INTRODUCTION
The new product launch phase is a critical part of the total new product development process. This is especially true in the consumer packaged goods arena, where nearly 26,000 new products were introduced in 1999.1 This compares to just over 12,000 new product introductions in 1986.2 With this dramatic escalation in the number of new products competing for consumer attention, the quality of launch programs greatly impacts the success of product introductions. Done well, a launch helps a new product rapidly establish itself among its target users, gain market share and enhance the company's brand position. Done poorly, a launch can negate all the time, money and human capital that went into developing the new product if it fails to achieve commercial success. Marketing experts estimate that two-thirds of all new products fail within two years.3 Many factors contribute to this high failure rate, including products that do not match customer needs or experience unforeseen competitive countermoves.4 In addition, each year it becomes more difficult to break through the noise generated by the thousands of existing products and line extensions. Sometimes, even well-conceived, innovative products meet with failure in the marketplace. Companies can end up pulling the plug on a perfectly good product because the launch strategy and execution failed to score high marks on the complex matrix of marketing factors that spell launch success. In this study, products had only six months to prove themselves in the marketplace. Considering the amount of time and resources spent on new product development and the short purchase cycles of many products, new products have a surprisingly small window of opportunity in which their fates are sealed. Despite the launch phase's critical nature, very little formal study has been done on the ingredients that comprise a successful launch. To provide much needed learning in this area for CEOs, marketing executives, and new product/brand managers of consumer product companies, Schneider & Associates, a Boston-based public relations firm with over 20 years of experience in product launches, commissioned this extensive investigation. The overall objectives of this two-phased study , the Schneider/Boston University New Product Launch Report, which is believed to be the first-of-its-kind ever undertaken, were to: Examine how managers carry out launches Identify launch success factors -- those strategies, tactics, and processes likely to improve the launch process Provide new information to help product managers increase their launch success rate The qualitative portion of the study included interviews with twelve5 carefully chosen "launch experts" from companies such as Brita Inc., a division of The Clorox Company; Royal Appliance and Unilever. The products launched by these executives each received more than two new product awards. Our goal in talking with the experts was to understand the activities that comprised the launch process, the tools they applied, and the conventional or unconventional wisdom and rules of thumb that guided their launch activities. We analyzed the transcribed interview data, identified salient issues, developed preliminary hypotheses from these themes, and integrated the findings as inputs to the next phase of the study -- the survey design. The quantitative research performed for this study looked at large enterprises with annual revenues ranging from $10 million to $10 billion. The Schneider/Boston University New Product Launch Report presents highlights and key findings from the quantitative study along with relevant illustrative quotes from the 12 one-on-one interviews with launch experts. The report gives a broad picture of the art of the launch as currently practiced by major consumer product companies.
1. "Build a Better Mousetrap" 1999 New Product Innovations of the Year by Marketing Intelligence Service, Ltd., Naples, NY, December 23, 1999. 2. Ibid. 3. Robert McMath, President, New Products Showcase and Learning Center, Ithaca, NY. 4. Journal of Marketing article "Retaliatory Behavior to New Product Entry" by Sabine Kuester, Christian Homburg and Thomas S. Robertson, Vol. 63 No. 4, October 1999. 5. Out of the 12 executives interviewed, only three remain at their respective companies. We have attributed quotes only to those individuals who have given us permission to do so. All other quotes are attributed using the interviewees title and type of company since we were unable to obtain permission to use their name.
METHODOLOGY
Working closely with Michael Elasmar, Ph.D., Executive Director of the Boston University Communications Research Center, we have compiled what we hope will be the first roadmap that provides a solid path on which marketing executives can travel to reach their product launch goals. The quantitative research done for this study involved an extensive and highly structured survey among consumer product executives with new product experience. A total of 91 completed interviews were obtained, 63 conducted by mail and 28 via the Internet. While reaching and obtaining research cooperation from executive-level audiences is extremely difficult, responses from study participants were found to be very open, honest, thorough, and insightful. The project was a joint academic and research practitioner effort conducted by Prescott & Associates, a strategic marketing and research firm based in Pittsburgh, in conjunction with the Communication Research Center at Boston University. Susan Fournier, Ph.D., Associate Professor of Business Administration/Marketing at Harvard Business School, was a consultant to the study.
THE SAMPLE
The sample for this research represents a broad array of consumer product companies from industries heavily engaged in new product activities. The Food & Beverage industry is most widely represented at 61% of the total sample, followed by Sporting Goods (16%) and Apparel & Shoes (13%) (See Appendix A for detailed list). Organizations that were contacted for this study are generally very large enterprises, with average annual revenues of $2.6 billion. Additionally, the companies who responded are actively involved in launching new products. On average, one-fifth (21%) of organizational revenues over the past three years were generated from new products. Study participants are seasoned marketing professionals with significant experience in new product activities and launch management. The study's sample is largely comprised of senior level executives: 51% hold CEO, Senior VP , or Marketing VP positions; 25% are Marketing Directors; and 24% are Marketing, Brand or Product Managers. The typical study participant has managed new products for eight years and has been personally responsible for introducing an average of seven new products and eleven line extensions from planning through market launch. All statistical significance testing reported in this document has been performed at the 95% level of confidence, with significantly higher differences denoted by an asterisk (*)6. For clarity, corresponding questions from the survey are listed below the charts and tables.
6. The data figures reported in this document were aggregated by Prescott & Associates, a strategic marketing and research firm based in Pittsburgh, PA.
100% 80% 60% 40% 20% 0% Highly Successful Less Successful 58% 42% Less Successful Highly Successful
FINDINGS
Below we report the findings from our research. Where applicable, quotes from the qualitative phase of our research are included to embellish and illustrate key themes. Results are presented in the form of fourteen success factors that are based on characteristics of highly successful launches: Conduct launch with a different mind set, a different philosophy. Treat launch as a distinct and separate phase. Appreciate the sub-processes within the launch phase, and don't cut them short. Respect and appreciate that launch timing is everything. Get planning priorities straight. Have a plan, but don't set it in stone. Expect delays and learn to live with them. Recognize that teams work. Don't put the CEO in charge of launch. Focus on the consumer to improve success. Gaining shelf presence is key. Spend money on products that are new. Fight for bigger launch budgets. Consider public relations: an overlooked weapon in the launch arsenal.
LAUNCH CHARACTERISTICS*
Total % Exciting Creative Rewarding Proactive Systematic Evolutionary Synergistic Ego-involving Reactive Political Unpredictable 50% 46 46 43 22 19 20 24 22 21 14 Highly Successful Launches 63% 57 57 53 29 29 26 20 18 14 10 Less Successful Launches 38% 35 35 32 14 5 14 32 30 32 22
*Top responses to the question asking respondents to choose from descriptors that best characterize the product launch process. Q. Which of the following phrases describe the process of planning and executing the product launch extremely well?
7. The data was categorized into two groups, highly successful and less successful, based upon how the survey participants rated their product's performance in the market on a scale of one to ten with 1 = "Dismal Failure" and 10 = "Overwhelming Success."
To determine the typical new product development cycle of the companies who participated in the study, we posed questions pertaining to the duration of the new product development process. Based on the responses, the total product development process (including concept genera- Q. Within your organization is there a product launch phase which is distinguished from the "new product development" tion, prototype development, and development of final phase? product) generally begins 3 or more years before shipment and can continue up to just 2 - 3 months before launch. The launch phase can perhaps be best understood through its placement within the overall process of new product development. The new product development process itself is comprised of 4 sub-processes: 1. Initial concept generation usually begins at least 1 or 2 years prior to shipment. Interestingly, concept development for less successful products begins far earlier than for highly successful products (3 years versus 1 - 2 years). This may suggest a loss of internal momentum during the process, or is reflective of a problem-plagued development process. 2 . Final product development is usually completed 2 or 3 months prior to shipment and is generally concurrent with the timing of a final "go/no go" decision on the product. 3 . Concept and product testing starts within 1 or 2 years after initiation of the product development phase, lasting almost right up to shipment, and generally runs hand-in-hand with the development of a prototype and a final product. 4 . The launch phase generally occurs 1 or 2 years prior to shipment of the final product. The initiation of this timing of this phase is best defined in the following respondent's words: "As far as the terminology goes, there was a distinct phase called launch. It was when the marketing elements came together. Everything from national communications to point-of-purchase materials, to even just the relationship building from a buyer to seller perspective. It was all part and parcel of launch. Not only do you have to get retailers to understand what the benefit is from a consumer point of view, they also need to know how it is going to make them money and why is it relevant for their consumer base. That's all part and parcel of having an adequate and holistic launch. And that's what we call launch. -- Director of Marketing at a major consumer durables company
The end of the launch phase is likely to be: Some predetermined period after being in-market (28%) A date specified around the shipping period (26%) A pre-market milestone such as commercialization or packaging completion (22%)
Interestingly, differences exist between highly successful and less successful launches in terms of process markers. The companies with highly successful products were more likely to view the end of the launch phase when the product is on the shelves (35%), as opposed to the companies with less successful products (25%). Organizations with highly successful products were also nearly twice as likely to consider a shipping milestone to mark the end of launch (31% vs. 16% for companies with less successful products). In contrast, the companies with less successful products were twice as likely as those with highly successful products to consider a pre-market milestone (i.e., the ship date or the in-store date) as the end of launch (32% vs. 16%). Overall, it appears that extending launch activities past a pre-market milestone improves success.
FIGURE 1
APPRECIATE THE SUB-PROCESSES WITHIN THE LAUNCH PHASE, AND DON'T CUT THEM SHORT
The research clearly suggests that launch is a multi-staged process to be managed8 (See Figure 1 at left). Successful launches were in fact much more likely to have been managed through a series of definitive stages than were less successful products (62% to 35%). Similar to the Stage Gate Model9 used to specify the subprocesses in the new product development cycle, our findings indicate the following distinct and important phases of the launch process (See Appendices B and C for revised Stage Gate Model and Schneider Launch Model). Phase 1 - Launch Plan Development: While this phase begins one or two years prior to shipment of the final product, the finalization of a budget for launch may not occur until a year later (at the 10 - 12 month period), thus rendering the plan stage of launch as the most lengthy sub-component of the process. Phase 2 - PR/Communications Planning: The advertising agency is brought in quite early in the process, sometimes as far back as three or more years prior to shipment (during the initial concept generation phase). The timing is indicative of the on-going strategic relationships many ad agencies form with their clients. Overall, PR firm selection and PR planning typically begins within a year of final product shipping, lasting beyond shipment date. "We briefed the ad agency very, very early on. We met with them at the very beginning -- at Gate Zero. We had a briefing with them at every gate. -- General Manager, consumer durables company Phase 3 - Campaign/Promotions Planning: Promotions planning generally takes place 10 - 12 months before shipment. While advertising agencies are brought on board very early in the process during the concept development phase, promotions firms are generally not included until a more final product has been developed. Phase 4 - Distribution Planning/Channel Management: Distribution and channel management planning begins approximately one year prior to final shipment and continues until the product is shipped. Phase 5 - PR/Communications/Promotions Execution: The execution of advertising and promotions activities tends to parallel each other in time, running from 2 - 3 months before shipment until 4 - 6 months after. Execution of PR activities typically begins within 6 months of shipment and lasts until as late as 6 months after the product rollout (generally beginning before advertising and promotions launch). Phase 6 - Evaluation and Tracking: This phase concerns the period of close evaluation prior to making major decisions about the product's future. Evaluation research occurs 4 - 6 months before shipment and often lasts until 1 to 2 years after launch campaigns. In general, launch is described as 'a closely evaluated process' (39%). Phase 7 - Critical Evaluation Period: On average, the critical period for judging product viability is 6 months, surprisingly short considering the purchase cycles of many products.
8. A model of the process timeline was constructed based on the qualitative phase of this research. This model was then tested by having study participants complete a detailed timeline of the events and activities associated with the development and launch of their most recent product introduction. Respondents indicated when 27 individual events/activities were initiated, completed or occurred (for one time events) in relation to the product shipment date. 9. Cooper, R.G. and E. J. Kleinschmidt (1986), "An Investigation into the New Product Process: Steps, Deficiencies, and Impact," Journal of Product and Innovation Management, 3 (June), 71-85.
APPRECIATE THE SUB-PROCESSES WITHIN THE LAUNCH PHASE, AND DON'T CUT THEM SHORT
In general, the time horizon for launch tends to be longer for more successful products. More successful and less successful launches differed significantly with respect to the timing of the sub-phases, in fact: All major events considered to signal the beginning of the launch phase begin earlier for highly successful products. Less successful products tend to begin their launch planning far later than their business planning and budgeting, pointing to a strong focus on internal/financial matters at the expense of focusing on executional concerns. In general, highly successful products tend to engage involvement with external constituencies far earlier than less successful ones. They typically begin the planning and execution of external processes (advertis ing, PR, promotions) well before final product approval is received. Less successful products tend to begin the PR process somewhat later at 7 - 9 months prior to ship date vs. 10 - 12 months for highly successful products. Highly successful products tend to break their advertising campaign somewhat later than less successful ones, generally waiting until 2 to 3 months prior to shipment. This strategy allows for adequate distribution prior to generating awareness and trial. Highly successful products are more likely to begin distribution planning and channel management activities far earlier (approximately one year prior to final shipment) than their less successful counterparts (7 - 9 months before shipment). Highly successful products begin PR activities several months prior to advertising launch - potentially building anticipation or creating a buzz at a grass roots level prior to more formal mass media campaigns. This point supports the need to engage public relations early on in the process. The critical evaluation period for less successful products tends to begin earlier and last longer (from shipment until 10 - 12 months after) than for highly successful products (2 - 3 months after shipment until 7 - 9 months). Less successful products thus had a longer assessment period before decisions were made, with almost two-thirds (60%) being evaluated for more than 6 months after introduction, compared to only 24% of the highly successful products. This longer period was likely a function of organizations attempting to diagnose reasons for lower-than-expected success, or in line with research on sunk cost investments,10 simply reflects a reluctance among managers to give up on a new product and to spend good money after bad.
10
10. Staw, B. M. (1976). "Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action." Organizational Behavior and Human Resources 16: 27-44.
0%
20%
40%
60%
80%
100%
Q. To what extent do each of the following factors influence the timing of product introductions in your company/division?
11
92%
92%
20%
80%
100%
*Figures reported are based on highest number of responses indicating Extremely Critical and Very Important
Q. How critical was each of these considered when planning this product introduction?
12
13
14
TEAMS WORK
Characteristics most commonly seen as descriptive of launch activities are driven by a project champion (64%) and significant senior management involvement (63%). Team formation and composition (both internal and external) emerged as critical to launch success. The key learning here is that teams are good, big teams are better, and multidisciplinary teams work best. Teams are brought in early in the process -- much in advance even of the formal go/no go decision. The assembly of the project team closely parallels the development of the business plan. "Get them in up front so that they are involved in the planning process." -- General Manager, consumer durables company Teams were established in 60% of the new product launches studied. On average, these teams included 5 or 6 core members. An analysis of team composition revealed several interesting findings: The typical team includes at least one Marketing VP/Marketing Manager/Brand Manager (90% of cases). If a Marketing VP/Marketing Manager/Brand Manager is not on the team, the team is most apt to be managed by the CEO and includes just 1 or 2 other people. One or more people from Operations/Engineering, Manufacturing, or Product Development/R&D are also usually present (81%). Communications and Information Technology are only included as core members on very large teams (10+ members).
50% 40% 30% 20% 10% 0% 10% 29% 30% 24% 22% 10% 4 or 5 38% 38%
1 to 3
6 or 7
8 or more
*Figures reported here are comparative totals from responses to the survey question (Q. 33a) about team compositions and level of involvement.
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TEAMS WORK
External agencies, such as PR and advertising, were not typically part of the core launch teams of those companies surveyed. Just 25% of the executives surveyed reported including external suppliers or support groups as members of their core teams. Three-quarters (76%) however, used external groups as secondary team members. Advertising agencies had the greatest team presence overall; 69% of the teams included the advertising agency as either a core or secondary member. A sizeable minority also included package design firms (40%), PR firms (33%), and promotions firms (24%) on their core secondary teams. The chart below illustrates the typical make-up of the core and secondary launch teams:
CORE AND SECONDARY LAUNCH TEAM COMPOSITIONS CORE TEAM Product Development/R&D Operations/Engineering Marketing Manager Manufacturing Brand/Product Manager
SECONDARY INTERNAL TEAM Senior Management Sales VP/Manager Marketing Research Finance
These results stand in stark contrast to the qualitative research phase, where all companies surveyed reported external agency members on their core launch teams. Since all 10 companies involved in the qualitative research were award-winning launch experts, there may be a lesson to be learned about the importance of placing advertising, public relations and promotions agencies on the core team. Also, with the Internet becoming a major force in channel distribution, Web developers and other Internet partners should be included on the core team as well (See Appendix D for proposed launch team composition chart). "I think of our advertising and PR agencies as real partners. And we bring them in the launch planning and launch meetings - absolutely. They're a part of the team." -- Vice President of Marketing, major consumer durables company Team dynamics distinguished more successful launches from less successful ones. Teams were formed for 69% of the highly successful products and just 54% of the less successful ones. Highly successful products were also managed by larger teams; 60% had more than 5 team members compared to only 34% of the less successful products.
16
There are, however, a number of important differences between highly successful and less successful launches in terms of the individuals with primary responsibility for product introduction: Highly successful launches were far more apt to have been managed by Brand or Product Managers than less successful ones (36% vs. 6%). Less successful launches were also more apt to be under the direct responsibility of senior management (CEOs/Presidents) compared to more successful products. Of the less successful efforts, 23% were managed by CEOs/Presidents, compared to 16% for highly successful products. Of the less successful launches, 66% were managed by senior marketing personnel (Marketing VP , Marketing Director, or Marketing Manager) compared to 43% for highly successful products.
These findings suggest that while the involvement of senior management (including CEOs or Presidents) is critical to new product success (61% of highly successful launches involved senior management), such high level managers should cede a direct management role. Individuals solely dedicated to the launch effort, (Brand or Product Managers), are best suited to be primarily responsible for the launch process, rather than senior personnel whose multiple and competing duties can impair focus and tactical expertise.
66%
Other
Less Successful
Q: Which one of the following individuals had primary responsibility for this product introduction (either as a team leader or as the sole individual responsible)?
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CEOs/PRESIDENTS/SR. MANAGEMENT
MARKETING VP/DIRECTOR/MANAGER
As the charts illustrate, when brand/product managers were in charge of launch, the launches were highly successful 84% of the time. However, when CEOs or Marketing VPs managed the launch, they were less successful 65 - 70% of the time.
18
Q: Please indicate how the marketing budget was allocated across each of the marketing support categories listed below.
The Consumer/Trade and Consumer-Focused segments had the largest average marketing budgets ($10.8 and $3.9 million, respectively). Interestingly, the Diverse segment had a generally lower average budget ($1.6 million), suggesting that those employing this strategy were spreading less money across a wider range of support activities. Interestingly, highly successful products were more apt to belong to the Consumer-Focused segment (35%) than less successful ones (22%), while the less successful tended to fall within the Trade-Focused (25% vs. 14% for highly successful) or Diverse segments (28% vs. 18% for highly successful). Even though combined Consumer/Trade budgets exceeded straight consumer spending by almost 3 times, it appears that marketing dollars focused directly at the consumer are more effective than spending combined dollars on Consumer/Trade. Managers who put money into Consumer/Trade focused strategies were just as likely to succeed as they were to fail. Programs geared directly at the consumer enhanced the chance of launch success. Managers' perceptions of what delivered a bang-for-the-buck corroborate these findings. Activities with the greatest perceived return on investment are consumer-oriented: consumer advertising (51%), consumer promotions (44%), and merchandising (43%).
19
10 or more
20
Line Extension
Q: Which of the following best describes how "new" this product was to your organization?
21
Q: Please indicate how the Marketing Budget was allocated across each of the marketing support categories listed below.
11. Actual budget figures are not reported here given the wide range of launch types (national roll-outs, regional roll-outs and test markets) and the wide variation of industries. Caution is advised when interpreting these numbers.
22
*Frequency of top box responses rating impact of public relations activities based on a 5 point scale where 1 = Tremendous Impact and 5 = No Impact At All.
23
12. Quotations are verbatim responses to the survey question: We are very interested in accounts of particularly effective or ineffective public relations efforts related to the new product launch you have been detailing in this survey. Please share any of your experiences in this regard. Since the participants completed the quantitative survey anonymously, we are unable to attribute their quotes.
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APPENDIX A
The following list comprises the participants verbatim written responses to the question: Into which product category does this product fall? For organizational purposes, we have listed them in alphabetical order and noted instances of duplicate responses: Apparel (3) Athletic Footwear Baking Mixes Baseball Beer Beverage Beverage Wine Bicycles/Toys Bottled Water Camping Appliances-Stoves/Lanterns Canadian Whiskies Category Extension Cereal Chilled Juice and Juice Beverages Commercial Confectionary - Lollipops Consumer Food Consumer Products/Beverage/Wine Dairy Designer Fashion Dinner Sausage Distilled Spirit - Rum Specialty Dry Pasta Retail Packaged Goods Exact Weight Boneless Ham Products Eye Care-Contact Lenses Fishing Reel Food (3) Foodservice (2) Foodservice Storage and Handling Foodservice/Pizza for Delivery or Carry-out Food - Yogurt Footwear Frozen Frozen Chicken Burgers Frozen Coffee Frozen Foods/Entrees Frozen Pizza Frozen Vegetable Golf Bags Golf Clubs Golf Equipment Golf Irons (Premium) Hair Care Shampoo/Conditioner Hard Candy Housewares Lighting Meat Meat Snacks Meat Solution - Frozen Menswear Milk New Product No Response (5) Nutraceutical Nutritional Bars Packaged Fruit Pantyhose Personal Care Bath Products Pie Pizza Plumbing Pool Accessories Processed Meats Protective Equipment Ready-to-eat Breakfast Cereal Refrigerated Apple Juice Refrigerated Salad Dressing Refrigerated Yogurt Retail - Beauty Product Sandwich Seafood Appetizers Seasonal Food Gifts Side Dishes - Food/Foodservice Smoking Control (OTC) Smoothies Snack Food Steel Golf Shaft Super Premium Wine Varietal Table Wine Womens Clothing Work Boots Wrinkle Free Men's Pants
25
APPENDIX B
The highly regarded Stage Gate Model, developed by Robert Cooper, plots the new product development process. In his model, the new product development process has five gates -- with the last gate combining full production and market launch.
STAGE GATE MODEL Detailed Investigation Testing & Validation PostImplementation Review 5 PIR
Ideation
Preliminary Investigation
Development
Our research suggests that launch deserves its own gate separate from full production. Given the multi-staged processes involved in this complex phase, we are suggesting that a sixth gate be added called Market Launch. In the model below, the dotted lines represent launch activities that overlap other new product development gates and extend beyond the post-implementation review.
Market Launch
Ideation
PIR
Preliminary Investigation
Development
Full Production
PostImplementation Review
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APPENDIX C
The Launch Model extracts the sub-processes that comprise the proposed sixth gate as shown below. Our research suggests that launch is a multi-staged process with seven distinct phases, all of which need to be closely managed.
Market Launch
Ideation
PIR
Preliminary Investigation
Development
Full Production
PostImplementation Review
27
APPENDIX D
The diagram shows the proposed methodology for creating launch teams. The core launch team members (Marketing, Operations and Sales) anchor the launch process with the external agencies available as resources for the core team. All participants need to interact with senior management from time to time throughout the launch process for approvals and funding.
Sales
Sales VP/Managers
Operations
R&D, Engineering, Manufacturing
28
To expand our research, we are asking additional companies to participate in the study by taking the survey on the Web or by mail. In exchange, we are offering participants the complete Executive Summary of the Schneider/BU New Product Launch Report. If you are interested in taking part in this survey, please e-mail Boston University's Communication Research Center at crc@bu.edu. To take the survey online, type Launch Survey-Web in the subject line and Boston University will send out the URL address with a user name and password to access the survey online. If you prefer to fill out the survey by hand and mail it to BU, please type Launch Survey-Mail in the subject line and add your address information in the message box to receive the survey by mail. We thank you in advance for your participation.
585 Boylston Street Boston, MA 02116 Phone: 617-536-3300 Fax: 617-536-3180 www.schneiderpr.com
Schneider & Associates, 2001