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Clustering product launches by price and

launch strategy
Roger J. Calantone
Department of Marketing and Supply Chain Management, Michigan State University, East Lansing, Michigan, USA, and

C. Anthony Di Benedetto
Fox School of Business and Management, Temple University, Philadelphia, Pennsylvania, USA
Abstract
Purpose The purpose of this paper is to examine the interaction of pricing strategies with other aspects of launch, in particular, timing, logistics/
inventory strategy, and coordination with support organizations, and the effect on profit and competitive performance.
Design/methodology/approach The paper presents an empirical study of 215 recent new product launches, focusing on pricing and other strategic
and tactical launch decisions and the resulting profitability and competitive performance. Clusters of new product launches are identified and the
profitability and competitiveness of each cluster are discussed.
Findings The paper finds that some clusters are related to greater success than others. The most profitable and competitively successful cluster
contained launches supported by solid market research and marked by good timing decisions. By contrast, the least profitable/successful cluster were
higher price launches unsupported by adequate research.
Research limitations/implications The study is limited by the fact that the sampling frame is made up of members of a professional association of
product development and management, and may therefore be more representative of best practice in new product development (NPD) than of NPD
in general. The authors believe the use of the key informant method is justified in this study, however this method has been criticized in the past.
Originality/value The pricing decision for a new product is sometimes oversimplified as a high-low or skimming versus penetration choice. The
study finds that the actual effect of pricing on ultimate success is much more complex, and that one must consider not only price level, but also the
timing of the launch, the logistics and inventory strategy, the extent of market research, testing, and planning, and so forth.
Keywords Product launch, Pricing policy, Distribution management, Inventory management
Paper type Research paper

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0885-8624.htm

on product launch until the early 1990s, as reported by


Calantone and Montoya-Weiss (1994). Soon after, the
Product Development & Management Association (PDMA)
published its Handbook of New Product Development, which
included review articles on consumer (Ottum, 1996) and
industrial (Stryker, 1996) product launch. About this time,
several research studies into product launch were initiated in
the USA, the UK, and The Netherlands, as shown in Table I.
An important research milestone was the special issue on new
product launch, published by the Journal of Product Innovation
Management in November 1999. Empirical studies up until
this time focused on strategic and tactical launch decisions
and their effects on performance (e.g. Hultink, Griffin, Hart
and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997;
Hultink and Hart, 1998). Later studies expanded on this
literature base to investigate related issues such as the role of
logistics and supply chain relationships in successful launch
(Bowersox et al., 1999), differences in competitive reactions
to launches of radical and incremental new products
(DeBruyne et al., 2002), launch signaling (Hultink and
Langerak, 2002), the moderating role of product
innovativeness (Lee and OConnor, 2003), and the role of
market orientation (Langerak et al., 2004).

Journal of Business & Industrial Marketing


22/1 (2007) 419
q Emerald Group Publishing Limited [ISSN 0885-8624]
[DOI 10.1108/08858620710722789]

A research grant from the Product Development & Management


Association funded this research. The authors would like to thank
Wesley Johnston and two anonymous reviewers for their insightful
comments on an earlier draft.

An executive summary for managers and executive


readers can be found at the end of this article.

Introduction
The best firms at new product development (NPD) depend
heavily on new products for continued sales revenues, and
effective product launch greatly improves the overall chances
of new product success (Maidique and Zirger, 1984;
Calantone and Di Benedetto, 1988; Cooper, 1979; Cooper
and Kleinschmidt, 1987, 1990; Griffin, 1997; Di Benedetto,
1999). Product launch is also financially risky, and in fact is
often the most costly stage in the NPD process (Booz, Allen
and Hamilton, 1982; Calantone and Montoya-Weiss, 1994;
Cooper and Kleinschmidt, 1987; Hultink, Griffin, Hart and
Robben, 1997; Guiltinan, 1999).
In spite of its managerial importance, launch has only
recently begun to attract much academic research attention.
Table I presents the most prominent empirical and review
articles on the subject of launch from the early 1990s to the
present day. Surprisingly, little empirical research had focused

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Table I Product launch literature summary


Author and year

Type of publication

Major topic

Calantone and Montoya-Weiss


(1994)
Saunders and Jobber (1994)

Review article

The launch plan, launch timing, launch strategies, control of launch process

Empirical study (US and UK)a

Hultink and Schoormans (1995)


Ottum (1996)
Stryker (1996)
Hultink, Griffin, Hart and Robben
(1997)
Hultink, Hart, Robben and Griffith
(1997)
Hultink et al. (1998)
Hultink and Hart (1998)
Robben (1998)
Guiltinan (1999)

Empirical study (The Netherlands)


Review article
Review article
Empirical study (UK)
Empirical study (The Netherlands)

Di Benedetto (1999)

Empirical study (North America)

Hultink and Robben (1999)

Empirical study (The Netherlands)

Bowersox et al. (1999)

Conceptual paper

Hultink et al. (1999)

Empirical study (UK)

Hultink et al. (2000)

Empirical study (UK)

Thoelke et al. (2001)

Case study (eight Dutch companies)

DeBruyne et al. (2002)


Hultink and Langerak (2002)

Empirical study (USA, UK, The


Netherlands)
Empirical study (The Netherlands)

Lee and OConnor (2003)

Empirical study (USA)

Langerak et al. (2004)

Empirical study (The Netherlands)

Nagle (2005)

Review article

Calantone et al. (2005)

Review article

Launch of replacement products and comparison of successful to unsuccessful


launches
Analysis of high-tech product launch decisions
Issues and procedures for launching a consumer product
Issues and procedures for launching a business product
Interactions between product launch decisions and performance outcomes;
differentiates strategic and tactical launch decisions
Relationship between launch strategies and performance outcomes;
differentiates strategic and tactical launch decisions
Categorization of generic new product launch strategies
Comparison of launch strategies for high and low advantage new products
Categorization of generic new product launch strategies
Launch tactics need to be aligned with perceptions of new product relative
advantage and compatibility; relationship between strategy and tactics
Successful launches related to good execution of strategic, tactical, and
information-gathering activities
Relationship between launch strategy and market acceptance as well as product
performance for both consumer and industrial products
Importance of logistics and supply chain relationships to successful launch; lean
launch strategies based on response-based logistics
Consumer product launch decisions; relationship between launch decisions and
performance outcomes
Comparison of consumer and industrial new product launch decisions;
examined launch support program (e.g. advertising media)
Strengths and weaknesses of launch strategies (differentiation, make-or-buy
decision, launch of new feature, etc.)
Competitive reactions to radical versus incremental new products are different;
discusses in which situations competitors are likely to react or not
Investigates launch signals such as hostility, commitment, and consequences,
and the impact of these on strength and speed of competitive reaction
Relationship between communication strategy and new product performance is
moderated by the products innovativeness
Market orientation is related to product advantage and to launch strategies and
tactics
The launch plan, launch phases, the launch team and manager selection, launch
and continuous improvement
Launch strategy, flexible supply chain, benefits of a lean launch, illustrations in
two industries

Empirical study (UK)


Empirical study (UK)
Empirical study (UK)
Conceptual paper

Note: a All empirical studies are cross-sectional surveys unless otherwise noted

Most of the empirical and conceptual studies of product


launch in Table I distinguish two groups of launch decisions:
strategic and tactical launch decisions (Hultink, Griffin, Hart
and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997;
Hultink and Robben, 1999; Guiltinan, 1999). Strategic
decisions are those that are concerned with product and
market issues, and are often finalized early in the NPD
process, perhaps in the Product Innovation Charter or at
product protocol specification. Strategic decisions target
market decisions (niche versus mass market), leader vs
follower decisions, and decisions on relative innovativeness
(Guiltinan, 1999; Di Benedetto, 1999; Calantone and
Montoya-Weiss, 1994). Tactical decisions include familiar
marketing mix decisions such as product branding, sales and

distribution support, promotion activities, timing decisions,


and pricing decisions. These decisions are usually made after
the launch strategy has been decided, and may be influenced
by strategic decisions already taken (Guiltinan, 1987;
Di Benedetto, 1999; Calantone and Montoya-Weiss, 1994).
Launch management is often ignored in the handoff of
products between the team developing the commercial entity
and the consumer product brand managers or business-tobusiness (B2B) product sales managers. Despite much
literature showing benefits of speed to market and early
entry advantage (see Lieberman and Montgomery, 1988,
1998), many firms do not develop pragmatic, heavily
monitored, and flexible launch programs. In this article, we
focus on a narrow perspective of the launch management
5

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

process pricing and its relationship to overall launch


management in order to dredge up patterns of good and
poor approaches to launch management.
Pricing decisions are always at the crux of the management
dilemma. Falling prices generally stimulate demand and drive
the volume cost decreases that most new product programs
depend on to realize and capitalize on the advantages of early
market entry; yet falling prices reduce revenues and margins
for all concerned in the new product commercial enterprise,
unless costs fall even faster. The payoff to better
understanding of past launch behaviors is to develop an
approach to shorten breakeven times and to understand and
control new product launch programs better.
The established marketing literature is quite clear about the
need to coordinate pricing decisions with all other elements of
the marketing mix. A firm may choose to set a premium price
on its product in order to skim the market (maximize revenue
obtained by different price segments), or to establish the
product as a quality leader. In each case, the product quality,
distribution channel, and promotion strategy must be
consistent with and supportive of the higher price so that it
is justified. Similarly, if production and distribution costs can
be contained, a penetration price strategy would be effective.
In addition, managers must take cost-volume-profit
considerations into account when making the skim vs
penetration price decision (for a thorough discussion of all
these issues, see Kotler (2003, pp. 473-7); see also Guiltinan
(1999)). Skimming or penetration pricing will not necessarily
lead to good performance; proper execution of the price
strategy, made in coordination with the rest of the marketing
mix, is essential.
Some academic research has recently focused on the
interactions among the various activities conducted at the
time of the launch stage (Guiltinan, 1999; Ottum, 1996;
Hultink, Griffin, Hart and Robben, 1997; Hultink and
Robben, 1999). In this study, we examine the interactions
between pricing and other marketing-mix elements, and also
study the roles of launch timing, logistics, and the
coordination with support organizations throughout the
distribution channel (Calantone and Montoya-Weiss, 1994;
Ottum, 1996) as well as the effect of industry structure and
environment. Despite the evidence of the need to coordinate
price with other marketing mix elements, managers still will
make faulty pricing decisions, focusing only on the revenues
generated by high prices (Calantone and Montoya-Weiss,
1994; Stryker, 1996). The effects of other variables included
in this study, such as launch timing, logistics decisions, and
distribution channel decisions, have received relatively less
research and are relatively less understood.
In this study, we explore the combined effects of pricing
and non-pricing strategic and tactical decisions made by firms
at the time of launch. We review the literature on product
launch to identify strategic and tactical variables thought to
affect launch success. We collect data from 215 recent new
B2B and consumer product launches. Respondents provided
information on price decisions made at the time of launch,
and we empirically identify three clusters of pricing strategies.
We also gather information on how well the strategic and
tactical variables related to launch were carried out, as well as
on industry structure, environment, and overall profitability
and competitive performance of the new product. From this
analysis we identify constellations of new product launches in
terms of pricing and related launch strategies, and discuss the

success outcomes of each. These constellations can be related


to pure skimming and penetration strategies, but with
shades of difference in terms of the corresponding strategic
and tactical variables that suggest reasons for better or poorer
performance. We conclude by deriving and discussing
managerial recommendations, and outlining future research
directions.

Overview of variables affecting launch


Pricing and marketing mix strategy
The skim versus penetration price decision is closely linked
with the new products marketing mix strategy. A
differentiated product with a perceived relative advantage
over competitors can be supported with an extensive
promotional program, selection of exclusive distribution
channels, and a skimming pricing strategy (Kotler, 2003,
pp. 473-5). A skimming strategy is most effective where the
product is perceived to have a relative competitive advantage,
and is highly compatible with the buyers experiences and
values (Guiltinan, 1999). Penetration pricing may be
appropriate in situations where the manufacturer can reduce
production and distribution costs sufficiently and capture a
price leadership position, or if low price is needed to
overcome adoption barriers and speed diffusion (Guiltinan,
1999; Kotler, 2003, p. 473). Skimming and penetration
pricing are both sound strategies, the choice between them
being a managerial decision made in consideration with
marketing mix strategy.
Price is an important factor at the time of launch as barriers
to adoption may exist: the new product is incompatible with
the buyers experiences or values, is perceived to be overly
complex or offers no relative advantage (Rogers, 1995,
pp. 212-44). A price discount rewards the buyer for bearing
the risk of trial (Crawford and Di Benedetto, 2003, p. 424).
Furthermore, the pricing decision is not restricted to the skim
versus penetration decision. The firm must also consider
demand sensitivity to price, and existing cost-volume-profit
relationships, to determine the net profit impact of reducing
price and stimulating demand.
Firm resources, skills, and NPD activities
Many empirical studies (Cooper, 1979; Cooper and
Kleinschmidt, 1987, 1990, 1993; Calantone and Di
Benedetto, 1988; Song and Parry, 1997a) demonstrated
that, for new B2B products, adequate marketing and
technical resources and skills are precursors of new product
success. Cooper (1979) found that two critical factors leading
to new product success were marketing and technical
synergies and proficiencies. This research stream also
investigated the effects of carrying out specific activities
related to the marketing and launch of new B2B products,
including customer selection, in-use testing with customers,
test marketing, finalizing marketing and manufacturing plans,
sales force training, and executing advertising and distribution
strategy. A firm possessing key marketing skills is more
capable of conducting the specific marketing and launch
activities for NPD projects, and that better performance of
marketing and launch activities were tied to ultimate success
(Calantone and Di Benedetto, 1988; Song and Parry, 1997a).
6

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Work group structure


Cross-functional team activity is important throughout the
new product development process; firms that actively
incorporate mechanisms for stimulating interfunctional
coordination should perform better at launch (Gupta et al.,
1986; Ruekert and Walker, 1987; Gupta et al., 1988; Griffin,
1992; Griffin and Hauser, 1992, 1993; Towner, 1994; Song
and Dyer, 1995; Song and Parry, 1997a). If cross-functional
teams have significant input in manufacturing, distribution,
logistics, or marketing and sales strategy, the ultimate success
of the launch should be positively influenced, in terms of both
higher quality products and speedier development (Millson
et al., 1992; Moenaert and Souder, 1996; Nijssen et al., 1995;
Sherman et al., 2000). Manufacturing-marketing integration
is especially critical to success at the time of launch (Song
et al., 1998). Interdepartmental committees, task forces and
other temporary groups, and liaison personnel specifically
assigned to interdepartmental coordination are all
mechanisms that have been successfully employed in
increasing cross-functionality (Bingham, 2003).

Industry structure and environment


Managers must consider industry structure and environment
when planning a product launch strategy. The intensity of the
competition, bargaining power of suppliers and customers,
threat of product substitution, and entry/exit barriers, all
affect firm performance (Porter, 1980, 1985; Chakravarthy,
1997). Uncertainties in the market environment can arise
from several sources. Technology, market demands, and
competitive strategies and actions can all be relatively
unpredictable, leading to high uncertainty (Khandawalla,
1977; Covin and Slevin, 1989; Rosenberg, 1994). These
sources of uncertainty must be taken into account when
developing launch strategies, including marketing mix
decisions (Dess and Beard, 1984; Bourgeois and Eisenhardt,
1988).

Method
Data collection
We used a retrospective methodology in this study, in which
managers were asked to give their perceptions regarding
launch decisions and product performance. While there are
some limitations inherent in this methodology (MontoyaWeiss and Calantone, 1994; Brown and Eisenhardt, 1995)
that will be discussed later, it is relatively common in NPD
research (e.g. Cooper and Kleinschmidt, 1987, 1993). A mail
survey was developed for data collection (details on scales
included appear below).
Respondents were requested to provide detailed
information on one of their companys most recent new
product launches. They chose a single product launched no
more than five years ago, that could be considered to be
characteristic of their firm at the time of launch. A
characteristic new product was defined for the respondents
as one that is typical in that it required no unusual or new-tothe-firm skills or resources.
The survey was mailed to all practitioner members of the
PDMA. PDMA practitioner members were chosen as the
sampling frame, since they are representative of the most
knowledgeable managers active in new product development
and management. A follow-up telephone call and second
mailing were used to increase response rates. A key informant
method was used for data collection; this procedure is
frequently used in NPD research (e.g. Cooper, 1979; Cooper
and Kleinschmidt, 1987). Respondents were experienced
practicing managers in the area of product development, and
were the most knowledgeable sources of information on the
NPD project and on its launch (Phillips, 1981). Consumer as
well as B2B products (goods and services) were included
among the respondents. A total of 215 usable questionnaires
were returned, which represented a response rate of 13.4
percent. Demographics (functional area and job title/level) of
the sample were compared to the demographics of the PDMA
membership and the sample was very representative of the
sampling frame (details available from the authors on
request).
Split-half reliability was assessed by splitting the sample into
early versus late respondents, and the means of all variables
were calculated for each half. The two halves were found not
to be significantly different from one another.

Logistics and inventory strategy


In cases where there are uncertainties in new product
demand, the firm must be prepared to make quick
adjustments whenever necessary. This requires excellent
integration of the logistics function with marketing,
manufacturing, and operations (Petersen et al., 2003). The
likelihood of successful product launch should increase if the
logistics strategy seeks to become more efficient in terms of
logistics facilities, number of suppliers, and number of
products and stockkeeping units, and if lean launch, quickresponse programs, and flexible manufacturing techniques are
used (Stryker, 1996; Bowersox et al., 1999).
Market orientation
The firms market orientation should also have an impact on
its execution of launch tactics and on ultimate performance
(Kahn, 2001). Market orientation has been defined as
organization-wide generation and dissemination of market
information on customer needs and wants, and organizational
response to this information (Jaworski and Kohli, 1993). A
market orientation will be manifested in several ways with
respect to product development and launch activities: the firm
will conduct more frequent meetings with customers, hold
more interdepartmental meetings to discuss market trends,
periodically check new product development against changing
customer needs, take quicker corrective action to satisfy
customers, and so on (Di Benedetto, 1999).
Launch timing
The timing of the launch also critically affects new product
success. Earlier launch helps a new product build a
reputation, especially if it has a substantial relative
advantage and there are switchout costs due to learning of
new systems or technology on the part of buyers (Guiltinan,
1999). Empirical research suggests a close relationship
between product performance, delivered customer value,
launch timing, and success rate (Cooper and Kleinschmidt,
1990; Zirger and Maidique, 1990; Lilien and Yoon, 1990).
The appropriateness of launch timing can be assessed on
several dimensions: relative to firm goals, competitors,
customers, channel promotions, and so on.
7

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Scales
Except where noted, all scale items are measured on 0-10
Likert-type scales. The full set of all scale items contained in
each scale is provided in the Appendix.

market orientation, and further validated in studies by Song


and Parry (Song and Parry, 1992, 1994, 1996, 1997a, b;
Parry and Song, 1994). Respondents were asked several
questions about the extent of interaction with customers and
with other departments and functional areas when developing
the new product. The speed with which the firm was prepared
to respond to competitive changes or to satisfy unhappy
customers was also assessed.

Pricing strategy
Based on the pricing-related literature cited above, a five-item
scale of Likert-type questions was developed to measure
pricing strategy and pretested (see pretesting procedure
below). This scale required respondents to state level of
agreement with statements regarding penetration pricing,
skimming pricing, pricing to encourage early adoption,
pricing to encourage channel acceptance, and alignment of
price with a differentiation strategy.

Launch timing
Based on the literature review, a fourteen-item scale of launch
timing was developed and pretested. Again using 0-to-10
Likert-type scales, respondents were asked to state the extent
to which they believed the timing was on target with respect to
business-unit goals, the competition, customers, top
management objectives, the distribution channels
requirements, channel coordination considerations, service
policies and training, and so on.

Marketing mix strategy


A set of seven scale items relating to marketing mix strategy at
the time of launch, originally validated and used in the Project
Newprod studies (Cooper and Kleinschmidt, 1987, 1993),
was used in this study. This scale asked respondents to rate
the quality of several elements of marketing mix strategy at the
time of launch: selling effort, advertising, promotion, service
and technical support, product availability, product
distribution, and price levels.

Industry structure
A 24-item scale of industry structure previously used in
studies of NPD by Song and Parry (Song and Parry, 1992,
1994, 1996, 1997a, b; Parry and Song, 1994) was used.
Respondents were asked several questions about the
bargaining power of suppliers and customers, the extent of
entry and exit barriers, the hostility of industry competition,
the sophistication of customers, the predictability of
technological, market, and competitive strategy changes,
and several other descriptors of industry structure and
environment.

Firm resources and skills


Seven scale items on firm resources and skills pertaining to
product launch, used in the Project Newprod studies, was
used in this study. Respondents were asked whether the
following resources and skills were more than adequate for the
selected product launch: marketing research, sales force,
distribution, advertising and promotion, R&D, engineering,
and manufacturing.

Performance
A seven-item scale of performance was adapted from the
Project Newprod studies of Cooper and Kleinschmidt (1987,
1993). While overall profitability is an extremely important
measure of new product performance, a single-item scale of
performance is probably an oversimplification for most firms
(Cooper and Kleinschmidt, 1987, 1990; Griffin and Page,
1993; Hultink and Robben, 1995). A firm may consider a
new product a success if it, say, captures significant market
share even if it is not highly profitable. Therefore, seven items
capturing several dimensions of success (in terms of profit,
sales and market share) relative to the business units
objectives and other new product launches were developed.
These were measured on Likert-type scales ranging from 2 5
(far below objective) to 5 (far exceeded objective).

Work group structure


A six-item scale was developed from the literature and
pretested. This scale required respondents to state the extent
to which cross-functional teams made decisions concerning
manufacturing, logistics, and marketing strategies, and the
extent to which mechanisms were set in place to encourage
cross-functional integration.
Logistics and inventory strategy
A new scale was developed and pretested based on the
relevant literature. It contained 16 scale items. Some of these
required respondents to assess the extent to which logistics
strategy focused on reducing the number of facilities,
suppliers, products, stockkeeping units, and so on, with the
objective of increasing efficiency. Other questions probed the
use of sales forecasting, lean launch or low inventory
launch techniques, quick-response or efficient customer
response programs, flexible manufacturing, and integration of
logistics with other functional areas.

Pretesting
The questionnaire was pretested by practicing managers
participating in a university executive training program, and
by classes of evening MBA students. The pretest ensured that
all questions were clear and that the scale items adequately
represented the desired constructs. Only minor corrections
were made to the questionnaire based on the debriefing done
after the pretests.

Market research, testing, and planning


This 15-item scale was taken from the Project Newprod
studies and assesses how well several market-related activities
were undertaken. These included: customer selection, in-use
testing with customers, test marketing, finalizing marketing
and manufacturing plans, delegating research work to outside
contractors, studying customer feedback, sales force training,
planning and testing advertising, executing advertising
strategy, and managing distribution channel activities.

Results
Identification of price strategy clusters
The SPSS based K-means clustering procedure was used to
group the new product launches into clusters, according to
their responses to the five scale items on strategic pricing,
which are:
1 Our firm launched the new product with a low
introductory (penetration) price.

Market orientation
A 14-item scale of market orientation was adapted from the
scales used by Narver and Slater (1990) in their research into
8

2
3
4
5

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

moderately-high-price launches which account for likely


channel acceptance. Since, for Cluster 2, neither channel
acceptance nor differentiation are strong motivators in setting
the high price, possibly Cluster 2 firms are seeking to recoup large
expenses quickly through a high price without consideration of
the effects on demand or through the channel. For a fuller
understanding of the firms launch strategies, the clusters were
then compared on all other scale items.

We priced the product, at launch, to encourage early


adoption.
We priced the new product with great attention to channel
acceptance.
Differentiation strategy was a prime motivator in setting
price.
We charged a premium price for our new product.

As shown in Table II, three distinct clusters emerged, which


are briefly described below. The three clusters contained 70,
49, and 96 cases respectively: all 215 usable cases were
classified into one of the three clusters.
The three clusters are then compared to determine if there
are significant differences on any of the other scale items
(related to performance, marketing mix, resources and skills,
etc.). Analysis of variance was used on the cluster means,
followed by post hoc multiple range tests. Table II presents all
test results. The last column in Table II shows all cases in
which multiple range tests indicated significant differences
between clusters.

Inter-cluster differences
Cluster means were found for each of the individual scale
items included in the questionnaire (see the Appendix), and
analysis of variance and multiple range tests were used to find
significant differences among them. Table II shows the results
only for cases where significant differences (at the 0.05 level
except where indicated) across the cluster means were found.
Performance differences
Some significant performance differences between the three
clusters were found. In particular, Cluster 3 (good research/
good timing) rated its new product launch significantly more
successful than that of Cluster 2 in terms of market share
relative to objective (Cluster 3 and 2 means 1:439 and
0.356 respectively, significant at 0.05 level). Cluster 3
launches were also rated higher than those of Cluster 2 in
terms of sales relative to other new product launches
(means 1:899 and 0.978 respectively, significant at 0.10
level). No other significant differences in performance were
found. The results suggest the importance of considering
channel acceptance when setting a premium launch price: the
cluster that sets the highest price (Cluster 2) is significantly
less likely to consider channel acceptance when doing so, and
its launches are rated significantly lower in performance.
The inadequacy of launch strategies for the Cluster 2
(high price/poor support) launches is further confirmed by
consideration of the other variables in the analysis. In fact, the
most obvious result in Table II is that Cluster 2 is repeatedly
outperformed by Clusters 1 and 3 (low price/poor timing
and good research/good timing) in almost every case where
there are significant differences in means. These differences
are briefly summarized below.

Cluster 1 (the low price/poor timing cluster)


These products were launched at low introductory
(penetration) prices, with the objective of encouraging early
adoption. The low-price strategy was selected with great
attention to channel acceptance. (Cluster 1 means are
significantly higher than those of the other two clusters on
the first three scale items, and its mean on the fifth scale item
is the lowest of all three clusters.) Cluster 1 is conscientious
about market research, testing, and planning activities (it and
Cluster 3 are consistently better at these activities than
Cluster 2), and could have been called good research/low
price/poor timing (but we chose short, concise, descriptive
cluster names). However, it is outperformed in terms of
several timing variables by Cluster 1.
Cluster 2 (the high price/poor support cluster)
These products were launched with premium prices
(skimming strategy). Little consideration was placed,
however, on the likely acceptance of the new product by the
channel, or on encouragement of early adoption. (Cluster 2
means are significantly lower than those of the other two
clusters on the first three scale items, and its mean on the fifth
scale item is the highest of all three clusters.) Note that there
were no significant differences among the clusters in terms of
differentiation strategy (the fourth scale item): one might have
expected Cluster 2 to be more likely to set premium prices in
order to pursue a differentiation strategy.

Marketing mix strategy differences


Cluster 3 (the best performing cluster) outperformed Cluster
2 in terms of advertising appropriateness, while Cluster 1
outperformed Cluster 2 in terms of product availability
(differences significant at 0.05 level). For example, in the case
of advertising appropriateness, the Cluster 3 mean was 5.620,
significantly higher than Cluster 2 (4.681) at the 0.05 level.
Cluster 2 (6.213) was also outperformed by both Clusters 1
and 3 on appropriateness of pricing level (7.892 and 7.676
respectively).

Cluster 3 (the good research/good timing cluster)


This cluster uses a pricing strategy intermediate to that of
Clusters 1 and 2. It is less likely than Cluster 1 to set a
penetration price to encourage early adoption, however it is
less likely than Cluster 2 to set a premium price. Interestingly,
though, Cluster 3 sets price with attention to channel
acceptance: the difference between Clusters 1 and 3 on this
scale item is only significant at the 0.10 level. Cluster 1 is very
similar to Cluster 3 in performing market research, testing,
and planning activities, but outperforms Cluster 3 on several
timing variables.
A preliminary interpretation of the three clusters
suggests that Cluster 1 comprises low-introductory-price
launches, Cluster 2 comprises launches where premium,
skimming prices are used but with little concern for early
adoption or channel acceptance, and Cluster 3 comprises

Work group structure


Cluster 1 outperformed Cluster 2 on three scale items related
to work group structure: interdepartmental committees
facilitate joint decision-making (Cluster 1 and 2 means
6:839 and 5.804 respectively, significant at 0.10 level), liaison
personnel exist who coordinate the efforts of several
departments for purposes of a project (Cluster 1 and 2
means 6:712 and 5.478, significant at 0.05 level), and
cross-functional teams made decisions on distribution or
logistics strategy (Cluster 1 and 2 means 5:803 and 4.385,
significant at 0.05 level). On the last of these scale items,
Cluster 3 also outperformed Cluster 2.
9

Strategic pricing facet


Our firm launched the new product with a low introductory (penetration) price
We priced the product, at launch, to encourage early adoption
We priced the new product with great attention to channel acceptance
Differentiation strategy was a prime motivator in setting price
We charged a premium price for our new product
Performance
Relative to your business units other new product launches, how successful was this market entry in
terms of sales?
Relative to your business units objectives for this product launch, how successful was this market
entry in terms of market share?
Marketing mix support
Advertising
Product availability: sufficient inventory available
Pricing: appropriateness of pricing level(s)
Resources and skills
Our engineering skills and resources were more than adequate
Work group structure
Interdepartmental committees are set up to allow departments to engage in joint decision making
Liaison personnel exist whose specific job it is to coordinate the efforts of several departments for
purposes of a project
Cross-functional teams make decisions concerning distribution or logistics strategy
Logistics and inventory strategy
Our sales forecasts helped keep manpower and training costs reasonable (no excess in hiring, training,
plant switchovers of labor, etc.)
Quick response (QR) or efficient customer response (ECR) programs were in force.
Updates to product design were needed after the first several manufacturing runs were accomplished.
When we went to national launch with this product/service, logistics personnel were involved in
planning marketing programs
When we went to national launch with this product/service, logistics personnel were involved in
formulating our distribution strategies
When we went to national launch with this product/service, logistics personnel were involved in
coordinating with sales management
When we went to national launch with this product/service, logistics personnel were involved in lean
inventory strategies
When we went to national launch with this product/service, logistics personnel were involved in
service planning (after sale)
Market research, testing, and planning

Table II Clustering and multiple range test results

0.766
1.213
1.652
5.596
8.404

0.978
0.356
4.681
7.044
6.213
7.043
5.804
5.478
4.386

4.476
3.857
5.978
3.727
4.409
4.795
4.326
3.791

1.266
0.688
4.871
7.937
7.892
6.578
6.839
6.712
5.803

5.969
4.603
7.000
4.951
5.934
6.049
6.017
5.475

Cluster 2
High price/
poor support
n 5 49

7.000
7.281
6.859
5.615
3.431

Cluster 1
Low price/
poor timing
n 5 70

10

(continued)

Volume 22 Number 1 2007 4 19

1 . 2, 1 . 3 * *

1 . 2, 3 . 2 * *

1.2

1.2

1 . 2, 1 . 3

1 . 2, 1 . 3
3 . 2**
1.3

1.2
1 . 2, 3 . 2

1 . 2*

3.1

3 . 2, 3 . 1 * *
1 . 2, 1 . 3 * *
1 . 2, 3 . 2

3.2

3 . 2**

2 . 3, 3 . 1, 2 . 1

1 . 3, 3 . 2, 1 . 2
1 . 3, 3 . 2, 1 . 2
1 . 3 *, 3 . 2, 1 . 2

Significant differences *

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

4.613

5.355

5.578

5.312

3.641

4.921
4.891
5.688

5.943
6.366

6.638

7.257

5.620
7.171
7.676

1.439

1.899

2.254
4.299
6.250
6.383
7.103

Cluster 3
Good research/
good timing
n 5 96

Clustering product launches by price and launch strategy

11

Note: * Sig. at 0.05 level except those marked; * * are sig. at 0.10 level

Delegating or contracting specialized research work to outside contractors


Studying feedback from customers regarding this product during launch
Studying feedback from customers regarding this product after launch
Planning and testing the advertising for this product
Executing the advertising strategy for this product (e.g. good copy placement, adequate number of
insertions)
Managing distribution channel activities for this product.
Market orientation
Several of our departments generated competitive intelligence independently
We periodically reviewed the likely effect of changes in our business environment (e.g. regulation) on
customers
We had frequent interdepartmental meetings to discuss market trends and developments.
We periodically reviewed our product development efforts to ensure that they were in line with what
customers want
If a major competitor had launched an intensive campaign targeted at our customers, we would have
implemented a response immediately
We were quick to respond to significant changes in our competitors pricing structures
Timing of launch
From the point of view of our major customers, the timing or our launch was excellent
The timing of our launch helped us achieve a competitive advantage
Top management believed the timing of our market entry was excellent
Channel cooperation was well developed ahead of time
Channel coordination was accomplished as planned
We achieved rapid deployment of our product into the distribution channel
Channel/trade promotion was executed on time
Industry structure and environment
Competition in our markets is generally very intensive and hostile
The entry barriers to the industry are very high
The exit barriers are very high
Customers in these markets are technologically sophisticated
Our competitors product design changes are highly predictable
Access to distribution channels blocks new entrants

Table II

8.617
6.681
4.277
5.872
6.000
5.630

7.312
5.938
5.138
6.292
5.800
4.576

5.848

6.523

5.894
5.702
6.106
5.304
5.457
5.511
5.822

4.391
4.311

5.818
5.212

5.621
5.682
5.242
5.477
5.754
6.231
6.323

3.644

4.712

4.848
4.422

4.087
5.696

5.444
5.554

6.061
6.015

3.689
5.617
5.717
3.543

Cluster 2
High price/
poor support
n 5 49

5.557
6.769
6.742
5.016

Cluster 1
Low price/
poor timing
n 5 70

6.725
6.913
5.671
5.565
5.246
5.134

6.478
6.754
6.116
6.561
6.552
6.657
7.015

5.812
5.791

6.739

5.814
4.871

4.967

5.565
6.757

4.969
6.571
6.657
4.926

Cluster 3
Good research/
good timing
n 5 96

2 . 3**
3.1
3.2
1 . 3**
2 . 3**
2.1

3.1
3 . 1, 3 . 2
3 . 1**
3 . 1, 3 . 2
3 . 2, 3 . 1 * *
3.2
3 . 2, 3 . 1 * *

1 . 2, 3 . 2 * *
1 . 2, 3 . 2

3 . 2**

3 . 2, 1 . 2
1 . 2**

3 . 2, 1 . 2 * *

1 . 2, 3 . 2
3 . 1, 3 . 2

1 . 2, 3 . 2
1 . 2, 3 . 2
1 . 2, 3 . 2
1 . 2, 3 . 2

Significant differences *

Clustering product launches by price and launch strategy


Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto


Volume 22 Number 1 2007 4 19

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Logistics and inventory strategy


Cluster 1 outperformed Cluster 2 on six scale items related to
logistics and inventory strategy: sales forecasts helped keep
manpower and training costs reasonable, and logistics
personnel were involved in planning marketing programs,
formulating distribution strategies, coordinating with sales
management, planning lean inventory strategies, and planning
after-sale service. Cluster 1 also outperformed Cluster 3 on
three scale items: sales forecasts helped to keep manpower
and training costs reasonable, updates to product design were
needed after initial manufacturing runs, and logistics
personnel were involved in planning marketing programs.
For example, regarding forecasts for manpower and training
costs, the means for Clusters 1, 3, and 2 were 5.969, 4.921,
and 4.476 (Cluster 1 mean significantly higher than each of
the other two means at the 0.05 level). As shown in Table II, a
few additional differences were significant only at the 0.10
level.

industry as having lower entry barriers, as new entrants were


not blocked by lack of access to distribution channels. Cluster
2 respondents characterized their industries as having
intensive, hostile competition, yet competitors product
design changes were judged to be relatively predictable.
Cluster 3 respondents noted the high entry and exit barriers
in their industries, but also felt that their customers were
rather less technologically sophisticated than those of
Cluster 1.
With the additional information obtained from these scales,
we now have a more complete picture of each of the three
clusters.
Cluster 1 (low price/poor timing) launches are relatively
successful low-introductory-price launches, supported by
careful selection of inventory and pricing levels, and
attention to cross-functional teaming and work group
structure. Sales forecasts are useful in logistics applications,
and the logistics personnel are involved in most facets of
strategic planning. Importantly, most of the market research
and testing activities are carried out well, and market
orientation is comparatively high. Nevertheless, this cluster
is outperformed on most measures of launch timing.
Cluster 2 (high price/poor support) launches are lesssuccessful high-introductory-price launches. Firms in this
cluster tend to be significantly less market oriented than the
other firms, and in general, the marketing research and testing
activities are not well done. There is less cross-functional
teaming, and less involvement of logistics personnel in
inventory strategy development. Cluster 2 launches are not as
well timed as are those in other clusters. Cluster 2s difficulty
in timing launches, and their lower performance levels, might
be to some extent explained by an intensive, hostile
competitive environment marked by unpredictable product
design changes.
Cluster 3 (good research/good timing) launches are the
most successful in terms of sales relative to other businessunit launches, and market share relative to objective. These
are relatively high-introductory-price launches, supported by
a high degree of marketing orientation and solid market
research and testing. The firm supports the launch with
careful selection of advertising and pricing levels, and crossfunctional involvement in distribution strategy. Sales forecasts
are useful in logistics applications. Cluster 3 excelled on all
dimensions of launch timing. In contrast to Cluster 2, Cluster
3 faces a less hostile competitive environment and more
predictable product design changes, and also a more stable
competitive environment in that entry and exit barriers are
high.

Market research, testing, and planning


Cluster 2 was significantly outperformed by both Clusters 1
and 3 (at the 0.05 level) on five of the market research and
testing-related scale items, including: delegating specialized
research work to contractors, studying feedback from
customers during and after launch, training the sales force,
planning the advertising, and executing advertising strategy.
For example, regarding delegating specialized research work
to outside contractors, Cluster 1 and 3 means were 5.557 and
4.969 (not significantly different), while the Cluster 2 mean
was 3.689 (significantly different at 0.05 level). In addition,
Cluster 3 was significantly higher than both other clusters on
managing distribution channel activities for the product.
Market orientation
Clusters 1 and/or 3 significantly outperformed Cluster 2 in
terms of market orientation on several scale items, including:
multiple departments generating competitive intelligence
independently, conducting regular effects of business
environment on customers, having interdepartmental
meetings to discuss market trends, reviewing product
development efforts, implementing a competitive response
quickly, and responding quickly to competitors pricing
structures. Most of these differences were significant at the
0.05 level. For example, on periodic review of the effect of
business environment changes on customers, the Cluster 2
mean was 4.391, significantly lower than both Cluster 1
(5.818) and Cluster 3 (5.814) at the 0.05 level.
Launch timing
Cluster 3 scored significantly higher than Clusters 1 and/or 2
on seven launch-timing-related scale items: timing was
excellent from the viewpoint of major customers, timing of
launch helped achieve a competitive advantage, top
management believed that timing was excellent, and channel
cooperation was well developed ahead of time and
accomplished as planned, rapid deployment into the
distribution channel was achieved, and channel promotion
was executed on time. For example, on achievement of
competitive advantage, Cluster 3s mean (6.754) was
significantly higher than that of Cluster 1 (5.682) and
Cluster 2 (5.702) at the 0.05 level.

Discussion and managerial implications


Summary of findings
This study used a retrospective methodology to gather
information about 215 recent new B2B and consumer
product launches. We clustered the launches into three
groups according to the characteristics of the pricing
strategies selected at launch, and discovered patterns among
the pricing as well as non-pricing launch strategies and tactics.
The three clusters represent three approaches to pricing
strategy within a new product launch context.
There are some parallels between the familiar pure
skimming and penetration pricing strategies and the three
clusters we derived empirically: the first cluster comprises

Industry structure and environment


The industry structures characterizing the three clusters were
rather different. Cluster 1 respondents characterized their
12

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

mostly instances of penetration pricing, the second and third


mostly skimming pricing. Our results underline the
importance of proper execution of all aspects of the launch
strategy. For example, though both Clusters 2 and 3 include
instances of price skimming, Cluster 3 outperforms Cluster 2
there is good and bad skimming (to be summarized
below). Our findings support the notion of penetration versus
skimming pricing, and also suggest that neither skimming nor
penetration pricing necessarily leads to superior performance,
especially if the pricing decision is poorly coordinated with the
rest of the launch strategy.
The three clusters have very distinctive models of behavior.
Firms in the first cluster of pricing approaches employ a
penetration launch price. Generally, the cost and quick
market share gains theoretically predicted for this strategy
were obtained, and a position to defend the market gains
prevailed. The second cluster of pricing approaches can be
characterized as premium launch prices, but lacking in
support (i.e. bad skimming). The supplier believes that its
product should demand a premium price, but has not
invested in the requisite marketing research, testing, and
planning to correctly align the market entry with the value
proposition sought by the customer. There is also poor
integration of logistics personnel into strategic decisions, and
a low degree of market orientation. Because of this lack of
market orientation and the lack of sufficient investment in
research to calibrate product deliverables with customer
needs, the launch effort is less successful. The supplier is too
cheap with the market research investment, too cheap with
the time necessary for good customer calibration, or forced
into an originally unplanned high price by cost overruns
through mismanagement of the NPD process or wild
forecasting at the business case set at the start of the NPD
process.
Finally, in the third cluster, a relatively high price is sought,
but only after sufficient market research, testing, and planning
is invested to assure an excellent calibration between
customer needs and supplier deliverables, and also to assure
that the timing of the launch is correct from the viewpoint of
customers and channel members (good skimming). One
should expect that customers will demand extra well done
performance on a variety of product and service dimensions if
they will invest in a high priced substitute for the product that
currently meets their requirements. The risk to a potential
customer is multiplied if they must switch to a new product at
a high price; thus excellent customer calibration is the only
prudent path for the high priced market launch entry. Our
findings show that this third cluster significantly outperforms
the second cluster, which also uses a premium price strategy
but, as noted above, lacks the requisite support. Thus, our
findings suggest that all aspects of the launch strategy,
including timing and logistics, must be in place in order for
the skim price to be successful.

made in light of the products perceived advantages relative to


competition and its marketing mix strategy.
Timing, logistics, and channel issues are relatively lessstudied elements of the launch strategy, though our results
show that they can have a significant impact on whether a
price strategy succeeds or fails. These variables deserve
greater attention from both academics and practitioners, and
recent research has begun to address them (Bowersox et al.,
1999; Calantone et al., 2005). Furthermore, much previous
research has shown the importance of cross-functional teams
throughout the NPD process, up to and through the launch
phase. Management must consider all of these elements, and
the interactions among them, when planning the launch of its
new products (e.g. Nagle, 2005). As seen in Cluster 3, good
understanding of customer need and excellent market timing
are necessary to support a skimming price strategy. Poor
execution on these points is associated with lower
performance in Cluster 2 even though a skimming price is
used there as well. The reason for the difference, we infer, is
that Cluster 3 is better at executing other activities, that are
consistent with and support a skimming strategy, leading up
to launch. To summarize, management needs to think in
terms of constellations of marketing mix and launch timing
decisions that support, and are consistent with, one another.
Limitations and directions for future research
We note several limitations of the present study. The response
rate is relatively low. Comparison of the sample to the PDMA
practitioner sampling frame, however, suggests that the
sample is representative of the PDMA practitioner
membership. One may question whether the PDMA
membership is representative of product managers in
general. Companies that are PDMA members may include
a high proportion of firms that are actively involved in
improving their NPD processes, or may over-represent the
best new product firms. The sample may be more
representative of best practice in NPD than of NPD in
general, and these firms might, on average, be better at
making pricing and related decisions to support product
launch. A logical next step would be to determine launch
practices across a wide spectrum of firms, including PDMA
non-members as well as members. Also, the PDMA sample
contains several industries, potentially obscuring betweenindustry differences in launch strategy. Further research could
specifically examine a given industry (for example, chemical,
automotive, or software) to determine if there are industryspecific pricing and related launch strategies that tend to be
related to success.
Second and third limitations of the study are the use of the
retrospective methodology and the key informant method. As
noted earlier, these are methods commonly used in recent
NPD research studies. The retrospective methodology
requires respondents to provide their perceptions on each of
the scale items, including those on performance. Since the
data are collected retrospectively, some halo effect bias may
exist, since the true outcome of each NPD project (i.e. its
success or failure) was known prior to filling out the
questionnaire. Some respondents may have biased their
responses upward (for example, to make their product look
more successful than it really was), though in our pretests this
was generally not found to be a problem. The key informant
method has occasionally been criticized as information is
obtained from only a single individual, who might be

Managerial implications
Proper coordination of all elements of launch (strategies and
tactics) is required to mitigate the risks of NPD. Price level at
the time of launch is clearly important, but launch pricing
decisions are often made simplistically set a low penetration
price or a high skimming price to achieve goals such as quick
payback or market share increase. Our findings show that
launch pricing decisions cannot be made separately from
other strategic and tactical decisions. Rather, they need to be
13

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

insufficiently knowledgeable (Phillips, 1981). We believe we


have minimized the possible drawbacks of the key informant
method by carefully selecting respondents who were highly
involved in new product launch and therefore were very
knowledgeable sources of information on launch and all other
aspects of the NPD process. Furthermore, some recent
studies of senior managers have found that the key informant
method provides reliable and valid data on strategic decisions
and performance (Kumar et al., 1993; Zahra and Covin,
1993; Menon et al., 1996). The study is also limited by the
nature of the sample: non-US managers are not well
represented, nor are managers involved in consumer
product development. Future studies can seek to better
understand the complex set of decisions involved at the time
of product launch in these different launch settings.

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Appendix. The questionnaire

Pricing strategy
State your level of agreement with each of the following
(0 disagree strongly, 10 agree strongly):
Our firm launched the new product with a low
introductory (penetration) price.
We priced the product, at launch, to encourage early
adoption.
We priced the new product with great attention to channel
acceptance.
Differentiation strategy was a prime motivator in setting
price.
We charged a premium price for our new product.
Marketing mix support
Rate the quality of each of the following elements in the
launch of this product. (0 poor, 10 excellent):
Selling effort, e.g. the right people, properly trained, etc.
Advertising.
Promotion, e.g. discounts, trade shows, events.
Services and technical support for the customer, e.g. right
people, qualified, responsive.
Product availability: sufficient inventory available.
Product distribution: on-time delivery, quick response.
Pricing: appropriateness of pricing level(s).
Resources and skills
To what extent does each statement correctly describe this
selected product launch? (0 strongly disagree, 10
strongly agree).
For the selected product launch:
Our marketing research skills and resources were more
than adequate.
Our sales force skills and resources were more than
adequate.
Our distribution skills and resources were more than
adequate.
Our advertising and promotion skills and resources were
more than adequate.
Our R&D skills and resources were more than adequate.
Our engineering skills and resources were more than
adequate.
Our manufacturing skills and resources were more than
adequate.
Work group structure
Please indicate the extent to which the following are used.
(0 strongly disagree, 10 strongly agree).
For the selected product launch;
Interdepartmental committees are set up to allow
departments to engage in joint decision-making.
Task forces or temporary groups are set up to facilitate
interdepartmental collaboration on a specific project.
Liaison personnel exist whose specific job it is to
coordinate the efforts of several departments for
purposes of a project.

Further reading
Gupta, A.K. and Wilemon, D.L. (1986), The credibilitycooperation connection at the R&D-marketing interface,
Journal of Product Innovation Management, Vol. 5 No. 1,
pp. 20-31.
16

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Training the sales force.


Planning and testing the advertising for this product.
Executing the advertising strategy for this product (e.g.
good copy placement, adequate number of insertions).
Managing distribution channel activities for this product.

Cross-functional teams make decisions concerning


manufacturing strategy.
Cross-functional teams make decisions concerning
distribution or logistics strategy.
Cross-functional teams make decisions concerning
marketing or sales strategy.

Performance
Please indicate how successful this market entry was or has
been. (25 far less than the objectives, 5 far exceeded
the objectives):
How successful was this market entry from an overall
profitability standpoint?
Relative to your business units other new product
launches, how successful was this market entry in terms
of profit?
Relative to your business units other new product
launches, how successful was this market entry in terms
of sales?
Relative to your business units other new product
launches, how successful was this market entry in terms
of market share?
Relative to your business units objectives for this product
launch, how successful was this market entry in terms of
profit?
Relative to your business units objectives for this product
launch, how successful was this market entry in terms of
sales?
Relative to your business units objectives for this product
launch, how successful was this market entry in terms of
market share?

Logistics and inventory strategy


All items are scaled: 0 stronglydisagree, 10 strongly
agree.
Logistics strategy includes a priority to reduce:
The number of logistics facilities.
The number of product/material suppliers.
The number of logistics service providers.
The number of marginal customers.
The number of products or UPCs.
The number of stockkeeping units (SKUs).
Our logistics operations, from the manufacturing facility
to the customer, are highly integrated with marketing.
Our logistics operations, from the manufacturing facility
to the customer, are highly integrated with manufacturing
and production operations.
This product launch was considered a lean or low
inventory launch.
Our sales forecasts were really helpful in calibrating plant
size.
Our sales forecasts helped keep manpower and training
costs reasonable (no excess in hiring, training, plant
switchovers of labor, etc.).
Work-in-process inventories were well controlled.
QR (Quick Response) or ECR (Efficient Customer
Response) programs were in force.
Channel inventories were kept to a minimum.
Flexible manufacturing techniques were used on this
project.
Updates to product design were needed after the first
several manufacturing runs were accomplished.
When we went to national launch with this product/
service, logistics personnel were involved in:
Planning marketing programs.
Formulating our distribution strategies.
Coordinating with sales management.
Lean inventory strategies.
Service planning (after sale).
Setting return or replacement policies.

Market orientation
All items are scaled: 0 stronglydisagree, 10 strongly
agree.
When developing this new product:
Our marketing people met with customers frequently to
find out what products or services they needed.
Individuals from our manufacturing department
interacted directly with customers to learn how to serve
them better.
Several of our departments generated competitive
intelligence independently.
We periodically reviewed the likely effect of changes in our
business environment (e.g. regulation) on customers.
A lot of informal hall talk in our business unit
concerned out competitors tactics or strategies.
We had frequent interdepartmental meetings to discuss
market trends and developments.
Marketing personnel in our business unit spent time
discussing customers future needs with other functional
departments.
Data on customer satisfaction were disseminated at all
levels in this business unit frequently.
We tended to ignore changes in our customers product or
service needs for one reason or another.
We periodically reviewed our product development efforts
to ensure that they were in line with what customers want.
If a major competitor had launched an intensive campaign
targeted at our customers, we would have implemented a
response immediately.
We were quick to respond to significant changes in our
competitors pricing structures.

Market research, testing, and planning


Please indicate how well your business unit undertook each of
these activities (0 poorly, 10 excellently):
Selecting customers for testing market acceptance.
Submitting products to customers for in-use testing.
Executing test marketing programs.
Interpreting the findings of the market testing.
Finalizing plans for manufacturing.
Finalizing plans for marketing.
Establishing overall direction of this product launch.
Delegating or contracting specialized research work to
outside contractors.
Launching this product into the marketplace.
Studying feedback from customers regarding this product
during launch.
Studying feedback from customers regarding this product
after launch.
17

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

Our competitors product design changes are highly


predictable.
Our competitors timing of the new product introductions
are highly predictable.
Cost advantages of incumbents block new competitors.
Product differentiation of incumbents deters the entry of
new competitors.
Capital requirements prevent new competition.
High customer switching costs discourage new
competitive entry.
Access to distribution channels blocks new entrants.
Technology of distribution channel (i.e. electronic data
integration) blocks new entrants.

If we found that customers were unhappy with the quality


of our service, we would have taken corrective action
immediately.
If we found that customers would like us to modify a
product or service, the departments involved would have
made concerted efforts to do so.
Timing of launch
All items are scaled: 0 strongly disagree, 10 strongly
agree:
Relative to our business units goals, the timing of our
launch was on target.
Relative to our direct competition, the timing or our
launch was perfect.
From the point of view of our major customers, the timing
or our launch was excellent.
The timing of our launch helped us achieve a competitive
advantage.
The product went from development to launch with no
delays.
The product was launched at the appropriate time.
Top management believed the timing of our market entry
was excellent.
From the distribution channels point of view, the product
was launched at the right time.
Channel cooperation was well developed ahead of time.
Channel coordination was accomplished as planned.
We achieved rapid deployment of our product into the
distribution channel.
Service policies were in place prior to launch.
Service training was timely with respect to launch.
Channel/trade promotion was executed on time.

About the authors


Roger J. Calantone is Eli Broad Professor of Business
Administration at Michigan State University. His research
interests include the study of the new product development
process, the management of technology, and the
manufacturing and engineering interface. He has published
in several journals including the Journal of Marketing, the
Journal of Marketing Research, the Journal of Product Innovation
Management, Management Science, and Marketing Science.
C. Anthony Di Benedetto is Editor of the Journal of Product
Innovation Management, and Professor of Marketing, Fox
School of Business and Management, Temple University. He
earned a BSc. in Chemistry, an MBA, and a PhD in
Marketing and Management Science from McGill University.
His research interests include new product launch, and
international marketing strategy. He previously served as Vice
President of Publications for PDMA, Editor of the PDMA
newsletter Visions, and as Abstracts Editor for the Journal of
Product Innovation Management. C. Anthony Di Benedetto is
the corresponding author and can be contacted at:
anthony.dibenedetto@temple.edu

Industry structure and environment


All items are scaled: 0 strongly disagree, 10 strongly
agree.
In general, how much do you agree with each of the
following statements characterizing the business environment
in the primary markets your business unit currently serves?
Competition in our markets is generally very intensive and
hostile.
Our major suppliers have substantial bargaining power.
Our major customers have substantial bargaining power.
The threat of product substitution is very high.
The entry barriers to the industry are very high.
The exit barriers are very high.
New market entrants can expect a high level of retaliation
from existing firms.
The markets are very homogeneous (undifferentiated
markets and very similar customers).
Customers in these markets are technologically
sophisticated.
Our business unit can strongly affect competitive
situations.
We are very familiar with the market.
Customers needs can be easily translated into product
specifications.
Joint R&D/research efforts among firms in our industry
are frequent.
Technological changes are highly predictable.
Market demands are highly predictable.
Our competitors marketing changes are highly
predictable.

Executive summary and implications for


managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of this article. Those with a
particular interest in the topic covered may then read the article
in toto to take advantage of the more comprehensive description of
the research undertaken and its results to get the full benefit of the
material present.

Clustering product launches by price and launch


strategy
When Oscar Wilde spoke of people who know the price of
everything and the value of nothing, he was not talking about
marketers of new products but of cynics. Nevertheless, those
involved in putting new products or services on the market
who might think they know all there is to know about where
to pitch the price, need to be aware that pricing strategy is
only one aspect of a new product launch. Merely focusing on
price and neglecting other strategic and tactical launch
decisions can deny a company the profitability and
competitive performance it seeks.
In an exploration of the combined effects of pricing and
non-pricing strategic and tactical decisions made by firms at
the time of launch, Calantone and Di Benedetto recognize
18

Clustering product launches by price and launch strategy

Journal of Business & Industrial Marketing

Roger J. Calantone and C. Anthony Di Benedetto

Volume 22 Number 1 2007 4 19

that pricing decisions are always at the crux of the


management dilemma. Falling prices generally stimulate
demand and drive the volume cost decreases that most new
product programs depend on to realize and capitalize on the
advantages of early market entry.
Yet falling prices reduce revenues and margins for all
concerned in the new product commercial enterprise, unless
costs fall even faster. The payoff to better understanding of
past launch behaviors, the authors say, is to develop an
approach to shorten breakeven times and to better
understand and control launch programs.
However, despite the evidence of the need to coordinate
price with other marketing mix elements, some managers can
be tempted to turn a blind eye to anything other than the
revenues generated by the pricing decision. Furthermore,
launch management is often ignored in the handoff of
products between the team developing the commercial entity
and the consumer product brand managers or B2B product
sales managers. Effective managers should avoid these pitfalls
and consider the possible effects of variables other than price,
such as launch timing, logistics decisions and distribution
channel decisions.
In this study, which focuses on pricing and its relationship
to overall launch management, the authors considered 215
recent new business-to-business and consumer product
launches, grouping them in clusters representing three
approaches to pricing strategy, which highlighted:
1 low price/poor timing;
2 high price/poor support; and
3 good research/good timing.

were obtained, and a position to defend the market gains


prevailed. The second cluster of pricing approaches can be
characterized as premium launch prices, but lacking in
support (i.e. bad skimming). The supplier believes that its
product should demand a premium price but has not invested
in the requisite marketing research, testing and planning to
correctly align the market entry with the value proposition
sought by the customer.
There is also poor integration of logistics personnel into
strategic decisions and a low degree of market orientation.
Because of this lack of market orientation and the lack of
sufficient investment in research to calibrate product
deliverables with customer needs, the launch effort is less
successful. The supplier is too cheap with the market research
investment, too cheap with the time necessary for good
customer calibration, or forced into an originally unplanned
high price by cost overruns through mismanagement of the
new product development process, or wild forecasting at the
business case set at the start of the NPD process.
Finally, in the third cluster, a relatively high price is sought,
but only after sufficient market research, testing and planning
is invested to assure an excellent calibration between
customer needs and supplier deliverables, and also to assure
that the timing of the launch is correct from the viewpoint of
customers and channel members (good skimming).
The authors note: One should expect that customers will
demand extra well done performance on a variety of product
and service dimensions if they will invest in a high-priced
substitute for the product that currently meets their
requirements. The risk to a potential customer is multiplied
if they must switch to a new product at a high price; thus
excellent customer calibration is the only product path for the
high-priced market launch entry.
The conclusion is that all aspects of the launch strategy,
including timing and logistics, must be in place in order for a
skim price to be successful. Management needs to think in
terms of constellations of marketing mix and launch timing
decisions that support, and are consistent with, one another.

Their findings supported the notion of penetration pricing


(setting a relatively low initial price) versus skimming pricing
(setting a relatively high price which can allow costs to be
recouped before any competition sets in), but neither
skimming nor penetration pricing necessarily leading to
good performance. Proper execution of the price strategy,
made in coordination with the rest of the marketing mix, is
essential.
The three clusters had very distinctive models of behavior.
Firms in the first cluster of pricing approaches employed a
penetration launch price. Generally, the cost and quick
market share gains theoretically predicted for this strategy

(A precis of the article Clustering product launches by price and


launch strategy. Supplied by Marketing Consultants for
Emerald.)

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