country outperformed the test market) -approach it as a BUSINESS person -do something that's on strategy, but make it simple -ground people in mktplace reality -figure out what the customer proposition is and then leverage that (speak for the customer)

StratFix Main Takeaways

-work for a couple years and then get an MBA -education=good, more is generally better, it doesn't only need to come from school -never leave a company until you've been promoted at least once -4 LT views 1) you can always outlast a bad boss 2) you can never fully understand the true value of am experience you are having, while I'm the middle of it all 3) do right things always 4) always approach everything w/ strategy even if it is not fully developed -got to get promoted -become a business person, not just a marketing person -as much experience as fast as you can get it -do the right thing the right way Overarching career thoughts -find opportunities to work with and learn from great people -broaden yourself early in your career -if you focus on doing the right thing the right way, everything will work out Career lessons -buy emotionally and justify logically -nothing great achieved w/o enthusiasm -read numbers and listen to your gut -non-strategic leaders get labeled and shelved -do what average people never do -never leave until you're promoted and never leave a job for more money

Be familiar with the various types of competition for new products and services (table 4.1). Lecture

1) Directly competing products -ID who they are: list competitors and specific product features -Future impacts: what % of competition does this represent both today and in the future? for which customers? -Implications: How can you establish a differential advantage over these products? 2) Category -ID who they are: Describe the category of competition and the companies and products w/in the category -Future impacts: See #1 -Implications: How can yo position your offering as best in category? 3) Substitutes -ID who they are: Describe the actual "need" the products and services fulfill with their functionality -Future impacts: See #1 -Implications: How can you influence the perceived risk of customers shifting to substitutes 4) Budget -ID who they are: Highlight the potential resistance of customers to spending money on your type of product or need -Future impacts: See #1 -Implications: How can you encourage shifting of budgetary expenditures to your product? 5) organizational -ID who they are: Explain the "augmented" product provided by competing companies -Future impacts: See #1 -Implications: How can you develop collaborative efforts to better position your company over competing companies?

How to classify products using the 4R portfolio management method

1) reinforce 2) renew 3) resurrect 4) retire Typical stage of product lifecycle: 1. Maturity, 2. Any, 3. Post decline, 4. Decline Contribution to profits: 1. High, 2. Mid to high, 3. Potential, 4. Low Value (brand strategy): 1. High, 2. High potential, 3. High potential, 4. Declining Future growth potential: 1. Solid and self-sustaining, 2. Potential exists, 3. Potential exists, 4. Unlikely

Understand the various types of VOC research methodologies and the benefits and drawbacks of each approach

1-1 interviews • Telephone or live interview with individuals • Pros: quick, able to probe • Cons: can't observe Focus Groups • Discussions with 6-10 individual consumers • Pros: depth, productivity • Cons: group dynamics, low accuracy in purchase predictability Social Listening • Reviewing relevant online conversations to understand consumer needs (ex twitter search, google alerts, google trends, worldle.net) • Pros: authentic, discussion based • Cons: accuracy, those 'chatting' often represent extreme viewpoints) Survey • Online survey to a brad audience exploring product use, likes and dislikes, unmet needs • Pros: low cost, speed of feedback, large sample size • Cons: depth of information (can't probe)

Framework for Strategy Design

1. Arenas: where will we be active (produce categories, mkt segments, geographic areas, core technologies, value-creation stages)? What kind of business are we in? Need to define it narrowly enough to give focus but not so narrow that you restrict opportunities. Ex: if Amazon said they were only an e-commerce store, they wouldn't have original tv series. 2. Vehicles: what internal and external resources will we use to get there? The pieces we use to achieve our strategy. The enablers. Knowledge, skills and capabilities that a business has to get it done. Ex: -Internal: organic growth, own their own stores, employees (we have our own strong strong design team) -External: outsourcing (manufacturing partners), relationships with outside companies (licenses, joint venture, co branding), regulatory industries, acquisitions (I'll acquire another company that has the feature internally with my company) 3. Differentiators: what unique value do we add? How do we sustain our ability to add value? Ex: instant delivery food, experience, price is not sustainable differentiator for every company but it is for Walmart, quality, retail environment, brand, customer service. Is first mover advantage a sustainable differentiator? Depends on the barriers to entry, which industry, how innovative, how protective 4. Staging and pacing: in what sequence and how quickly? Staging: what sequence of moves will I take to accomplish my strategy? Pacing: How quickly will I accomplish these? How quickly do I want it to happen? 5. Economic logic: how will we make money? Revenues-cost=profits Revenue=price x quantity Cost=FC + VC P & L statement Ex: IKEA-VC advantage due to economies of scale and manufacturing. Prices low so quantity is really high.

How do firms, like FB use RWW?

1. Is it real?-Industry Analysis Use mints reports of the tablet industry to conduct a fast paced industry analysis -tablet industry today: overall size, growth/decline -tablet industry future: projected growth/decline in 2014 and beyond, stage of product lifecycle for tablet industry -contextualizaiton: what would 1% share of this industry mean for FB? (Not really a drop in the bucket) 2. Can we win? - competitive landscape -top competitors? -share of mkt? -positioning? -TM: define the TM segment (demographics, geographies, psychographics, behavioral elements). Overall size. Disposable income. -Purchase Dynamics: purchase trends, frequency of purchase, other. Can we win? Types of competition: *remember to assess more than just DIRECT competition *key question: how can FB establish a differential advantage in this category? -direct -category -substitute -budget -organizational 3. Is it worth doing? Brand fit assessment How do you assess if the opportunity is a fit for your brand? McDonalds Pizza: couldn't figure out how to cook I'm less than 3 minutes. Ppl at McDonald's dint expect them to sell pizzas Brand fit: a brand equity. Think coke. OR how does the product extension fit with th the brand? -ex: Starbucks-pasta, ice cream, tooth brush, etc.

Be familiar with the various types of innovation offered in the 'ten types of innovation.' Be able to analyze and offer examples for each of the types

Configuration • Profit model - how you make money; ex: Gillette • Network - how you connect with others to create value; ex: target • Structure - how you align your talents and assets; ex: whole foods • Process - how you use signature or superior methods; ex: Zara Product • Product performance - unique features or functionality; ex: oxo • Product system - complementary products/services; ex: scion Experience • Service - how you support the value of your offerings; ex: zappos • Channel - how you deliver to customers and users; ex: Nespresso • Brand - how you represent your offerings and business; ex: virgin • Customer engagement - how you foster distinctive interactions; ex: wii

Which elements should a product manager review when conducting periodic portfolio review sessions (see Ch. 10 pg. 251-252, and bottom of pg. 254)?

Check pages given!!! Reinforce, Renew, Resurrect, Retire using... Percentage of contribution to profits Brand value Strategic fit Growability Time-based potential Strategy and resource commitment Evaluate product performance to... -increases revenue, reduce costs, generate new customer value or eliminate obsolete products -Uncover opportunities and problems related to features -Potential new product entires -Potential quality issues to address in the upcoming fiscal year -Eval sales/profits by customs segment, channel of distribution, or geographic region; the complementary value of the product to others in the line; seasonal fluctuations in demand, the awareness and preference level for the product; rate of repeat purchases (retention); and planned versus actual peformance

Reasons to believe

Claims •Puffery: over-exaggeration ("the world's softest fabric") •Comparative: "burns 30% longer*" *than the leading competitive light bulb •Performance promise: "skin looks 2x healthier in 2 weeks" •Product features: natural, eco-friendly, organic •Claims must be substantiated Testimonial •"Nothing cleans like my Dyson vacuum" Guarantee •Warranty, money back guarantee Endorsement •Used by Olympic athletes Authority •Good housekeeping seal of approval Technology affiliation •Powered by NASA jet engine technology Brand equity •From the #1 brand in childcare

Pareto Analysis -What is it? -How it used to analyze product portfolios

Definition: 80/20 rule. 20% of my products in my portfolio are generating 80% of my sales volume Look at where 80% of the sales are and then look at the percentage of product line the product(s) take up. If it's close to 20% then that's what's overdelivering. The rest is in the majority that's inadequately performing. Should you drop the products that are under delivering? No, you don't want to lose diversity. Just focus on the others but keep these around. What are the implications for the 20% products? For the bottoms 80%? -can use it to make portfolio investment decisions -if Toyota just dropped the sienna, we would alienate a lot of parents wanting a minivan

Designs for environment

Designing a product specifically to minimize its environmental impact Stage: materials • Reduce the use of raw materials • Choose plentiful, renewable raw materials • Eliminate toxic materials • Increase energy efficiency of material extraction process • Increase use of recovered and recycled materials Stage: production • Reduce use of process materials • Specify process materials that can be fully recovered • Eliminate toxic process materials • Select processes with high energy efficiency • Reduce production scrap and waste Stage: distribution • Plan more energy efficient shipping • Reduce emissions from transportation • Eliminate toxic and dangerous packaging materials • Eliminate or reuse packaging Stage: use • Extend useful product life • Enable clean and efficient servicing operations • Eliminate emissions and reduce energy consumption during use Stage: recovery • Facilitate product disassembly to separate materials • Facilitate the recovery and recycling of old products to reduce landfill

Planned obsolescence

Designing a product with a limited lifespan from its inception (motivation? 'value engineering' vs consumption motivator

What do 'upstream' and 'downstream' mean in the context of product portfolio management? Double check this!!!

Downstream (portfolio management): strategy, strategic portfolio management, failure and risk. AKA lifecycle management Upstream (new product development): concept, create and commercialize. Stage 0=discovery 1=scoping 2=business case 3=development 4=testing 5=launch

Understand the 'stage gate' system for developing new products. Be familiar with the over-arching goal and supporting activities within each stage of the NPD process.

Each stage consists of -activities: formal information-gathering activities by the project team -integrated analysis: -deliverables: an integrated analysis of the results of the activities by the project team. What the project leader and teams bring to the decision point Then there's a gate. -go/kill decision -results are assessed and decision to invest more is made. -allow for team to prioritize their projects and run quality control The stages & gates 0) discovery: prework designed to discover and uncover opportunities and generate ideas --identify opportunities and ideas: explore unmet consumer needs, find sources of opportunities and ideas, define opportunities, ideate generate creative opportunities and solutions -need lots of great ideas -could include directed research, discovery of possible technologies, working with lead or innovative consumers, analyzing competitive products, etc Gate 1: idea screen - a single no to the criteria kills the project - soft screen - tentatively committing a few resources - saying it's ok to move on with more testing and research 1) scoping: a quick, preliminary investigation and scoping of the project. Largely desk research --screen and verify opportunity viability: assess feasibility and attractiveness: fit-brand, strategy, and consumer need?, market viability: TM, industry, competitive. Technical feasibility, financial assessment, selecting the best opportunities -inexpensive homework state, trying to determine marketplace and technical merit -do very little primary research, mostly secondary - do a primary technical and market analysis - low cost and short time Gate 2: second screen -more rigorous screening -evaluated in light of new info and then if it moves forward, more money and time will be put toward it -should have/must have criteria 2) build the business case: a much more detailed investigation involving primary research-both market-and technical leading to a business case, including product and project definition, project justification and a project plan --refine concepts and business case: an define product-form technology, concept generation. Test consumer concept evaluation. Analyze detailed financial analysis, sales forecasting and distribution considerations -critical homework stage -validity verified prior to investing a lot of money -define the winning new product-what's the tm, how will it be positioned, what are the product benefits, etc. -market studies determine customer needs, wants and preferences -competitive analysis -concept testing -technical appraisal focuses on doabitlity -business and financial analysis performed to justify case -result of this stage: integrated product definition -thorough project definition and detailed project action plan -stage should be handled be cross functional team members Gate 3: - last gate to kill project before significant spending - AKA money gate -shape of funnel changes to be less steep -sign off of project and product definition -double check processes of stages 2 -should meet and must meet criteria used to evaluate -development plan and preliminary marketing and operations plans developed -full project team assigned and resources committed 3) development: the actual detailed design and development of the new product, and the design of the operations or production process --cross functionally design and develop it: new product charter, prototyping and internal testing, intellectual property, design trends -implement development plan and begin physical development of the project -should result in a partially tested prototype -verify that it is hitting the majority of project development milestones -emphasis on technical work -mktg and operations work run in parallel to technical -build-test-feedback-revise spirals -testing, mktg, production facilities required, etc determined -prototype taken to consumer for feedback -update financial analysis, resolve regulatory, legal, and patent issues Gate 4: -check quality, development -Check progress and continued attractiveness of opportunity -testing or validation approved -new financial analysis done -mktg and ops plans reviewed for probable implementation in future -make sure that product matches definition from gate 3 4) testing and validation: tests or trials in the mktplace, lab, and plant to verify and validate the proposed new product, and its marketing and production/operations --cross-functionally develop and design it: test to ensure launch success: prototype and use testing, simulated teste mkts -in house product tests -user, preference, or field trials of the product -trial, limited or pilot production/operations -simulated test market, test market, or trial sell -revised business and financial analysis -if it's not working, then go back to stage 3 Gate 5: -final gate to kill product -after this, full scale sales and production go live -verify quality of stage 4 -check that product passed stage 4 with positive results, check financial returns, make sure operations and launch plans are still solid -make sure it's ready to launch -ops and mktg plans approved for implementation in stage 5, sometimes product life cycle is too 5) launch: commercializations-beginning of full operations or productions, marketing and selling --go to mkt-produce, mkt, sell it: commercialization (IMC) planning, distribution and sales, packaging, production ramp up and quality check sal-acquire and install all production equipment -full product launch -launch ops and mktg plane Post-launch review -new product project ended -project and product performance is reviewed -post audit done to find strengths and weaknesses of project, what can be done next time to improve, etc.. Each gate consists of: 1) required deliverables 2) criteria broken down into must meet (go/kill) and should meet (prioritize) 3) defined output: a decision, an approved action plan for the next stage and a list of deliverables and the day they will be due *this process is a funnel for new ideas Stages 0-2=concepting, 3-4=creating, 5=commercializion

How do you get the info you need for the RWW analysis?

External sources: -annual reports -library research database -professional and trade associations -white papers -social listening Internal sources: -strategy -team capability audits -SWOT analysis

Be familiar with the internal and external sources of new ideas. Pay special attention to the examples highlighted in class lecture

External: -Fast follower/'me too' products • Import geographically isolated innovations (red bull) • Bring a niche product to a broader audience (bag borrow or steal) • Dramatically improve existing offering/'annoyance driven' (iPod) -Ready made innovation sources • Vendor/supplier partners • Independent inventors • Technologies in adjacent or unrelated industries (Wii) -Responding to environmental changes • Responding to changing government regulations (e-cigarettes) -Lead users, extreme users, issue experts • Lead users: Leading edge of consumption (innovators/early adopters) • Extreme users: Push your product to the limit • Issue experts: Don't just think direct 'experts' - outside frame of reference -Open innovation/crowdsourcing • Open innovation: 'the purposeful inflows and outflows of knowledge and ideas to accelerate innovation, and expand your market. It assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to grow' • Crowdsourcing: the process of outsourcing tasks to a distributed group of external people • Crowdfunding: pooled monies to fund new product development ideas -Innovation tournaments • A competition among opportunities, embodying the Darwinian principle of survival of the fittest • Ex. MyStarbucksIdea.com Internal sources -Internal audit • Line extensions to build on existing operations (Chipotle breakfast burritos) • Customer service: complains & frustrations • Expanded distribution -Improved consumer experience • Functional decompositions (southwest airlines) • Attribute-based innovation assortments -Repositioning • Up/down market innovation (jeans) • De-commoditize a commodity (Altoids) -Co-branding (sephora by OPI) • Cross functional brainstorming • Innovation tournaments

Be familiar (skim here, no need for memorization) with the various cross-functional stakeholders who engage with Product Managers to develop new products. Understand the most-frequently engaged groups (Ch. 2 figure 2.2).

Possible cross functional teams: product manager and... Sales % R&D % Customers % Production Marketing research advertising product service distribution finance ad agences -engineering and project manager -industrial design -finance -operations, quality, and customer service -package emgimeerimg/graphic design -sales, customers and channel mktg* -agency partners/Marcomm* -consumer insights* -sourcing -see screenshot for reasoning Also see figure 2.2!

What is a 'gate' in the context of the 'stage gate system'? What are the potential outcomes of a gate meeting for a new product project?

Go Kill Hold Recycle

Media Types and Costs

Low budget • E-blasts • Online - banner ads • Social media • Search engine optimization High budget • PR - celebrity/athlete endorsements • PR - product placement or 'embedded marketing'

Most product managers work within a matrix organization. In this environment, how does an effective product manager accomplish goals and execute strategic tactics? *Check This!

Must accomplish goals and execute tactics through others. Occasionally, product managers report to engineering, product development or even product management. But most product managers report to a marketing function. Decide what you want to accomplish: 1) Market Penetration: (Existing Products/Existing Markets) Use a promotional strategy to get more sales w/ existing customers. Ex: Big Mac Super Bowl Multi Pack Promo 2) Product Development: (New Products/Existing Markets) Ex: shamrock shake, mighty kids meals (for Tweens) 3) Market Development: (Existing Products/New Markets) Expand geographically. Ex: McDonalds India 4) Diversification: (New Products/New Markets) New products for new markets. Ex: Chicken in India, potato wedges in Israel

Using products to achieve strategy

Reactive -Developing products to deal with competitive and mkt pressures, as they occur. -Wait for competitive set to define category for you -Types: Defensive, imitative, second but better, responsive Proactive -Developing products by explicitly allocating resources to preempt undesirable future events, and to achieve goals -Proactively planning to create a new space. -Types: research and development, marketing, entrepreneurial, acquisitions, alliances

Reactive vs proactive strategies

Reactive •Defensive: protects the profitability of existing products by countering competitive new products (primarily marketing mix responses) •Imitative: quickly copying a new product before its maker is assured of being successful ('me too') •Second but better: firm doesn't just copy the competitive produce, but it identifies ways to improve the product and its positioning •Responsive: purposefully reacting to customer requests Proactive •Research and development: develop technically superior products •Marketing •Entrepreneurial: building venture capital enthusiasm and generating resources •Acquisition: other firms are purchased with products new to the acquiring firm and perhaps the market •Alliances: designed to bring together the pool of skills in technology, marketing, production, finance, and geographical experience so the alliance members can be competitive in the market and achieve their goals

Reactive vs proactive

Reactive: developing products to deal with competitive and market pressures, as they occur. Works best when: •Require concentration on existing products or markets •Can achieve little protection for innovation •Are in markets too small to recover development costs •Are in danger of being overwhelmed by competitive imitation •Are in distribution chains dominated by another innovator Proactive: developing products by explicitly allocating resources to preempt undesirable future events, and to achieve goals. Works best when: •Require rapid sales growth •Mean entering new markets •Provide high volumes or margins •Offer a capability of achieve patent or market protection •Supply resources and time necessary to develop new products •Block competition form rapidly entering with a second but better strategy •Provide reasonable power in the distribution channel

Product positioning

Refers to deciding how a product is to be perceived in the minds of the consumer relative to the competition. Consider the customer's frame of reference. Therefore, the positioning statement should identify the relevant market segment, that segment's frame of reference, the product's point of differentiation, and an indication of why a product provides that differentiation

How to take action with the 4Rs

Reinforce: protect the sales of these "core" items; reduce erosion and promote loyalty -Ex of potential actions: product -> partnerships, low investment product enhancements -how could we protect mature products from competitive erosion? 4Ps: reminder ads, reposition in the minds of consumers to make it relevant for multi usage, change price, focus on points of difference, emotional ad campaign to remind them about loyalty Renew: revitalize products that are not living up to potential -promotion: retail display, encourage trial, extend the customer base -shift brand image, change how you communicate with the customer, revamp brand image or portfolio, high investment product enhancements, product extension Resurrect: give an old product another chance Retire: explore discontinuing this product

P&L statement

Selling costs: slotting fees (fees for placement on shelf); discounts (payment terms, i.e. 2/10 net 50); co-op funding (retail specific advertising); buy backs (purchasing competitive products to take over their space); returns (manufacturer pays the retailer for returned/defective products) *understand how to create a P&L from given information*

Cool ranch case history

Situation -new position=group manager for Doritos and tostitos -Doritos are the number one profit generator for frito lay -brand In crisis -Doritos: constant search for a fourth flavor to inject new growth -tostitos-a flash in the pan Doritos struggle has the organization on edge at this point -25 item growth initiative list -reviewed by SVP sales and mkting weekly Doritos flavor screen just came from research Strategic decision #1: -could we put the to sites flavor on the Doritos? -decision: find a way to make it work on time->no product testing-only way to make timing. Re formulate-get rid of the green color-not Doritos (limiting), find a name and positioning, develop and produce packaging Strategic decision #2 -developed and tested 2 naming no positioning options (Malibu dip and cool ranch) -research-absolute dead heat -brand group reco-cool ranch. Simpler, people know want ranch is -SVP sales and marketing had a different POV -invited to have a discussion to make his case. Do what you want but you bett be right. Outcome: -$125 million in year one sales -favorite part= 1 year later, acknowledgement from SVP that he had made the right call and he respected him standing up for his POV

Define 'scope creep' as it relates to product development

Tendency for product requirements to increase during development beyond those originally foreseen, leading to features that weren't originally planned and resulting risk to product quality or schedule

Six types of greenwashing - NPR

The sin of the hidden tradeoff • Suggesting a product is 'green' based on a single environmental attribute or an unreasonably naorrow set of attributes without attention to the other important environmental issues The sin of no proof • Any environmental claim that cannot be substantiated by easily accessible supporting information, or by a reliable third party certification The sin of vagueness • Every claim that is poorly defined or broad that its real meaning is likely to be misunderstood by the intended consumer The sin of irrelevance • Making an environmental claim that may be truthful but is unimportant and unhelpful for consumers seeking environmentally preferable products. It distracts the consumer from finding a truly greener option The sin of lesser of two evils • 'green' claims that may be true within the product category, but that risk distracting the consumer from the greater environmental impacts of the category as a whole The sin of fibbing • Making environmental claims that are simply false

Equation: Evaluating concept tests

Top 2 box purchase intent = % definitely would buy + % probably would buy Frequency per concept = ((annual usage quantity 1 x number of respondents 1) + (annual usage quantity 2 x number of respondents 2) + (annual usage quantity 3 x number of respondents 3)) / total number of respondents Profit potential per consumer = frequency x profit per consumer Total profit per concept = profit potential per consumer x total # of consumers in segment

A 'cradle to grave' mentality

Using a 'cradle to grave' assessment helps to identify the potential environmental impacts throughout the product lifecycle - from the 'birth' (cradle) of a product to 'death' (grave)

HBR creative that cracks the code

Variations on a meme - wonderful pistachios • People don't ignore subsequent versions because they've already seen the original one - that's the reason they pay attention in the first place Collaborating with the crowd - Oreo • Crowdsourcing The ad as a game - Coke China • Gaming that is embedded in ads - perhaps the only hope of engaging some people's interest long enough to get a message across Just enough humor - Kia Motors America • Excessive amounts of entertainment tend to backfire and actually reduce an ad's persuasiveness • Entertainment has a cooperating effect with persuasion A new social movement - marks and spencer • Using their mktg power to change consumer attitudes and behavior Ads that 'go native'- neiman marcus and target • The content people also know their customers will balk if they feel that content has been compromised by paid marketing • By borrowing all the elements viewers had chosen to enjoy and stringing the spots into a 'story within a story,' the marketers made them hard to skip

Go back to our lecture on "brand fit" and understand the key elements of consideration involved with branding: brand equities & scope, brand benefits, and brand architecture.

What is a brand? -a promise -the sum total of tangible (physical) and intangible (intellectual and emotional) attributes of a company or product FIT ASSESSMET: BRAND FIT What is a brand equity? -the value of an established brand-it's promise and all the associations that come to mind -coke has lots of unique brand equity -brands are worth a lot CONSIDERING BRAND FIT How does the product line extension "fit" with the brand? Ex: Starbucks strives to be the third place CONSIDERING BRAND SCOPE How does the product line extension "fit" with the brand? What's the scope for Starbucks brand? -cold drinks -soup -pasta -alcohol -what type of experience/environment? Selecting specific ideas -we can also use certain aspects of the RWW method to select the go forward IDEAS

Understand the real, win, worth it methodology for opportunity and idea screening. You will not need to memorize each of the questions of the R-W-W methodology for the exam, but you should have a good sense of the types of questions that should fall into each "bucket". Understand how specific firms used the R-W-W framework (like Facebook's tablet opportunity) in evaluating opportunity decisions

What is it? -used to evaluate individual projects -used to assess business potential and risk exposure in product portfolio -helps you choose The right opportunity to pursue -assess the viability of the opportunity -Asks is it real (industry analysis), can we win (TM and competitive landscape), and is it worth doing (financials and fit (brand, strategy, consumer need)) The model 1. Is it real? -> is the market real? Is the product real? -is there a need or desire for the product -can the consumer buy it -is the size of the potential market adequate -will the consumer buy the product --is there a clear concept --can the product be made --will the product satisfy the market 2.can we win? -> can the product be competitive? Can our company be competitive? -does it have a competitive advantage? -can the advantage be sustained -how will competitors respond --do we have superior resources? --do we have appropriate management --can we understand and respond to the market 3. Is it worth doing? -> will the product be profitable at an acceptable risk? Does launching the product make sense? -are forecasted returns greater than cost? -are the risks acceptable --does the product fit with our overall growth strategy Will top management support it

Go back to the Goody Heat lecture example to understand more about the drivers of Goody Heat's launch results.

What went wrong: -lower margins than anticipated -competitors becoming savvier with beauty packaging and increased advertising spend -only 2 engineers, had only ever worked on headbands -customers were concerned that the product was too big, issue was not addressed -received excellent distribution -took longer than expected because had to gather team and then learn about the category -price competition becomes more fierce -margins were lower than anticipated by 15% due to escalated retailer margins -new ceo hated electronics q Lessons: -listen to consumer suggestions -be more conservative? -have the correct skills -product wasn't going to sell itself -leaned on resources as a crutch -even with strong results, awareness is critical

Know the definition of "spiral" or "agile" development

o Continuous concept evolution based on consumer feedback throughout NPD process o Each refinement adds more people taking the survey/participating in the testing → Each step is a refinement o Step 1: Early qualitative refinement (Focus Groups) o Step 2: Quantitative validation (online survey) o Step 3: Simulated purchase environment testing

Be familiar with the characteristics of strong product names

o Easy to remember o Easy to say and SHORT o Available o Spell-able o Evocative of the thing it name sand benefits o Positive associations o Full dot-com availability (legally and practically available for use) o A great name can • Differentiate you • Trigger an emotional connection • Spark a conversation • Relay the benefits o Ways to brainstorms a name • Dictionary words • Proper nouns • Other roots Affixes and prefixes

Be familiar with the "best practices" for both giving and receiving feedback

o Feedback is a learned skill made easier through practice o Find the coaching in criticism • What makes receiving feedback difficult? • Truth triggers - Set off by the content of the feedback. When assessments or advice seem off base, unhelpful, or simply untrue, you feel indignant, wronged, and exasperated • Relationship triggers - Tripped by the person providing the feedback. Exchanges are often colored by what you believe about the giver and how you feel about your previous interactions with that person. • Identity triggers - All about your relationships with yourself. Whether the feedback is right or wrong, wise or witless, it can be devastating if it causes your sense of who you are to come undone: • Understand your "knee jerk" reaction to feedback • Becoming a better receiver • Know your tendencies • Disentangle the "what" from the "who" • Sort toward coaching • Unpack the feedback • Ask for one thing • Engage in small experiments (decide which feedback will help best) • Tips for receiving effective feedback: • Listen: Take notes • Ask clarifying questions • Avoid defensiveness: No need to "rebut" the claims • Acknowledge and/or genuinely apologize if necessary • Thank the giver! • Ask for more coaching • Tips for giving effective feedback • Ask for permission to give the feedback • Immediacy is crucial! • Keep it short • Formats: o Plus-Minus • Give a positive point and then a negative (related topics) o Situation-Action-Result-Coach • This is the format that should be used • Cite specific examples, state the facts Attach it to a Behavior, Not a Person. Remove emotion

What is reverse innovation, and why is it important for companies? How can it be leveraged for growth in global companies (GE Healthcare)?

o Innovation first launched or discovered in the developing world before spreading to the industrialized world o Important because can access creative capitalism, and emerging markets are where all of the growth is (BRIC countries) o GE Healthcare - GE portable ultrasound: is it cannabilizing? • No, accuracy is different • No, preemptive strike • No, even if lower price point, the quantity is increasing

Be familiar with the various methods used to evaluate concepts with the end consumer and how these methods are combined in a typical concept test plan

o Step 1: We filter/evaluate/improve the concepts internally • Evaluate fit, feasibility, profitability (internally o Step 2: Move-on to consumer concept testing • Consumer concept testing slows us down, but we still do it because we may be able to find issues before investing too much money, helps us know who will buy it after launch o 6 elements: Outlining concept tests • Why: Define the purpose/objectives of concept testing -- Narrowing, refining, forecasting? • Who: Choose a survey population -- Target market, sample size, recruitment criteria • How: Choose a survey format -- Qualitative, quantitative (combo?) • What: Concept stimuli -- Stimuli: verbal, visual, video, mock-ups • Competitive benchmark? -- How measured: Measure customer responses • Outline critical metrics (interest, purchase intent, naming preference, etc.) • So what: Interpret the results -- How will you use data to determine next step o Concept stimuli • How can I get a reaction AS CLOSE AS POSSIBLE to the "real" reaction of the final product, in a reasonable TIMEFRAME for a reasonable COST? - (Complex to Simple): • Working prototype o Pro: Closest to reality, offers the best feedback, allows user interaction o Con: Takes time and money to develop • Physical model o Pro: Great way to communicate features, size, user interaction, ergonomics o Con: Takes time and money to develop, limited functionality may distort feedback • Interactive multimedia/video o Pro: Great way to communicate features and function of a complex concept o Con: Takes time and money to develop • Simulation or Video o Pro: Software/website that mimics function or interaction of the product, more realistic o Con: takes time and money to develop • Photo/sketches of concept o Pro: Easier to envision the idea o Con: Takes more time and cost to develop • Narrative description (trigger statement) o Pro: Quick to develop, can test many ideas, open to refinement o Con: May feel incomplete and does not gain realistic feedback o Concept Testing Methodologies • Qualitative • One-on-one interviews, diads, triads • Focus groups • In-home interviews/ethnography • Large group testing labs • Allows you to ask why • Best for greater depth of exploration • Simulation • Test stores (physical and virtual) • Real store pilots • Quali-quant shelf set testing • Best for highest accuracy in predicting in-store results • Quantitative • Simple online surveys (qualtrics, surveymonkey) • Rigorous (bases studies) • Best for limited budget o More on Concept Testing: What do you learn from a concept test and how can you use the information? 1) What aspects of the concept are most memorable, most liked/disliked? o Concept revision, marketing/ packaging message, refinement 2) Is the concept benefit and technology clear, unique, and meaningful to the customer? o Concept revision, marketing/packaging message, refinement 3) How frequently is the consumer using the product? Is it a new use or replacement? o Sales forecasting 4) Is the product a good value? IS the consumer willing to purchase it at various prices? o Sales forecasting, price sensitivity, pricing decisions 5) Does my product appeal to the "masses" or a niche? What are the characteristics of the person who is most-interested in my product? o Consumer targeting and messaging; sales forecasting Concept Testing Metrics 1) Purchase intent (un-priced and priced) o Tells you how likely the consumer is to purchase the product 2) Interest o How interested is the consumer in the idea? 3) Clarity/comprehension o Are the core benefit and "how it works" clear to the consumer? 4) Relevancy o Does the product solve an important problem for the consumer? 5) Uniqueness o Is the product unique and different from competitive items (note: not always a strong indicator of in-market success, but helpful to gain distribution) 6) Believability o Is the consumer buying what you're telling them? 7) Usage and incrementally o How would the consumer use this product? How frequently? 8) Other (i.e. Performance or purchase immediacy)

• What is the "golden metric" of concept testing?

o Top 2 Box Purchase Intent

• Understand how to calculate a concept's top 2-box purchase intent score, and frequency rating. Be able to interpret these metrics in selecting go-forward concepts

o Top 2-Box Purchase Intent • Take top 2 (Definitely would buy, probably would buy), turn them into percentage of respondents who gave this answer, add the percentages together • How do you select go-forward concepts? • See lecture notes from 3/9 to practice o Frequency rating • See lecture notes from 3/9 • Know how to do Vis Eye drops example for frequency

Be familiar with methods for assessing concept price

o Van Westendorp Method • Price elasticity modeling • Method of assessing consumer's internal reference price, and price sensitivity with 3 questions: • What price would you expect to pay for this item? o Consumer is drawing from an internal reference price. o Helps to gage your consumer's internal reference price • What price would be so low that you would question this product's quality? • What price would be so high that you would no longer be willing to pay for the product? • Looking at what price is the optimal price for this product? o Price Waterfalls • Price elasticity modeling • Testing concept purchase intent at various prices: • How likely would you be to purchase this product for a price of $9.99 (Definitely to definitely would not) • How likely would you be to purchase this product for a price of $5.99? • How likely would you be to purchase this product for a price of $3.99? • Looking at what price maximizes our T2B purchase intent? Do not base on frequency! Just on T2B!! o Calculating and profit per aware consumer See notes from 3/9

First mover advantage

• Does not guarantee success. Many of the products we perceive as first movers (iPod, Kindle) were actually successful followers that fixed some of the mistakes of their predecessors. They also implemented superior launch strategies. Product managers are sometimes surprised to find out that their first-to-market new products were unable to sell themselves. Don't underestimate the value of a solid launch • Timing an entry with competition can neutralize the competitor's potential first mover advantage as well as possibly increase the potential market faster. Delaying an entry until after competition is in the market might make it possible to capitalize on competitive flaws as well a benefit from any competitor advertising that educates the market

Decisions regarding timing should take into account what impact the new product may have on the rest of the company's product line

• Launching a product before components essential to its usability are available is premature timing • Launching substitute products must be appropriately timed • If there are substantial pipeline inventory in the channel, you may want to postpone the launch until some of the old product has been sold • If a delayed launch risks a vacuum period when there is no inventory of either the old or new product, it can create a period of potential advantage for the competition

Payback analysis

•A measure of how quickly your initial investment generates income to cover the initial cost of creating the product •Payback # of years = cost of investment/gross margin $

ROI

•A measure of the efficiency of the company's investment in this new product •ROI = (gross margin - cost of investment)/cost of investment •In many cases, the ROI for new products is negative for 1-2 years, but becomes positive in later years •Cost of investment = any cost directly tied to developing your product. This would include R&D costs and would also include advertising & promotional costs

When is traditional market research less appropriate?

•Discontinuous or 'breakthrough' innovations •Technology-intensive products •Products which require rapid decision marking fast obsolescence

Concept best practices

•No jargon •One, focused benefit •Phrased in the consumer's voice •Avoid the kitchen sink (EDIT) •Consistent tone of voice •Speak to your TM

Product positioning approaches

•Price-value: walmart •Usage: taco bell 4th meal •User focused: home depot/lowes •Alternative: miraclegro organic choice potting mix •Secondary association: CU credit card •Attribute: tums

Strong concept insight statement: the voice of authority appropriate when...

•Professional target markets (B2B products) •Serious or life threatening products (alarm systems, medical devices)

Variable vs fixed costs on P&L

•Raw materials: variable •Tooling costs: fixed •Duty/tariffs: variable •Patent filing costs: fixed •Freight/shipping: variable •Overhead: fixed

Product positioning statement includes...

•Relevant market segments •Brand •Frame of reference •Point of differentiation •Competency or feature that is the source of competitive advantage

Installed base effect

•The massive inertial effect of an existing technology or product •A barrier for new technologies due to a high level of comfort and familiarity with existing solutions