Managing Processes and Products TMA 2 March 2011 by Panos Kyriakopoulos Success or failure of an innovation

A. The Company The company is the Greek Yellow Pages (GYP) which for the last 40 years is publishing directories in which the small medium size companies and professionals can advertise their products / services. GYP business was up to now to provide leads to its clients. During the last years GYP has developed, in parallel with its print directories, an on line search engine. Thus its clients have a presence both in print directories and internet. The company in its last strategic plan has included, as a main target, to extend its business to bring customers to its clients. Thus the Board has asked the Management to investigate the market and develop new products towards the new business target. B. Concept Generation The problem that the Management was asked to solve was to shift its products from simple products (print and internet) that were developed to enable the users to find companies / professionals in a specific area, to more sophisticated products, using direct marketing techniques, to bring customers to GYP clients. Thus GYP from a passive platform had to be transformed to a more active platform. The responsible department for product development within GYP organization is the Marketing department. The responsible team in the beginning recognized two ways to approach the challenge. The first one was to develop a product for the mobile phones, so the users could receive messages, using a filter, from business offering products and services they were interested with. The idea was to use augmented reality software and the users, enabling the photo program of their mobile phone, could see all business near them and the products / services available. I.e. if someone was interested to buy shoes, using his mobile phone could see which shops are nearby and have shoes. This idea was postponed since it had as a prerequisite that users had smart phones and only 5% of the users had smart phones at that time. The second one was to create an on line market place where the businesses were able to promote their offers in the on line site of GYP. Thus when somebody wanted to buy a product using the search machine, he could see also the available offers. Furthermore GYP whenever there was a new offer, it could send direct messages to a database of interested buyers. C. Project Selection Page 1 of 8

The solution that the marketing department decided to proceed with was to develop a product as following: The business / professional were able to offer through GYP on line platform, a coupon for their products / services. The coupon would have a nominal value but it was offered to the platform users with a high discount. The users could buy the coupon at the indicated discount price. The discount had to be more than 30% . The business could set maximum number of coupons to be sold and a period within the offer was valid. The user would print the coupon and use it to buy products/services with value equal to the value of the coupon. GYP would receive a commission based on the total transaction. The coupon offerings were to be shown in a special sector of the site as well as the page where the businesses were appearing when the user was undertaking a search. In this way the users for every search, they could see all offers available. GYP would also be sending direct e mails with each offer to users categories. GYP clients would also be able to put new offers on a self service basis through internet. GYP would be finding new deals using its sales force network. The marketing department analyzed the new product value proposition with various methods including: SWOT analysis
POLITICAL Political will decrease prices and inflation Political will increase use of interest SOCIAL Users search more for opportunities and good deals Users use more and more internet ECONOMIC Decrease of disposable income due to economic[visit] Increase of competition Decrease of profit margins TECHNOLOGICAL More technology tools to develop solutions

The new coupon product address: The possibility to offer product and services at lower prices Users that were not there to buy at nominal prices they would probably buy at a reduced price.[Discrimination of price] Business / professionals would pay for promoting their product /services only if a sale was done All the process can be done automatically through the use of modern technology tools.

Value Chain

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GYP Sales Dept.

SmallMedium/Bus iness/Profes sional

Offer Formation

Platform Logistics

Direct Marketin g

User Purchase r

The Small-medium company /professional would be paying for promoting its product/service to new customers as well as selling product/services in bulk at low margins. In order the new product to be successful: The GYP sales department must be successful to find interested business/professionals and develop together interested offers Small-Medium Business/professionals must offer such products/services that make sense to sell them at high discounts and still make some profit or out of the promotion to believe that they will gain new client. The platform/logistics must work smoothly and GYP will develop a database of interested users so it may send direct marketing mails. The type of products / services must be of interest of users and the users to know that they can find such offers to the GYP platform. Market Analysis The coupon market through internet was a very new market in Greece and it was very important to enter the market as soon as possible. The total market, when GYP decided to proceed with the coupons offering, was only 20mil. (total coupon sales through internet) and quite a few companies have already been entered. The main competitors were Groupon, a multinational company which was controlling 50% of the market and Golden Deals, a Greek company controlling 30% of the market. The rest 20% was controlled by many smaller companies. These companies were targeting companies working with high margins (more than 50%) and high fixed costs (eg. Restaurants, beauty services, etc). The platforms were charging 40%-50% commission on sales and all of them were having limited sales resources. GYP had access and business relationships to most of the prospective coupon users, had an extensive sales network and a successful internet presence with a high number of user visits. The key success factor was the implementation speed. A market study showed that the market could increase from 20mil., which was the figure during the study year, to more than 200mil wiithin a period of four years. TEECE Analysis
High Appropriability

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Coupons offering Low Complementary Assets High

Teece analysis showed that: It was easy for a company to develop a similar platform. The success of the business was based on the reputation of the company offering the coupons, its sales network, its business relationship and its present success in internet offerings. GYP had an excellent reputation, long studying relationship with the smallmedium companies and professionals an extensive sales network and a successful site. The coupon offering will be an add on product offered to its existing clients which will strengthen the total product offering. From the market analysis it was found that it was important that the product had to be developed within a period of 4 months and that the existing sales network was able to sell the coupon offering as an add on product. Furthermore it was important to be able to complete agreements for a minimum number of offerings before launching and create a database of prospective interested users. D. Product Development A project team was established to develop the new project. The project manager was the on line marketing manager together with a marketing assistant, a member of the IT department, a member of the finance department and a sales manager. The scope of the project team was to: Develop the product specifications. To test the product specification in the market and fine tune it. To decide on the business model, pricing etc To write down the technical specifications and award a contract to a subcontractor to develop the necessary software. To identify and solve any logistic issues including payment clearance with a bank. To organize the necessary internal structure to support the new product especially in the sales sector. To organize the launch strategy. To launch the product within a period of 4 months. Page 4 of 8

E. Product Commercialization Within the project team scope, as stated in the previous paragraph, was the product commercialization. During this phase the project team: Tested the product in the market. It actually developed and tested two types of products. The first one was similar with competition i.e. mainly coupons for services with high profit margin and high fixed costs where the businesses offered high discounts (50%). The second one was coupons for products of first need like gas oil or supermarket products where the discounts were much lower (510%). In the first case the commission charged was high and in the second one low. Tested the level of commissions that the clients were ready to pay. Requested the sales department to ask the salesmen to discuss the new product with their clients and return a questionnaire.

Furthermore it was decided during launching to go ahead with a strong advertising campaign and differentiate the offerings from the competitors by Include in the platform more than one offer per day. The competitors had the policy of offering for each geographical region the deal of the day. Include more than one offer per heading (business category) in order to create competition between businesses. Develop 5 internet sites (verticals) that will present the offers of each category (Entertainment, Beauty, Travel, Repairs, Daily needs). Include both types of products (high and low discounts). Decrease the commission from 40% - 50% to 30% for the high margin business. Try to create revenues from high number of offers. Provide the clients a self service possibility to set their offers.

The target was within a period of 12 months to get 50% of the coupon offering market and be the leader. F. The Innovation The coupons products through internet was something that was already in the market. The innovation of GYP was the following: To create a market place where the user, when he was searching for a particular business, to get in his organic results page also the relevant offers. To connect GYP clients with the market place so they can input their offer on a self service basis.

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To create vertical sites where a user can find content about the category (e.g. travel, entertainment, beauty etc), search business with various criteria and see offers. To include in the offers coupons for low margin products and services.

G. Outcome GYP, with a delay launched, the new product in Greece, The results were the following: There was a delay in launching of about 3 months. There was high demand from users. There was a difficulty from the sales department to find sufficient flow of discount deals. The low margin product offers were not as successful as anticipated. The GYP customers were not using the self service possibility. During the first year GYP had a market share of 30%. The growth of the market was as anticipated.

The new product can be considered as successful, but the innovation parts of it were not as successful as anticipated. H. Assessment of success and failure reasons of the new product. H1. Controllable

Project management and implementation The main problem was that the team was not able to keep the deadline of 4 months and the total duration reached 7 months. The reason was that the negotiations with the subcontractor, who developed the necessary software, took 2 months instead of the planed 15 days. Also there was a delay of 15 days of checking the deliverables and start using the software. Those 2 months of delay influenced the critical path of the project. A second delay, as well as a problem with the implementation strategy, was the decision to include in the launching low margin products of day use. These products were gas oil, supermarket products and mobile telephony airtime. These products are offered on a national level from very few large companies (supermarket chains, gas station chains and mobile companies) and all of them had time consuming internal decision processes. The idea of GYP was to have a 6 month contract with one company of each category and change the type of their offers on a weekly basis. The result was a delay of more than two months from the initial planning, and that due to time constrains the deals were not as attractive as they could be for the users. Thus the demand for these deals was not as high as expected. Furthermore the delay in launching gave the opportunity to the competitors to adjust their strategy. Problems were created to the sales department due to the fact that they have indicated to the clients a different date of launch and this date was delayed.

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Product / service advantage As stated in the above section the offers from the day use products were not as attractive as per the market expectations. Another innovation was the self service possibility of the businesses to enter their offers. This possibility was not used by the companies to the anticipated extend. The original idea was that, after the first deal, each business will continue entering coupon deals in the platform on its own. This possibility could be also be used for a business to answer on offers given by its competitors. Thus a lively market place could have been created with many offers. In practice this service advantage was not used and most of the businesses were expecting a sales representative visit to initiate their next offer. It seems that the businesses did not felt comfortable to use this possibility. GYP is presently studying the problem and will try to make the deal input method more user friendly and provide more training to the users. Predevelopment activities The first idea and the first analysis were correct. Coupons offering were a successful strategic extension for the Yellow Pages offerings. The buildup of the new product on YP brand name, business relations and internet platform was a successful one. Any problems of not having a 100% success had to do mainly with the implementation and commercialization phases. Proficiency of development process As stated there was not a good estimate of the time required of some of the critical actions and the negotiation skills of the team could have been better. Proficiency of marketing The marketing results were good for the expected demand of the coupons and the assumption that the GYP platform was the right environment to promote the new product. The launch strategy was successful and within a 12 month period GYP was able to acquire a 40% of the market shave. The growth prospects of the market were also strong as anticipated. The marketing department was not able to predict the difficulties that GYP clients will have in using the self service deal system and the difficulties of the sale department to have a sufficient constant flow of deals. Thus within the first 12 months GYP was not able to create a deep market place, as anticipated. H2. Uncontrollable Market potential Page 7 of 8

For this factor we can repeat the issues of deal flow and use of self service system which would have resulted in a deeper market place. The market studies showed that a potential exists, but it is an uncontrollable factor to estimate how quick this could happen. Market attractiveness It was not anticipated that the low discount coupons for daily products would not be as attractive as anticipated. One factor for that could be that the users are visiting GYP platform for certain categories of business and they are not interested to investigate for offers which are not connected with the classic YP categories. Competitors Behavior The main two competitors reacted with a decrease of their commissions. One of these competitors had entered the market as premium brand charging high commissions. With the entrance of GYP they all decreased the commissions to the level of 25% - 30%. This reaction took out from GYP the advantage of being a lower cost option. Capital requirements This went as planned. Regulation or legislation There were no changes or not known issues.

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