Backup Marketing Plans in Case of a Failed
Reformulation
"Is there any way to put a backup marketing plan in place in BRANDMAPS™ that would be enacted if a reformulation fails? For instance, our marketing plan will be based on the premise that our reformulation request would be successful. However, if it fails, our marketing strategy is meaningless and will result in losses."
I applaud you for thinking ahead and considering the full consequences of reformulation actions. Brand repositionings (i.e., "reformulations" in BRANDMAPS™) are major undertakings, with lots of associated risks, rewards, and costs. Repositionings are a major management challenge, to plan and to execute.
In BRANDMAPS™, bidding high for your reformulation request is the only complete protection you have to ensure a successful reformulation and to avoid marketing plan problems with failed reformulation attempts. Of course, even if your reformulation bid is highest, you must still have a technologically valid reformulation request and your reformulation must not violate any existing patents at the time of the reformulation. Thus, there's lots of detailed upfront analysis necessary to ensure that your reformulation will be successful.
There is no capability in BRANDMAPS™ to have one marketing plan (i.e., set of decision variables) in effect if you successfully reformulate and another marketing plan (i.e., set of decision variables) in effect if your reformulation request is unsuccessful. All marketing plans are unconditional. They happen whether or not your reformulation is successful. (But, see the special exception of conditional introductions associated with initial launches of products into market regions that also involve a reformulation.) This is part of the challenge of doing launches, repositionings, and reformulations. These marketing initiatives are very chaotic kinds of things with lots of potential for adverse consequences.
You do, of course, have the ability to make ad subsequent quarter, to update your marketing plans based on the outcome of a reformulation request. Thus, reformulation consequences for marketing plans aren't permanent all-or-nothing propositions.
There are some ways you can purchase a measure of insurance to protect yourself from the uncertainties associated with reformulation outcomes: (1) bid high; (2) conduct lots of careful analysis to ensure that you know competitive brands' formulations and patent zones when you form you reformulation request; (3) use the maximum emergency production limit (10%) to provide a measure of production flexibility in case your sales are unexpectedly high; (4) delay making major commitments of marketing support spending to a brand until you are sure that it has been reformulated successfully; and, (5) until you are sure that a reformulation has been successful, choose marketing decision variables that are not sharply focused on a particular product positioning (e.g., promotional type of 10, standard media mix of 55555, $0 dealer rebate).
Price is normally a special challenge in reformulations if the costs of the new product will be dramatically different than the old product. However, there's a logic in pricing "low" during a reformulation attempt, regardless of the short-run financial consequences. (Here, "low" refers to the lower of the prices associated with the old reformulation and the new reformulation.) If your reformulation is successful, a "low" price encourages trial of the new formulation. Since the reformulation is presumably superior to the old, the "low" price yields faster market share gains. You will, of course, expect to raise price someday to extract the superior financial performance that you hoped to achieve in the first instance with the reformulation effort. If your reformulation is unsuccessful, you were probably facing decreases in market share anyway so the "low" price is a way to hold your market position in the face of a poor product formulation.
Bidding on Minor Reformulations
"In BRANDMAPS™, is it necessary to bid for minor reformulations? Doesn't a firm already own the patent zone within which a minor reformulation occurs?"
Bidding is required for all reformulations, minor and major. Firms do not own exclusive rights to patent zones, since patent zones may overlap in BRANDMAPS™. Indeed, many products' patents could cover the same patent-zone point. It seems prudent to bid low for minor reformulations since the fallback position, the current formulation, is normally satisfactory.
Goodwill Carryover After Reformulation
[1] "Suppose that a firm has a mature product in the U.S. If they choose to reformulate that same product and reintroduce it into the U.S., how much of the goodwill carries over to the new product? I realize that the student manual says 'some' does, but is the student manual referring to bringing a new product in while the old one still exists? This question is relevant because the answer determines whether a team should cultivate an old brand or reformulate a new and improved brand." [2] "After reformulating, does the former position of the product influence dealer support? Or, does the new formulation have to start from ground zero with
Whether a reformulation is for an old already-in-a-market product or for a new to-be- introduced-to-a-market product, the same basic principle is at work. The former positioning is generally remembered by customers and dealers. It follows that the former positioning is taken into account in current purchase decisions. Reformulation means "new and (presumably) improved" with carryover of previous standing with customers (e.g., customer brand awareness) and dealers (e.g., dealer availability). Well-known, well-entrenched products build off their previous market positions after a reformulation, whether that reformulation is major or minor. Unknown products, launched (i.e., introduced in a market region or regions) at the time of reformulation, must build market presence. Awareness and distribution take time and cost money to develop. That's the reason why a dominant new formulation ("dominant" according to product design research) doesn't necessarily win the whole market immediately. It has to build up awareness, distribution, reputation, and convenience perception after launch. Two additional other observations are relevant here. First, an active brand that is reformulated for its current market(s) only does not need to be introduced. It is already active in its current markets. Introduction only occurs when a product is first launched into a market region or regions. Second, carryover is brand-specific not firm-specific. If you drop product 4-2 from a market and simultaneously introduce a reformulated version of product 4-1 into that same market, there is no carryover present. As far as the customers in that market are concerned, product 4-1 is a new product. It would have to earn market position, awareness, distribution, etc. like any other completely new product.
Introduction After Failed Reformulation
"One of my BRANDMAPS™ firms submitted a reformulation request and all three reformulation variations violated pre-existing patents. However, the product was still introduced into market region 1 with the exact same formulation as their original product 6-1 (30/30/30/5/5/5/5). After all three of their reformulation requests failed, the software introduced a second exactly identical product into market region 1. This split their sales and increased their costs. Shouldn't the same formulation have been a patent violation on their own existing product (6-1) in market region 1?"
Original (at initialization) formulations are grandfathered regarding BRANDMAPS™ patent laws. Their formulations are legal although all other reformulations must satisfy patent laws. Since all products start off with the same formulation (30/30/30/5/5/5/5), there are lots of apparent patent violations possible. Thus, the existence of this grandfathering provision. Note also that minor reformulations (i.e.., changes of no more than five) are not possible for the original formulations, until such time as all other original-formulation products have been reformulated since patent laws include a minimum patent zone of seven at all times.
Your students probably should have used a conditional introduction associated with this reformulation request. That way, an unsuccessful reformulation attempt would have resulted in the launch being canceled and the support spending being deleted. You might suggest that all your students review the student manual regarding "conditional introductions."
Note, also, that patents are universal, not region-specific. Thus, a patent protects a formulation everywhere, not just in the limited number of market regions in which it might happen to be actively distributed at the present time.