Download Part One - Lingnan University

Part Three
Business Marketing Programming
Part Three
Business Marketing Programming
Part 3 covers the key areas of business marketing programming.
Chapter 8 Developing and Managing Products
Chapter 14 Pricing and Negotiating for Value
Chapter 9 Business Marketing Channels
Chapter 10 Communicating with Customers (IMC)
Particular Communication Vehicles:
– Advertising, Trade Shows, and PR (Chapter 11)
– Direct mail, Telephone, and Internet (Chapter 12 )
– Personal Selling (Chapter 13)
8-2
Chapter Eight
Developing and Managing Products:
What do Customers Want?
Learning Objectives
 What is a Product?
 Managing Products
 Key product management decisions
 Product management levels
 Product management tools (portfolio and product life
cycle)
 New Product Development
 Identify the process of developing products internally
 Discuss the importance of lead users to the product
development process
 Indicate what partnering, with both suppliers and
customers, means to the product development process
8-4
What is a Product
BENEFIT:
How the Product or Service Satisfies
A Need
PRODUCT:
A Bundle of Benefits and a Collection
of Solutions to Needs and Wants
A Benefit That Satisfies a Customer
COMPETITIVE
Better than A Competitor’s Product
ADVANTAGE:
Benefits
8-5
Core Product & Augmented Product
Product – A collection of features; A collection of advantages;
A collection of buyer benefits including services.
Core Product – the tangible item plus customary services
Augmented Product – the tangible product plus customary and
unique/customized services comprises the augmented
product.
• A means of exceeding customer expectations
• Should be done on a customer-by-customer basis
• Is accomplished by adding unique/customized services to the core
product
• Aiding in building strong customer partnerships
E.g., computers + 2 hr free training is a core product or an augmented
product?
8-6
Managing Products
•
Key product management decisions
•
Product management levels
•
Management tools
1. Product Portfolio – BCG and GE matrix
2. Product Life Cycle
8-7
Key Product Management Decisions
1.
2.
3.
4.
Which product to introduce
Which products to keep
Which product to promote
What level of promotion to provide (low to
high?)
5. What products to continue or delete
8-8
Product Management Levels
The product category
The product line
The technology platform
The product itself
8-9
Product Management Tools
1. Product Portfolio Management Tools


BCG Matrix
GE Matrix
2. Product Life Cycle
8-10
The BCG Matrix
 Growth share matrix is a portfolio planning method that
evaluates a company’s products in terms of their market
growth rate and relative share.
•
Products are classified as: Stars, Cash Cows, Question
marks and Dogs
•
Marketing efforts, or investments, will change, depending on
the product’s classification
8-11
The BCG Matrix
8-12
The BCG Matrix
Stars are high-growth, high-share businesses or products
requiring heavy investment to finance rapid growth.
They will eventually turn into cash cows.
Cash cows are low-growth, high-share businesses or
products that are established; require less investment to
maintain market share in a stable market.
Question marks are low-share business units in high-growth
markets requiring a lot of cash to hold their share.
Dogs are low-growth, low-share businesses and products that
may generate enough cash to maintain themselves but do
not promise to be large sources of cash. Not worth much
investment.
8-13
The BCG Matrix
Problems with Matrix Approaches
•
•
•
•
Difficulty in defining SBUs and measuring market
share and growth
Time consuming
Expensive
Focus on current businesses, not future planning
8-14
GE Matrix
 A more advanced model developed by General Electric:
measuring market attractiveness and business strength
•
Market attractiveness is a composite measure of the
potential for sales and profits in a particular market segment
•
Business strength is the strength of our offering relative to
other companies’ products
•
GE Matrix is an expansion of the BCG matrix. The
dimensions are more comprehensive and detailed.
8-15
GE Matrix
Market Attractiveness
• Growth
• Diversity
• Competitive
Structure Change
• Technology Change
• Social Environment
GE Matrix
Business Strength
• Size of Market & Share
• Company Growth Rate
• Profit
• Margins
• Technology Platform
• Image
• People
8-16
Product Life Cycle
 Product Life Cycle (PLC) – The cycle of product
development, introduction, growth, maturity, and decline in
sales
•
PLC describes the sales history of a successful product
•
The cycle can be applied to individual products or to product
platforms or categories
•
As products go through the life cycle, marketing emphases
will change.
8-17
PLC Decision Points
Sales
Rapid expansion of distributors
Product line expansion
Niche marketing
Continued heavy promotion
Sales force incentives and
management
Search for new sources for
supply
Need to balance supply and
demand
Stock-out and back-order
damage control
Redirect focus & promotion
Invest in expanding production
Build inventory
Expand distributor network
Train expanded sales force
Institute marketing controls
Invest heavily in advertising
Target on best prospects:
innovators and enthusiasts
Use most loyal distributors
Use free samples
Use public demonstrations
and trade shows
Use publicity and endorsements
Use specialist media & catalogs
Development
Introduction
Strongly defend home-market
niches
Prune product lines
Emphasize gross contribution
rather than market share and
sales volume
Review logistics: prune costs
Reduce pioneering sale force
effort, more telemarketing
More trade than consumer
promotion
Introduce flankers, private
labels, generics
Reinvest in market research
& R&D
Use promotions to increase
heavy-user loyalty
Freeze investment in plant
Productivity review
Special trade promotions to
keep channels happy
Focused attacks on vulnerable
competitors
Long-term price reduction or
at least a short-term price
promotion
Keep plant at maximum
capacity and subcontract
excess
Growth
Maturity
Cut low-gross-margin products
from the line
Withdraw from channels in order
of their unprofitability
Freeze R& D and product
modifications
Freeze advertising and
promotions
Attempt to maintain price to the
end
Buy back remaining stock and
redistribute
Maintain spare parts and service
Consider divesting while it is a
going concern
Decline
Time
8-18
PLC – A new look
Product
Development
R&D
Test
Marketing
Kill the
product
Introduction
Growth Maturity Decline
Find New Repeat Life
Uses
Cycle
Find New
Markets
8-19
PLC – Recommendations for each stage
Introduction – Profits are not expected; the focus is on
building distribution channels; a truly innovative product
must focus on stimulating primary demand
Growth – Sales and profits increase at their fastest rate;
product differentiation may be employed in an attempt to
stimulate secondary demand
Maturity – Sales level off; maintain/improve its profit
position through product differentiation
Decline – seek markets/applications for the product
8-20
Discussion Question
Some authors have combined the life cycle and portfolio
matrices into one model.
1.
How would you do that?
2.
What are some limitations of the model?
8-21
New Product Development
The most basic decision: go – no go decision
Risks involved in developing new products:
 Investment risk – we decide to go ahead with the
product, it fails, and we lose some or all of our
investment
 Opportunity risk – we decide to kill a product and
thereby lose all of the revenue we would have gained if it
had been a success
8-22
Product Development Process
EVALUATION
LAUNCH
BETA TESTING
PRODUCT DEVELOPMENT
SPECIFYING FEATURES
SCREENING AND PRELIMINARY
INVESTIGATION
IDEA GENERATION
8-23
New Product Development Process
Internally developed products:
1.
Begin as an idea that must be screened to determine if it is worth
further development (concept test)
2.
Features are specified and then a prototype is created
3.
A small run of the product is manufactured and beta, or field,
tested – letting customers use in real-world conditions
4.
The product is launched and evaluated
8-24
Making a product successful
Five factors are key to success:
Company’s ability to identify needs and satisfy them
1.
Have close ties with a well defined market to anticipate customer needs.
2.
Company is highly integrated and market-oriented
3.
Company has a competitive advantage in technology and production
capability
Company’s ability to market products
4.
Company has a strong marketing proficiency
5.
New product launch adequately financed
8-25
Winning the new product contest
FOCUS ON CORE COMPETENCY(WHAT YOU DO BEST
FOR A COMPETITIVE ADVANTAGE)
PLUS
PROVIDE GREATEST VALUE TO CUSTOMER
EQUALS
SUCCESSFUL PRODUCT
8-26