- Commercial planning
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Commercial Planning is the term commonly used for commercializing a product. The success of a new product depends not only on the idea behind the product, but also on the marketing of the new product before, during and after the product launch. New Product Launching (NPL) is part of the New Product Development method.
- “In the modern world of business, it is useless to be a creative original thinker unless you can also sell what you create. Management cannot be expected to recognize a good idea unless it is presented to them by a good salesman.” David M. Ogilvy
A practical example is used in this article to give a clear view of the results and the functioning of this method. The case that is used in this article is as follows:
- A software company (further mentioned as “T-computing”) has developed mainly office software, but is now developing a new computer game. The game is almost in the testing phase and the company expects to finish the development in 6 months. It’s now time for preparing to launch this computer game into the market.
Method purpose
The new product launch method, as described in this article, gives a checklist of important activities for launching new products. It specifies strategic and tactical activities in the marketing area, which conducts in a strategic plan and a tactical plan. These plans are a preparation for launching a new product.
Method explanation
This method has no strict order in activities, except for the main two activity categories:
- Create a launch strategy
- Create an approach for the product launch
The top-down approach is used, so the launch strategy must be developed before the approach for the NPL. These main activities are shown on the right in figure 1: the meta process diagram of the New Product Launch method.
Figure 1: New Product Launch process model
Strategic planning
A launch strategy gives a long-term vision about the new product. During the first activity, research will be done to create a strategic plan for launching the new product, and the changes in the company regarding to the new product.
Define competitive stance
Description: defining the competitive stance gives information about the current market situation in relation to the new product. Other companies could have the same (sort of) product, which means that there are competitors in the market. The company has to decide how to place itself and the product between the competitors, in order to maximize the market share (or another predefined goal of the company, for example, maximize market share in a specific customer group). The competitive stance forms finally a competitive strategy.
Purpose: to optimize the product placement between competitors in the market.
Product: a chapter in the strategic plan. It can consist of:
- Competitors overview with (core) competencies
- SWOT analysis
- Strategy for maximizing competitive advantage
Example: the computer game is a first-person shooter and other software companies and resellers also sell this kind of game. T-computing has to find out what the competitive advantages are, in respect to the competitors. It could mean that the company’s game is far less aggressive than the other games, which is more attractive for children under 16. But on the other hand, older people often do not appreciate a shortage of violence in first-person shooters.
Define market strategy
Description: defining the market strategy gives insight in the actions that are necessary to achieve marketing objectives. The company has to get familiar with the market and must decide how and where to place the product in the market. Other actions are the way to approach potential customers, and the way to attract the targeting customer group (for example, low prices or high quality).
Purpose: the market strategy serves as a way to position the company and the product successfully and uniquely in the market.
Product: a chapter in the strategic plan. It is commonly known as a marketing plan . It can consist of:
- Market analysis
- Consumer analysis
- Company analysis
- Marketing strategy
- Sales approach
Example: the first-person shooter far less aggressive than other first-person shooters. After the market analysis and consumer analysis, it appears that children under the age of 16 really like this kind of game. An approach for reaching this customer group is to make publicity on products that they like, as candy and soda.
Define company strategy
Description: defining the company strategy, also known as business strategy, specifies the objectives of the company in relation to the new product. Policies, plans and resources that are needed to achieve these objectives are defined in this activity.
Purpose: the company strategy is a plan for fulfilling long-term company objectives.
Product: a chapter in the strategic plan. It can consist of:
- Situational analysis
- Vision & mission statements
- Strategic and tactical objectives
- SWOT analysis
- Implementation plan of objectives
Example: if T-computing wants to grow in the Dutch gaming industry and get a market share of 10%, it has to find out how that is possible and which actions have to be taken. For example: should T-computing make game-development a core industry?
Define product strategy
Description: defining the product strategy gives insight in strategic product characteristics as the innovativeness, product newness and the product life cycle (PLC) time.
Purpose: the product strategy helps creating the right expectations of a product.
Product: a chapter in the strategic plan. It can consist of:
- Product comparison
- PLC
- New product development cycle time
- Product development planning for the future
Example: if T-computing wants to have a long product life cycle for the first-person shooter game, because of high development costs, it has to decide how to keep the product interesting and innovative during the whole PLC. It is possible to plan updates for new weapons, levels and characters in the game, so that the game gets renewed.
Tactical planning
After creating a launch strategy, an approach for launching the new product has to be defined. This activity uses the marketing mix structure for preparing the NPL on a tactical level. The outcome of this activity is a tactical plan.
Product: Choose brand
Description: a brand for the product has to be chosen. The company has to decide whether to create a new brand, make an extension of a brand, or that the product falls under an existing brand.
Purpose: to place the new product in the line of other products in the company.
Product: the product (decision) can be one of the following:
- New brand
- Brand extension
- Existing brand
In combination with the “define breadth of assortment”, it forms a product plan. This plan contains information and decisions about the new product and is part of the tactical plan.
Example: because it is the first computer game, created by T-computing, it can define a new brand, where the game belongs to. A brand extension is not possible, because of the great difference between office software and games. If T-computing does not work with brands for products, it is possible that the brand is the company itself.
Product: Define breadth of assortment
Description: the breadth of the product assortment of the company has to be defined. It depends on the customer needs and the possibility to create a bigger or smaller product assortment. The customer needs can be inventoried by a market research.
Purpose: deciding about the breadth of the assortment gives the company insight in the future new product developments.
Product: the product (decision) is the amount of current and future products in the assortment. The product is a product plan (see paragraph 2.2.1).
Example: T-computing wants a bigger Dutch market share on the gaming software area. Their choice is to develop more games, to interest more customer groups by offering a variety of genres. It is then the question how big the product assortment has to be, for optimizing the product sales.
Pricing: Define price level
Description: the price of the product has to be defined. A product price is based on development, production, storage, transport and promotion costs. The price level must be carefully balanced as shown in figure 2. The higher the price level, the more profitable, but the less attractive it is for potential customers.
Figure 2: price level balancingPurpose: the price level of a new product is essential for selling the product.
Product: in combination with the “define pricing policy”, it forms a pricing plan. This plan contains information and decisions about the pricing of the new productand is part of the tactical plan.
Example: the targeting customer group is younger than 16 years. These people often don’t have much money to spend, so the price can not be too high. After a market research , it appears that the targeting customer group wants to spend about 15 to 30 Euros for a game. T-computing can now make a price level, because the expectations from the customers and the costs per product are known.
Pricing: Define pricing policy
Description: the company has to make a price policy. Discounts can be given to consumers or resellers, who buy large batches of a product. It is also possible to create different price levels for different customer groups and geographical locations.
Purpose: creating attractive opportunities for consumers, so that they tend to buy the product faster.
Product: a pricing plan (see paragraph 2.2.3).
Example: T-computing wants to sell much games toy stores, because they attract children under 16 years old. If a toy store buys 1000 game products at once, they can get a discount. T-computing has to find out how much discount is appropriate (balance between profit for the company and attractiveness to buy much at once).
Promotion: Define promotion expenditures
Description: a detailed budget for the promotion activities has to be defined. With this budget, the promotion of the new product can be designed and started.
Purpose: defining the promotion expenditures gives a clear view on the costs for promoting the new product. This information can be used in calculating the price level of the product.
Product: in combination with the “define sales force intensity” activity, it forms a promotion plan. This plan contains information about the promotion costs and activities and is part of the tactical plan.
Example: T-computing has to find out the combination of which, and how much, promotion activities are best for reaching the targeting customer group(s). The balance between promotion expenditures and promotion activities has to be found. Children under 16 years watch often TV, but seldom read books or magazines, so an expensive TV commercial is probably better than a, cheaper, advert in a magazine.
Promotion: Define sales force intensity
Description: the size and capacity of the sales force have to be defined. The size depends on the expectations of the product: does it demand much effort to sell and will it sell much?
Purpose: gives insight in the needed sales personnel and costs for training and/or hiring this personnel.
Product: a promotion plan (see paragraph 2.2.5).
Example: T-computing expects that the new game will sell very good in the first month. After that the sales will slow down. The company now has to estimate the amount of sales personnel for the first month and later. Hiring extra personnel for the first month is a possibility, because they are not necessary for the time after.
Distribution: Define distribution channels
Description: the way of transport has to be chosen. It could be an existing distribution channel, that the company already uses, but it could also be a new kind of distribution channel.
Purpose: gives insight in the use of distribution channels and with this information, it is possible to prepare the distribution.
Product: in combination with the “define distribution expenditures” and “define distribution intensity”, it forms a distribution plan. This plan contains information about the organization of the distribution of the new product and is part of the tactical plan.
Example: T-computing can use the same distribution channels as before, because the physical size of the game software is the same as the size of office software. In the other distribution activities, the company has to determine how the distribution channels will grow.
Distribution: Define distribution expenditures
Description: a detailed budget for the distribution of the new product has to be defined. With this budget, the distribution of the new product can be organized and prepared.
Purpose: defining the distribution expenditures gives a clear view on the costs for distributing the new product. This information can be used in calculating the price level of the product.
Product: a distribution plan (see paragraph 2.2.7).
Example: T-computing has to determine the cost of distributing the product to resellers and directly to the customer.
The cost per product will be defined by the way of transport: the faster the transport, the higher the cost.
Distribution: Define distribution intensity
Description: the size and capacity of the distribution have to be defined. The size and capacity depends on the expectations of the product: does the company think that the new product will be sold very much in a short amount of time?
Purpose: gives insight in the needed capacity for distribution of the new product.
Product: a distribution plan (see paragraph 2.2.7).
Example: the company expects that the game will sell very good in the first month. After that the sales will slow down. T-computing now has to estimate the amount of sales personnel for the first month and later. Hiring extra personnel for the first month is a possibility, because they are not necessary for the time after.
List of Concepts
The list below consist of the concepts that are used in this article. The books Kubr, T., Marchesi H., Ilar, D.,
Kienhuis, H. (1998). Starting up: Achieving success with professional business planning and Gilligan C., (2003). Strategic Marketing Planning were used for explanation of the concepts. The concepts are created during the new product launch activities. Behind each concept, the associated paragraphs are mentioned.
- COMPANY STRATEGY (2.1.3)
- COMPETITIVE STRATEGY (2.1.1)
- DISTRIBUTION PLAN (2.2.7 & 2.2.8 & 2.2.9)
- MARKET STRATEGY (2.1.2)
- PRICING PLAN (2.2.3 & 2.2.4)
- PRODUCT PLAN (2.2.1 & 2.2.2)
- PRODUCT STRATEGY (2.1.4)
- PROMOTION PLAN (2.2.5 & 2.2.6)
- STRATEGIC PLAN (2.1)
- TACTICAL PLAN (2.2)
Combination of activities and concepts
This chapter visualizes the combination between the NPL activities and the resulting concepts. The STRATEGIC PLAN concept consists of COMPETITIVE STRATEGY, MARKET STRATEGY, COMPANY STRATEGY, and PRODUCT STRATEGY. The TACTICAL PLAN concept consists of PRODUCT PLAN, PRICING PLAN, PROMOTION PLAN, and DISTRIBUTION PLAN.
References
Berry, T. (2004). Hurdle: The book on business planning. USA: Palo Alto Software Inc.
Hultink, E.J., Griffin, A., Hart, S., Robben, H.S.J. (1997). Industrial New Product Launch Strategies and Product Development Performance. Journal of product innovation management, Volume: 14, Issue: 4 (July 1997), pp: 243-257
Kubr, T., Marchesi H., Ilar, D., Kienhuis, H. (1998). Starting up: Achieving success with professional business planning. The Netherlands: McKinsey & Company
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