Product Launch-Value Proposition

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Product Launch

Value Proposition

May 2009

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1. Concept Definition and Key Challenges

2. Our Focus and Value Proposition

3. Our Approach

4. Why Frost & Sullivan

5. Case Studies and Key References

Table of Content

Table of Content

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• Additional revenue streams, reduction & diversification of risk

• Organic expansion

• Value of company, share price

• Opportunity for exponential and not just incremental sales

• Erosion of margins due to competition

• Changing market conditions or opportunities on growing markets

• Emerging markets

• Address changing customer needs

• Retaining leadership position/ be perceived as an industry shaper/ innovator

• Copying innovators

• Technology exploitation

• Capitalise on skills base

• Employee motivation and retention

Value-generation Value-generation CommercialCommercial OperationalOperational

Typical reasons for launching new products:

Generate additional revenue and margin

1. Concept Definition & Key Challenges

Companies seek out new product launch opportunities for strategic, commercial and operational reasons

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Not all launches meet expectations. To be successful, 'classic' product launch pitfalls need to be avoided

• The product or service should be launched to address customer needs. This is obvious, but is probably the biggest cause of launch failures. In today's competitive world, there is a shortage of customers, not of products or capacity.

• The company launching the product should know what specific needs its product will address. Which customers (target)? What offering (position)? Why is it better (differentiate)? It's not only because it works that customers will pay for it.

• Companies tend to overestimate revenue forecasts for the new product. They have not fully understood the market they are addressing, their ability to deliver and provide service, and how their current situation may hinder the launch process.

• A product launch should be executed by a clearly defined, cross-functional Launch Team, integrating key members of Corporate Management, R&D, Sales, Service, Supply Chain. It is not just the job of Marketing.

• A product launch process should be supported by a clearly defined Launch Plan: objectives, goals, timelines, toll gates, tasks, responsibilities, report lines, performance measurements.

• A product launch is a process, not an event.

External

Internal

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NPL is the 2nd step of Product Lifecycle Management and it determines the business success of the new product

New Product Development

New Product Launch

Product Management

Scope: New Product Launch in the Product LifecycleV

alu

e

Sales

0 Profit/ loss Profit/ loss

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3. Our Approach



Table of Content

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2. Our Focus & Value Proposition

Frost & Sullivan gives equal importance to building the fact foundation, marketing planning and implementation

New Product Development

New Product Launch

Product Management

Product Lifecycle & New Product Launch scope

Capability Assessment

MarketAssessment

Marketing Strategy Plan

MarketingOperations

Plan

LaunchMonitoring &Adjustments

Va

lue

Sales

0 Profit/ loss Profit/ loss

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2. Our Focus & Value Proposition

Frost & Sullivan focuses on fact-based and actionable analysis and recommendations

• Working value proposition summary• Resource analysis

• HR• Production Assets• Sourcing & Suppliers• Logistics• Sales & Marketing Network

• Budget analysis

• Segments: • Rank target markets & segments• Addressable market

• Customers: • Needs/ unmet needs• Price points, elasticity• External factors (regulation, etc.)

• Competition• Pricing, Positioning• Distribution• Differentiation strategies

• Adjustment by country/ region

• Performance dashboards• Operation monitoring• Product performance tracking

• Post launch product fine-tuning (bugs, customisation, targeting…)

• Marketing plan adjustments

• Value proposition confirmation • Distribution strategies • Draft critical pathway for launch• Sales and margins forecasts, KPI's• Impact of new product upon existing

product portfolio

• Product & packaging adjustments• Price levels• Customer value• Promotion plan• Support tools to effective launch

(sales, logistics, provisioning, crm, management)

Capability Assessment Market Assessment

Launch Monitoring & Adjustments

Marketing Strategy Marketing Operations Plan

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3. Our Approach



Table of Content

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Conclusions & Recommendations

Marketing Strategy

Step 1: Create a strong fact foundation

Output: Opportunity validation

Output: Value proposition + business case

Base case scenario GO/NO GO decisionImplementation plan

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Step 2: Confirm new product launch strategy Step 3: Implement the strategy


Output: Implementation roll out & impact measurement

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Market Assessment

Output: Opportunity validation

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3. Our Approach

The New Product Launch best practice programme is organised in 3 complementary and successive steps

Marketing Operations

Output: Marketing (launch) plan

Using the components of this framework, careful diagnosis of client challenges and opportunities allows a tailor-made approach to be recommended

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3. Our Approach

Capability Assessment (1)


• Manufacturing needed• Partner network, suppliers &

platform needed • Organisation structure & RACI• Investment needed (human capital,

financial, technologies, assets)• Promotion resources required

• What are our capability & expertise gaps to target these product and customer segments?

• What are the required changes?• What are the key success factors?

• Capability gap analysis: • Production, Sourcing &

Suppliers • Sales & Marketing, other HR

• Cross-functional stakeholder buy-in• Priorities for validation and planning• Assign Launch team

• What expectations are common to key stakeholders?

• What are key challenges and opportunities?

• Who is on steering committee?

• Working version of value proposition

Key drivers Key questions

• Key financials: • Revenue streams• CAPEX, OPEX, margins

• What are ROI scenarios?• How do we manage the risks?• What are the key milestones?• What are the critical success

factors?

• Budget Analysis

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Benefits of the proposed changes will come from six areas and initial forecasts suggest they are significant:

1. Increased stand alone Solution XYZ sales

2. Increased XYZ sales to current customers

3. Increased XYZ and technology sales to high-end customers

4. Increased XYZ and technology sales to following market by developing a targeted proposition

5. Improved margin

6. Protection from business erosion

Incremental revenue p.a. by year 5

$800k-$1m

$480k-$600k

$5m-$7.5m (IT $1m-$1.5m)

$5-$6m (IT $500k-$600k)

Currently unquantified

$1.24m in lost IT share

Return on Investment

Year 1 Year 2 Year 3 Year 4 Year 5-$5m

0$5m

$10m

$15m

$20m

$25m

$30m$35m

Highest negative in investment cycle$2.6m

Cumulative Revenue

Quarterly Revenue

An estimate of implementation costs suggests payback could begin after 24 months

Key Assumptions-Transitional costs tail off after 24 months-Ongoing costs after change remain the same as now. Any cost savings taken as benefit, any new staff taken on through restructuring-Average total cost to employ project team is $1,200 per day during implementation

3. Our Approach

Capability Assessment (2) - Budget Analysis, illustrative

Question: What levels of ROI can be expected and when?

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3. Our Approach

Market Assessment

Market Assessment Key drivers Key issues and questions

• Regulatory & certifications• Characteristics (intrinsic

environment)• Features/ technologies required• Existing technologies & limits • Decision making • Usage trends; sensitivity

• Key players, offering• Distinctive advantages, barriers• Best practices• Economics• Go-to market routes

• Segmentation• Size & growth; forecast• Market penetration• Product switch

• What are the trends/ behaviours/ expectations? Interests in new approach?

• What are the opportunities?• What are the key success factors?

• How is the market segmented?• What are the opportunities?• Which ones should be captured?• What share can be reached?

• Key competitors SWOT• Most likely scenarios for

supply/demand balance, implications

• Transferable best practices?

• Features• Segments• Distribution

• Does the product need to be adjusted to local specificities?

• What’s the impact?• Adjustment by country/ region

• Competition• Pricing, Positioning• Distribution• Differentiation strategies

• Customers: • Needs/ unmet needs• Price points, elasticity• External factors (regulation,

etc.)

• Segments: • Rank target markets &

segments• Addressable market

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Revenuefrom

segment(000's)

Revenuegrowth

Company G

Company C

Company F

Company H

Company E

Company D

Company B

Company A(US only)

Size of the bubble: relative breadth of portfolio

3. Our Approach

Market Assessment (2) - Competitive Analysis, Illustrative

Question: How does breadth of portfolio translate into revenues and revenue growth?

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3. Our Approach

Marketing Strategy

Marketing Strategy Plan

• Fit with current strategy, objectives and projects?

• Impact on existing projects?

• Sales scenarios • Margin scenarios• KPIs relevant to the business

(NPV)

• Roadmap (short, mid, long term)• Action plan (quarterly plan for the

first year)


• Segment to be targeted• Product characteristics• Unmet needs to be covered by the

new product• Distinctive advantage• Strategic fit with portfolio

• How is the market segmented?• What is the proposition to

customers?• What is the unique selling point?• How can the product best

complement the portfolio?

• Distribution and channel model

• What is most effective way to reach, sell to and retain customers?

• What adjustments are needed to current model?

• What are the pitfalls to avoid?• What are the key actions to be

launched?

• What is the business scenario?• What are the key assumptions?• What are the key success

indicators to monitor?

• Cannibalisation/ substitution• Existing product/ project lifecycle• Impact over current investments

• Draft critical pathway for launch

• Distribution strategy

• Validation of value proposition

• Impact of new product on existing product portfolio

• Sales and margins forecasts, KPI's

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47

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62

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100Top long term complications

Top short term side effects

Top target values

Middle long term complications

Middle short term side effects

Top cost of disposables

Standard size

Top learning time

Top staffing time

Middle learning time

Middle machine purchase cost

Small sizeTop integration

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C

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E

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Question: what set of features and benefits are most likely to lead to purchase?Conjoint Analysis of Customer Priorities, Medical Technologies

QQuality

CCost

EEase of Use

Top machine purchase cost

Middle cost of disposables

Quality of Treatment

Total Cost

Ease of Use/Ergonomics

Category Utility/Score

!

Q

Customers overwhelmingly traded Cost and Ease of Use for Quality of Treatment. The ranking of sub-levels showed meaningful variations per country.

Conjoint analysis tests the criteria buyers use to make purchase decisions by forcing them to make trade-offs between different features/benefits.

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3. Our Approach

Marketing Strategy (2) - Value Proposition, Illustrative

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Category Utility/Score

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3. Our Approach

Marketing Operations

Marketing Operations Plan Key drivers Key questions

• Local Product usage & preferences• Product features specific to

targeted local market• Packaging specific to targeted local

market

• What product adjustments are required to adapt locally?

• Any certification required?• What are local regulatory

requirements?

• Product & packaging adjustments

• Competitor price• Churn rate• Production costs• Customer price acceptance

• How price sensitive are customers?

• What’s the price elasticity?• Do we target premium position?

• Price levels

• Brand• Product features & quality level• Warranty• Packaging

• What is our unique selling point?• What are the priorities of our target

customer?• Do we target premium position?

• Customer value

• Promotional mix: advertising, sales, promotions, PR

• Budget• Program & targeted impact • CRM model

• Which message will resonate best with the customer segment?

• Which media provide optimal access to our target?

• How do we roll it out over time?

• Promotion plan

• Sales force, tools & training• Distribution & logistics• CRM tools• Product management tools & KPIs

• Who will sell/ distribute and how? • What are the tangible/ intangible

assets needed?• What are the projected results &

boundaries?

• Support tools for effective launch

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3. Our Approach




• Product features & quality level• Packaging

• Is product delivering as expected?• What adjustments are required?• Post-launch product fine-tuning

• Market penetration• Customer satisfaction• Actual sales, costs & margin

• Is product delivering as expected?• Are we progressing according to

plan?• Which KPIs need strengthening?

• Post-launch product tracking

• Promotion• Distribution• Price levels

• Is performance in line with forecasts?

• Have unforeseen external factors impacted progression?

• What adjustment are required?

• Post-launch product operation monitoring

• Sales, costs and margin forecast• Targeted customer segment• Promotion• Distribution• Price levels

• What evidence is available to support marketing and promotional efficacy?

• How do we address the weakest links?

• Any adjustment required to our forecast plan as a result?

• Post-launch product marketing plan adjustment

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3. Our Approach



Table of Content

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Why Frost & Sullivan?

Dedicated focus on growth and how new product launches contribute to growth.

Track record of successful new product launch consulting projects over 45 years.

Frost & Sullivan combines both Consulting and Research expertise

Frost & Sullivan offers both global and local perspectives

Frost & Sullivan generates synergies across different sectors and markets

Frost & Sullivan is the Growth strategy consulting firm

International organisation with 32 offices across all key regional markets

Strong understanding of the local issues which underpin the success of new product launch strategies and roll-out

Industry expertise supported by an international pool of functional experts

Best-in-class consulting methodologies proven to be effective through experience in multiple new product launch projects

Experience gained across a complete range of industries and services used to advantage in product launch projects

Capability to identify new product launch opportunities across different industries and markets

Frost & Sullivan assets for a successful new product launch project :

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3. Our Approach



Table of Content

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The client: • A global medical technology and healthcare company with

leading positions in renal care marketsThe challenge • Steady decline in market share of a core revenue-

generator• Product perceived as less reliable than competition• Gaps in their product line and pipeline• Hence a need to redefine the product portfolio and

establish the value proposition for new products due for launch mid-term.

The Objectives • Develop a market-entry/ development

roadmap• Undertake end-user analysis to support

the value proposition• Complement its business planning with a

robust business case

Outcome & business impact• Clear value proposition to focus all pre-launch initiatives• Shift in focus from product to market• Market-driven business case for Board• Investment in key product features to support the value

proposition

5. Case Studies & Key References

Develop Value Proposition - Medical Technology

Our approach & work• Stage 1 - Validate the existing processes and assumptions• Stage 2 - Define the Value Proposition by understanding user requirements and perceptions (Conjoint &

Qualitative Analyses).• Stage3 - Develop a business case to define the product mix, generate addressable market plan, identify

risks and generate input for making business plan.

• Cross-functional team alignment around market needs

• and client value proposition• ‘Best practice’ precedent for ongoing

product portfolio assessments

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The Client • Our client was created in 2005 by ultrasound medical imaging

experts. Funded by venture capital firms, our client had already performed early-stage clinical studies which demonstrated significant improvements in diagnostic specificity.

The Challenge• They were about to launch their first system for use in breast

cancer diagnosis. To support further investment decisions and attract further investors, the client and their key VC partner needed to validate both the price premium for the new technology and their corresponding business case for launch.

The Objectives • Validate key points of client’s

business case for EU and US:• Validate price points for novel

system across 6 countries• Validate volume and value market

potential and estimate five-year adoption curve

• Identify distributor remuneration models

Outcome & business impactKey success factors were identified for our client and price premium ranges were validated. The detailed market scenarios highlighted the impact of validated clinical evidence short-term and of price pressures long-term. The improved understanding of regional variants helped validate go-to-market strategy.The client will use the assessment as objective, third-party validation when raising further capital and during marketing launch at the RSNA annual congress.

5. Case Studies & Key ReferencesInternational launch, innovative ultrasound system, market potential assessment

Our approach & work

Supported with secondary research, markets were modelled based on information gathered from key opinion leaders in leading breast centres, ultrasound manufacturers and distributors. Market models were drafted for multifunction, breast-dedicated and the client ultrasound system. Market penetration scenarios were drafted based on weighted competitive, quantitative and qualitative factors

Documents

Product Launch-Value Proposition