Clustering product launches by price and

launch strategy
Roger J. Calantone
Department of Marketing and Supply Chain Management, Michigan State University, East Lansing, Michigan, USA, and
C. Anthony Di Benedetto
Fox School of Business and Management, Temple University, Philadelphia, Pennsylvania, USA

Abstract
Purpose – The purpose of this paper is to examine the interaction of pricing strategies with other aspects of launch, in particular, timing, logistics/
inventory strategy, and coordination with support organizations, and the effect on profit and competitive performance.
Design/methodology/approach – The paper presents an empirical study of 215 recent new product launches, focusing on pricing and other strategic
and tactical launch decisions and the resulting profitability and competitive performance. Clusters of new product launches are identified and the
profitability and competitiveness of each cluster are discussed.
Findings – The paper finds that some clusters are related to greater success than others. The most profitable and competitively successful cluster
contained launches supported by solid market research and marked by good timing decisions. By contrast, the least profitable/successful cluster were
higher price launches unsupported by adequate research.
Research limitations/implications – The study is limited by the fact that the sampling frame is made up of members of a professional association of
product development and management, and may therefore be more representative of “best practice” in new product development (NPD) than of NPD
in general. The authors believe the use of the key informant method is justified in this study, however this method has been criticized in the past.
Originality/value – The pricing decision for a new product is sometimes oversimplified as a “high-low” or “skimming versus penetration” choice. The
study finds that the actual effect of pricing on ultimate success is much more complex, and that one must consider not only price level, but also the
timing of the launch, the logistics and inventory strategy, the extent of market research, testing, and planning, and so forth.

Keywords Product launch, Pricing policy, Distribution management, Inventory management

Paper type Research paper

An executive summary for managers and executive on product launch until the early 1990s, as reported by
readers can be found at the end of this article. Calantone and Montoya-Weiss (1994). Soon after, the
Product Development & Management Association (PDMA)
Introduction published its Handbook of New Product Development, which
included review articles on consumer (Ottum, 1996) and
The best firms at new product development (NPD) depend
industrial (Stryker, 1996) product launch. About this time,
heavily on new products for continued sales revenues, and
several research studies into product launch were initiated in
effective product launch greatly improves the overall chances
of new product success (Maidique and Zirger, 1984; the USA, the UK, and The Netherlands, as shown in Table I.
Calantone and Di Benedetto, 1988; Cooper, 1979; Cooper An important research milestone was the special issue on new
and Kleinschmidt, 1987, 1990; Griffin, 1997; Di Benedetto, product launch, published by the Journal of Product Innovation
1999). Product launch is also financially risky, and in fact is Management in November 1999. Empirical studies up until
often the most costly stage in the NPD process (Booz, Allen this time focused on strategic and tactical launch decisions
and Hamilton, 1982; Calantone and Montoya-Weiss, 1994; and their effects on performance (e.g. Hultink, Griffin, Hart
Cooper and Kleinschmidt, 1987; Hultink, Griffin, Hart and and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997;
Robben, 1997; Guiltinan, 1999). Hultink and Hart, 1998). Later studies expanded on this
In spite of its managerial importance, launch has only literature base to investigate related issues such as the role of
recently begun to attract much academic research attention. logistics and supply chain relationships in successful launch
Table I presents the most prominent empirical and review (Bowersox et al., 1999), differences in competitive reactions
articles on the subject of launch from the early 1990s to the to launches of radical and incremental new products
present day. Surprisingly, little empirical research had focused (DeBruyne et al., 2002), launch signaling (Hultink and
Langerak, 2002), the moderating role of product
The current issue and full text archive of this journal is available at innovativeness (Lee and O’Connor, 2003), and the role of
www.emeraldinsight.com/0885-8624.htm market orientation (Langerak et al., 2004).

A research grant from the Product Development & Management

Journal of Business & Industrial Marketing
22/1 (2007) 4–19 Association funded this research. The authors would like to thank
q Emerald Group Publishing Limited [ISSN 0885-8624] Wesley Johnston and two anonymous reviewers for their insightful
[DOI 10.1108/08858620710722789] comments on an earlier draft.

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 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Table I Product launch literature summary

Author and year Type of publication Major topic
Calantone and Montoya-Weiss Review article The launch plan, launch timing, launch strategies, control of launch process
(1994)
Saunders and Jobber (1994) Empirical study (US and UK)a Launch of replacement products and comparison of successful to unsuccessful
launches
Hultink and Schoormans (1995) Empirical study (The Netherlands) Analysis of high-tech product launch decisions
Ottum (1996) Review article Issues and procedures for launching a consumer product
Stryker (1996) Review article Issues and procedures for launching a business product
Hultink, Griffin, Hart and Robben Empirical study (UK) Interactions between product launch decisions and performance outcomes;
(1997) differentiates strategic and tactical launch decisions
Hultink, Hart, Robben and Griffith Empirical study (The Netherlands) Relationship between launch strategies and performance outcomes;
(1997) differentiates strategic and tactical launch decisions
Hultink et al. (1998) Empirical study (UK) Categorization of generic new product launch strategies
Hultink and Hart (1998) Empirical study (UK) Comparison of launch strategies for high and low advantage new products
Robben (1998) Empirical study (UK) Categorization of generic new product launch strategies
Guiltinan (1999) Conceptual paper Launch tactics need to be aligned with perceptions of new product relative
advantage and compatibility; relationship between strategy and tactics
Di Benedetto (1999) Empirical study (North America) Successful launches related to good execution of strategic, tactical, and
information-gathering activities
Hultink and Robben (1999) Empirical study (The Netherlands) Relationship between launch strategy and market acceptance as well as product
performance for both consumer and industrial products
Bowersox et al. (1999) Conceptual paper Importance of logistics and supply chain relationships to successful launch; lean
launch strategies based on response-based logistics
Hultink et al. (1999) Empirical study (UK) Consumer product launch decisions; relationship between launch decisions and
performance outcomes
Hultink et al. (2000) Empirical study (UK) Comparison of consumer and industrial new product launch decisions;
examined launch support program (e.g. advertising media)
Thoelke et al. (2001) Case study (eight Dutch companies) Strengths and weaknesses of launch strategies (differentiation, make-or-buy
decision, launch of new feature, etc.)
DeBruyne et al. (2002) Empirical study (USA, UK, The Competitive reactions to radical versus incremental new products are different;
Netherlands) discusses in which situations competitors are likely to react or not
Hultink and Langerak (2002) Empirical study (The Netherlands) Investigates launch signals such as hostility, commitment, and consequences,
and the impact of these on strength and speed of competitive reaction
Lee and O’Connor (2003) Empirical study (USA) Relationship between communication strategy and new product performance is
moderated by the product’s innovativeness
Langerak et al. (2004) Empirical study (The Netherlands) Market orientation is related to product advantage and to launch strategies and
tactics
Nagle (2005) Review article The launch plan, launch phases, the launch team and manager selection, launch
and continuous improvement
Calantone et al. (2005) Review article Launch strategy, flexible supply chain, benefits of a lean launch, illustrations in
two industries
Note: a All empirical studies are cross-sectional surveys unless otherwise noted

Most of the empirical and conceptual studies of product distribution support, promotion activities, timing decisions,
launch in Table I distinguish two groups of launch decisions: and pricing decisions. These decisions are usually made after
strategic and tactical launch decisions (Hultink, Griffin, Hart the launch strategy has been decided, and may be influenced
and Robben, 1997; Hultink, Hart, Robben and Griffin, 1997; by strategic decisions already taken (Guiltinan, 1987;
Hultink and Robben, 1999; Guiltinan, 1999). Strategic Di Benedetto, 1999; Calantone and Montoya-Weiss, 1994).
decisions are those that are concerned with product and Launch management is often ignored in the handoff of
market issues, and are often finalized early in the NPD products between the team developing the commercial entity
process, perhaps in the Product Innovation Charter or at and the consumer product brand managers or business-to-
product protocol specification. Strategic decisions target business (B2B) product sales managers. Despite much
market decisions (niche versus mass market), leader vs literature showing benefits of speed to market and early
follower decisions, and decisions on relative innovativeness entry advantage (see Lieberman and Montgomery, 1988,
(Guiltinan, 1999; Di Benedetto, 1999; Calantone and 1998), many firms do not develop pragmatic, heavily
Montoya-Weiss, 1994). Tactical decisions include familiar monitored, and flexible launch programs. In this article, we
marketing mix decisions such as product branding, sales and focus on a narrow perspective of the launch management

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 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

process – pricing and its relationship to overall launch success outcomes of each. These constellations can be related
management – in order to dredge up patterns of good and to “pure” skimming and penetration strategies, but with
poor approaches to launch management. shades of difference in terms of the corresponding strategic
Pricing decisions are always at the crux of the management and tactical variables that suggest reasons for better or poorer
dilemma. Falling prices generally stimulate demand and drive performance. We conclude by deriving and discussing
the volume cost decreases that most new product programs managerial recommendations, and outlining future research
depend on to realize and capitalize on the advantages of early directions.
market entry; yet falling prices reduce revenues and margins
for all concerned in the new product commercial enterprise,
unless costs fall even faster. The payoff to better Overview of variables affecting launch
understanding of past launch behaviors is to develop an
approach to shorten breakeven times and to understand and Pricing and marketing mix strategy
control new product launch programs better. The skim versus penetration price decision is closely linked
The established marketing literature is quite clear about the with the new product’s marketing mix strategy. A
need to coordinate pricing decisions with all other elements of differentiated product with a perceived relative advantage
the marketing mix. A firm may choose to set a premium price over competitors can be supported with an extensive
on its product in order to skim the market (maximize revenue promotional program, selection of exclusive distribution
obtained by different price segments), or to establish the channels, and a skimming pricing strategy (Kotler, 2003,
product as a quality leader. In each case, the product quality, pp. 473-5). A skimming strategy is most effective where the
distribution channel, and promotion strategy must be product is perceived to have a relative competitive advantage,
consistent with and supportive of the higher price so that it and is highly compatible with the buyer’s experiences and
is justified. Similarly, if production and distribution costs can values (Guiltinan, 1999). Penetration pricing may be
be contained, a penetration price strategy would be effective. appropriate in situations where the manufacturer can reduce
In addition, managers must take cost-volume-profit production and distribution costs sufficiently and capture a
considerations into account when making the skim vs price leadership position, or if low price is needed to
penetration price decision (for a thorough discussion of all overcome adoption barriers and speed diffusion (Guiltinan,
these issues, see Kotler (2003, pp. 473-7); see also Guiltinan 1999; Kotler, 2003, p. 473). Skimming and penetration
(1999)). Skimming or penetration pricing will not necessarily pricing are both sound strategies, the choice between them
lead to good performance; proper execution of the price being a managerial decision made in consideration with
strategy, made in coordination with the rest of the marketing
marketing mix strategy.
mix, is essential.
Price is an important factor at the time of launch as barriers
Some academic research has recently focused on the
to adoption may exist: the new product is incompatible with
interactions among the various activities conducted at the
the buyer’s experiences or values, is perceived to be overly
time of the launch stage (Guiltinan, 1999; Ottum, 1996;
complex or offers no relative advantage (Rogers, 1995,
Hultink, Griffin, Hart and Robben, 1997; Hultink and
pp. 212-44). A price discount rewards the buyer for bearing
Robben, 1999). In this study, we examine the interactions
between pricing and other marketing-mix elements, and also the risk of trial (Crawford and Di Benedetto, 2003, p. 424).
study the roles of launch timing, logistics, and the Furthermore, the pricing decision is not restricted to the skim
coordination with support organizations throughout the versus penetration decision. The firm must also consider
distribution channel (Calantone and Montoya-Weiss, 1994; demand sensitivity to price, and existing cost-volume-profit
Ottum, 1996) as well as the effect of industry structure and relationships, to determine the net profit impact of reducing
environment. Despite the evidence of the need to coordinate price and stimulating demand.
price with other marketing mix elements, managers still will
make faulty pricing decisions, focusing only on the revenues
Firm resources, skills, and NPD activities
generated by high prices (Calantone and Montoya-Weiss,
Many empirical studies (Cooper, 1979; Cooper and
1994; Stryker, 1996). The effects of other variables included
Kleinschmidt, 1987, 1990, 1993; Calantone and Di
in this study, such as launch timing, logistics decisions, and
Benedetto, 1988; Song and Parry, 1997a) demonstrated
distribution channel decisions, have received relatively less
that, for new B2B products, adequate marketing and
research and are relatively less understood.
In this study, we explore the combined effects of pricing technical resources and skills are precursors of new product
and non-pricing strategic and tactical decisions made by firms success. Cooper (1979) found that two critical factors leading
at the time of launch. We review the literature on product to new product success were marketing and technical
launch to identify strategic and tactical variables thought to synergies and proficiencies. This research stream also
affect launch success. We collect data from 215 recent new investigated the effects of carrying out specific activities
B2B and consumer product launches. Respondents provided related to the marketing and launch of new B2B products,
information on price decisions made at the time of launch, including customer selection, in-use testing with customers,
and we empirically identify three clusters of pricing strategies. test marketing, finalizing marketing and manufacturing plans,
We also gather information on how well the strategic and sales force training, and executing advertising and distribution
tactical variables related to launch were carried out, as well as strategy. A firm possessing key marketing skills is more
on industry structure, environment, and overall profitability capable of conducting the specific marketing and launch
and competitive performance of the new product. From this activities for NPD projects, and that better performance of
analysis we identify constellations of new product launches in marketing and launch activities were tied to ultimate success
terms of pricing and related launch strategies, and discuss the (Calantone and Di Benedetto, 1988; Song and Parry, 1997a).

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Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Work group structure Industry structure and environment

Cross-functional team activity is important throughout the Managers must consider industry structure and environment
new product development process; firms that actively when planning a product launch strategy. The intensity of the
incorporate mechanisms for stimulating interfunctional competition, bargaining power of suppliers and customers,
coordination should perform better at launch (Gupta et al., threat of product substitution, and entry/exit barriers, all
1986; Ruekert and Walker, 1987; Gupta et al., 1988; Griffin, affect firm performance (Porter, 1980, 1985; Chakravarthy,
1992; Griffin and Hauser, 1992, 1993; Towner, 1994; Song 1997). Uncertainties in the market environment can arise
and Dyer, 1995; Song and Parry, 1997a). If cross-functional from several sources. Technology, market demands, and
teams have significant input in manufacturing, distribution, competitive strategies and actions can all be relatively
logistics, or marketing and sales strategy, the ultimate success unpredictable, leading to high uncertainty (Khandawalla,
of the launch should be positively influenced, in terms of both 1977; Covin and Slevin, 1989; Rosenberg, 1994). These
higher quality products and speedier development (Millson sources of uncertainty must be taken into account when
et al., 1992; Moenaert and Souder, 1996; Nijssen et al., 1995; developing launch strategies, including marketing mix
Sherman et al., 2000). Manufacturing-marketing integration decisions (Dess and Beard, 1984; Bourgeois and Eisenhardt,
is especially critical to success at the time of launch (Song 1988).
et al., 1998). Interdepartmental committees, task forces and
other temporary groups, and liaison personnel specifically
assigned to interdepartmental coordination are all
mechanisms that have been successfully employed in Method
increasing cross-functionality (Bingham, 2003). Data collection
We used a retrospective methodology in this study, in which
Logistics and inventory strategy managers were asked to give their perceptions regarding
In cases where there are uncertainties in new product launch decisions and product performance. While there are
demand, the firm must be prepared to make quick some limitations inherent in this methodology (Montoya-
adjustments whenever necessary. This requires excellent Weiss and Calantone, 1994; Brown and Eisenhardt, 1995)
integration of the logistics function with marketing, that will be discussed later, it is relatively common in NPD
manufacturing, and operations (Petersen et al., 2003). The research (e.g. Cooper and Kleinschmidt, 1987, 1993). A mail
likelihood of successful product launch should increase if the survey was developed for data collection (details on scales
logistics strategy seeks to become more efficient in terms of included appear below).
logistics facilities, number of suppliers, and number of Respondents were requested to provide detailed
products and stockkeeping units, and if “lean launch,” quick-
information on one of their company’s most recent new
response programs, and flexible manufacturing techniques are
product launches. They chose a single product launched no
used (Stryker, 1996; Bowersox et al., 1999).
more than five years ago, that could be considered to be
“characteristic” of their firm at the time of launch. A
Market orientation “characteristic” new product was defined for the respondents
The firm’s market orientation should also have an impact on
as one that is typical in that it required no unusual or new-to-
its execution of launch tactics and on ultimate performance
the-firm skills or resources.
(Kahn, 2001). Market orientation has been defined as
The survey was mailed to all practitioner members of the
organization-wide generation and dissemination of market
PDMA. PDMA practitioner members were chosen as the
information on customer needs and wants, and organizational
sampling frame, since they are representative of the most
response to this information (Jaworski and Kohli, 1993). A
knowledgeable managers active in new product development
market orientation will be manifested in several ways with
respect to product development and launch activities: the firm and management. A follow-up telephone call and second
will conduct more frequent meetings with customers, hold mailing were used to increase response rates. A key informant
more interdepartmental meetings to discuss market trends, method was used for data collection; this procedure is
periodically check new product development against changing frequently used in NPD research (e.g. Cooper, 1979; Cooper
customer needs, take quicker corrective action to satisfy and Kleinschmidt, 1987). Respondents were experienced
customers, and so on (Di Benedetto, 1999). practicing managers in the area of product development, and
were the most knowledgeable sources of information on the
Launch timing NPD project and on its launch (Phillips, 1981). Consumer as
The timing of the launch also critically affects new product well as B2B products (goods and services) were included
success. Earlier launch helps a new product build a among the respondents. A total of 215 usable questionnaires
reputation, especially if it has a substantial relative were returned, which represented a response rate of 13.4
advantage and there are switchout costs due to learning of percent. Demographics (functional area and job title/level) of
new systems or technology on the part of buyers (Guiltinan, the sample were compared to the demographics of the PDMA
1999). Empirical research suggests a close relationship membership and the sample was very representative of the
between product performance, delivered customer value, sampling frame (details available from the authors on
launch timing, and success rate (Cooper and Kleinschmidt, request).
1990; Zirger and Maidique, 1990; Lilien and Yoon, 1990). Split-half reliability was assessed by splitting the sample into
The appropriateness of launch timing can be assessed on early versus late respondents, and the means of all variables
several dimensions: relative to firm goals, competitors, were calculated for each half. The two halves were found not
customers, channel promotions, and so on. to be significantly different from one another.

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Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Scales market orientation, and further validated in studies by Song

Except where noted, all scale items are measured on 0-10 and Parry (Song and Parry, 1992, 1994, 1996, 1997a, b;
Likert-type scales. The full set of all scale items contained in Parry and Song, 1994). Respondents were asked several
each scale is provided in the Appendix. questions about the extent of interaction with customers and
with other departments and functional areas when developing
Pricing strategy
the new product. The speed with which the firm was prepared
Based on the pricing-related literature cited above, a five-item
to respond to competitive changes or to satisfy unhappy
scale of Likert-type questions was developed to measure
customers was also assessed.
pricing strategy and pretested (see pretesting procedure
below). This scale required respondents to state level of Launch timing
agreement with statements regarding penetration pricing, Based on the literature review, a fourteen-item scale of launch
skimming pricing, pricing to encourage early adoption, timing was developed and pretested. Again using 0-to-10
pricing to encourage channel acceptance, and alignment of Likert-type scales, respondents were asked to state the extent
price with a differentiation strategy. to which they believed the timing was on target with respect to
business-unit goals, the competition, customers, top
Marketing mix strategy
management objectives, the distribution channel’s
A set of seven scale items relating to marketing mix strategy at
requirements, channel coordination considerations, service
the time of launch, originally validated and used in the Project
policies and training, and so on.
Newprod studies (Cooper and Kleinschmidt, 1987, 1993),
was used in this study. This scale asked respondents to rate Industry structure
the quality of several elements of marketing mix strategy at the A 24-item scale of industry structure previously used in
time of launch: selling effort, advertising, promotion, service studies of NPD by Song and Parry (Song and Parry, 1992,
and technical support, product availability, product 1994, 1996, 1997a, b; Parry and Song, 1994) was used.
distribution, and price levels. Respondents were asked several questions about the
Firm resources and skills bargaining power of suppliers and customers, the extent of
Seven scale items on firm resources and skills pertaining to entry and exit barriers, the hostility of industry competition,
product launch, used in the Project Newprod studies, was the sophistication of customers, the predictability of
used in this study. Respondents were asked whether the technological, market, and competitive strategy changes,
following resources and skills were more than adequate for the and several other descriptors of industry structure and
selected product launch: marketing research, sales force, environment.
distribution, advertising and promotion, R&D, engineering, Performance
and manufacturing. A seven-item scale of performance was adapted from the
Work group structure Project Newprod studies of Cooper and Kleinschmidt (1987,
A six-item scale was developed from the literature and 1993). While overall profitability is an extremely important
pretested. This scale required respondents to state the extent measure of new product performance, a single-item scale of
to which cross-functional teams made decisions concerning performance is probably an oversimplification for most firms
manufacturing, logistics, and marketing strategies, and the (Cooper and Kleinschmidt, 1987, 1990; Griffin and Page,
extent to which mechanisms were set in place to encourage 1993; Hultink and Robben, 1995). A firm may consider a
cross-functional integration. new product a success if it, say, captures significant market
share even if it is not highly profitable. Therefore, seven items
Logistics and inventory strategy capturing several dimensions of success (in terms of profit,
A new scale was developed and pretested based on the sales and market share) relative to the business unit’s
relevant literature. It contained 16 scale items. Some of these objectives and other new product launches were developed.
required respondents to assess the extent to which logistics These were measured on Likert-type scales ranging from 2 5
strategy focused on reducing the number of facilities, (far below objective) to þ5 (far exceeded objective).
suppliers, products, stockkeeping units, and so on, with the
objective of increasing efficiency. Other questions probed the Pretesting
use of sales forecasting, “lean launch” or “low inventory The questionnaire was pretested by practicing managers
launch” techniques, quick-response or efficient customer participating in a university executive training program, and
response programs, flexible manufacturing, and integration of by classes of evening MBA students. The pretest ensured that
logistics with other functional areas. all questions were clear and that the scale items adequately
represented the desired constructs. Only minor corrections
Market research, testing, and planning
were made to the questionnaire based on the debriefing done
This 15-item scale was taken from the Project Newprod
after the pretests.
studies and assesses how well several market-related activities
were undertaken. These included: customer selection, in-use
testing with customers, test marketing, finalizing marketing Results
and manufacturing plans, delegating research work to outside
Identification of price strategy clusters
contractors, studying customer feedback, sales force training,
The SPSS based K-means clustering procedure was used to
planning and testing advertising, executing advertising
group the new product launches into clusters, according to
strategy, and managing distribution channel activities.
their responses to the five scale items on strategic pricing,
Market orientation which are:
A 14-item scale of market orientation was adapted from the 1 Our firm launched the new product with a low
scales used by Narver and Slater (1990) in their research into introductory (penetration) price.

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2 We priced the product, at launch, to encourage early moderately-high-price launches which account for likely
adoption. channel acceptance. Since, for Cluster 2, neither channel
3 We priced the new product with great attention to channel acceptance nor differentiation are strong motivators in setting
acceptance. the high price, possibly Cluster 2 firms are seeking to recoup large
4 Differentiation strategy was a prime motivator in setting expenses quickly through a high price without consideration of
price. the effects on demand or through the channel. For a fuller
5 We charged a premium price for our new product. understanding of the firms’ launch strategies, the clusters were
then compared on all other scale items.
As shown in Table II, three distinct clusters emerged, which
are briefly described below. The three clusters contained 70, Inter-cluster differences
49, and 96 cases respectively: all 215 usable cases were Cluster means were found for each of the individual scale
classified into one of the three clusters. items included in the questionnaire (see the Appendix), and
The three clusters are then compared to determine if there analysis of variance and multiple range tests were used to find
are significant differences on any of the other scale items significant differences among them. Table II shows the results
(related to performance, marketing mix, resources and skills, only for cases where significant differences (at the 0.05 level
etc.). Analysis of variance was used on the cluster means, except where indicated) across the cluster means were found.
followed by post hoc multiple range tests. Table II presents all
test results. The last column in Table II shows all cases in Performance differences
which multiple range tests indicated significant differences Some significant performance differences between the three
between clusters. clusters were found. In particular, Cluster 3 (“good research/
good timing”) rated its new product launch significantly more
Cluster 1 (the “low price/poor timing” cluster) successful than that of Cluster 2 in terms of market share
These products were launched at low introductory relative to objective (Cluster 3 and 2 means ¼ 1:439 and
(penetration) prices, with the objective of encouraging early 0.356 respectively, significant at 0.05 level). Cluster 3
adoption. The low-price strategy was selected with great launches were also rated higher than those of Cluster 2 in
attention to channel acceptance. (Cluster 1 means are terms of sales relative to other new product launches
significantly higher than those of the other two clusters on (means ¼ 1:899 and 0.978 respectively, significant at 0.10
the first three scale items, and its mean on the fifth scale item level). No other significant differences in performance were
is the lowest of all three clusters.) Cluster 1 is conscientious found. The results suggest the importance of considering
about market research, testing, and planning activities (it and channel acceptance when setting a premium launch price: the
Cluster 3 are consistently better at these activities than cluster that sets the highest price (Cluster 2) is significantly
Cluster 2), and could have been called “good research/low less likely to consider channel acceptance when doing so, and
price/poor timing” (but we chose short, concise, descriptive its launches are rated significantly lower in performance.
cluster names). However, it is outperformed in terms of The inadequacy of launch strategies for the Cluster 2
several timing variables by Cluster 1. (“high price/poor support”) launches is further confirmed by
Cluster 2 (the “high price/poor support” cluster) consideration of the other variables in the analysis. In fact, the
These products were launched with premium prices most obvious result in Table II is that Cluster 2 is repeatedly
(skimming strategy). Little consideration was placed, outperformed by Clusters 1 and 3 (“low price/poor timing”
however, on the likely acceptance of the new product by the and “good research/good timing”) in almost every case where
channel, or on encouragement of early adoption. (Cluster 2 there are significant differences in means. These differences
means are significantly lower than those of the other two are briefly summarized below.
clusters on the first three scale items, and its mean on the fifth Marketing mix strategy differences
scale item is the highest of all three clusters.) Note that there Cluster 3 (the best performing cluster) outperformed Cluster
were no significant differences among the clusters in terms of 2 in terms of advertising appropriateness, while Cluster 1
differentiation strategy (the fourth scale item): one might have outperformed Cluster 2 in terms of product availability
expected Cluster 2 to be more likely to set premium prices in (differences significant at 0.05 level). For example, in the case
order to pursue a differentiation strategy. of advertising appropriateness, the Cluster 3 mean was 5.620,
significantly higher than Cluster 2 (4.681) at the 0.05 level.
Cluster 3 (the “good research/good timing” cluster)
This cluster uses a pricing strategy intermediate to that of Cluster 2 (6.213) was also outperformed by both Clusters 1
and 3 on appropriateness of pricing level (7.892 and 7.676
Clusters 1 and 2. It is less likely than Cluster 1 to set a
respectively).
penetration price to encourage early adoption, however it is
less likely than Cluster 2 to set a premium price. Interestingly, Work group structure
though, Cluster 3 sets price with attention to channel Cluster 1 outperformed Cluster 2 on three scale items related
acceptance: the difference between Clusters 1 and 3 on this to work group structure: interdepartmental committees
scale item is only significant at the 0.10 level. Cluster 1 is very facilitate joint decision-making (Cluster 1 and 2 means ¼
similar to Cluster 3 in performing market research, testing, 6:839 and 5.804 respectively, significant at 0.10 level), liaison
and planning activities, but outperforms Cluster 3 on several personnel exist who coordinate the efforts of several
timing variables. departments for purposes of a project (Cluster 1 and 2
A preliminary interpretation of the three clusters means ¼ 6:712 and 5.478, significant at 0.05 level), and
suggests that Cluster 1 comprises low-introductory-price cross-functional teams made decisions on distribution or
launches, Cluster 2 comprises launches where premium, logistics strategy (Cluster 1 and 2 means ¼ 5:803 and 4.385,
skimming prices are used but with little concern for early significant at 0.05 level). On the last of these scale items,
adoption or channel acceptance, and Cluster 3 comprises Cluster 3 also outperformed Cluster 2.

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 Table II Clustering and multiple range test results
Cluster 1 Cluster 2 Cluster 3
“Low price/ “High price/ “Good research/
poor timing” poor support” good timing”
n 5 70 n 5 49 n 5 96 Significant differences *
Strategic pricing facet
Our firm launched the new product with a low introductory (penetration) price 7.000 0.766 2.254 1 . 3, 3 . 2, 1 . 2
We priced the product, at launch, to encourage early adoption 7.281 1.213 4.299 1 . 3, 3 . 2, 1 . 2
We priced the new product with great attention to channel acceptance 6.859 1.652 6.250 1 . 3 *, 3 . 2, 1 . 2
Differentiation strategy was a prime motivator in setting price 5.615 5.596 6.383
We charged a premium price for our new product 3.431 8.404 7.103 2 . 3, 3 . 1, 2 . 1
Performance
Relative to your business unit’s other new product launches, how successful was this market entry in
terms of sales? 1.266 0.978 1.899 3 . 2**
Relative to your business unit’s objectives for this product launch, how successful was this market
entry in terms of market share? 0.688 0.356 1.439 3.2
Marketing mix support
Roger J. Calantone and C. Anthony Di Benedetto

Advertising 4.871 4.681 5.620 3 . 2, 3 . 1 * *

Product availability: sufficient inventory available 7.937 7.044 7.171 1 . 2, 1 . 3 * *
Clustering product launches by price and launch strategy

Pricing: appropriateness of pricing level(s) 7.892 6.213 7.676 1 . 2, 3 . 2

Resources and skills
Our engineering skills and resources were more than adequate 6.578 7.043 7.257 3.1

10
Work group structure
Interdepartmental committees are set up to allow departments to engage in joint decision making 6.839 5.804 6.638 1 . 2*
Liaison personnel exist whose specific job it is to coordinate the efforts of several departments for
purposes of a project 6.712 5.478 5.943 1.2
Cross-functional teams make decisions concerning distribution or logistics strategy 5.803 4.386 6.366 1 . 2, 3 . 2
Logistics and inventory strategy
Our sales forecasts helped keep manpower and training costs reasonable (no excess in hiring, training,
plant switchovers of labor, etc.) 5.969 4.476 4.921 1 . 2, 1 . 3
Quick response (QR) or efficient customer response (ECR) programs were in force. 4.603 3.857 4.891 3 . 2**
Updates to product design were needed after the first several manufacturing runs were accomplished. 7.000 5.978 5.688 1.3
When we went to national launch with this product/service, logistics personnel were involved in
planning marketing programs 4.951 3.727 3.641 1 . 2, 1 . 3
When we went to national launch with this product/service, logistics personnel were involved in
formulating our distribution strategies 5.934 4.409 5.312 1.2
When we went to national launch with this product/service, logistics personnel were involved in
coordinating with sales management 6.049 4.795 5.578 1.2
When we went to national launch with this product/service, logistics personnel were involved in lean
Volume 22 · Number 1 · 2007 · 4 –19

inventory strategies 6.017 4.326 5.355 1 . 2, 3 . 2 * *

When we went to national launch with this product/service, logistics personnel were involved in
Journal of Business & Industrial Marketing

service planning (after sale) 5.475 3.791 4.613 1 . 2, 1 . 3 * *

Market research, testing, and planning
(continued)
 Table II
Cluster 1 Cluster 2 Cluster 3
“Low price/ “High price/ “Good research/
poor timing” poor support” good timing”
n 5 70 n 5 49 n 5 96 Significant differences *
Delegating or contracting specialized research work to outside contractors 5.557 3.689 4.969 1 . 2, 3 . 2
Studying feedback from customers regarding this product during launch 6.769 5.617 6.571 1 . 2, 3 . 2
Studying feedback from customers regarding this product after launch 6.742 5.717 6.657 1 . 2, 3 . 2
Planning and testing the advertising for this product 5.016 3.543 4.926 1 . 2, 3 . 2
Executing the advertising strategy for this product (e.g. good copy placement, adequate number of
insertions) 5.444 4.087 5.565 1 . 2, 3 . 2
Managing distribution channel activities for this product. 5.554 5.696 6.757 3 . 1, 3 . 2
Market orientation
Several of our departments generated competitive intelligence independently 4.712 3.644 4.967 3 . 2, 1 . 2 * *
Roger J. Calantone and C. Anthony Di Benedetto

We periodically reviewed the likely effect of changes in our business environment (e.g. regulation) on
customers 5.818 4.391 5.814 3 . 2, 1 . 2
Clustering product launches by price and launch strategy

We had frequent interdepartmental meetings to discuss market trends and developments. 5.212 4.311 4.871 1 . 2**
We periodically reviewed our product development efforts to ensure that they were in line with what
customers want 6.523 5.848 6.739 3 . 2**
If a major competitor had launched an intensive campaign targeted at our customers, we would have

11
implemented a response immediately 6.061 4.848 5.812 1 . 2, 3 . 2 * *
We were quick to respond to significant changes in our competitors’ pricing structures 6.015 4.422 5.791 1 . 2, 3 . 2
Timing of launch
From the point of view of our major customers, the timing or our launch was excellent 5.621 5.894 6.478 3.1
The timing of our launch helped us achieve a competitive advantage 5.682 5.702 6.754 3 . 1, 3 . 2
Top management believed the timing of our market entry was excellent 5.242 6.106 6.116 3 . 1**
Channel cooperation was well developed ahead of time 5.477 5.304 6.561 3 . 1, 3 . 2
Channel coordination was accomplished as planned 5.754 5.457 6.552 3 . 2, 3 . 1 * *
We achieved rapid deployment of our product into the distribution channel 6.231 5.511 6.657 3.2
Channel/trade promotion was executed on time 6.323 5.822 7.015 3 . 2, 3 . 1 * *
Industry structure and environment
Competition in our markets is generally very intensive and hostile 7.312 8.617 6.725 2 . 3**
The entry barriers to the industry are very high 5.938 6.681 6.913 3.1
The exit barriers are very high 5.138 4.277 5.671 3.2
Customers in these markets are technologically sophisticated 6.292 5.872 5.565 1 . 3**
Our competitors’ product design changes are highly predictable 5.800 6.000 5.246 2 . 3**
Access to distribution channels blocks new entrants 4.576 5.630 5.134 2.1
Volume 22 · Number 1 · 2007 · 4 –19

Note: * Sig. at 0.05 level except those marked; * * are sig. at 0.10 level
Journal of Business & Industrial Marketing
 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Logistics and inventory strategy industry as having lower entry barriers, as new entrants were
Cluster 1 outperformed Cluster 2 on six scale items related to not blocked by lack of access to distribution channels. Cluster
logistics and inventory strategy: sales forecasts helped keep 2 respondents characterized their industries as having
manpower and training costs reasonable, and logistics intensive, hostile competition, yet competitors’ product
personnel were involved in planning marketing programs, design changes were judged to be relatively predictable.
formulating distribution strategies, coordinating with sales Cluster 3 respondents noted the high entry and exit barriers
management, planning lean inventory strategies, and planning in their industries, but also felt that their customers were
after-sale service. Cluster 1 also outperformed Cluster 3 on rather less technologically sophisticated than those of
three scale items: sales forecasts helped to keep manpower Cluster 1.
and training costs reasonable, updates to product design were With the additional information obtained from these scales,
needed after initial manufacturing runs, and logistics we now have a more complete picture of each of the three
personnel were involved in planning marketing programs. clusters.
For example, regarding forecasts for manpower and training Cluster 1 (“low price/poor timing”) launches are relatively
costs, the means for Clusters 1, 3, and 2 were 5.969, 4.921, successful low-introductory-price launches, supported by
and 4.476 (Cluster 1 mean significantly higher than each of careful selection of inventory and pricing levels, and
the other two means at the 0.05 level). As shown in Table II, a attention to cross-functional teaming and work group
few additional differences were significant only at the 0.10 structure. Sales forecasts are useful in logistics applications,
level. and the logistics personnel are involved in most facets of
strategic planning. Importantly, most of the market research
Market research, testing, and planning
and testing activities are carried out well, and market
Cluster 2 was significantly outperformed by both Clusters 1
orientation is comparatively high. Nevertheless, this cluster
and 3 (at the 0.05 level) on five of the market research and
is outperformed on most measures of launch timing.
testing-related scale items, including: delegating specialized
Cluster 2 (“high price/poor support”) launches are less-
research work to contractors, studying feedback from
successful high-introductory-price launches. Firms in this
customers during and after launch, training the sales force,
cluster tend to be significantly less market oriented than the
planning the advertising, and executing advertising strategy.
other firms, and in general, the marketing research and testing
For example, regarding delegating specialized research work
activities are not well done. There is less cross-functional
to outside contractors, Cluster 1 and 3 means were 5.557 and
teaming, and less involvement of logistics personnel in
4.969 (not significantly different), while the Cluster 2 mean
inventory strategy development. Cluster 2 launches are not as
was 3.689 (significantly different at 0.05 level). In addition,
well timed as are those in other clusters. Cluster 2’s difficulty
Cluster 3 was significantly higher than both other clusters on
in timing launches, and their lower performance levels, might
managing distribution channel activities for the product.
be to some extent explained by an intensive, hostile
Market orientation competitive environment marked by unpredictable product
Clusters 1 and/or 3 significantly outperformed Cluster 2 in design changes.
terms of market orientation on several scale items, including: Cluster 3 (“good research/good timing”) launches are the
multiple departments generating competitive intelligence most successful in terms of sales relative to other business-
independently, conducting regular effects of business unit launches, and market share relative to objective. These
environment on customers, having interdepartmental are relatively high-introductory-price launches, supported by
meetings to discuss market trends, reviewing product a high degree of marketing orientation and solid market
development efforts, implementing a competitive response research and testing. The firm supports the launch with
quickly, and responding quickly to competitors’ pricing careful selection of advertising and pricing levels, and cross-
structures. Most of these differences were significant at the functional involvement in distribution strategy. Sales forecasts
0.05 level. For example, on periodic review of the effect of are useful in logistics applications. Cluster 3 excelled on all
business environment changes on customers, the Cluster 2 dimensions of launch timing. In contrast to Cluster 2, Cluster
mean was 4.391, significantly lower than both Cluster 1 3 faces a less hostile competitive environment and more
(5.818) and Cluster 3 (5.814) at the 0.05 level. predictable product design changes, and also a more stable
competitive environment in that entry and exit barriers are
Launch timing
high.
Cluster 3 scored significantly higher than Clusters 1 and/or 2
on seven launch-timing-related scale items: timing was
excellent from the viewpoint of major customers, timing of Discussion and managerial implications
launch helped achieve a competitive advantage, top
Summary of findings
management believed that timing was excellent, and channel
This study used a retrospective methodology to gather
cooperation was well developed ahead of time and
information about 215 recent new B2B and consumer
accomplished as planned, rapid deployment into the
product launches. We clustered the launches into three
distribution channel was achieved, and channel promotion
groups according to the characteristics of the pricing
was executed on time. For example, on achievement of
strategies selected at launch, and discovered patterns among
competitive advantage, Cluster 3’s mean (6.754) was
the pricing as well as non-pricing launch strategies and tactics.
significantly higher than that of Cluster 1 (5.682) and
The three clusters represent three approaches to pricing
Cluster 2 (5.702) at the 0.05 level.
strategy within a new product launch context.
Industry structure and environment There are some parallels between the familiar “pure”
The industry structures characterizing the three clusters were skimming and penetration pricing strategies and the three
rather different. Cluster 1 respondents characterized their clusters we derived empirically: the first cluster comprises

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 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

mostly instances of penetration pricing, the second and third made in light of the product’s perceived advantages relative to
mostly skimming pricing. Our results underline the competition and its marketing mix strategy.
importance of proper execution of all aspects of the launch Timing, logistics, and channel issues are relatively less-
strategy. For example, though both Clusters 2 and 3 include studied elements of the launch strategy, though our results
instances of price skimming, Cluster 3 outperforms Cluster 2 show that they can have a significant impact on whether a
– there is “good” and “bad” skimming (to be summarized price strategy succeeds or fails. These variables deserve
below). Our findings support the notion of penetration versus greater attention from both academics and practitioners, and
skimming pricing, and also suggest that neither skimming nor recent research has begun to address them (Bowersox et al.,
penetration pricing necessarily leads to superior performance, 1999; Calantone et al., 2005). Furthermore, much previous
especially if the pricing decision is poorly coordinated with the research has shown the importance of cross-functional teams
rest of the launch strategy. throughout the NPD process, up to and through the launch
The three clusters have very distinctive models of behavior. phase. Management must consider all of these elements, and
Firms in the first cluster of pricing approaches employ a the interactions among them, when planning the launch of its
penetration launch price. Generally, the cost and quick new products (e.g. Nagle, 2005). As seen in Cluster 3, good
market share gains theoretically predicted for this strategy understanding of customer need and excellent market timing
were obtained, and a position to defend the market gains are necessary to support a skimming price strategy. Poor
prevailed. The second cluster of pricing approaches can be execution on these points is associated with lower
characterized as premium launch prices, but lacking in performance in Cluster 2 even though a skimming price is
support (i.e. “bad” skimming). The supplier believes that its used there as well. The reason for the difference, we infer, is
product should demand a premium price, but has not that Cluster 3 is better at executing other activities, that are
invested in the requisite marketing research, testing, and consistent with and support a skimming strategy, leading up
planning to correctly align the market entry with the value to launch. To summarize, management needs to think in
proposition sought by the customer. There is also poor terms of constellations of marketing mix and launch timing
integration of logistics personnel into strategic decisions, and decisions that support, and are consistent with, one another.
a low degree of market orientation. Because of this lack of
market orientation and the lack of sufficient investment in Limitations and directions for future research
research to calibrate product deliverables with customer We note several limitations of the present study. The response
needs, the launch effort is less successful. The supplier is too rate is relatively low. Comparison of the sample to the PDMA
cheap with the market research investment, too cheap with practitioner sampling frame, however, suggests that the
the time necessary for good customer calibration, or forced sample is representative of the PDMA practitioner
into an originally unplanned high price by cost overruns membership. One may question whether the PDMA
through mismanagement of the NPD process or wild membership is representative of product managers in
forecasting at the business case set at the start of the NPD general. Companies that are PDMA members may include
process. a high proportion of firms that are actively involved in
Finally, in the third cluster, a relatively high price is sought, improving their NPD processes, or may over-represent the
but only after sufficient market research, testing, and planning “best” new product firms. The sample may be more
is invested to assure an excellent calibration between representative of “best practice” in NPD than of NPD in
customer needs and supplier deliverables, and also to assure general, and these firms might, on average, be better at
that the timing of the launch is correct from the viewpoint of making pricing and related decisions to support product
customers and channel members (“good” skimming). One launch. A logical next step would be to determine launch
should expect that customers will demand extra well done practices across a wide spectrum of firms, including PDMA
performance on a variety of product and service dimensions if non-members as well as members. Also, the PDMA sample
they will invest in a high priced substitute for the product that contains several industries, potentially obscuring between-
currently meets their requirements. The risk to a potential industry differences in launch strategy. Further research could
customer is multiplied if they must switch to a new product at specifically examine a given industry (for example, chemical,
a high price; thus excellent customer calibration is the only automotive, or software) to determine if there are industry-
prudent path for the high priced market launch entry. Our specific pricing and related launch strategies that tend to be
findings show that this third cluster significantly outperforms related to success.
the second cluster, which also uses a premium price strategy Second and third limitations of the study are the use of the
but, as noted above, lacks the requisite support. Thus, our retrospective methodology and the key informant method. As
findings suggest that all aspects of the launch strategy, noted earlier, these are methods commonly used in recent
including timing and logistics, must be in place in order for NPD research studies. The retrospective methodology
the skim price to be successful. requires respondents to provide their perceptions on each of
the scale items, including those on performance. Since the
Managerial implications data are collected retrospectively, some halo effect bias may
Proper coordination of all elements of launch (strategies and exist, since the true outcome of each NPD project (i.e. its
tactics) is required to mitigate the risks of NPD. Price level at success or failure) was known prior to filling out the
the time of launch is clearly important, but launch pricing questionnaire. Some respondents may have biased their
decisions are often made simplistically set a low penetration responses upward (for example, to make their product look
price or a high skimming price to achieve goals such as quick more successful than it really was), though in our pretests this
payback or market share increase. Our findings show that was generally not found to be a problem. The key informant
launch pricing decisions cannot be made separately from method has occasionally been criticized as information is
other strategic and tactical decisions. Rather, they need to be obtained from only a single individual, who might be

13
 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

insufficiently knowledgeable (Phillips, 1981). We believe we industry?”, Journal of Product Innovation Management,
have minimized the possible drawbacks of the key informant Vol. 10 No. 2, pp. 240-51.
method by carefully selecting respondents who were highly Covin, J. and Slevin, D.P. (1989), “Strategic management of
involved in new product launch and therefore were very small firms in hostile and benign environments”, Strategic
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1993; Menon et al., 1996). The study is also limited by the Hultink, E.J. and Robben, H.S.J. (2002), “The impact of
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Vol. 19, pp. 1111-25. New York, NY.

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 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Ruekert, R.W. and Walker, O.C. Jr (1987), “Marketing’s Page, A.L. (1993), “Assessing new product development
interaction with other functional units: a conceptual practices and performance: establishing crucial norms”,
framework and empirical evidence”, Journal of Marketing, Journal of Product Innovation Management, Vol. 10 No. 4,
Vol. 51 No. 1, pp. 1-19. pp. 273-90.
Saunders, J. and Jobber, D. (1994), “Product replacement:
strategies for simultaneous product deletion and launch”, Appendix. The questionnaire
Journal of Product Innovation Management, Vol. 11 No. 5,
pp. 433-50.
Sherman, J.D., Souder, W.E. and Jenssen, S.A. (2000),
Pricing strategy
“Differential effects of the primary forms of cross-
State your level of agreement with each of the following
functional integration on product development cycle
(0 ¼ disagree strongly, 10 ¼ agree strongly):
time”, Journal of Product Innovation Management, Vol. 17
Our firm launched the new product with a low
No. 4, pp. 257-67.
introductory (penetration) price.
Song, X.M. and Dyer, B. (1995), “Innovation strategy and
We priced the product, at launch, to encourage early
the R&D-marketing interface in Japanese firms: a
adoption.
contingency perspective”, IEEE Transactions on Engineering We priced the new product with great attention to channel
Management, Vol. 42 No. 4, pp. 360-71. acceptance.
Song, X.M. and Parry, M.E. (1992), “The R&D-marketing Differentiation strategy was a prime motivator in setting
interface in Japanese high-technology firms”, Journal of price.
Product Innovation Management, Vol. 9 No. 2, pp. 91-112. We charged a premium price for our new product.
Song, X.M. and Parry, M.E. (1994), “The dimensions of
industrial new product success and failure in state Marketing mix support
enterprises in the People’s Republic of China”, Journal of Rate the quality of each of the following elements in the
Product Innovation Management, Vol. 11 No. 2, pp. 105-18. launch of this product. (0 ¼ poor, 10 ¼ excellent):
Song, X.M. and Parry, M.E. (1996), “What separates Selling effort, e.g. the right people, properly trained, etc.
Japanese new product winners from losers”, Journal of Advertising.
Product Innovation Management, Vol. 13 No. 1, pp. 1-14. Promotion, e.g. discounts, trade shows, events.
Song, X.M. and Parry, M.E. (1997a), “The determinants of Services and technical support for the customer, e.g. right
Japanese new product successes”, Journal of Marketing people, qualified, responsive.
Research, Vol. 34 No. 2, pp. 64-76. Product availability: sufficient inventory available.
Song, X.M. and Parry, M.E. (1997b), “A cross-national Product distribution: on-time delivery, quick response.
comparative study of new product development processes: Pricing: appropriateness of pricing level(s).
Japan and the United States”, Journal of Marketing, Vol. 61
No. 2, pp. 1-18. Resources and skills
Song, X.M., Thieme, R.J. and Xie, J. (1998), “The impact of To what extent does each statement correctly describe this
cross-functional joint involvement across product selected product launch? (0 ¼ strongly disagree, 10 ¼
development stages: an exploratory study”, Journal of strongly agree).
Product Innovation Management, Vol. 15 No. 4, pp. 289-303. For the selected product launch:
Stryker, J.D. (1996), “Launching a new business-to-business Our marketing research skills and resources were more
product”, in Rosenau, M.D., Griffin, A., Castellion, G. and than adequate.
Anscheutz, N. (Eds), The PDMA Handbook of New Product Our sales force skills and resources were more than
Development, Wiley, New York, NY, pp. 363-80. adequate.
Thoelke, J.M., Hultink, E.J. and Robben, H.S.J. (2001), Our distribution skills and resources were more than
“Launching new product features: a multiple case adequate.
examination”, Journal of Product Innovation Management, Our advertising and promotion skills and resources were
Vol. 18 No. 1, pp. 3-14. more than adequate.
Towner, S.J. (1994), “Four ways to accelerate new product Our R&D skills and resources were more than adequate.
development”, Long Range Planning, Vol. 27 No. 2, Our engineering skills and resources were more than
pp. 57-65. adequate.
Zahra, S.J. and Covin, J.G. (1993), “Business strategy, Our manufacturing skills and resources were more than
technology policy and firm performance”, Strategic adequate.
Management Journal, Vol. 14, pp. 451-78.
Work group structure
Zirger, B.J. and Maidique, M.A. (1990), “A model of new
Please indicate the extent to which the following are used.
product development: an empirical test”, Management
(0 ¼ strongly disagree, 10 ¼ strongly agree).
Science, Vol. 36 No. 7, pp. 867-83. For the selected product launch;
Interdepartmental committees are set up to allow
Further reading departments to engage in joint decision-making.
Task forces or temporary groups are set up to facilitate
Gupta, A.K. and Wilemon, D.L. (1986), “The credibility- interdepartmental collaboration on a specific project.
cooperation connection at the R&D-marketing interface”, Liaison personnel exist whose specific job it is to
Journal of Product Innovation Management, Vol. 5 No. 1, coordinate the efforts of several departments for
pp. 20-31. purposes of a project.

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Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

Cross-functional teams make decisions concerning Training the sales force.

manufacturing strategy. Planning and testing the advertising for this product.
Cross-functional teams make decisions concerning Executing the advertising strategy for this product (e.g.
distribution or logistics strategy. good copy placement, adequate number of insertions).
Cross-functional teams make decisions concerning Managing distribution channel activities for this product.
marketing or sales strategy.
Performance
Logistics and inventory strategy Please indicate how successful this market entry was or has
All items are scaled: 0 ¼ stronglydisagree, 10 ¼ strongly been. (25 ¼ far less than the objectives, þ5 ¼ far exceeded
agree. the objectives):
Logistics strategy includes a priority to reduce: How successful was this market entry from an overall
The number of logistics facilities. profitability standpoint?
The number of product/material suppliers. Relative to your business unit’s other new product
The number of logistics service providers. launches, how successful was this market entry in terms
The number of marginal customers. of profit?
The number of products or UPCs. Relative to your business unit’s other new product
The number of stockkeeping units (SKUs). launches, how successful was this market entry in terms
Our logistics operations, from the manufacturing facility of sales?
to the customer, are highly integrated with marketing. Relative to your business unit’s other new product
Our logistics operations, from the manufacturing facility launches, how successful was this market entry in terms
to the customer, are highly integrated with manufacturing of market share?
and production operations. Relative to your business unit’s objectives for this product
This product launch was considered a “lean” or “low launch, how successful was this market entry in terms of
inventory” launch.
profit?
Our sales forecasts were really helpful in calibrating plant
Relative to your business unit’s objectives for this product
size.
launch, how successful was this market entry in terms of
Our sales forecasts helped keep manpower and training
sales?
costs reasonable (no excess in hiring, training, plant
Relative to your business unit’s objectives for this product
switchovers of labor, etc.).
launch, how successful was this market entry in terms of
Work-in-process inventories were well controlled.
market share?
QR (Quick Response) or ECR (Efficient Customer
Response) programs were in force.
Channel inventories were kept to a minimum. Market orientation
Flexible manufacturing techniques were used on this All items are scaled: 0 ¼ stronglydisagree, 10 ¼ strongly
project. agree.
Updates to product design were needed after the first When developing this new product:
several manufacturing runs were accomplished. Our marketing people met with customers frequently to
When we went to national launch with this product/ find out what products or services they needed.
service, logistics personnel were involved in: Individuals from our manufacturing department
Planning marketing programs. interacted directly with customers to learn how to serve
Formulating our distribution strategies. them better.
Coordinating with sales management. Several of our departments generated competitive
Lean inventory strategies. intelligence independently.
Service planning (after sale). We periodically reviewed the likely effect of changes in our
Setting return or replacement policies. business environment (e.g. regulation) on customers.
A lot of informal “hall talk” in our business unit
Market research, testing, and planning concerned out competitors’ tactics or strategies.
Please indicate how well your business unit undertook each of We had frequent interdepartmental meetings to discuss
these activities (0 ¼ poorly, 10 ¼ excellently): market trends and developments.
Selecting customers for testing market acceptance. Marketing personnel in our business unit spent time
Submitting products to customers for in-use testing. discussing customers’ future needs with other functional
Executing test marketing programs. departments.
Interpreting the findings of the market testing. Data on customer satisfaction were disseminated at all
Finalizing plans for manufacturing. levels in this business unit frequently.
Finalizing plans for marketing. We tended to ignore changes in our customer’s product or
Establishing overall direction of this product launch. service needs for one reason or another.
Delegating or contracting specialized research work to We periodically reviewed our product development efforts
outside contractors. to ensure that they were in line with what customers want.
Launching this product into the marketplace. If a major competitor had launched an intensive campaign
Studying feedback from customers regarding this product targeted at our customers, we would have implemented a
during launch. response immediately.
Studying feedback from customers regarding this product We were quick to respond to significant changes in our
after launch. competitors’ pricing structures.

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Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

If we found that customers were unhappy with the quality Our competitors’ product design changes are highly
of our service, we would have taken corrective action predictable.
immediately. Our competitors’ timing of the new product introductions
If we found that customers would like us to modify a are highly predictable.
product or service, the departments involved would have Cost advantages of incumbents block new competitors.
made concerted efforts to do so. Product differentiation of incumbents deters the entry of
new competitors.
Timing of launch Capital requirements prevent new competition.
All items are scaled: 0 ¼ strongly disagree, 10 ¼ strongly High customer switching costs discourage new
agree: competitive entry.
Relative to our business unit’s goals, the timing of our Access to distribution channels blocks new entrants.
launch was on target. Technology of distribution channel (i.e. electronic data
Relative to our direct competition, the timing or our integration) blocks new entrants.
launch was perfect.
From the point of view of our major customers, the timing About the authors
or our launch was excellent.
The timing of our launch helped us achieve a competitive Roger J. Calantone is Eli Broad Professor of Business
advantage. Administration at Michigan State University. His research
The product went from development to launch with no interests include the study of the new product development
delays. process, the management of technology, and the
The product was launched at the appropriate time. manufacturing and engineering interface. He has published
Top management believed the timing of our market entry in several journals including the Journal of Marketing, the
was excellent. Journal of Marketing Research, the Journal of Product Innovation
From the distribution channel’s point of view, the product Management, Management Science, and Marketing Science.
was launched at the right time. C. Anthony Di Benedetto is Editor of the Journal of Product
Channel cooperation was well developed ahead of time. Innovation Management, and Professor of Marketing, Fox
Channel coordination was accomplished as planned. School of Business and Management, Temple University. He
We achieved rapid deployment of our product into the earned a BSc. in Chemistry, an MBA, and a PhD in
distribution channel. Marketing and Management Science from McGill University.
Service policies were in place prior to launch. His research interests include new product launch, and
Service training was timely with respect to launch. international marketing strategy. He previously served as Vice
Channel/trade promotion was executed on time. President of Publications for PDMA, Editor of the PDMA
newsletter Visions, and as Abstracts Editor for the Journal of
Industry structure and environment Product Innovation Management. C. Anthony Di Benedetto is
All items are scaled: 0 ¼ strongly disagree, 10 ¼ strongly the corresponding author and can be contacted at:
agree. anthony.dibenedetto@temple.edu
In general, how much do you agree with each of the
following statements characterizing the business environment Executive summary and implications for
in the primary markets your business unit currently serves? managers and executives
Competition in our markets is generally very intensive and
hostile. This summary has been provided to allow managers and executives
Our major suppliers have substantial bargaining power. a rapid appreciation of the content of this article. Those with a
Our major customers have substantial bargaining power. particular interest in the topic covered may then read the article
The threat of product substitution is very high. in toto to take advantage of the more comprehensive description of
The entry barriers to the industry are very high. the research undertaken and its results to get the full benefit of the
The exit barriers are very high. material present.
New market entrants can expect a high level of retaliation
from existing firms.
The markets are very homogeneous (undifferentiated Clustering product launches by price and launch
markets and very similar customers). strategy
Customers in these markets are technologically When Oscar Wilde spoke of people who know the price of
sophisticated. everything and the value of nothing, he was not talking about
Our business unit can strongly affect competitive marketers of new products but of cynics. Nevertheless, those
situations. involved in putting new products or services on the market
We are very familiar with the market. who might think they know all there is to know about where
Customers’ needs can be easily translated into product to pitch the price, need to be aware that pricing strategy is
specifications. only one aspect of a new product launch. Merely focusing on
Joint R&D/research efforts among firms in our industry price and neglecting other strategic and tactical launch
are frequent. decisions can deny a company the profitability and
Technological changes are highly predictable. competitive performance it seeks.
Market demands are highly predictable. In an exploration of the combined effects of pricing and
Our competitors’ marketing changes are highly non-pricing strategic and tactical decisions made by firms at
predictable. the time of launch, Calantone and Di Benedetto recognize

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 Clustering product launches by price and launch strategy Journal of Business & Industrial Marketing
Roger J. Calantone and C. Anthony Di Benedetto Volume 22 · Number 1 · 2007 · 4 –19

that pricing decisions are always at the crux of the were obtained, and a position to defend the market gains
management dilemma. Falling prices generally stimulate prevailed. The second cluster of pricing approaches can be
demand and drive the volume cost decreases that most new characterized as premium launch prices, but lacking in
product programs depend on to realize and capitalize on the support (i.e. “bad” skimming). The supplier believes that its
advantages of early market entry. product should demand a premium price but has not invested
Yet falling prices reduce revenues and margins for all in the requisite marketing research, testing and planning to
concerned in the new product commercial enterprise, unless correctly align the market entry with the value proposition
costs fall even faster. The payoff to better understanding of sought by the customer.
past launch behaviors, the authors say, is to develop an There is also poor integration of logistics personnel into
approach to shorten breakeven times and to better strategic decisions and a low degree of market orientation.
understand and control launch programs. Because of this lack of market orientation and the lack of
However, despite the evidence of the need to coordinate sufficient investment in research to calibrate product
price with other marketing mix elements, some managers can deliverables with customer needs, the launch effort is less
be tempted to turn a blind eye to anything other than the successful. The supplier is too cheap with the market research
revenues generated by the pricing decision. Furthermore, investment, too cheap with the time necessary for good
launch management is often ignored in the handoff of customer calibration, or forced into an originally unplanned
products between the team developing the commercial entity high price by cost overruns through mismanagement of the
and the consumer product brand managers or B2B product new product development process, or wild forecasting at the
sales managers. Effective managers should avoid these pitfalls business case set at the start of the NPD process.
and consider the possible effects of variables other than price, Finally, in the third cluster, a relatively high price is sought,
such as launch timing, logistics decisions and distribution but only after sufficient market research, testing and planning
channel decisions. is invested to assure an excellent calibration between
In this study, which focuses on pricing and its relationship customer needs and supplier deliverables, and also to assure
to overall launch management, the authors considered 215 that the timing of the launch is correct from the viewpoint of
recent new business-to-business and consumer product customers and channel members (“good” skimming).
launches, grouping them in clusters representing three The authors note: “One should expect that customers will
approaches to pricing strategy, which highlighted: demand extra well done performance on a variety of product
1 low price/poor timing; and service dimensions if they will invest in a high-priced
2 high price/poor support; and substitute for the product that currently meets their
3 good research/good timing. requirements. The risk to a potential customer is multiplied
Their findings supported the notion of penetration pricing if they must switch to a new product at a high price; thus
(setting a relatively low initial price) versus skimming pricing excellent customer calibration is the only product path for the
(setting a relatively high price which can allow costs to be high-priced market launch entry.”
recouped before any competition sets in), but neither The conclusion is that all aspects of the launch strategy,
skimming nor penetration pricing necessarily leading to including timing and logistics, must be in place in order for a
good performance. Proper execution of the price strategy, skim price to be successful. Management needs to think in
made in coordination with the rest of the marketing mix, is terms of constellations of marketing mix and launch timing
essential. decisions that support, and are consistent with, one another.
The three clusters had very distinctive models of behavior.
Firms in the first cluster of pricing approaches employed a (A précis of the article “Clustering product launches by price and
penetration launch price. Generally, the cost and quick launch strategy”. Supplied by Marketing Consultants for
market share gains theoretically predicted for this strategy Emerald.)

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