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The old product-driven strategies do not work. New products are a classic strategy for growth. However, new products alone do not guarantee growth. Customers do not buy just any new product. They buy only the new products for which they have a need. For example, Keithley Instruments’ Chairman Joe Keithley declared themselves a failure in their 1992 Annual Report, "Our introduction of new products . . . has not produced growth . . . and we are not pleased." Becton Dickinson’s Medical Systems division (BDMS) had fifteen major new product initiatives underway in engineering, yet found themselves with losses and declining sales.
The old formulas are not helpful. Other guidelines express the sum of marketing, promoting, and selling as a percentage of sales. For instance, operating ratio surveys indicate that 15 to 20 percent of sales would be average for a components business, 25 to 30 percent for systems, and 40 to 60 percent for software. However, formulas expressed as a percentage of sales are of no use for new products (or new markets, or new fields), since new products have no sales until the product is ready. Lumping the functions together diverts board attention and investment commitment away from the marketing portion. That guideline offers no assistance in the timing of the marketing effort. Sales figures are history, while the board needs future-oriented intelligence. For example, BDMS outspent their main rival, Hewlett-Packard, by 70 percent in total marketing, promoting, and selling — 26 percent to 15 percent of sales. Yet Hewlett-Packard was number one in market share and profitable while BDMS was number seven with losses. BDMS could not afford to increase its already large sales-and-marketing budget to "out-market" its rival. BDMS found that the sales percentage formula was not helpful.
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