New product Management: Increasing your odds of success

Bryan Cassady Guest Professor, Bryan@fast-bridge.com
KU Leuven Master Class
Building Ideas that stick
and people never forget…
New Product Marketing….
Increase your odds of Success
MEGA download
12 lectures
Over 1000 slides !

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About this course
It is a sad fact that most new businesses, products and service fail. Some
estimate the failure rate is as high as 90%. This course is about why products
fail and what you can do to increase your odds of success.
This lecture is a part of series of 12 lectures. In my classes I use a lot of
videos. If you’d like to see the presentations with videos, go to:
http://www.fast-bridge.net/resources/new-product-marketing/
I hope in the pages that follow you will find new ideas and inspiration… If
you’d like to download the whole class go to:
http://www.slideshare.net/bryancassady2/2009-course-new-product-
management-by-bryan-cassady
If you have ideas on ways to improve this course or would like help with your
new products, I’d love to here from you…
Bryan Cassady
bryan@fast-bridge.com
+32-475-860-757

Much of what I teach in my courses I cover in our new Scale up Weekend
Built on the success of the startup weekends. Scaleup weekends is new 54
hour event reserved for companies looking to scale their business.
In every event, participants will learn the fundamentals they need to scaleup.
This program is a fast, fun and efficient way to learn how to CREATE,
COMMUNICATE, & COMMERCIALIZE Meaningfully Unique Ideas.
www.scaleupweekend.com
If you are looking for ways to increase the speed and reduce the risk of your
next product launch, please feel free to contact me directly. In our network we
have over 200 consultants in 16 countries to help you accelerate your
business success.
Bryan Cassady
Bryan@fast-bridge.com
+32 475 860 757

KU Leuven Master Class: New Product Marketing
1/11 Course Introduction
Building Ideas that stick
and people never forget…

Dave’s story

Dave’s story… it is fun to read…

What do you remember from this ad ?
A car, waves…
But I’l bet not the brand or benefits

"A medium-sized 'butter' popcorn at a
typical neighborhood movie theater
contains more artery-clogging fat than a
bacon-and-eggs breakfast, a Big Mac
and fries for lunch, and a steak dinner
with all the trimmings — combined!"

Talk to someone tonight…
 The kidney heist
 The story
 The details (probably not
all)
 Movie popcorn
 A lot of fat
 The car
 The visuals
 The brand
 The benefit
 The non-profit
company
 ?

A lie can get halfway around the
world before the truth can even get
its boots on.
Mark Twain

To
develop
sticky
ideas,
make
your
message:
1
2
3
4
5
6

S imple
U nexpected
C oncrete
C redible
E motional
S tory Based

1
2
3
4
5
6

http://www.fast-bridge.net/resources/new-product-marketing/

http://www.fast-bridge.net/resources/new-product-marketing/http://www.fast-bridge.net/resources/new-product-marketing/

It is always easier to explain after the fact

16 reasons products fail (Nielsen) Lecture Number
1
A less-than-optimal "configuration" of product or service
attributes and benefits is selected.
1 What is a new product
2 Marketers fall in love with a product no one else loves
3 Marketers assess the marketing climate inadequately. 2 Market research
4
A failure to ask the right questions and a belief that everything is
a big idea
5 A questionable pricing strategy is implemented. 3 Pricing
6 Cannibalization underestimated 4 Forecasting and business planning
7
Over-optimism about the marketing plan leads to a forecast that
cannot be sustained in the real world.
8 Too focused on the internal game not enough on the market 5 What really happens at work/ Selling a business case
9 Too focused on being first 6 Timing: Is there a first mover advantage
10 The Lemming effect
11 Lack of a strong sustainable position in the market 7 The basics of market interaction
12
The marketing plan for the new product or service is not well
implemented in the real world.
8 Execution
13 The plan is too complicated
14 No Support to get things done 9 Selling your ideas
15 A weak positioning strategy is used.
16
The advertising campaign generates an insufficient level of new
product/new service awareness.
10 Popper : Asking the 1 big question

A group presentation 20-30 min
Lecture 80-90 min
Then a discussion 60 min

Date Lecture Who Assignment Student Presentation
Present
Group
Reading
11/02/2010 intro B Brand You None Summary: Made to Stick
18/02/2010 What is a new product B Concept proposals None
New product evaluation methods
Concept Training
25/02/2010 Market research B 3 big research Qs/ How to answer Concept proposals 1-Jan The wisdom of crowds
04/03/2010 Pricing for Value B Pricing Reco in 1 category
3 big research Qs/ How to
answer
2-Jan TBD
11/03/2010
Forecasting and business
planning
B A systems view of the business Pricing Reco in 1 category 3-Jan Chapter 5 Senge + Fifth discipline
18/03/2010 Building Buzz and interest B
A buzz activity: contest invite or link
request
A systems view of the
business
4-Jan The cluetrain manifesto
25/03/2010
What really happens at work/
Selling a business case
E Choosing the Best ad
A buzz activity: contest invite
or link request
5-Jan PG 99
01/04/2010
Timing: Is there a first mover
advantage
E First mover or fast second your reco Choosing the Best ad 6-Jan
Managing What consumers learn
through experience
the second mover advantage
08/04/2010 No Class(Spring Break) X no assignment X X
15/04/2010 No Class(Spring Break) X no assignment X X
22/04/2010
The basics of market
interaction (strategy)
E Choice of a value discipline
First mover or fast second
your reco
7-Jan The discipline of market leaders
29/04/2010 S-D Logic (execution) E
A service Mantra proposal
Choice of a value discipline 8-Jan TBD
06/05/2010 Selling your ideas E A sales letter
A service Mantra proposal
9-Jan Cialdini/ The new positioning
13/05/2010 New Class or no class ? E Winner or loser A sales letter 10-Jan TBD
20/05/2010 Class wrap up j no assignment Winner / Loser 11-Jan Nothing
Practice Exam Due
If all goes as planned , an Oxford style debate in the last class

“Success is a question of how to marshal your
resources. Be really great in four or five areas.
Make some hard choices.
“The big challenge is to worry less about your
weaknesses and build more on your
strengths. Every success in your life will be
based on your strengths.”

Bryan Cassady
Email: bryan@leuvenresearch.com
Why did you take this course? :To teach it
About you:
A long time ago, an American boy came to Belgium, where he
met a pretty woman in a Laundromat. They got married
a year later and decided to stay in Europe. Since then, Bryan
has set up 9 successful business in 7 different countries. Several of which should have never
succeeded.
Skills:
 A born marketer and salesman with a proven track of record business start-ups and
business development
 A Talent for thinking outside the box and finding simple solutions to complex business
issues.
Driven by the challenge of new business initiatives…Proud to be able to make impossible
things to happen.
Now in academia, because he enjoys learning and teaching.

2/11 What is a new product?
Products only a mother would love
Learning to shoot puppies

S imple
Unexpected
C oncrete
C redible
E motional
S tory Based

A less-than-optimal "configuration" of product or
service attributes and benefits is selected.
Lack of a strong sustainable position in the
market
Marketers fall in love with a product no one else
loves
The marketing plan for the new product or
service is not well implemented in the real
world.
Marketers assess the marketing climate
inadequately.
The plan is too complicated
A failure to ask the right questions and a belief
that everything is a big idea
No Support to get things done
A questionable pricing strategy is implemented. A weak positioning strategy is used.
Cannibalization underestimated
The advertising campaign generates an
insufficient level of new product/new service
awareness.
Over-optimism about the marketing plan leads
to a forecast that cannot be sustained in the real
world.
Too focused on the internal game not enough
on the market
The Lemming effect

Marketing is the management process that identifies,
anticipates and satisfies customer
requirements profitably.
The Chartered Institute of Marketing
(CIM)

Sometimes you gotta shoot the puppy
before he grows up

“There will always be need for
some selling. But the aim of marketing
is to make selling superfluous. The aim
of marketing is to know and
understand the customer so well that
the product or service fits him and sells
itself. Ideally, marketing should result in
a customer who is ready to buy. All that
should be needed is to make the
product or service available.”Peter Drucker

Expected

Core Benefit
Generic Product
Expected Product
Augmented Product
Potential Product
Q: Why is the iPod a success…

What makes what you’re selling
Different and desirable

 Business analysis
 Evaluation of ideas
 Making things happen
3 fundamental roles
 Accountable for definition,
development, marketing and
profits of a product
 Defines the business case, gets
money, responsible for ROI
 Managing a business
A baby CEO

Product
Manager
Customer
Service
R & D
Logistics
Advertising
Top
Management
Sales
Purchasing
Marketing
Research
Legal
Customers
Finance
Production

“Product management is one of the most common training
grounds for senior executives. Many VPs and CEOs were
formerly product managers. The joy (and sometimes pain) of
product management is it’s horizontal nature, working with
Sales, Development, Marcom, Finance, Professional Services
and senior Executives. Product management is where we
learn to lead through influence rather than mandate.”
Barbara Nelson, Pragmatic Marketing

You have to keep pulling

High
Low High
New
product
lines
20%
Improvements
to existing
products
26%
Additions to
existing
product lines
26%
New-to-world products
10%
Repositioning's
7%
Newnesstocompany
Newness to market
Size of circle denotes number of introductions relative to total

Apple operating system vs. Windows
This South African Shiraz received 87pts from Rovani, Wine Advocate #155

“people look at what interests them and
sometimes it’s your ad.”
Howard Gossage

1965 1974 1981 1986 1990 1997
34%
24%
13% 12%
8%
?
Percent of adult viewers who could name one or more brands advertised
in a TV program they had just watched:
Newspaper Ad Bureau

‘‘More than nine out of ten consumable products launched in
the last ten years offered absolutely nothing new to the
consumer.
More than eight out of ten new products fail. You don’t need
to be a statistician to realize there’s a correlation between the
two numbers.’’
-- Robert McMath

Idea Generation
Screening
Concept Development
& Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization

Ideas, screening
Concept, analysis
Prod.
devel
Test
mktg
commercialization
The time to
Make mistakes !
Budget

“I think there’s a world market for about five computers.”
(President of IBM)
“TV won’t be able to hold on to any market it captures after the
first six months. People will soon get tired of staring at a
plywood box every night.”
(President of 20th Century Fox)

“I think there’s a world market for about five computers.”
(President of IBM)
TV won’t be able to hold on to any market it captures after the
first six months. People will soon get tired of staring at a
plywood box every night.”
(President of 20th Century Fox)

today’s
business

Study
Test
Do

Solution
Do more
But in my opinion, almost certainly wrong

Ready, Aim,Fire

Concept Development
Implementation
Project Start Concept Freeze Market Introduction
Concept Time Response Time
Total Lead Time

Post-It-Notes: the super glue
that wouldn’t stick
Levi jeans: the failed gold
digger feeding his family

Ready, Fire, Aim

Failure = Normal = Good.
(“Reward excellent failure. Punish mediocre success.”)
“Fail faster. Succeed sooner.“
“Fail. Forward”
Tom Peters

Fire, Fire, Fire

"Life is what happens
while you’re busy making plans"
--John Lennon

Exultation
Disenchantment
Confusion
Search for the guilty
Punishment for innocent
Distinction for uninvolved
Introduction
Testing/Test
MKTG
Screening &
Refinement
Idea
Generation

“Remember Perspective is everything.”
Two shoe salesmen... find themselves in backward part of
Africa. The first salesman wires back to the head office....
there is no prospect of sales.. Natives do not wear shoes.
The second wires "No one wears shoes here. We can
dominate the market. Send all available stock

business ideas
Which puppy(ies)
worth saving ?

Group
Number
Pets.com Kosmo Despair.com Etoys.com Petrock.com Flooz Webvan
Is there a benefit (real or
percieved)
People willing to pay (enough)
Cost of cut-through acceptable
People will see the benefit buy
again / recommend to others
Will someone hate it
Kill Puppy (0 = kill, 1 = love)
Member Views
Class ID

Pets.com
Pet supplies via the
internet
Save big, save time
Stay at home

Kosmo.com
Instant delivery of
products purchased via
the internet in big cities.
Order a wide variety of
products, from movies to
snack food, and get them
delivered to your door for
free within an hour.

Despair.com
We hate all the senseless, wasted time on employee motivation and un-founded
optimism
We imagine you do to, buy our products and show your true colors

Continuous effort is the key to unlocking your potential
Winston Churchill

Etoys.com
The new place to buy
toys. Find you want on
the internet

Petrock.com
Pets take a lot of time and
energy. Your kids can
have almost as much fun
with a pet rock.
We even include a care
guide

Webvan.com
Buying groceries should
be easier. With web van
you can get all your
groceries, so you have
time for other things

Where do big ideas come from ?

Distinguishing Characteristic:
Selecting between given means to achieve pre-determined goals
Sometimes new means may be generated
M1
M2
M3
M5
M4
Given
Goals

E2
E3
E . . .
En
M1
M2
M3
M4
M5
Given Means
Imagined
Ends
E1
Distinguishing Characteristic:
Imagining possible new ends using a given set of means

 Who is coming
 What will they like
 Plan a menu
 Go Shopping
 Make the meal
 Enjoy
Traditional
 What is in the
Fridge ?
 What can we do
with that
 Guess what is for
dinner ?
 Enjoy ?
Effectual

?

Leverage contigencies

Who I am
What I know
Whom I Know
What can I do?
Interact with
others
Stakeholder
pre-
commitments
New
goals
new
means

Causal
Logic
(predict)
Visionary
Logic
(predict)
Adaptive
Logic
(react)
Effectuation
Logic
(negotiate)
lowhigh
low high
Predictability
ofthefuture
Controllability
of the future
Effectuate …
… under uncertainty
… in new markets
… for new products

The quickest easiest way to get
started selling a product…
Objective: Fast failures and
maybe a big success

“Concepts are ideas that you think will resonate and mean something
to people interested in a product or service. Good concepts are
insight based.”
“You need to think about what are the real benefits consumers are
looking for. Concept statements should be written in a manner that
stresses the strategic benefits of any given concept vs. creative
writing appeal.”
“While the copywriting should be neither boring nor bland, it is
important to distill the idea down to its primary reason-for-being.”

or

Reciprocity
 On is more willing to comply with a request for participation to the extent that compliance
constitutes repayment of a perceived gift favour or concession.
Consistency
 Once an individual has taken a freely chosen stand on an issue, he/ she will exhibit a
tendency to act consistently with this commitment
Social validation
 Individual commonly decide on appropriate actions for themselves by searching for
information as to how similar other have acted or are acting in a similar situation
Authority
 People are more likely to participate if a legitimate authority is asking for participation
Scarcity
 Requests than emphasise the value of “making your voice hear” or “having your opinion
count” will be more effective when coupled with information suggesting that such an
opportunity is rare.

What you need to deliver Group
Core Concept + Loans: Home or personal 1 6
Core Concept + Credit Card 2 7
Core Concept + Insurance: Life, Home, Car, Travel… 3 8
Core Concept + Telephone/ Internet or Mobile 4 9
Core Concept + Utility: Gas, Electric, Water… 5 10

Accepted beliefs
Consumers are getting more and more frustrated with "unwanted mail“
The mail I send is not junk mail - it just needs to go to the right people
There is a shortage of relevant data. Data is often out of date/not updated very regularly
Benefit
Select Post gives you the information you need to reach consumers that want your mail
Reason to believe in the product
Proven to work in other countries. Response rates 20-400% higher
a program being developed with you in mind
with the support of the Belgian Post brand
Reassurance
Developed in collaboration with leading companies, and industry leaders
based on detailed consumer and advertiser testing
Brand Character
Always on the look out for win/win/ solutions. Always doing the right thing....
A good listener, willing to learn/open/progressive, well-informed/ever striving

3/11 Rethinking Market Research
A new view on Market Research
Learning to run real research

1000
40
1000
30
1000
20
1000
10
5,000

Paradigms = models, patterns the basic way of
perceiving, thinking valuing
A dominant paradigm is seldom if ever stated explicitly;
it exists unquestioned… transferred through culture
and unspoken business practices
William Harmon-
An incomplete guide to the future

Hot summers
Warm winters
Evidence of
global warming
Cold summers
Cold winters
Evidence of
global warming

I will see it when I believe it
vs.
I will believe it when I see it
Too much research is the first type

 We often do research to check our
brilliant ideas
 SUGGING (Selling under the guise
of market research)
Issues
 Objective criteria in place before
the research starts
 Is 35% planned purchase good or
bad
 Clearly define your biases before
you start
 Focus on insight (vs. confirmation)
 Do regular reality checks
Solutions

“The formulation of the problem is often more essential
than its solution”
Albert Einstein

Research that Produces Customer Insights
Based on a lecture by M. Sawney
(Northwestern University)

A good product manager
 Builds, Shares, and uses insights
Chris Start
P&G

Example
“The consumer isn’t a moron. She is your wife.”
David Ogilvy
“We don’t sell cosmetics, we sell hope”
Revlon

Offering
(WHAT)
Process
(HOW)
Presence
(WHERE)
Customers
(WHO)
1
4 2
3
Networking
Brand
Supply Chain
Organization Value Capture
Customer Experience
Platform
Solution

Offering
(WHAT)
Process
(HOW)
Presence
(WHERE)
Customers
(WHO)
Networking
Brand
Supply Chain
Value Capture
Customer Experience
Platform
Solution
Organization

Offering
(WHAT)
Process
(HOW)
Presence
(WHERE)
Customers
(WHO)
Networking
Brand
Supply Chain
Value Capture
Customer Experience
Platform
Solution
Organization
One place all
The info
Answers in
30 minutes

Using observation to formulate an
idea or theory. “Qualitative” or
“Interpretative” research draws on
inductive reasoning.
Sheba cats are part of the family
Inductive Reasoning
Taking a known idea or theory and
applying it to a situation (often with
the intention of testing whether it is
true). “Quantitative” or “positivist”
research draws on deductive
reasoning.
Sheba buyers are 240% more
likely to buy pet magazines
Deductive Reasoning

Qualitative Research Quantitative Research
Also Known As interpretative / responsive positivist / deductive
Type of Reasoning (usually) inductive (usually) deductive
Objective Generate insights that
lead to hypotheses
Validate insights by testing
hypotheses
Outcomes Illuminate a situation to create
deeper understanding and
insights
Accept or reject a proposed
theory, or get specific answers
to well - defined questions
Methods Qualitative, eclectic Quantitative, rigorous
Approach to Validity truth seen as subjective and
socially constructed
truth seen as objective and
universal

New understanding that is actionable
and competitively unique
Interpretation of the research
findings
Consider carefully the
research objectives.
Data Analysis and Data
Reduction
Traditionally, marketing
researchers and research
agencies stop here

Of most value because offers new
ways of looking at markets that lead to
competitive advantage
Summarizes the implications of the
research for the business
Selected information that is of interest,
but lacking in implications
Informs the business about a market,
but no indication of relative importance
of different pieces of information
Of little value because it is usually
difficult to understand and interpret on
its own.

Inductive, Qualitative,
Exploratory Research
that Produces Insights
Deductive, Quantitative,
Confirmatory Research
that Validates Insights

New Products
focus…
Proactive,
Episodic
Reactive,
Routine
Validation
Research
Exploratory
Research

Customer
insights
Ideas from
Innovative
Customers and
Partners
Patterns in
Customer
Transaction Data
Observation of
Customer Behavior
in Native
Surrounding
Anomalies and
Discrepancies
Metaphors and
Analogies
Introspection,
Intuition and
Brainstorming

Top Management
Product
Development
Legal and
corporative
affairs
Corporate
Marketing
Market
Research
Product
Marketing

Worst practices Best practices

Source : McKinsey
Finance &
Accounting
Marketing
Information
Service
Human
Resources
Market
Research
How useful is the information?Not very
1 2 3 4 5
very

How do you think the insight was developed ?

His conclusion… the idiots errors
cancelled each other out

“Bringing new members into the organization, even if they’re
less experienced and less capable, actually makes the group
smarter simply because what little the new members do know
is not redundant with what everyone else knows.”
(p.31)

Alpha Group
138
132 135
139
135
137
Diverse Group
121 84 111
75 135 31

“Most of the time” the diverse group outperforms the
group of the best by a substantial margin.
See Lu Hong and Scott Page Proceedings of the
National Academy of Sciences (2002)

Alpha Group
ABD
ADE BCD
ABC
BCD
ACD
Diverse Group
AHK FD AEG
EZ BCD IL

collective intelligence increases as the “herd mentality”
decreases and the people in the group express what they
genuinely think rather than going along with whatever
everyone else is saying.
“The more influence a group’s members exert on each other,
and the more personal contact they have with each other, the
less likely it is that the group’s decisions will be wise ones.”
(p.42)

Decentralization means everyone in the crowd will try their own
approach to the problem rather than having their efforts
directed from the top down.

Mon Tue Wed

Brad: (8-8)2
+(10-12)2
+(10-9)2
= 5
Matt: (10-8)2
+(12-12)2
+(8-9)2
= 5
Crowd: (9-8)2
+(11-12)2
+(9-9)2
= 2

(Brad-Crowd)2
= 1 + 1 + 1 = 3
(Matt-Crowd)2
= 1 + 1 + 1 = 3

Implication: Diversity can trump skill

“If a group satisfies those conditions [diversity, independence,
decentralization, aggregation] , its judgement is likely to be
accurate. Why? At heart, the answer rests on a mathematical
truism. If you ask a large enough group of diverse, independent
people to make a prediction or estimate a probability, and then
average those estimates, the errors each of them makes in
coming up with an answer will cancel themselves out. Each
person’s guess, you might say, has two components:
information and error. Subtract the error, and you’re left with
the information.”
– James Surowiecki

Armstrong’s seer-sucker theory…
no matter how much evidence exists than seers do not
exist, suckers will pay for the existence of seers…

Why do we believe in seers…
because we get fooled by randomness…
because we are looking back not looking forwards..

Why not just hire an expert…
Because, groups usually do better than experts

Conclusions
Cheap crowds ≈ Expensive research
Greater descrimination between ideas
New Product
Concept
Monadic Test
With matched samples of 100
in the target market
(Top 2 Box Purchase Intent)
Research Market 1*
With diverse group of 500
people- *betting
(Top 2 Box Purchase Intent)
Significant
Differences
A 85 86
B 83 82
C 81 90 +
D 78 91 **
E 74 69
UK Norms (top 2 box) 67 67
F 64 24 ***
G 64 22 ***
H 54 53
I 49 39 ***
J 43 17
Respondent Base Sizes: Monadic = 100 per cell / Research Market *Betting =502
Fig. 1, Top Two Box Purchase Intention Result – Research Market 1*

“The best collective decisions are the product of
disagreement and contest, not consensus or
compromise.”
(p.xix)
“The best way for a group to be smart is for each
person in it to think and act as independently as
possible.”
(p.xix)

4/11 Pricing for value and profits
What Radiohead Knows
The Art of Pricing & Making a Profit

Unfortunately, they lost a few dollars on
every customer they served.

Source: Compustat; Mckinsey analysis
100.0
19.2
68.3
12.5
101.1 13.5
Revenuees Fixed Costs Variable costs Operating profits
1 1
Price increase
of 1.0%
Price increase
of 8.0%

2.3
3.3
7.8
11.1%
Fixed cost
Volume
Variable cost
Price
…Create Operating Profit Improvement of
1%
improvement
in...
*Based on average econimics of 2,463 companies in comopustat aggretate

And most importantly something you think about,
not (and I repeat) not something
determined solely by your competition

Illustrating Price Relationship
Price Vol. Rev. Cost Profit
(£) Unit (m) (£m) (£m) (£m)
1 17 17 27 -10
2 16 32 36 6
3 14 42 24 18
4 9 36 19 17
5 7.5 37.5 17.5 20
6 5 30 13 15
7 3 21 13 8
8 2 16 13 8
9 1 9 11 -2
10 0 0 10 -10

-15
-10
-5
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10

High
Value
Super
Value
Mild
Value
Economy

The right price is not objective, but value based

How much a rational consumer would be willing to pay
for your product, if he had a perfect understanding of
its actual worth* …
John Gourville
Harvard Marketing Guru

$120 $108
$480
$432
$100
$108
Price
Labour Costs
Servicing/Diesel
$700 - $540
- 10%
- 10%
$ 700

The problem: result = ball dependent
Consumers didn’t use the ball
Worse results, product died
(same idea back as Liquid compact)

High Price Low Price
Price 31 18
Client 60 100
Cost/ Unit 14 10
Net/ unit 17 8
Profit 1020 800

Our chef's thinking
High Price Low Price Likely Best Case
Price 31 18 24.5 54.5
Clients 60 100 80 85
Cost /unit 14 10 12 11.5
Net/ unit 17 8 12.5 13
Profit 1020 800 1000 1105
Differential Pricing
High Medium Low Total
Price 31 24.5 16 27.5
Clients 55 25 10 90.0
Cost /unit 11 11 11 11.0
Net/ unit 20 13.5 5 16.5
Profit 1100 337.5 50 1,487.5
Extra points % Increase
Versus likely results 578 63%
Versus maybe scenario 383 26%

Before you start…
Do you have a product someone wants ?
If not, don’t waste your time

Facts
The new airplane will be competing against
Cessna’s flagship C172 which has a list price
of $300,000. This would be your logical
starting price point.
Thoughts
Customers look to substitutes for clues on what your product is worth. Even
if you have a great product but competitors set their prices unrealistically
low, customers will assume your product is worth less.
Substitutes
Competitors
Income
Demand
Environment

Facts
Your plane will have a faster cruising speed, a
longer cruising range, a faster climb rate and
a revolutionary new safety system.
Your research suggests these attributes should
be worth about $120,000 to purchasers. Your
brand, however, is less well known meaning
resale value will be affected. Detract $30,000
from the new airplane’s value to allow for this.
Thoughts
How your product measures up (in terms of attributes) by comparison with
your competitors. Customers will look at brand, convenience, quality, service,
style and other attributes to evaluate whether your product’s value is lower
or higher. This dictates whether you can charge a premium.
Substitutes
Competitors
Income
Demand
Environment
$300,000

Facts
People who purchase your airplanes are able
to claim a $25,000 tax break on their federal
taxes because this plane features an
enhanced safety system.
Thoughts
The income level of your product’s buyers, and whether they have discretionary
income or watch every penny. Obviously the higher their income, the more
“wriggle room” you have to increase your margins. Increases in your customer’s
income will also impact their value perceptions
Substitutes
Competitors
Income
Demand
Environment
$300,000
$90,000

Facts
To cover increased operational costs, airports
have recently raised their landing fees. To
compensate for that, most airplane
manufacturers are lowering their list prices by
$20,000.
Thoughts
Changes in the price for related products. For example, the price of gasoline
influences the relative value of gas guzzlers. Increases or decreases in the prices
of any products which are related to yours will impact noticeably on the perceived
value of your product.
Substitutes
Competitors
Income
Demand
Environment
$300,000
$90,000
$25,000

Facts
There have recently been some very positive
news articles run in major newspapers talking
about the benefits of private ownership of
airplanes. It’s currently considered to be the
“in thing” to do. This should allow you to
increase your prices by about $15,000
Thoughts
The overall market environment and whether your product’s value is going to be
affected by the arrival of a fad, new information, or other external events beyond
your control
Substitutes
Competitors
Income
Demand
Environment
$300,000
$90,000
$25,000
- $20,000

$5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $15
Potential Price Points
Too Cheap Expensive Too Expensive Bargain
100
Van Westerndorp Output
0
80
60
40
20
“Stress Zone”
MPC
(Marginal Cheap Price) OPP (“Optimal Price Point”)
IDP (Indifference Price Point)
MEP (Marginal Expensive Price)

$5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $15
Potential Price Points
40%
20%
0%
Van Westerndorp Output

Brand A Brand B Brand C
I would not
buy any of
these.
Brand A Picture Brand B Picture Brand C Picture
No Bells and Whistles Bells and Whistles Bells, no Whistles
Regular Shipping Next Day Delivery Two Day Delivery
No Money Back
Guarantee
Money Back
Guarantee
Money Back
Guarantee
$27.00 $44.00 $35.00
   
A regression technique - usually multinomial logit -- is used to analyze the model. Even so, a
fair amount of analysis can be done using high level data summaries.

Note: Disguised example. Attributes and measures have been altered.
Select the beverage you would be most likely to purchase at your next visit to a convenience
store. If you would not choose any of these, select the “none” option.
Next
None

Price
+20%
+15%
+10%
+5%
Current
-5%
-10%
Share of Demand
Elasticity: Rate at which demand
falls as price increases.
10% 14% 18% 22% 26% 30% 34% 36%
� 𝑑𝑑 = −4%/5% = −0.8

Consumer surplus
Ride 1 at $ 0 price
Price willing to
Pay per ride
Demand
0 1 2 3 4 5 6
Number of rides

Strategic Options
Lever Segment Attribute Importance
Price
Discount
Smart Consumer
High Income
Shopper
Advance
Purchase
Smart Consumer
High Income
Shopper
Airlines
Smart Consumer
High Income
Shopper
Restricted
Timings
Smart Consumer
High Income
Shopper
Magnet
Fence
Proposed Design
Discount Vocation
travel Fare
Feature Rationale
 50% discount
to full fare
 Attract price
sensitive “
Smart
Consumer
segment”
 1 month
advance
purchase
 No ability to
specify airline
carriers
 Weekday
department
 Discharge
“High income
Shopper” from
switching to
low price seats

Be Found offers several flexible pricing solutions which are all based on a
"no cure no pay" model. For example you may choose to pay for the
qualified visitors who enter your site, a flat fee for every new
membership or a percentage of each online sale.

“One fallacy is the belief that the
consumer acts ‘logically’ in his or her
buying decisions.”
James P. Nault, Fairmont Foods

Source: Dickson & Sawyer (1990)

$ 9.95 Shipping and handling = their profit
Question: Why does it work

i
iii
ii
iv

I offered to pay €0
They then processed my order

Note
Best Selling album in 2008
4 million copies

5/11 Forecasting & Business Planning
Learning System Thinking
To better predict the future

0
1
2
3
4
5
6
7
8
9
10
utilities mortgage credit cards internet pension savings telephone personal
loans
insurance
Lowest chance
of success
Highest chance
of success

Group 2 3 4 5 6 8 9 Total
Utilities 55 69 77 106 42 76 49 72
Credit cards 136 149 85 45 52 53 72 86
Mortgage 96 43 44 144 106 101 79 89
Pension 98 79 81 58 111 113 109 94
Internet 67 51 181 96 98 129 93 102
Savings 128 113 111 125 85 102 83 106
Telephone 75 98 135 75 163 105 136 111
Personal loans 114 132 79 141 129 78 144 114
Insurance 133 177 100 109 130 144 136 129
Correlations
Group 0.42 0.58 0.50 0.48 0.40 0.40 0.34 0.45
Class 0.17 0.32 0.13 0.12 0.36 0.22 0.35 0.24

* Not accurate, but for description

Number of hits on website 1.4
Number of books sold in the U.S. 1.5
Telephone calls received 1.22
Magnitude of earthquakes 2.8
Diameter of moon craters 2.14
Intensity of solar flares 0.8
Intensity of wars 0.8
Net worth of Americans 1.1
Number of persons per family name 1
Population of U.S. cities 1.3
Market moves 3 (or lower)
Company sizes 1.5
Exceedance = breaking point = 250K
Exponent = power = 1.5
Num Books Sales
0 16,000,000
0 8,000,000
0 4,000,000
3 2,000,000
A 12 1,000,000
64 500,000
Given 96 250,000
272 125,000
2,172 62,500
B 49,152 31,250
3,145,728 15,625
569,437,594 7,813
291,552,047,998 3,906
Calculations
A 96/((1,000,000/250,000)^-1.5)
B 96* ((250,000/31,250))^1.5)

Exponent Share of the top 1% Share of the top 20%
1 99.99% 99.99%
1.1 66% 86%
1.2 47% 76%
1.3 34% 69%
1.4 27% 63%
1.5 22% 58%
2 10% 45%
2.5 6% 38%
3 4.6% 34%
* Clearly, you do not observe 100 percent in a finite sample.

Investment Investment Return ROI Cum invest Cum return Cum ROI
1 100 2000 2000% 100 2000 2000%
2 100 150 150% 200 2150 1075%
3 100 100 100% 300 2250 750%
4 100 100 100% 400 2350 588%
5 100 50 50% 500 2400 480%
6 100 50 50% 600 2450 408%
7 100 25 25% 700 2475 354%
8 100 25 25% 800 2500 313%
9 100 10 10% 900 2510 279%
10 100 10 10% 1000 2520 252%
11 100 5 5% 1100 2525 230%
12 100 4 4% 1200 2529 211%
13 100 3 3% 1300 2532 195%
14 100 2 2% 1400 2534 181%
15 100 1 1% 1500 2535 169%
16 100 1 1% 1600 2536 159%
17 100 1 1% 1700 2537 149%
18 100 0 0% 1800 2537 141%
19 100 0 0% 1900 2537 134%
20 100 0 0% 2000 2537 127%
Totals 2000 2537 127%

0%
500%
1000%
1500%
2000%
2500%
0%
500%
1000%
1500%
2000%
2500%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Cumulative
ROI
ROI

Output Output Output
20.0% 80.0%
*20%
36.0% 64.0%
*20%
48.8% 51.2%
20.0% 51.2%

For each of the following ten items, provide a low and high guess such that you are 90
percent sure the correct answer falls between the two. Your challenge is to be neither too
narrow (i.e., overconfident) nor too wide (i.e., underconfident). If you successfully meet this
challenge you should have 10 percent misses– that is, exactly one miss.
Low High Correct
1. Martin Luther King's age at death _________ _________ _________
2. Length of the Nile River (km) _________ _________ _________
3. Number of countries that are members of OPEC _________ _________ _________
4. Number of books in the Old Testament _________ _________ _________
5. Diameter of the moon (km) _________ _________ _________
6. Weight of an empty Boeing 747 (kg) _________ _________ _________
7. Year in which Wolfgang Amadeus Mozart was born _________ _________ _________
8. Gestation period (in days) of an Asian elephant _________ _________ _________
9. Air distance from London to Tokyo _________ _________ _________
10.Deepest (known) point in the ocean (meters) _________ _________ _________

PERCENTAGE OF MISSES
Type of People Tested Type of Question Asked Ideal Target
Actually
Observed
Harvard MBA’s Trivia facts 2% 46%
Employees of a chemical
company
Chemical industry and
company - specific facts
10% 50%
50% 79%
Managers of a computer Co.
General business facts
Company - specific facts
5% 80%
5% 58%
Physicians
Probability that a patient has
pneumonia
0-20% 82%
Physicists
Scientific estimates like the
speed of light
32% 41%

(Source: Gary Larson, The Farside Gallery Chronicle Publishing Co.,1980)
“What do you mean ‘Your guess is as good as mine’?
My guess is a hell of a lot better than your guess!”

2 out of 10 real differences, the rest statistically significant
Yes
Yes
Source: New products what separates winners from losers
Cooper & Kleinschmidt

40
60
50
30
20
10
0
True accuracy
Part 1
Estimated accuracy
Amount of case study read by subjects
Part 2 Part4Part 3
Percentageofquestionscorrect

Items of information available to handicappers
405 2010
40%
20%
10%
30% Confidence Does Increase
Accuracy Does Not Increase
Performance

Actualprobability
Predicted probability (confidence)
Medical Diagnoses
Weather forecasts

 The British were sinking many
German subs.
 The assumptions:
 Codes could not be broken
 It must be a leak
 The right Q: How could they
have broken our code
 A false code released just in code
could have tested the assumption
and might have changed the way
 It is now 2 years after the launch,
Beatthatquote has failed
 Why did it fail…
 Just asking the question
You’ll get more ideas…
(about 50% more on average)

Be humble1
2
3 Look at the big picture
4

For a good introduction see
The Fifth Discipline, Peter Senge

Turn knob Measure Change
Filling a glass of water

Soviet Arms
Threat to
Americans
Need to Build
US Arms
US Arms
Threat to
Soviets
Need to Build
USSR Arms
USSR Arms
Threat To
Soviets
US Arms
Need To Build
US Arms
Threat To
Americas
Need to build
USSR ARMS

Number of
visits
Experience
Partner sites
Number of leads
Client conversion costs
Quality of
Leads
What clients will
pay
Type of clients
Repeat
Visits
Page visits
Trust

1
2
3
4

Issues
Can we increase
profitability with a new
production process?
Sub-Issues
Will it reduce our costs?
Sub-Issues
Can our organization
implement the changes?
Sub-Issues
Will our quality level fall
while making the
changeover?

Events
Patterns
Structures
**Mckinscy&Company

1
2
3
4
Look at the big picture

Key word_
English UK num
Key_Word_
NL BE num NL num
loan 7.87 4,090,000 lening 7.1 49,500 7.23 90,500
home mortgage 7.31 60,500 hypotheek 6.04 18,100 3.21 260
mortgage 11.72 5,000,000 hypotheek 6.04 18,100 3.21 450,000
Cost per click
Searches per month

Key word_
English UK num
Key_Word_
NL BE num NL num
loan 7.87 4,090,000 lening 7.1 49,500 7.23 90,500
home mortgage 7.31 60,500 hypotheek 6.04 18,100 3.21 260
mortgage 11.72 5,000,000 hypotheek 6.04 18,100 3.21 450,000
Belgium Netherlands
Data from google adwords
Are Belgian consumers really less interested ?
If yes, why is the price higher than the
Netherlands ?
Are they searching in a different way (eg. Using
google.nl instead of google.be)
Do you believe the numbers ?

Secondary source
Data
Calculation Result

Belgium
Mortage New House
Households 4,000,000.00
% Move/ year 0.08
Total Movers 320000
Renters 0.4
Net 192000
% take loan 0.75
Market Size 144000
Re-mortgage
Households 4000000
% second mortage 0.04
Market Size 160000
Total Market 304000
Avg. Value of a new loan 5000
Market Value 1,520,000,000.00
Available market
Total Loans 304,000
% Internet 60%
% would use internet 50%
Available market 91,200

Registered Minivans
Dodge Caravans 120,000
Ford Windstars 20,000
Toyota Sienas 8,000
Total Market Size 148,000

Costs of production
Number Fixed Costs First 50 K After 50 K Total Costs Avg. Cost
25,000.00 100,000 150 40 3,850,000 154.0
50,000.00 100,000 150 40 7,600,000 152.0
75,000.00 100,000 150 40 8,600,000 114.7
100,000.00 100,000 150 40 9,600,000 96.0
125,000.00 100,000 150 40 10,600,000 84.8
150,000.00 100,000 150 40 11,600,000 77.3
175,000.00 100,000 150 40 12,600,000 72.0
200,000.00 100,000 150 40 13,600,000 68.0
225,000.00 100,000 150 40 14,600,110 64.9
250,000.00 100,000 150 40 15,600,220 62.4
275,000.00 100,000 150 40 16,600,330 60.4

At companies like P&G, brand managers are trained
hard to stay in touch with their gut feelings…

6/11 The real role of marketing
What really happens at work
Getting out of the thick of thin things

- Startup firm

Convert the value proposition into
a market offering
Inbound
Product Development
Outbound
Product Marketing
Take the offering and the
value message to market

“Outbound/Tactical”
 Outbound-heavy role
 Understanding of product
 Understanding of vertical markets
 Less authority and direct influence
 Ability to manage interfaces
 Ability to communicate internally
“Inbound/Strategic”
 Inbound-heavy role
 Close interaction with engineering
 Defining target markets
 Generating customer wins
 Broad authority and influence
 Ability to think strategically

Market requirements
Positioning framework
Product launches
List pricing/SKUs

Product Manager Influence
(1-None, 10- Complete)
Defining Product Specifications 7.23
Managing Product Releases 6.96
Product Positioning 6.93
Product Upgrade Decisions 6.28
Managing Launch Events 6.44
Product Pricing 6.28
Product Packaging/SKU Decisions 6.31
Customer Segmentation 5.62
Consumer Promotions 5.48
Channel and Partner Promotions 5.15
Product Advertising 5.26
Channel Selection 4.78
Corporate Branding & Advertising 4.46

Product
Development
Product
Conception
Product
Launch
Product
Sustaining
Responsibilities:
 Market research
 Target market definition
 Competitive analysis
 Positioning
 Market Requirement
Forecasts
Interfaces:
 Customers
 Research firms
 Engineering
 Finance
 Sales
Responsibilities:
 Refine market
requirements
 Customer research
 Trade-off schedule
vs. features
Interfaces:
 Engineering
 Customers
 Partners
Responsibilities:
 Product introduction plan
 Customer demos
 Refined forecasts
 Sales training
 Press kits
 Trade shows Events
collateral
 Promotion/Advertising
 BOM/Inventory
Responsibilities:
 Sales training
 Customer promotions
 Trade promotions
 Product updates
 Next version planning
Interfaces:
 Customers
 Engineering
 Tech support
 Sales
 Partners
Interfaces:
 Customers
 Sales
 Analysts
 Press
 Engineering
 Finance
 Tech support

Yes No
Product Revenues 62.2% 37.8%
Product Profitability 61.5% 38.5%
Market Share 46.9% 53.1%
Customer Satisfaction 19.7% 80.3%

Business
Knowledge
Business
Knowledge
Business
Knowledge
Business
Knowledge
Business
Knowledge
 “What it does”
 “What it needs to do”
 Product functionality
 Product roadmap
 Product architecture
 Core technology
 Product bugs/gaps
 Product usability
 Complementary products
 Competing products
 Who - Customer segments
 Why - Customer needs
 Where – End-use scenarios
 How often – Usage levels
 Why not – Usage barriers
 Who else – Customer DMU
 How – Customer DMP
 Purchase drivers
 Upgrade drivers
 Installation experience
 Usage experience
 Customization experience
 Support experience
 Upgrade experience
 Partner/VAR experience
 Unmet needs
 Known product problems
 Known service problems
 Brand/company image
 Customer satisfaction
 Key demand trends (by
segment)
 Key technology trends
 Key alliances/partnerships
 Competitive products
 Competitors’ motivations
 Potential competitors
 Strengths/weaknesses
(company)
(product)
(partners)
(brand)
 Customer insight process
 MRD development process
 Product planning process
 Budgeting process
 Product development
process
 Product testing process
 Product launch process
 Partner management
process
 Company values
 Company vision/strategy
 Company image/brand
 Vision of the business
 Goals of the business

Importance (10 point scale)
Customer knowledge 8.81
Product knowledge 8.65
Competitor knowledge 8.21
Company business knowledge 8.00
Macro environmental knowledge 7.61

+/- 20% 20-30%
+/- 20% +/- 40%

Important !
What you know don’t know might be less important
than what don’t know you don’t know

Important: remember we tend to over-estimate our capabilities I
wouldn’t invest in this business

Group
Group
Prediction
Score
Group Size Worse Percentile
Number
Correct
Group
Number
Indiv. Avg
9 1 5 4 20% 7 4.4
1 1 9 8 11% 5 3.0
4 2 9 7 22% 5 3.2
10 3 7 4 43% 4 2.8
5 4 8 4 50% 4 3.0
2 4 5 1 80% 4 3.0
7 6 7 1 86% 4 4.4
8 3 8 5 38% 3 1.6
6 5 8 3 63% 3 2.9
3 7 8 1 88% 2 2.6
50%

Statement of Purpose
An introductory sentence that concisely and succinctly
states the reason for the recommendation. Provides a
context for the memo as a whole
Background
Factual analysis That connects the purpose of the
memo to the strategic objectives of the company or
the brand. Also provides facts in relation to the
problem recommendation Is supposed to address.
Rationale
The reasons for the recommendation, and the logic
by which the recommendation was reached.
Recommandation
The specific proposal on how to solve the problem or
exploit the opportunity detailed in the background
section.
Discussion
Details of the recommendation, anticipated questions
or areas of concern, risk assessment, identification of
other alternatives, details of the recommendation.
Next Steps
Who will be following through on the
recommendation, what target dates they would be
working towards, what actions they would be taking
to execute the recommendation
Supporting Exhibits
Other supplementary information as appropriate.

(not looking for an answer but how to find the answer)
Is there a market for high priced (very effective)
loan leads in Belgium

Note; if you want to make this east, think about how an advertisement is put together. Hook, Product (in your case your
Reco) Benefit, Reason Why, Next steps.

Facts

Next assignment due
before the next class not Monday

Due Date Assignment
Presentation
Group
Grading
Group
10/10/2007 What is the product (consumer + partner) 1 5
10/10/2007 What is the product (consumer + 2 6
10/17/2007 What are the right research Qs 3 7
10/31/2007 Pricing for value and profits 4 8
11/7/2007 Predicting business results/scenario planning 5 9
11/14/2007 15 minutes to fame; presenting your bus. Case 6 10
11/21/2007 A realistic into market timing 7 1
11/28/2007 What if, planning for the first 3 months 8 2
12/5/2007 Business Metrics – scorecard for success 9 3
12/12/2007 Launch advertising 10 4
Deliver your next assignment to group 10 and me
List of groups and group member sent by email to all class
participants

Assignment due November 5 (this is Monday November 5)

Keys to evaluating advertising
And some fun to end the class
7

Where is John
The beef West Drugs
[ ] Win [ ] Win [ ] Win
[ ] lose [ ] lose [ ] lose
What is your gut reaction?
Is a clear strategy communicated?
What’s the Big Selling Idea?
Is Drama used and is it good?
Product Registration and Recall
Is it convincing and distinctive
Does it motivate action?
Winner/Loser
Budget Allocation

New product Management: Increasing your odds of success

New product Management: Increasing your odds of success

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