New product marketing strategies and practices

Company and Product Overview
Herschel Supply is a Vancouver-based company that specializes in backpacks and similar items. The company was founded in 2009 and has become quite trendy, experiencing strong growth since that time (Herschel Supply, 2017). They now sell in the US, Hong Kong, Australia, New Zealand and more, in addition to their home market. Herschel products are sold at a premium, and are known for their simple, elegant styling, and sturdy construction.
The company is now planning to expand its product line into suitcases. This is a natural extension given the current flagship product is backpacks, and the company already produces smaller travel bags. Launching a line of suitcases would give Herschel not only a natural extension, but access to a large market. The suitcase business is highly competitive, but there are no brands that have the same brand image and attributes that Herschel brings, so executives believe that there is tremendous opportunity. However, entering this market requires a considerable amount of planning on the marketing and product side, and the role of the product marketing manager will be to drive this effort forward.
The new suitcase line will fit with the current brand image of simple, elegant, stylish and sturdy, the same attributes that encapsulate the rest of the Herschel line-up. The suitcase industry is highly competitive, and split into three main segments. At the low end are fairly generic brands, such as those produced for discounters like Wal-Mart. These offer relatively low quality at relatively low prices. Price is the main point of competition. The mid-market is fairly large, ranging basically from starter midmarket brands like American Tourister to premium mid-market brands like Samsonite. This segment is fairly large, and the brands typically compete on brand name, as well as quality, while maintaining approachable price points. The high end, which features brands like Tumi, and various luxury brands, typically focuses on style, high quality and brand as key differentiators. Herschel expects that its luggage will compete at the upper end of the mid-market, against Samsonite but as a more stylish alternative, positioned away from business travel and more towards the independent traveler.
Key Success Factors
Di Benedetto (1999) identified several key success factors in new product launches: marketing research, sales force, distribution, promotion, R&D and engineering. These factors make intuitive sense. Marketing research reflects the ability of the company to identify what gaps exist in the market. R&D and engineering reflect the ability to execute on that vision – to bring a quality product to market that aligns with the gap in the market that was identified. Further, sales, distribution and promotion are all critical influencers of the buyers' journey, and should reasonably influence the success of a new product launch.
Di Benedetto also notes that the timing of the launch is another important factor, so it is important that the company is able to identify whether there is an optimal time, and then to make sure that the launch process is managed so that the timing is aligned with the best possible launch time.
Cooper and Kleinschmidt (1995) discuss the KPIs that are typically used to measure the success of a new product launch. A lot of the activities, especially those in marketing, are going to be driven by the choice of KPIs that are used for the launch. An example would be whether Herschel intends to measure success on the basis of market share, or profit, because there is a trade-off between high spending to win penetration at the expense of short-term profitability, and seeking out short-term profitability that might come at the expense of market share.
Cooper (1994) also built out a framework for evaluating new product success. The ability of a new product launch to meet KPIs is dependent on product superiority, strong market orientation, focus and project prioritization, early and sharp product definition, solid up-front homework, cross-functional team approach, quality of execution, and a systematic stage-and-gate new product process. There is a clear emphasis on research and planning in these factors, as new product launches done without proper planning will either result in a product that the market doesn't need (or want) or they will deliver a product that doesn't fit with the identified gap. For example, not having an early and sharp product definition could result in significant delays as the scope of the product changes substantially, forcing all teams involved to go back to the drawing board on numerous occasions.
Ernst, Hoyer and Rubsaamen (2010) discuss the interface between marketing and R&D that is needed to drive success new product development. Without cross-functional cooperation between marketing, sales and R&D, a new product is less likely to succeed. Marketing can help to determine what gaps exist in the market, sales can help to define pain points, and R&D can work with these departments to ensure that the new product fits a need that the market has, but that might not be served by existing products. When there are breakdowns in these linkages, a new product might still succeed, but the odds of that happening are going to be lower.
Roberts and Candi (2014) discuss the role that social media can have in new product development. For many companies, social media is a marketing function, and the ability to engage directly with customers means that testing of ideas can occur quickly over social media. They found in their study, however, that social media was a relatively ineffective tool for market research. There were some issues they identified, including the self-selection of people to interact with the company on social media. Social media, however, is an effective launch tool.
Cheng, Chang and Li (2013) find that structure by which a new product is developed does not influence the success of the product. Their study looked at project-related, organization-related, process-related and market-related items methods and found that each can be effective. This actually does provide insight for Herschel in that how the new product development process is structured might be situational in terms of success, but it also means that the company can work with any model – the key success factors are to be found elsewhere.
A study on early adopters also has some good insight for new product development and launch (Frattini, et al, 2013). Early adopters play two critical roles – dissemination of information about the new products, and imitation, where followers seek to imitate the early adopters. Herschel's successful launch in the backpack industry was driven by early adopters, who made the backpacks fashionable, and allowed for these backpacks to go mainstream. Something similar would be tremendously beneficial for the company's new luggage line.

Ranking the Factors
The most important factor appears to be getting alignment between the needs of the market and the actual product. This means that marketing and product need to be engaged from the outset to determine if current Herschel customers would be willing to buy the company's luggage. In theory, this should be the case because most luggage lacks the styling, and the brands tend to be older and more staid – Herschel appeals to a younger demographic not presently targeted by the major luggage companies. But testing and inquiry would be critical to not only gauging the existence of the market, but its size, and what product attributes should be the focus of development. Assuming that what the company knows about selling backpacks will immediately transfer to luggage is not recommended. But this marketing / R&D alignment is considered one of, if not the most, important success factor, which really indicates that nailing the product is critical to success.
Social media is going to be important at launch, but the research shows that it probably has little value in the pre-launch stage at best, and at worst will tip off competitors to the company's strategy with respect to launching this new product.
Big data has value in terms of extrapolating trends but at the same time, for a new product big data is somewhat limited. Data deficiency is common – but understanding the macro-level demographic trends that might open up this market is important. For example, Herschel should know its own demo, and where that fits in with the luggage business. If that demo has a demand for luggage and clearly existing companies aren't marketing to that demo, then that would imply that a market exists.
Behavioral economics matters as well – people who buy Herschel backpacks are willing to pay a premium for their backpack because they are going to wear it almost every day. Can the same be said for luggage? Furthermore, style is fine with backpacks because they stay on your person, but it is a known issue that flashier, more stylish luggage may be targeted by thieves. So these two questions have to be addressed to determine of the behavioral economics of luggage are the same as they are for backpacks. Again, the company cannot assume that what they know now about their current business will translate cleanly to a new product line.

Best Approaches
First, a cross-functional team with marketers and designers will be required to bring this product together. A B2C company should rely more on marketers than sales – Herschel's current success should mean that its distribution channel partners are open to new products. The company can confirm with its biggest partners if need be, but the key is to ensure that the company's target market wants and needs its luggage, before going down this road. To the extent that the luggage market is different from the backpack market, the company will need to weigh those differences in both in the decision to pursue the project, but also in how the product is developed and ultimately how it is marketed. Make sure that the teams work together to bring something to market that the market will buy.
The recommendation is to focus on having a comprehensive marketing strategy. Assuming that the development team can bring the product to fruition – they aren't reinventing the wheel here, just putting a fresh brand on it – the key will be to get channel partners on board. Further, there is a need for the company to ensure distribution, and have a specific plan to attract the early adopters. These early adopters will be critical to the penetration of the new product. It is believed that rapid penetration will be required, lest the competition respond quickly with competitive designs.
The third recommendation is that the company sets out an appropriate budget to market the launch. The launch phase is important, and a lot of planning will need to go into this launch phase in order for this to work. A large marketing budget, and sufficient resources, are required to ensure that the entire target market hears about the new product. The launch should be done in the fall, as this is when luggage sales peak in advance of the holiday and winter travel seasons. Setting the timing and aggressively marketing the product from the outside will be key – penetration will be needed for this business to achieve scale, and for it to ward off challenges from the incumbents in the market. If these three recommendations are executed well, then the launch should be successful.


References

Cheng, C., Chang, M. & Li, C. (2013) Configural paths to successful product innovation. Journal of Business Research. Vol 66 (2013) 2561-2573.

Cooper, R. (1994) New products: the factors that drive success. International Marketing Review. Vol. 11 (1) 60-76.

Cooper, R. & Kleinschmidt, E. (1995). Benchmarking the firm's critical success factors in new product development. Journal of Product Innovation Management. Vol. 12 (1995) 374-391.

DeBenedetto, C. (1999) Identifying key success factors in new product launch. Journal of Product Innovation and Management. Vol. 16 (1999) 530-544.

Ernst, H., Hoyer, W. & Rubsaamen, C. (2010) .Sales, marketing, research-and-development cooperation across new product development stages: Implications for success. Journal of Marketing. Vol. 74 (September 2010) 80-92.

Frattini, F., De Massis, A., Bianchi, M. & Sikimic, U. (2013). The role of early adopters in the diffusion on new products: Differences between platform and nonplatform innovations. Journal of Product Innovation Vol. 31 (3) 466-488.

Herschel Supply website. Various pages. (2017)

Roberts, D. & Candi, M. (2014) Leveraging social media sites in new product development: Opportunity or hype? The Journal of Product Innovation Management. Vol. 31 (S1) 105-117.