How to Launch a New Product
by Arthur Middleton Hughes

 

So, you are about to launch a new product. You want to get it rapidly out into the market. You need satisfied buyers whom you can use to promote the product's adoption by a wider audience. Business to business marketers who maintain a customer marketing database today have some excellent tools available to permit a profitable launch of new products to their existing customers. Instead of flooding the mails with brochures, the modern marketer can pinpoint likely buyers among his customer base with considerable accuracy. The key to success lies in finding those customer segments which are most disposed to become early adopters. Once the new product has been launched and is widely accepted, the more conservative customers will be easier to sell. How do you identify these essential early adopters? There are a number of simple techniques available today that are explained in this article.

Types of Business Customers

Dr. Paul Wang, of Northwestern University, is widely known for his identification of the three main business customers: program buyers, transaction buyers and relationship buyers. A program buyer is one who follows some sort of internal procedure to make their business purchases. This is typical of governments or mature industries which have developed manuals which govern their buying process. Typically, such buyers try to spread their purchases of any one category among several suppliers according to a fixed schedule. Such program buyers are almost immune to external marketing stimulus. They are highly unlikely to be early adopters. One of the first steps in finding early adopters, therefore, is to identify the program buyers, and eliminate them from consideration. Your sales force and your common sense can help in this task.

The second business buyer type identified by Dr. Wang is the transaction buyer. These are companies that are primarily motivated by price. They are willing to shop around for every purchase. They have everyone’s catalog and actively compare prices. Loyalty is almost unknown to these buyers. You can keep your warehouse open on a Saturday afternoon to meet an urgent need for such a buyer. The following Tuesday when they have a big additional purchase, they will bid it out, rather than giving it to you in return for your exceptional service only three days before. These buyers are also unlikely to be early adopters. How can you identify transaction buyers? If you are on sale, they will flock to buy from you. When your competitor is on sale, they will desert you. By keeping track of the ebb and flow of buyers as your prices change, you can often identify these transaction buyers, and eliminate them from your product launch portfolio.

For your initial product launch, your best reception will be found in the relationship buyers. These are business customers who like your products and services. They have built a relationship with your employees. They think of your company as their primary supplier of your category. They do not want to be bothered to have to shop around every time they make a new purchase. They look for quality, good service, helpfulness, friendship and information. If you can supply these things, they will stick with you when your competition is on sale. If you have a new product, they will be the first to want to hear about it. It is to these good people that we look for our product launch.

SIC Penetration Ratios

Finding the relationship buyers is only the start of a new product launch, however. To identify the early adopters, we must find businesses in areas where we have a high penetration ratio, and customers who, by their behavior, are disposed to respond to our promotion. To determine the penetration ratio, it is necessary to have all of our customers coded by Standard Industrial Code (SIC). If you send your customer database to Dun & Bradstreet, or other similar suppliers, they can quickly code most of the records by SIC code. They can also tell you how many companies there are in the US who lie in the same SIC codes. This is where the penetration ratio comes in. A SIC code identifies the type of business: paint manufacturer, casualty insurance company, movie theatre. When your file comes back from D&B it will have these codes attached. There will still remain a certain percentage for which a match cannot be found. In most cases, a trained clerk can supply the missing codes by eyeball: Eternal Rest Funeral Home is probably a funeral home, even though it was not on the D&B list. Carson Lamp Sales is probably a wholesaler of electrical products. A careful screening of your list should permit coding of more than 90% of your customer base in a few days time.

 


Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.hughes@dbmarketing.com) which provides strategic advice on relationship marketing. Arthur is also Senior Strategist at e-Dialog.com (ahughes@e-Dialog.com) which provides precision e-mail marketing services for major corporations worldwide. Arthur is the author of Strategic Database Marketing 3rd ed. (McGraw Hill 2006). You may reach Arthur at (954) 767-4558 .


The articles on this web site are available to the general public to read, enjoy and for limited business use. If you want to reprint more than one or two of them for resale or use in a business or educational environment, send an email to Arthur Hughes at arthur.hughes@dbmarketing.com. He will give you permission by return email. The cost, depending on the number of copies you want to reprint, is very inexpensive.