August 25th, 2010

DOES A RETRO PRODUCT STRATEGY REALLY WORK?

Lately, I have been thinking about retro product strategies. You know, when companies maintain or introduce new products that are rooted in designs or use models of the past. I am not talking about products that are just a continuation of trendy or faddy products and categories from years gone by – lava lamps, soda bottle dispensing machines, rotary telephones, and other forms of retro collectibles. No… what I am thinking about are 1) products that have withstood the sands of time and are still popular today and 2) products that are introduced with modern features but packaged in industrial designs to look like they are retro or vintage. They are designed to evoke feelings of nostalgia and of the durability inherent in yesteryear’s products. Let me explain these two types of products in more detail.

 Old Products That Still Sell Well Today

Most of these products are CPG-type food and sundry products. They may have been reformulated, have had new packaging/sizes, and varied pricing over time; however, they are products that have been around for a very long time. Examples include the original McDonald’s hamburger, Crest toothpaste, Johnson’s Baby Shampoo, WD40, Pyrex, Jack Daniel’s whiskey,[RG1]  Crayola crayons, and so on. They still sell very well because they have become imbedded in the fabric and use of our everyday life. They were the best in class then and best in class now. Their product designs and packaging are timeless and very much aligned with their histories.

Some products have become retro because customers never perceived the incremental features and benefits of newer products as outweighing the old products. A great example is the HP 12C calculator. HP makes other calculators (some more fully featured than the HP 12C), but old-school [RG2] people (note: you started work before 1990) still prefer the original 12C.

This was quite a surprise to HP early on. As a result, HP adjusted its strategy and has not only continued to produce the calculator since 1981, but created derivatives such as the 12C Platinum and 12C 25^th Anniversary calculators.

What happens when companies push too far with product development that favors the new over the old? Nothing positive, I am afraid. They [JB3] violate one of those universal laws of marketing by creating products that their customers don’t want. Remember the New Coke – Old Coke marketing and product debacle? Coke had to reintroduce “Coke Classic” to address the customers’ complaints and differentiate the product from “New Coke.” Later, the company killed the “New Coke” product and quietly renamed “Coke Classic” just plain, regular “Coke” again.

Still other old products become niche products with certain customers and applications. For example, DJs and rappers like to scratch real, old-fashioned records, using turntables, when they perform or record and use equipment especially for that purpose. Of course, some of the newer versions have USB interfaces and other ways to plug them into computers and recording equipment. A lot of musicians like the sound of old synthesizers like the Yamaha DX-7.

Modern Products That Draw On the Past for Inspiration

A retro product is a modern product that draws on the past for inspiration. Some retro products are replicas or reissues [RG4] of old favorites, while others are completely new designs with style or detail touches that bring to mind an earlier period. Some industries in which fashion and design are important excel at this.

For example, take the new Chevy Camaro or the gull-winged Mercedes SLS AMG, whose lineages are clearly tied to the muscle and sports car looks of the 1960s and 1970s. Baby Boomers in their 40s and 50s desire those cars, and indeed many drove them back in the day. People like to play old video games either through emulation or on new gaming platforms like the Xbox 360. This is often called retrogaming. Another specific and clear example of this trend is the way in which the sport garments from the ‘70s and ‘80s are used nowadays. Soccer jackets, jerseys and T-shirts with former logos of the soccer associations are very popular; their designs commonly invoke the old days by using lines in the sides and combinations of colors characteristic of those times.

Comparison of old and new Camaro

Brands such as Adidas, Converse, and Nike have their own divisions that specialize in retro products. Jukeboxes could have evolved their designs to keep up with the times; however, even though they play digital files or CDs these days, the design is firmly rooted in the past. Some Motorola police radios look remarkably similar to the ones used in the 1970s, albeit with better LCD displays.

When Does A Retro Strategy Work?

Of course, that is the $100M question. Nobody wants a retro version of an Apple II PC , the original, walkie-talkie sized Motorola cell phone (sometimes called the “brick”), or VisiCalc, the original spreadsheet software. Clearly there are limits to what a retro strategy can achieve. High technology devices that are constantly changing – getting faster, cheaper, better, smaller, and so on – don’t do particularly well with a retro strategy. In some ways, the most successful retro product strategies are derived when the customer views the technology or product as so mature that it cannot be improved upon. Like a fine wine, time makes the products better (compared to alternatives). Retro product strategy is also tied to retro brand revival. This means the brand and the products are revived together, as opposed to creating a retro product within a portfolio of an existing product line and brand.

Retro product strategies seem to work better in categories such as toys, food, candy, beverages, sundries, [RG5] fashion/apparel, music and cars. With rare exceptions, they don’t work well with most IT products, communications, consumer electronics, etc.

In its paper “Everything Old Is New Again,” DDB Communications tied the success of retro products to their ability to 1) allow for rediscovery, 2) connect with timeless consumer values, 3) stay true but contemporize, and 4) build a community around the products.

In summary, understanding the role of nostalgia in the consumption and customer experience is a valuable product strategy. If it is there and can be tapped, it could be a fruitful business strategy for your business.

 Please share your classic and retro product cases and observations on this blog.

Additional Resources:

http://www.americanretro.com/

http://retrowonders.com/

www.ddb.com/pdf/yellowpapers/DDB_YP_Retrobrands_Jul09.pdf

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Posted By Vince Ferraro

July 21st, 2010

6 Product Strategies to Accelerate Business Growth Today

I want to devote this blog post to discuss alternative product strategies to accelerate business growth. Specifically, the 6 key product strategies we used to grow the business while I was at HP. A couple of key considerations are 1) that all of these product strategies approach new business growth in a different way. In HP, we had a healthy paranoia about the competition. As a result, we had no qualms about cannibalizing our own business if we felt that 2) it would help us grow the size of the available market, our market share, or help defend us from current or anticipated competitive moves.

The 6 key product strategies are:

New-to-World Products: These are inventions and discoveries like desktop laser and inkjet printers, iPad, CAT/MRI scanning devices, etc. This product strategy can be extremely disruptive in the market and game changing for customers and vendors. Often times, the disruption comes from lower pricing or smaller physical size. Other ‘new to world’ products are created from categories that already exist; however, new products redefine the categories by using innovative or alternative technology. Examples that come to mind are electric cars, Elliptigo bikes, digital cameras, and Swiffer mops. In some cases, the technology has been around a long time (electric car technology was first used in 1897). Until recently, nobody was able to scale the required battery technology in a way that provided a viable, cost-effective alternative to internal combustion engines. Of course, this is changing rapidly. Creating a completely new product for a completely new market is the most difficult of all the product strategies to execute. In most cases, even the most innovative of new products have some lineage to a previously known technology or application. This is the least used strategy because of its complexity.

New Category Products: These are products that are not new to the world, but new to the company. For example, Apple introduced the iPhone, Mercedes introduced the M Series SUV, Vizio introduced a product line of televisions. In some cases, these new products served adjacent markets/customers using existing channels. In others, it was more risky because the companies did not have an established market presence in the markets they launched their new products in. When companies fail here, often times they are high profile failures. For example, Microsoft’s Zune or Apple’s Newton to go after the emerging PDA market led by Palm at the time.

Additions to Product Lines: These are product line extensions to the company’s existing product line and brand like Diet Coke. HP developed the PhotoSmart printer to go after the market of printing photos at home. In many cases, these are adjacent market opportunities that require more marketing innovation as opposed to technology innovation. Another example of a brand extension is Jello-gelatin creating Jello Pudding Pops and pudding. The line extensions increased awareness of the brand name and increased profitability by providing offerings in more than one product category. According to Wikipedia, A brand’s “extendibility” depends on how strong consumer’s associations are to the brand’s values and goals. “Ralph Lauren’s Polo brand successfully extended from clothing to home furnishings such as bedding and towels. Both clothing and bedding are made of linenand fulfill a similar consumer function of comfort and hominess. Arm & Hammer leveraged its brand equity from basic baking soda into the oral care and laundry care categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Another example is Virgin Group, which was initially a record label that has extended its brand successfully many times; from transportation (airplanes, trains) to games stores and video stores such a Virgin Megastores.”

Product Improvements: Are improvements to existing products that are used to grow market share and revenues. For example, Michelin continuously re-launches their successful X One tire series. WD40 re-launched the venerable WD40 lubricant with a ‘Smart Straw’ which resolved customer satisfaction issues of losing the tiny red straw taped to the side of the can. And let’s not forget Microsoft. They introduced Windows 7 as a replacement for Vista.  Some companies have used nostalgia to create retro products with strong lineages to the past like the HP 12C Classic calculator, creating the paradox that ‘old’ is ‘new’. This is the most frequently used product strategy.

Repositioning Existing Products: These are products that are re-targeted for new use models. For example, using baking soda as a deodorant (and 14 other uses). Another example, Lucozadewas first marketed for sick children and then rebranded to target athletes. Merck introduced Propecia, which is essentially a lower dosage version of their popular prostate drug Proscar, when they found the side effect of drug reduced the effects of male pattern baldness.

Cost Reductions: In this strategy, new products replace existing ones, with a lower cost structure. As a result, the new products that result from this approach drive different pricing options and therefore, bigger market opportunities. Some brands, like Ajax, are becoming dollar store brands. In March 1984, the LaserJet(subsequently called the LaserJet Classic) was introduced. It was a 300-dpi, 8 ppm printer that sold for $2,995 with a remarkable desktop design. This product was highly disrupted when compared to the large line and laser printers found in glass rooms of that era. By 2008, HP had introduced $99 laser printers that were 2X faster, smaller, had better print quality, and were 96% lower in price! What started as an expensive device for large enterprises was able to serve additional markets (like small business and consumer) as price points, image quality, performance, and size were improved upon. Finally, Southwest Airlines was able to capture significant market share from established airline companies by offering a no frills, low price alternative flights on popular, domestic routes.

It is important to note that product growth strategies can also be combined. When HP decided to go after the copier market, we took an existing LaserJet platform and added multifunction capability – scan, copy, additional software, and new paper handling capability. In some ways, it was an addition to our existing product line because not all use models were based on the copier market (but some were). It was certainly new to hp, but it also had elements of ‘new to world’ and ‘cost reductions’ because we were building it on a printer platform, which had lower cost and better reliability than a copier. This allowed us to offer a compelling value proposition and take market share away from entrenched competitors.

Business models are also an important consideration. How do you maximize revenues and profits over the life of the product? At HP, we had a razor-razor blade business model (for printers) that was very profitable. Gillette, Keurig, and Swiffer all have similar business models based on this concept. In addition, the concept of ‘lifetime value of the customer’ becomes important here. Even if you do not have a razor-razor blade business model, you can consider other ways to derive accessories, support, or services revenue and profits over the life of your product. This is not only important financially, but can also help improve the overall customer experience and satisfaction of your products by end user customers by meeting a broader set of needs.

The key point here is that all of these strategies require a robust, new product pipeline in order to continue to grow revenues, unit volumes, and market share. Each one of these strategies can be slotted by 1) the level of technology newness and 2) the level of newness the product is to the market and 3) the current level the company participates in these or adjacent markets. The more ‘new’ the product is on these vectors, the higher the risk and potential return. There is an interesting chart that illustrates this concept that can be found here.

Additional Resources:

1000Ventures.com

Product-Market Growth Matrix

Align Product Strategy

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Posted By Vince Ferraro

April 14th, 2010

Putting the “S” Back into Your Marketing Communications

I know a great many people who do excellent marketing. Ask them to write a data sheet, deliver a positioning statement, key product messages, brief an agency, customer story, etc. and they will rise to the occasion by delivering excellent work. Their messages will be prioritized and on target, the positioning will clearly differentiate their products from the competition, and the agencies will have what they need to create compelling  advertising, PR, and other elements of the marketing mix.

So why am I writing this blog entry? It’s simple. Often times, the communications are missing the sizzle and snap that differentiates excellent marketing communications from best-in-class. If you eat Rice Krispies  - nothing happens until put the milk on them. Then (and only then) do you hear the snap, crackle and pop. The milk is the activator of the crackling sounds. As a marketing person, this Kellogg differentiation has always fascinated me.

Likewise in marketing – something needs to be poured on the marketing communications to give it that something extra – an activator or catalyst. I call it the “S” or sizzle and snap. Others might call it the Wow factor, the Pixie Dust, the Secret Sauce.  You get the idea.

Kay Ross wrote and interesting article about creating more effective marketing communications that I like a lot. At the end of the day, the role of marketing is to “sell more stuff, to more people, for more money”, said Sergio Zyman, the former CMO of Coca-Cola.

So on one hand, I think there is a bunch of tactical things you can do to improve the effectiveness of your marketing materials and communications. You can have strong calls to action, features and benefits expressed from a customer point of view. Equally important is to ensure that the products and communication strategy reinforce the strategic pillars of your company. This is especially true in PR and analyst relations. Unless you are Apple, sophisticated press does not want to hear about your products. What is more valuable to a company are communications that 1) outline the company’s strategy, 2) is explicit about the pillars of its strategy, and 3) uses products, solutions, and partnerships, alliances, acquisitions as proof points of its strategy. And in the messaging of all of this, there needs to be something tangible and sizzling to hang on to and get interested about. This is where your marketing creativity comes in.

For example at HP, we introduced the HP 1018 as the world’s smallest laser printer. While you might think that was a small story (no pun intended), improving the customer experience of the space a printer occupies on a desktop is important, which plays into the larger strategy and a proof point that HP delivers a great customer experiences.

Another example was the recent announcement by Cisco that it was improving the ability of small businesses to connect, secure, and communicate. The products, features, support, and services were the proof points of its ability to deliver on the strategy.

What doesn’t work as well? Here are Sony’s product-centric press releases.

Tie your product or services messaging and marketing collateral around your business’ strategy and strategic initiatives. The net result is that you will build more industry momentum, improve the company’s image and reputation, and educate customers who will really see the differentiation and value your products bring to the market.

Now – go out there and start sizzling!

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Posted By Vince Ferraro

March 30th, 2010

Is Your New Product Introduction Process Launching Your Company to Success (Part 2)?

In this blog post, I will continue the conversation about key success factors for new product introductions. In the last blog (Part 1) we identified 6 factors that are crucial to your company’s product launch success. In this blog, I will discuss 3 more and offer some conclusions.

Accurate Supply and Demand Planning

Related to rollover strategy, having the right demand and supply plan is crucial for a successful product launch. In addition to the uncertainty of fluctuating introduction dates and slipping R & D schedules, a poorly executed supply and demand plan will knock the wind out of the sails of any new product launch, no matter how well executed or creative the other elements of the marketing mix are. This topic, in more detail, will be the subject of another blog post. But the short answer is that (often times) significant inventory needs to be built in advance of a product introduction, in order to accommodate the initial ordering spike and channel stocking requirements. There is no hard and fast or easy rule to apply here. The decision on how much inventory to build is a function of many factors including B2B or B2C segmentation, forecast accuracy, long lead time parts procurement, channel stocking requirements, and of course the rollover strategy – hard or soft. Also to be considered is the inventory policies for that range of products. For example, you may choose to have a higher degree of inventory, manufacturing and mix flexibility with a $199 product than a $99 product. Why? Because (generally speaking) there is more revenue, profit etc. in selling the higher priced products. When companies have a broad portfolio of products (like HP did) – low end and low priced products generally had lower levels of profitability than higher end and higher priced products. This should not be a surprise. As a result in some companies, low end volumes are limited to a certain percentage of total products sold or to a specific market share goal, in order to prevent too much erosion of profitability and mix to the low end.

Delivering Broad Communications

The importance of delivering broad launch communications to suppliers, the channel, key customers, and sales reps are crucial to coordinating a successful product introduction across key stakeholders. Some companies (like Apple) don’t let their sales reps know about their new products the day of the launch. This often results in end user confusion as nobody can answer the inquiries/support calls of end users when the product is announced. While there are legitimate issues with wanting to maintain confidentiality of a product launch (e.g. to prevent a premature competitive response), years of experience have told me the more open and coordinated conversations around the new products, their launch strategy, rollover plans, key messages, etc. are, the better the outcomes for OEMs and their channel partners and customers.

Having An Integrated Marketing Plan

For many people, the launch plan is synonymous with marketing communications – PR, marketing, demo units, marketing collateral, advertising, and promotions. While these are certainly important elements of any new product intro, there is another layer of thinking in the launch plan that needs to be considered. For example, how strategic is this product for the company’s future revenues or company/brand image and how strong is the story? Is there any announcement within this intro (e.g. hardware, technology, partnerships) that fortifies or offers proof points for the company’s strategy along a new or existing dimension? Each product introduction should be like a piece of gigantic jigsaw puzzle that fortifies and moves the company to improved competitive advantage. Master this concept and you will beat out 95% of your competition in the effectiveness of your product launch process. If you start thinking like this right now, I am confident you will get the new product launch results you are looking for.

Here are some additional questions to think about, related to your launch strategy.

10 Questions to Consider About Your Launch Strategy

1. Is the new product strategic or tactical? Both in financial performance and market segment
2. What is the key value proposition and messaging of the product? Is it compelling and sustainable?
3. What is the positioning of the product, related to the competition, and other products the company manufactures? Is the product innovative and can it disrupt the competition?
4. How does this product contribute to the longer term vision and financial performance of the businesses? Is it a big contributor to future growth?
5. Is this product newsworthy? Will the press or industry analysts run a story about it?
6. How much do end users care, read or follow the news of a new product announcement?
7. How frequently does the company launch products – monthly, quarterly, or annually? The idea being is that the velocity of any particular introduction, and its activities, will be a function of how often introductions are done the business unit. Not all of them can be strategic.
8. Will there be enough inventory available at launch? A related question … is there too much inventory remaining for the old product? If so, what do we do about it?
9. Are all of the elements of the launch aligned and ready to go? For example in addition to product availability are demo units ready, advertising creatives media buying plan in place?
10. Is the product launch coordinated with end user and channel seasonality? If timing is not synched, the potential exists that you will not get enough channel or end user momentum for the launch.

Let’s recap. There are 9 factors that are key to successful product introductions. They include:

1. Reliability of the Product Development Schedule
2. Strategic Nature of the Product
3. What is The Story Behind the Product?
4. Availability of the Product after the Launch Announcement
5. Rollover Strategy
6. Windows Planning
7. Accurate Supply and Demand Planning
8. Delivering Broad Communications
9. Having an Integrated Marketing Plan

In conclusion, a product launch is one of those top 5 things marketing can do to help ensure the successful viability of the future business. Careful consideration about the right focus, resourcing, and support given to a new product launch will go a long way in helping build brand awareness and preference and future financial and market share growth. One final comment and that is as it relates to services and software. In the case of these product groups (vs. hardware), there may not be a physical product to rollover. But the think most of the other factors apply to these product categories. So please let me know your NPI success factors in your comments back to me on this blog.

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Posted By Vince Ferraro

March 22nd, 2010

Is Your New Product Introduction Process Launching Your Company to Success (Part 1)?

For many companies that are trying to grow, new product introductions (often called NPIs) are a critical component to that growth strategy. In fact, some companies even set goals around new product introductions in hopes that it drives significant future revenues and profitability. For example, 50% of future revenues over the next three years is derived from new product introductions. Of course, not all companies can achieve that goal. It depends on the industry, its typical product development cycle, customer expectations for new product releases, etc. A 50% goal for a technology company would not be an overly aggressive goal.

There are important distinctions to be made about how new products get introduced, depending on what type of product it is. Using Apple, as an example, new products can come from three general pipelines (although there are certainly variations). Completely new products (like the iPad), replacement products (like the iPhone 3GS), and product line extensions (iPod Touch after iPod Classic).

As a marketer attempting to plan for a successful NPI, there are some important considerations that need to be included. First, many people equate a new product introduction with their PR and Marcom activities. They would say that they have done the press release, created the data sheet, took a few photos, put the new product in the catalog and price list – so they are done. While these are essential components of an introduction, it is only a few of the many launch activities. Second, most successful introductions are tied to defining and articulating the strategic intent of the company and its business strategy. What do you think is more interesting? A press release about a new product and its specifications or a press release which talks about the strategic intent/strategy of the company with a new product and/or its technology as the proof or substantiation point? Here is a great example about merging strategy and product introduction messages from Hewlett-Packard.

The more effective new product introductions are measured on a weekly basis. Depending on the type of product introduction – new products in new markets are typically more complicated than a replacement/rollover product. Starting an introduction process more than 12 months in advance is not unheard of.

Other important considerations include the following.

Reliability of the Product Development Schedule

It is paramount that a new product is introduced using a highly confident R & D schedule and process. Nothing screws up an introduction more than a development team that cannot commit to key dates, especially within 90-120 days of the launch for this is when key introduction trigger decisions (e.g. buying media, press and analyst tours, product rollover decisions) need to be made. Often times, you will hear the term “pull the trigger”. This simply means a critical decision has to be made and any pull back would be difficult and/or costly.

Strategic Nature of the Product

How strategic the product is (which could be defined by revenue contribution, profitability, new market, market share potential, etc.) will determine how much effort and money will go into the launch strategy and plan. So the question is, is it a Big Bang launch or a minor new product introduction? Or is it something in between? Resources will generally get applied according to the strategic significance of a product’s launch. The Boston Consulting Group’s Portfolio Growth Matrix is one way to help define which products are the “Stars” and are worth more attention vs. the “Dogs”.

What is The Story Behind the Product?

In a successful, new product launch, there needs to be a strategic message or story behind the product. How does the product contribute to the future success of the company, develop a new market, and reinforce previous strategic announcements? A successful product launch will be a proof point to a company’s strategy and reinforce a strategic initiative, not distract from it.

Availability of the Product after the Launch Announcement

In a perfect world, we would launch a product on a particular day and customers would hear about it, rush to the store and buy it, and have instant gratification. Rarely does it work that way. There are two important things to consider. First, If it is a new product category for the company or a new product in a new market or a new product in a market where the company does not play (e.g. Apples original iPhone or Microsoft’s Xbox 360), there is some flexibility on when a product needs to be available in the channel. In fact, many companies introducing products in a category like this will sometimes pre-announce a product in order to disrupt their competitor’s business (like Apple’s iPad and Amazon’s Kindle). This can be an effective strategy when used appropriately. When the product replaces an existing product, great care needs to be exercised to ensure the rollover from the old product to the new product does not disrupt channel supply or company revenues. Of course, this is easier said than done; but it is possible in a company with world-class product development launch capabilities. There are, of course, numerous examples of companies that get this wrong.

Rollover Strategy

With products that are replacing existing products, great care needs to be exercised in the formulation of the rollover strategy. Sometimes companies will initiate a “hard rollover”, which means that production of a new product will ramp down or stop as the production of a new product ramps up. Others prefer to do a “soft rollover” where the old product and a new product co-exist for several months, until the new product has enough inventory and there is confidence of high quality units being produced. Based on my experience launching hundreds of new products, my suggestion is a “soft rollover” approach as a hard rollover is extremely difficult to execute well. It is somewhat channel dependent. There are other considerations including customer type, channel used, and build to order vs. an inventoried and stocked product.

Windows Planning

It almost always makes sense for new products to be bunched up together and introduced in a few, strategic timeframes (also called Windows as opposed to numerous discreet product introduction events throughout the year. Why? Because, some of the best product introductions will be tied to seasonal purchasing cycles of the customer. For example in retail, such windows include Back to School and Holiday. You would never launch a product in December. With business customers, these Windows can be tied to government and education buying cycles or non-holiday Spring and Fall months. For example, it makes no sense to introduce products for business during regional times for vacation (like summer months, August in Europe). I suggest a 3 stage introduction window planning approach – which looks at 0-6 months, 7-12 months, and 13-18 months out into the future. The idea is that introductions are being managed across three different time horizons as opposed to discreet moments in time. It would not uncommon for the actual launch dates and plans to change in these outer windows (greater than 12 months out) as more certainty comes from the product development schedule. At the same time, there needs to be a lot of detail (and stability) about launch plans in 0-6 months. Another important part of this process is that it allows comparative window introduction window planning. What I mean by this is the product messaging, promotional campaigns, advertising, strategic intent communications can be looked at as evolving and inter-related to each other over the 3 introduction windows. This approach, in and of itself, will make your new product launch process more strategic.

I will end the blog here for now. I will complete this discussion in a Part 2 of this topic, which will be my next blog post. In conclusion, let me say that the keys to success for any new product introduction is planning, planning, planning. In addition, it’s knowing how the new product fits into your company’s strategic plan and vision and being able to articulate that (product and strategy) to customers, channel partners, stockholders, and other key stakeholders.

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Posted By Vince Ferraro