Innovative Precise Product - Essay Example

Introduction Precise is at the crossroads of deciding whether to launch its new innovative product at Oracle OpenWorld 2000 while it is still in its early stages or wait until the next year. There is risk and reward in both scenarios. If they choose to launch their new innovative product there is a risk of failing to prepare it in time. This might lead to consumers losing trust in the product or its functionality at an early stage which will make their job of regaining their customer’s loyalty way more difficult.

Another issue related to the first decision is that the targeted customers may not recognize the actual need to purchase the new product and therefore pay much more for it. If they do not launch the product, they might lose an opportunity for a first-mover advantage in the market. The company might lose the novelty of the new product because other companies are always on the developing spree and might come up with something similar in a short period. Having analyzed the risks associated, there are three main issues that Precise is facing and if addressed can help to arrive at a decision. (a) When to launch?

Within the answer of which lies the explanation for key issues of new product planning and development (b) How to Market it? The answer to that question should suggest correct segmentation analysis and valued marketing strategies to attack the targeted segment (c) What is the best price? An in-depth study of the ideal pricing strategy and one that matches its sales and marketing strategy should be undertaken by Precise. Analysis: Precise is still under the planning and development stage and the product is a novice in the market.

Precise is carrying reputation risk and risk of losing its customers. When weighted with the benefits of an early launch, I feel Precise should not launch it in OpenWorld 2000. Two scenarios crop up if it’s launched. One, the Product might lose out of revenue and customer trust, and two this will give a half-baked product to the competitors to develop a similar product and launch it themselves. Precise’s strategy to sell Insight should differ from its existing one. An existing strategy that focuses and depends more on the sales reps is not fetching the desired results.

The current strategy is not securing enough revenues and hence the bottom line is less affected. The new product, which is an end-to-end product needs a specialized team of sales personnel who can sell not only in ‘Database server’ and ‘Storage’ but also include in them User, Web network server and Application servers. Insight is created as an end-to-end solution. Why should it come cheap? If this is the one that the market wants and if Precise can deliver on time and with desired features, the pricing should be high.

This may add some obstacles to selling it. Customers are so used to a certain price range that they might find it hard to adjust to the new pricing strategy. This is where a team of better-equipped sales agents help create that market need. The consumer may not recognize immediately the need for such a product or the marginal benefit they will derive out of it, but if pitched on the right note they will be convinced. The pricing decision is no doubt the most crucial decision, especially in a price-conscious and competitive market.

Also since it’s a new product, too high or too low can make or destroy its perception in the market. Precise should consider demographic data like the region they cover, average order size, average size of companies they cater to etc. in the pricing decision. Precise also needs to keep in mind the position of the potential buyer to whom they are going to sell it, and via direct sales or third party. Sometimes third party also works as they have built a certain level of trust in the market and a name for themselves.

Another factor is the economic strength of the potential buyers; this factor may internally integrate/overlap with other psychological factors whether the buyers are willing to pay the extra amount for INSIGHT and whether would they consider it as a more qualified software. But the important question remains: how much are they willing to pay for this product? Given the fact that Insight is still a new product to be introduced to the market, it is hard to determine the price elasticity for this software since no historical data is available.

Yet, Precise can always refer to the other method of estimating price elasticity through collecting data from the target market to conclude the relationship between the quantity demanded and its effect on price changes. However, does Precise want to spend a large amount of money on such a method while its validity is still in question, and does Precise want to spend time on this research instead of focusing on developing the product in time if they decide to go to WorldOpen 2000? Options: About the first issue, Precise has two options: The First is to launch the product in World 2000 despite its pre-maturity.

While doing that, they should stress the fact that it’s still in progress and assure their clients that it will carry even more attractive functional abilities by the time of delivery which will be in one year. They might urge customers to think about it as a semi-finished product for their benefit, so that Precise can take their suggestions and incorporate them in fully functional software. This will mark the beginning of the era of Insight. They can use this additional required year for developing the product in strengthening the ties with their potential customers.

They can also get them involved in the development process by identifying their needs and working on fulfilling them. The Second option is to wait until WorldOpen 2001 to launch a fully developed product. During those two years, they should study their marketing strategy thoroughly. Make sure the pricing and sales strategy is in place and case a competitor comes up with a similar product to Insight during this period, they should take advantage of learning from the other company's mistakes and develop more competitive features.

About the question of how to market it, Precise to date has created a niche for its segment. People think of Precise as a specialist company. They should try to maintain that strategy and make sure the product placement of insight is similar. Customers should be sold on price but on uniqueness and novelty. Innovation and niche should be stressed and no other company can provide this end-to-end solution. BMC is thriving on its direct sales team and figures are improving as a percentage of revenue each year.

Similarly, if a good sales force is deployed Precise should do well. Secondly, VAR and System integrators will not work on new products such as Insight, so direct sales is the best option. About the third issue, Precise could consider maximizing its profit in the long run. However, Alon cannot determine yet how much are the total costs of the software, since it's still in its early stages. There are a couple of pricing objectives to be considered Like how much are they expecting Insight to give them in returns and what price will guarantee them the largest or sole market share by preventing competition.

Precise has not been efficient in considering cost in the past. In the year 1999 Marketing costs were nearly 75% of total revenues and they made losses at the end of the year. In considering Insights price cost of production, promotion and distribution should be considered as part of the price in addition to labor and programming implicit and explicit costs. This will give a realistic estimate and not create a burden on the balance sheet of the company as a whole. Cost-plus and Rate-of-return pricing methods are appropriate in the case of Precise/ Insight.

However, those two approaches may have downsides whereby one could argue that by using either one of those couple approaches Precise won't determine accurately if its targeted market is willing to pay for Insight. But for that, if they decide to launch it in 2001, they might want to go for market research and then decide. Another is that there is a negative relationship between pricing and sales volumes. Both methods fail to estimate the outcome. All of that doesn’t reflect on competition adequately.

If the Precise methods of pricing in considering cost would put them in tight competition, then they are at risk of getting out of the market completely.