Business Marketing Product Management. The Six Sources of Competition in a Product Market Downstream...

Business Marketing

Product Management

The Six Sources of Competition in a Product Market

DownstreamCustomers

DownstreamCustomers

UpstreamSuppliersUpstreamSuppliers

Existing Direct Competitors

CurrentPartnersCurrentPartners SubstitutesSubstitutes

New Entrants

New Entrants

Must monitor current & potential product offerings Must monitor current & potential product offerings of eachof each

What is a Product?

• Anything that can be offered to a market to satisfy a want, need, or desire.

• Can be (individually or combined):– Physical good; autos, tablets, smartphones, etc.– Intangible service; haircut, concert, higher ed., etc.– Person; singer, golfer, presidential candidate, etc.– Place; Hawaii, Venice, etc.– Organization; American Heart Assn, Girl Scouts, etc.– Idea; family planning, no texting driving, etc.

What is a Product Offering?

• The complete package or bundle of benefits that the customer purchases.– Ease of purchase– Purchase payment– Services that aid in buyer receiving full benefit from

the product– Assistance with product disposal (if necessary)

Product Management Levels

• The Product Itself– e.g., Canon’s imageRunner 1310 copier

• The Technology Platform– The core technology that is the basis for a product line– e.g., Canon’s digiting scanner

• The Product Line– Canon’s complete line of imageRunner copiers

• The Product Category– e.g., plain paper copiers

Product Lines Defined

• Proprietary or Catalog: – Standard products offered to many customers

– usually inventoried in anticipation of sales orders.

• Custom-built:– Different variations of accessories and options

– Complement proprietary or catalog products offered.

– Marketer-designed

Product Lines Defined

• Custom-designed:– Products designed a particular user or very

limited number of users

– User-designed

• Industrial services: – Intangibles

– Maintenance, machine repair, consulting

How much does the componentcontribute to our product’s value

image in our customers’ view?

Minor Component

Major Component

Are we good at it?

Can we own the marketfor it?

Can we or do we want toprotect it?

Is it our kind of business?-Financial justification

-Risk assessment-Stability of technology

Make it!

NoYes

Is the componentunique to our markets?

Purchase as aCommodity

Yes

No

No

Yes

No

No

Yes

Yes

Develop Partnershipwith qualified

supplier(s)

Collaborate indevelopment with

technology-orientedsupplier(s)

Make or Buy Decisions

New Product Approaches

• Technology push: – Engineering driven.– Focus on development of a new technology– Market unsure

• Market pull: – Customer / Market driven.– Focus on fulfilling unmet customer

needs/desires.– Market more certain

Traditional New Product Development Model

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

Stage 6

Stage 7

Go/ No-Go Decisions in Product Development

Initiative Development

Initiative Development

Market TestMarket Test

Concept TestingConcept Testing

LaunchLaunch

Idea Generation and

Screening

Idea Generation and

Screening

Business Case Analysis

Business Case Analysis

No-goNo-go

X

No-goNo-go

X

No-goNo-go

X

GoGo

GoGo

GoGo

1st Go/No-Go PointQuick assessment of market size, growth rate, fit of organization

2nd Go/No-Go PointIs there sufficient market interest?

3rd Go/No-Go PointDoes market respond positively to “almost finished product” (beta test)?

Why Do New Products Fail?

The missing marketing plan No real need exists Market size is overestimated or a “Me

Too” product fails to penetrate the market

The offering fails to meet needs adequately

Market will not pay needed price Contrary perceptions of innovation

A good marketing plan is a solution to all of these!

Factors Influencing New Product Success

• Close ties to a well-defined market that lead to a product advantage

• Highly integrated and market-oriented company

• Competitive advantages– Technology– Production

• Strong marketing proficiency

• Strong financial support

Marketing’s Role inProduct Development

Understand the technology in depth Define/redefine current & future customer

needs Guide development based on customer

needs Motivate other departments & organizations Screen & select ideas from all sources Reward efforts of technical & support staff Catalyze company resources to get right

talent on the job

Organization of the New Product Effort

• Product manager: – Individuals responsible for four P’s marketing mix

decisions for specific product line as it travels through life cycle; responsibility often extends to new product development.

• New product committee: – Part-time interdisciplinary management group reviews

new product proposals; advantages outweigh disadvantages because committee is most common form of organizational structure for managing new products.

Organization of the New Product Effort

• New product department: – Specific department generates and evaluates new

product ideas, directs and coordinates development work, and implements field testing and precommercialization of new product; allows for maximum effort in new product development, but at expense of major overhead costs.

• New product venture team: – Task force representing various departments

responsible for new product development and implementation; normally dissolved once new product is established in market.

Product Life Cycle (PLC)

DeclineDecline

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

TimeTime

Sales Revenue/

period

Sales Revenue/

period

Development

Development

Technology Adoption Life Cycle (TALC)

Technophiles

Technophiles

Visionaries

Visionaries

LaggardsLaggards

TimeTime

Sales from New

Adopters/period

Sales from New

Adopters/period

Pragmatists

Pragmatists

Conservatives

Conservatives

The TALC and PLC Superimposed

TALC - Sales from New Adopters/

Period

TALC - Sales from New Adopters/

Period

PLC – Total Sales

PLC – Total Sales

TimeTime

Product Life Cycle

Actual PLC curves can be any shape product that doesn’t sell at all fad that grows fast but has short life seasonal product regenerated product life cycle “typical” product life cycle

When to Terminate a Product

• Cash usage is excessive and cannot be reduced• Contribution to profit insufficient

– Unprofitable product

– Investment can be diverted to more profitable product(s)

• Customer demand– Customer needs/desires have changed

– Some products are useful because customers do not need multiple vendors.

• New technology has replaced existing technology

5 Levels of the Product

• Core Benefit– Fundamental benefit being bought

• Housing, shelter

• Basic Product– Actual product providing the core benefit

• Manufactured home

• Expected Product– Set of attributes & conditions buyers normally expect

when purchasing this type of product• Kitchen, living room, bedroom(s), bathroom(s)

5 Levels of the Product

• Augmented Product– Level of the product that goes beyond customer

expectations to satisfy customer desires.– Selling the sizzle, not the steak.

• Washer/dryer, flower arrangements, higher quality carpeting

• Potential Product– Future augmentations

• Built-in wifi, self-cleaning toilets

Unique Service Characteristics

• Intangibility– Difficult for customers to evaluate– Forced to sell a promise– Difficult to advertise & display– Price difficult to set & justify

• Perishability– Cannot inventory– Difficult to balance supply & demand– Unused capacity lost forever– Demand is very time sensitive

Unique Service Characteristics

• Heterogeneity– Quality difficult to control– Delivery difficult to standardize– Cost/maintenance of automation high

• Inseparability– Employees critical to delivery– Other customers may affect service outcomes– Service success does not guarantee satisfaction

Dis/Confirmation of Expectations

• Customers enter purchase situations with expectations– Based on needs, personal experience, and secondary

experience

• Customers’ perceptions of product performance are compared to these expectations

• If perceived performance > expectations, satisfaction• If perceived performance < expectations, dissatisfaction• Either outcome influences

– Future exchanges (and brand loyalty)– Word-of-Mouth

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

The Result of SatisfactionThe Result of Satisfaction

Shape of the zone remains essentially the sameShape of the zone remains essentially the same

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

Dissatisfaction

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

The Result of DissatisfactionThe Result of Dissatisfaction

The zone actually widens slightly.The zone actually widens slightly.

oBoth expectations are lower.oDrop in AE greater than drop in DE.

oFuture exchanges at risk due to disloyalty.oNegative word-of-mouth effects future exchanges with others.

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

CustomerCustomerDelightDelight

Zone of Tolerance

Adequate Expectations

Desired Expectations

TheZone

OfTolerance

The Result of Customer DelightThe Result of Customer Delight

The zone actually narrows slightly.The zone actually narrows slightly.

oBoth expectations increase.oIncrease in AE greater than increase in DE.oZone narrows

oFuture exchanges more likely.oPositive word-of-mouth effects future exchanges with others.