Today’s Topics
Launching a New Product,
Review of Course Learnings,
and
Final Exam Preparation
Please fill out the online
course assessment survey
Written comments are
particularly appreciated !!
Course Schedule
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Business objectives
Financial measurements
(Google)
Company analysis; roles
& responsibilities
(Medtronic)
Business & product plans
(FHP Wireless)
Target customers
(DLJdirect)
Competitive analysis
(Airborne Express)
Product decisions
(Techsonic)
Midterm exam (THINK)
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The Marketing Function
(Lenovo)
Sales & Sales Channels
(GolfLogix)
Internet Marketing &
Sales (HubSpot)
R&D: Product
Development (Guidant)
Operations (Crocs)
Product Launch
(Invisalign)
Final exam (Emotiv)
Thursday, Dec 15th,
1-4pm, E230
Today’s Agenda
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Launching a product: Invisalign case
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Summary of key learnings from the course
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Review case for final exam (Emotiv)
Our Last Assignment:
Product Launch
Invisalign
A new technology ( ~ 2000)
for aligning teeth
Product Launch Assignment:
Align Technology in 2001
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Invisalign straightens teeth via a series of clear
plastic retainers designed and made specifically
for each patient
Higher price and higher COGS than traditional
metal braces, but “better”
Product available for about 2 years
Annual revenues ~$50M but OI ~($100M)
Adoption rate by orthodontists is insufficient to
support future growth
Arguably, the product needs to be “re-launched”
Assignment Questions
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Which of the three end-customer (patient) segments
identified should be Align’s target? Why?
Which of the promotion and sales tasks (promotion,
selling, fulfillment, service) should be done by Align? By
the dentists? By the orthodontists?
What are the orthodontist’s “channel economics” for
Invisalign vs. standard braces?
What barriers are preventing increased adoption of
Invisalign by orthodontists?
How should Invisalign be positioned with orthodontists?
(write a positioning statement)
By what methods should Invisalign be promoted to
dentists? To orthodontists?
Making Product Decisions
Financial
Analysis
(health,
challenges)
Market Analysis
(customers, needs,
market trends)
Competitive
Analysis
(strengths,
weaknesses)
Decision Criteria: Objectives/Constraints
Competitive Adv Decision (SCA)
Target Customer Decision (C)
Product Decisions
(4P’s)
Align Technology
Income Statement
YEAR ENDING; $K
Total Revenue
Cost of Revenue
Gross Profit
R&D exp
SG&A exp
Non Recurring
Operating Income
31-Dec-10
31-Dec-08
31-Dec-06
387,126
303,976
206,354
83,709
78,850
64,775
303,417
225,126
141,579
25,997
26,165
18,474
170,137
177,216
146,298
4,549
6,231
14,343
102,734
15,514
-37,536
Invisalign’s Current Channel
gold arrow = promotion
Invisalign
-promotion
-salesforce (30)
Sales, training,
support
Orthodontists
Dentists
-8,500 in US
-6,500 trained by
Invisalign
-120,000 in US
referral
visit
Patients
-2M/year in US
-35,000 Invisalign
patients (<2%)
visits
Target Customers
Current target: adults and adolescents with mild-tomoderate conditions; sensitive to appearance
for social/personal/professional reasons
Segments identified:
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Health conscious
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Prior (braces) users
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Beauty conscious
Selecting Target Customers:
considerations
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Segment size
Revenue and margin opportunity
Customer benefits
Customer interest
Customer willingness-to-pay
Competition/market coverage
Sales channel and associated profit margin
Cost to serve
Customer loyalty/lock-in
Channel Economics --- example
List price = $100
Manufacturer
channel
price
COGS = 35
expenses = 20
65
Channel
Partner
end
user
price
90
COGS = 65
expenses = 20
gross margin % = 30/65
= 46%
gross margin % = 25/90
= 28%
OI % = 10/65
= 15%
OI % = 5/90
= 6%
Pricing: considerations
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Value/benefit delivered
Customer’s ability to pay
Competitive alternatives/pricing
Product “image” created
Initial sales ramp
Profitability (short- and long-run)
Positioning statement
development
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Who are you positioning yourself “with” ?
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What do they desire and fear ?
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Who/what are you positioning “against” ?
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What are your differentiators/benefits ?
Invisalign Positioning
with Orthodontists
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Positioning with = orthodontists
Orthodontist desires = ?
Orthodontist fears = barriers
Positioning against = ?
(might depend on target customer)
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Positioning content = ?
Review: Major Course Topics
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Financials
Business Plans
Market analysis
Competitive analysis
Product decisions
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Marketing
Sales & channels
R&D
Operations
Product launch
Learning Outcomes:
you will learn to …
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analyze a company’s financial performance and assess
its opportunities and challenges for future growth
assess the barriers to success in a particular market and
select the appropriate target customers
identify a company’s competitive advantages by
performing a comprehensive analysis of its direct and
indirect competition
define the “whole product” and decide on appropriate
product differentiators
And, you will learn to…
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select appropriate sales/distribution channels and
promotional messages and methods
identify best practices in new product development and
the challenges in integrating the marketing, operations
and product development functions
understand how technical people interact with
marketing, sales and operations personnel, and how
they contribute to resolution of business issues
understand how business issues impact technical work
…because you’ll understand
and apply these Concepts (13)
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Definition of product
success
Whole product
Product plan: key
success factors
Differentiation
Market attractiveness
Target customers
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Competitive
advantage
Marketing mix (C+4P)
Product positioning
Sales functions
Channel options
Channel value-added
Operations balance
… and you’ll be able to use
these Methods/Tools (13)
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Income statement
analysis
Financial benchmarks
Target customer
description
Target customer
selection
5 Forces analysis
Competitive analysis
(10 dimensions)
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Identifying
competitive options
Decision criteria
Product decisions
Product competitive
positioning
Channel economics
Process dimensions
Product development
best practices
The Basics……
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Companies try to maximize the wealth of their owners ---
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Stock price and the ability to pay dividends are driven by
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market cap (stock price) plus dividends
earnings, and beliefs about future earnings growth
Individual products and services are successful iff they
contribute targeted amounts to earnings/ earnings growth
Earnings growth (ultimately) requires revenue growth
Firms use financial statements to develop plans, and
measure/analyze/report on their performance
…..and, in terms of
business objectives…..
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A company’s basic financial objective is to grow
its earnings quickly and sustainably, in order to
raise its stock price and have the ability to pay
its owners dividends
Products are successful if and only if they attain
their targeted contribution to corporate earnings
The Income Statement
Revenues
- Cost of Goods Sold (COGS)
= Gross Margin (gross profit)
- M&S expense
- R&D expense
- G&A expense
= Operating income (EBIT)
- Interest
- Taxes
= Net income (earnings)
Key Financial Concepts
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Operations vs. total/net (e.g., OI vs. NI)
Normalizing results: return measures (e.g., OI as % of
revenue; operating return on assets)
Knowing what “good” results are: benchmarks; general
and industry-specific
Recognizing cash vs. non-cash
- Measures (e.g., OI vs. NOCF)
- Capital goods: depreciation/amortization
- Working capital: inventory, accounts rec’bl.
Method: How to analyze an
Income Statement
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(First, compute “the percentages”)
Operating income vs. net income
In-period operating performance: costs and expenses as
a % of revenue; compare to benchmarks
Cross-period performance (trends): relative change in
rev, costs, expenses, earnings… improvements vs.
deteriorations, and why
Going-forward opportunities and challenges/risks for
each line item
“Good” Operating Returns
in the Business Market
Sold direct
Higher GM %
Higher R&D %
Sold indirect
Software
27%
23%
Hardware
18%
12%
Service
15%
-
Lower GM %
Lower M&S %
“Good” Operating Returns
in the Consumer Market
Sold direct
Higher GM %
Higher R&D %
Sold indirect
Software
20%
16%
Hardware
11%
7%
Service
9%
Lower GM %
Lower M&S %
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Business/Product Plan Learnings
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Content/scope of a business/product plan
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Critical aspects of a “winning” plan
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Differentiation: importance, definition, identification
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Start-ups: success factors, funding requirements,
success profiles
Critical Aspects
of a Winning Plan
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Company: people, skills, resources
Product: “whole” product & its benefits
Market: attractiveness & target customers
Competition: differentiation !!
Sales and marketing plan: channels
Operations plan: mfg, logistics, service
Financials: investor liquidity
Markets/Customers Learnings
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Market attractiveness: the five forces model
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The concept of target customers
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How to describe target end-customers: groups,
demographics, psychographics, needs
Target customer selection method/process
(DLJdirect)
Competition Learnings
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Competitive advantage, and its relationship to
differentiation
How companies create value; “added value” as a
measure of competitive advantage
Performing a competitive analysis (method/dimensions:
Airborne Express)
Making business decisions based on competitive analysis
results; competitive options framework
Definitions
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Differentiator = a dimension of the “whole product” that
is unique or best compared to competitive offerings (as
measured by the value assessed by the targeted
customers);
examples = best service, first-to-market
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Competitive advantage = a capability, competency,
process, skill or position of a company that enables
creation of one or more differentiators;
examples = marketing expertise, large customer base
Differentiation
from Competitors’ Products
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Whole product differentiation is the answer to:
Why do customers choose your product
instead of somebody else’s ?
(or buying nothing at all?)
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Product differentiators are the things that are
unique or best about the whole product, compared
to the customers’ other alternatives
Potential areas for differentiation = dimensions of
the whole product (product features, price, sales,
marketing, customer service/support, brand, etc)
Identifying Competitive
Options
Products
Current
products
Current
Position
Current
target
customers
Customers
Therefore…
Competitive Options
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Protect & defend current customer/product segment
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Increase market share in current segment
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Selectively extend (whole) product offerings
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Selectively extend target customer set
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Become a broad-line supplier
Making Product Decisions
Financial
Analysis
(health,
challenges)
Market Analysis
(customers, needs,
market trends)
Competitive
Analysis
(strengths,
weaknesses)
Decision Criteria: Objectives/Constraints
Competitive Adv Decision (SCA)
Target Customer Decision (C)
Product Decisions
(4P’s)
Decision Criteria Address…
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Revenues
COGS/gross margin
Expenses
Profits (usually, operating income)
Timeframe for results
Risk tolerance
Constraints (financial and other resources)
Marketing: Learnings
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Elements of the Marketing Mix (C+4P)
Basis of mix decisions: market & financial objectives and
competitive advantage(s)
Importance of product positioning
Positioning factors:
- positioning with? (target customers)
- positioning against? (relevant competitors)
- desires & fears of positioning target
- key positioning content (esp. differentiators
and benefits)
Promotion (marcomm): choosing the vehicle(s)/ media
that provides best and most cost-effective access to the
target
Sales Channels: Learnings
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The basic sales functions: (promotion/marcomm); selling,
fulfillment, and service
Channel value-added: Higher and lower value-added
channels; value-added functions
Specific channel options: direct (multiple types), OEM,
integrator, VAR/VAD, distributor, dealer/retailer/reseller,
etc
Channel decision criteria: considerations in matching
products, customers, and channels
Channel economics: channel margin, profit
Channel conflict: coordinating multiple channels
Channel Economics --- example
List price = $100
Manufacturer
channel
price
COGS = 35
expenses = 20
65
Channel
Partner
end
user
price
90
COGS = 65
expenses = 20
gross margin % = 30/65
= 46%
gross margin % = 25/90
= 28%
OI % = 10/65
= 15%
OI % = 5/90
= 6%
Learnings: R&D
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Characteristics of market-focused new product
development processes……best practices
Process dimensions: What? How? How well?
(objectives, structure/discipline, execution
quality)
Marketing/R&D integration: aspects, desired vs.
actual integration, barriers
Learnings: Operations
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Operations functions: manufacturing,
logistics & service
Characteristics of world-class operations
processes
The Operations Balance
Impacts on operations: marketing, sales,
R&D
The Operations Balance
COGS
Inventory
Customer
Service
Final Exam
Thursday, Dec 15th
1 – 4pm
E 230
Process for final exam
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Handwritten; no laptops or other
communicating devices
Open book, open note;
all materials on paper
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Question sheet must be returned
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Stevens Honor Code applies
Typical Grade Distribution
individual semesters vary considerably
D/F
C
B
A
homework
0+
10%
10%
80+%
class participation
0+
30%
45%
25%
5%
3(12%)
35%
8(31%)
40%
14(54%)
20%
1(4%)
final exam
out of 26 students
0+
25%
6.5
50%
13
25%
6.5
course grade
0+
15%
60%
25%
mid-term exam
actual grades
Final Exam Case
Emotiv Systems:
It’s the Thoughts That Count
Brain-computer interface (BCI)
technologies
Emotiv Systems in 2007
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Emotiv’s EEG-based product can sense 30
mental states (12 expressive, 6 affective, 12 cognitive)
Currently targeting the video game market, but
other application markets are possible (medical,
military, market research, etc)
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Decisions to make before 2008 product launch:
- console or PC games?
- distribution channels
- pricing
- game development?
Potential Exam Topics
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Income statement analysis
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Decision criteria (objectives, outcomes)
Market attractiveness (5 Forces)
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Competitive analysis
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Competitive advantage
Target customer selection/description
Differentiation (whole product)
Product decisions (pos-and-neg’s)
Channel economics
Channel choice (pos-and-neg’s)
Product positioning
Pricing
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Promotion
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Please fill out the online
course assessment survey
Written comments are
particularly appreciated !!