The ups and downs of new product launches

Launching a new product can be like a roller coaster ride. There are highs, like the increased sales and the sense of pride that comes from bringing something from idea to finished product. And then there are lows—problems associated with new designs and other first-time experiences that can stop that sense of euphoria cold.

On a roller coaster, of course, everyone expects to experience ups and downs. But companies often fail to anticipate problems when they launch new products, according to André Kuper, a project manager for Hewlett-Packard Co.

In his session at CSCMP's 2007 Annual Conference, "Instilling Change in How Products Are Brought to Market," Kuper regaled his audience with tales of unexpected outcomes of new product launches and offered some advice. Here are some of his true-life stories:

• It pays to involve legal, tax, and import experts early in the design stage to avoid costly surprises that could make new products uncompetitive. For example, the duty rate for a photocopier that has been built into a printer is higher than that for a traditional copier—a fact that product planners and design engineers may not know.
• Duty rates are based on government- determined product classifications. Unfortunately, those classifications rarely undergo major updates. As a result, they may lag 10 years or more behind the technology to which they apply. Not only can that make it difficult for importers and exporters to properly classify new technologies, but it also increases the likelihood that customs authorities will interpret classifications for new products differently than they do— and any such discrepancy will have an impact on a product's taxes, duties, and profitability.
• Many high-tech companies rely on postponement (delayed customization) to keep costs down for products that have a basic framework and a great deal of variation at the stock-keeping unit (SKU) level. But that approach is cost-effective only when the price of the semi-customized product is high. When prices fall significantly—as they have for printers, for example—postponement becomes too costly in relation to the product's selling price. Companies that don't review their cost/price scenarios regularly can end up losing money before they know it.
• Changes in a product's quality and pricing can sometimes lead to internal competition among product lines. A case in point: As the quality of ink-jet printers got better and the price of laser printers dropped, the two product lines essentially "met in the middle" and began to compete for the same buyers.