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Innovation and New Product Development PART THREE: Develop the Value Proposition Chapter 8 for the Customer Product I: Innovation and New Product Development 1. Explain how value is derived 3. Understand the importance 5. Explain the process of product through different product and types of product adoption and the diffusion of layers pp. 246–249 innovations pp. 253–255 innovations pp. 261–267 BUILD A BETTER MOUSETRAP—AND “NEW AND IMPROVED!” THE PROCESS ADOPTION AND DIFFUSION Outline ADD VALUE p. 246 OF INNOVATION p. 253 OF NEW PRODUCTS p. 261 2. Describe how marketers 4. Show how firms develop new Check out the Chapter 8 Study Map classify products pp. 249–252 products pp. 255–261 on page 268. HOW MARKETERS CLASSIFY NEW PRODUCT DEVELOPMENT p. 255 PRODUCTS p. 249 Objective Neal Goldman A Decision Maker at Under Armour Neal Goldman is director of men’s training and team sports apparel at Under Armour. Based in Baltimore, Maryland, Neal has been on the Under Armour men’s apparel business for four years. He has held various product category business responsibilities, including those for Baselayer, NFL Combine, and Football. Prior to Under Armour, he worked at War- rior Sports, where he was the product and brand manager for the Brine Lacrosse brand. At Warrior, Neal oversaw everything from product direction to execution to marketing asset activation, doubling Brine’s business in three years. Neal graduated with a degree in English literature in 2004 from Georgetown University, where he also was a four-year starter and co-captain of the men’s lacrosse team. He graduated in the top 10 all time in scoring and was named the 2004 Georgetown Male Athlete of the Year. What I do when I’m not working? My motto to live by? My management style? Playing with my wild two-year-old son and I have two: (1) If it was easy, anybody Lead by actions, not words. I want my Info still pretending I’m as good of a lacrosse could do it. (2) Be the thermostat, not the team to see what empowerment to make player as I was 10 years ago. thermometer. decisions looks like. First job out of school? What drives me? My pet peeve? Wrigley Gum sales rep. Personally, making my family proud. Meetings where lots of words are said but Neal’s Professionally, curiosity of the unknown. no decisions are made. Career high? I feel like it’s an evolving ranking, but currently it’s the acknowledgment of being made director. 244 Here’s my problem... Real People, Real Choices In 1996, Kevin Plank, a football player at the University with customers and leveraging its roster of professional athletes and creative of Maryland, had the thought that there must be a better resources to explode into the Baselayer category—and threaten our house. solution to the 100 percent cotton T-shirt he and his fellow teammates were To make matters worse, the product development calendar is an 18-month wearing under their pads. Their shirts were quickly soaked with sweat within process from line architecture briefing to market delivery. When business began minutes of practice, and once they were saturated, it seemed like it took an to dip, the reality of the situation was that any product line overhaul might be too eternity for them to dry. Not only did the wet, uncomfortable feeling of a heavy little too soon. The HeatGear compression line sells millions of units each year. Any shirt bother him, but they also fit poorly; the shirts were constantly poking out product adjustment can send ripple effects through the supply chain, which in turn of the jersey and becoming a distraction. He can affect delivery times, sales, and profit. On the other hand, the longer Under knew there had to be a better solution, so he Armour waited to enact a new plan, the more we would see a dip in sales. A delay Things to remember scoured the garment district, found a synthetic in responding to the threat had the potential to threaten long-term revenue and The compression HeatGear blend that met his liking, and took that mate- decrease Under Armour’s overall market share in the athletic apparel category. Baselayer line of garments rial along with a small underwear shirt to a As the leader of the business unit, my role was to assess our options and was the heritage product tailor. With that, the first run of Under Armour deliver a strategy that took into account all cross-functional groups with the category for Under Armour’s compression shirts was created. end goal of recouping short-term revenue as well as setting the brand up for $2 billion-plus global em- What started as Kevin’s idea in 1996 long-term success. pire. Over the years the has exploded into a $2 billion-plus empire line remained a vital part of 18 years later that now encompasses world- the company and had not Neal considered his Options 1 • 2 • 3 evolved. Beginning in the class footwear, outerwear, and women’s and spring of 2011, HeatGear youth products. But no matter how much Approach the decision as a product problem. Build Baselayer sales experienced Under Armour grows and expands into new new product offerings to get into retail ASAP. Try to reverse the declining sales due to markets and categories around the world, the sales trend with new, exciting styles. This emphasis on immediate competition. While Under heritage product category, compression Heat- new product development to produce a new collection of Baselayer Armour had ignored new Gear, remains a vital part of the company. This Option apparel could capture open-to-buy dollars from retailers (i.e., the product initiatives, Nike’s Pro Baselayer apparel line links directly to Under budget they have to purchase retail merchandise), who clearly were Combat line, marketed using Armour’s core message: “Protect This House.” going to begin allocating more of their funds to Nike. It could also help Under all touch points with a heavy In the spring of 2011, Under Armour focus on in-store promo- Armour to look more enticing and competitive compared to other products in the started to see a gradual decline in HeatGear tions and social media, had market, which would draw shoppers back to our core brand. But because Under become a major competitor. Baselayer sales during a time when historically Armour’s product development team would have to make this happen on an ac- It would take 18 months for business would begin ramping up. The brand’s celerated time line with no opportunity for delays, production expenses would Under Armour to take a new biggest sporting goods wholesale partners were go up. We would need to position materials, trims, and manufacturing with our product to market. telling us that for the first time since the company current supplier so that once designs and fits were completed, production could created this category, they were seeing severe start immediately. Combine speed to market with the substantial aesthetic and competition from other brands. One major threat material direction this product line would demand, and the costs of producing was Nike, which had just launched a new product campaign called Pro Combat. If these styles could climb anywhere from 25 to 50 percent. Under Armour wouldn’t Under Armour had created the story of compression apparel, Nike’s Pro Combat be able to pass these costs on to consumers in such a competitive market, so was aiming to write the next chapter. The company clearly planned to target the short-term gains at retail could come at the expense of bottom-line revenue. In next wave of athletes, who might not have ever been exposed to the Under Armour addition, we had to assume that we wouldn’t acquire more floor space in stores, brand, for their new performance gear line. so some of our current product offerings would have to come off the displays to The challenge we faced was twofold: product and marketing. At least make room for the new. The company might need to take back the current product from the consumer’s perspective, the HeatGear Baselayer product line had not and absorb those costs against sales as well as add more inventory to the books. evolved in over a decade. The core franchise business had been treated like “milk and eggs” in the sense that as long as these basic items were in stock, customers wouldn’t forget to pick up key essentials. That mind-set contributed You Choose to a lack of new product initiatives within this range, as we had been focusing Which Option would you choose, and why? on creating new category opportunities, such as women’s apparel and athletic 1. YES NO 2. YES NO 3. YES NO shoes. Marketing also played a critical role in this challenge, as Nike launched a full-on assault in all touch points with a heavy focus on retail in-store creative See what option Neal chose on page 267 and social media. Our bigger rival was forging a new emotional connection MyMarketingLab™ Improve Your Grade! Over 10 million students improved their results using the Pearson MyLabs. Visit mymktlab.com for simulations, tutorials, and end-of-chapter problems. 245 246 PART THREE | DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER Chapter 8 Approach the decision as a marketing problem. Stay the course with the current prod- uct line and invest time, money, and resources immediately into ramping up the messaging that Under Armour sent to its target market of active athletes. This would allow us to continue investing in other new business categories and allow one of the brand’s strengths—storytelling—to be on Option display.
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