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How to launch a successful new product (and predict this year’s Christmas #1 toy)

Category : Business

Predictive analytics to set product launch strategy and to understand what will happen in the market

In this the fourth of our series on how analytics can be used in retail, we’re looking at how analytics  can be used to support the launch of new products.

A few weeks ago, Amazon revealed that they don’t look to make any profit on the sale of their Kindle devices. This confirmation of their pricing strategy has been followed with numerous news articles revealing how this strategy differs significantly from that of rival Apple and questioning whether this short-termloss making  approach is going to pay off in the long term. Amazon asserts that it will, and that their profitable ebook content sales are already increasing.

AmazonApple

These two very successful companies, both global household names, employ widely different pricing strategies, both bold, planned and decisive.

As things stand now, here in 2012, sales figures suggest that Apple’s strategy is the stronger,

Apple and Amazon Revenues 1999 to 2012

Comparing Apple and Amazon Revenues 1999 to 2012

*chart from barefigur.es

but, as we all know, the Tortoise beat the Hare. Sometimes slow and steady wins the race. One reason these brands’ pricing strategies have given rise to such a huge volume of news stories is that no one really knows which strategy is better. It’s a suspenseful race full of questions. How long will Apple’s rocket revenue increases continue? Will either  company take risks they cannot recover from? What will the new successful products be? How will they launch them?

Any company when planning to launch a new product has to answer that final question and it splits down into many more questions that need to be addressed. What will the pricing strategy be? How will we market this? Where will we retail it (which countries, which partner retailers, which shop sizes)? These are all questions where analytical insight can help to mitigate the risk, minimise inefficiencies, minimise stock-outs or over-costly inventories and maximise profit margin as the new product hits the real and virtual shelves.

What are the retail strategies for Christmas in the UK?

Here in the UK at the end of this year, with Amazon’s latest Kindle and Apple’s iPad Mini already available for purchase with their pricing strategies clear, the run-up to Christmas opens up a whole range of new retail battles ……

  • Mobile phone companies (with the exception of Apple) are storing up new handsets for release to the market in mid to late November.
  • Party food of all kinds is now appearing on shop shelves.
  • All throughout London, every restaurant with a capable chef is advertising their Christmas menu to attract office party business
  • and in the most famous Christmas battle of all (arguably, maybe the Christmas #1 Single beats this, we’ll leave you to argue silently – or in the comments – with us, if you choose) the line up for the 2012 best-selling toy is complete.
This week the Toy Retailers Association announced the contenders.

Understanding the characteristics of a best-selling toy

The Figure It Out team wondered what kind of toy is most likely to win the battle this year. We researched previous winners and identified a small set of attributes for each toy to see what the winners have in common. (The full list is at the end of this article).  So, over the past 27 years:

  • the average price-point for the best-selling Christmas toy is £31
  • just over half the toys were related to film or TV
  • two thirds have a collectible attribute
  • 30% were high-tech
  • a little more than a third were innovative at the time
  • none had won previously
Using a very simple model, accepting a toy characteristic if more than half of the previous winners had it and rejecting it otherwise, we compared these results to the Toy Association list.

What will be the number one stocking filler at Christmas?

Looking for a toy in the £20-£40 price-bracket, with a TV/film connection and the possibility of collecting other similar items, but without any high-tech or innovation, the selection is reduced to just two toys.

What will be the best-selling toy this Christmas?

2012 Christmas Toy Battle

So, our prediction is that this year’s best-selling Christmas toy will be either the Monster High Ghouls Rule Dolls or the newly TV famous Cabbage Patch Kids.

Analytics is for life, not just for Christmas

Of course, much more than this can be done with analytics at this product selection stage. Rather than looking at the contenders at this stage, when the products are ready for market and about to start selling, we can gather data regarding many attributes from thousands of possible Christmas best-sellers, and identify clusters of products which could be successful, to recommend toy needed  to create the new Christmas star.

Thinking more widely on the product launch, analytics and social listening can be applied across the product launch lifecycle. Examples include:

  • Likelihood to buy by product and price across channels to inform channel and pricing strategies
  • adopting an agile approach to marketing by using social listening to respond to online and social impact, as well as competitor behaviours
  • using sales data and customer behaviour to forecast stock and supply chain demands in advance to minimise stock-outs on the shelves.
To coin a phrase, “Analytics is not just for Christmas” - at all times of year Business Analytics is able to support decision making around product launch management. From design decisions, helping create product launch strategies, dynamic and innovative pricing models, managing the marketing impact, supporting stock management, and supporting customers, analytics can support and guide businesses to improve their performance at every stage.

Appendix

Best Selling Christmas Toys 1985- 2011

Year Best –Selling toy Price Related to TV or film Previous Winner Collectible High Tech Innovative
1985 Transformers, robots in disguise

£16.87

Yes

No

Yes

No

No

1986 Football Stickers

£0.10

Yes

No

Yes

No

No

1987 Sylvanian Families

£6.97

No

No

Yes

No

Yes

1988 Ghostbusters Proton Pack

£19.87

Yes

No

No

No

Yes

1989 Batman Bat Mobile

£9.94

Yes

No

No

No

No

1990 Teenage Mutant Hero Turtles

£3.78

Yes

No

Yes

No

No

1991 Game Boy

£69.94

No

No

Yes

Yes

No

1992 Thunderbirds Tracy Island

£32.87

Yes

No

Yes

No

No

1993 Barbie Dolls

£10.97

No

No

Yes

No

No

1994 Power Rangers Figures

£4.74

Yes

No

Yes

No

No

1995 POGS

£0.49

No

No

Yes

No

No

1996 Toy Story Buzz Lightyear

£23.87

Yes

No

Yes

No

No

1997 Teletubbies

£27.39

Yes

No

Yes

No

No

1998 Furby

£24.87

No

No

No

Yes

Yes

1999 “Who wants to be a millionaire?” board game

£23.78

Yes

No

No

No

No

2000 Teksta the robot

£38.74

No

No

No

Yes

Yes

2001 Bob the Builder

£19.97

Yes

No

Yes

No

No

2002 Bratz dolls

£24.99

Yes

No

Yes

No

No

2003 Beyblades

£5.99

No

No

Yes

No

Yes

2004 Robosapien

£74.97

No

No

No

Yes

Yes

2005 MP3 players, PSP, Xbox 360

£9.99-£279.99

No

No

Yes

Yes

No

2006 Nintendo Wii

£129.99-£169.99

No

No

Yes

Yes

Yes

2007 In the Night Garden Iggle Piggle

£34.99

Yes

No

Yes

No

No

2008 High School Musical Dance Mat

£17.99

Yes

No

No

Yes

Yes

2009 Go Go Pet Hamsters

£9.99

No

No

Yes

No

Yes

2010 Toy Story 3

£4.99

Yes

No

No

No

No

2011 KidZoom Digital Camera

£34.99

No

No

No

Yes

Yes

*data taken from newslite.tv

 

About the author

Jonathan Chadwick
Jonathan Chadwick
Jon has worked for 18 years as an analytical consultant in the UK, USA and Europe for a diverse range of sectors, most recently Financial, Oil & Gas and Government. Jon has extensive experience in benefits realisation, modelling, business analytics, portfolio management and change management. Jon devised and created Figure It Out.

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