Download 5. Product_Management_and_Strategy

Product
The Four Ps: The Tools
The Four Cs: The Ends
Marketing
Mix
Place
Product
Customer
Solution
Price
Customer
Cost
ConvenPromotion ience
Communication
Plea From an Anonymous
Customer
• Don’t Sell me Clothes, Sell me a sharp appearance,
style and attractiveness.
• Don’t Sell me a House, Sell me comfort, contentment,
a good investment and a pride of ownership.
• Don’t Sell me Toys, Sell my children happy moments.
• Don’t Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.
• Don’t Sell me Books, Sell me pleasant hours and the
profits of knowledge.
• Don’t Sell me Computers, Sell me the pleasure and
profits of the miracles of modern technology.
The Moral is…..
• Don’t Sell me THINGS, Sell me Ideas,
Feelings, Self-respect, Home, Life and
Happiness.
PLEASE DON’T SELL ME
THINGS
Growth Strategies
Present
Products
New
Products
Present
Markets
Market
Penetration
Product
Expansion
New
Markets
Market
Expansion
Diversification
Vertical Integration
Figure 2.4
Source: H. Igor Ansoff, “Strategic Diversification” , Harvard
Business Review, September-October 1957, pp.113-24
5
What is a Product?
• A Product is anything that can be offered to a market for
attention, acquisition, use, or consumption and that might
satisfy a want or need.
• Includes:
–
–
–
–
–
–
–
–
Physical Objects
Services
Events
Persons
Places
Organizations
Ideas
Combinations of the above
Five Product Levels
Potential product
Augmented product
Expected product
Basic product
Core benefit
Product Classifications
Consumer Products
Convenience Products
 Buy frequently & immediately
 Low priced
 Mass advertising
 Many purchase locations
i.e Candy, newspapers
Shopping Products
 Buy less frequently
 Higher price
 Fewer purchase locations
 Comparison shop
i.e Clothing, cars, appliances
Specialty Products
Unsought Products
 Special purchase efforts
 New innovations




High price
Unique characteristics
Brand identification
Few purchase locations
 Products consumers don’t
want to think about these products
 Require much advertising &
personal selling
i.e Life insurance, blood donation
Product Classifications
Industrial Products
Materials
and
Parts
Capital
Items
Supplies
and
Services
Product Attributes
Developing a Product or Service Involves Defining
the Benefits that it Will Offer Such as:
Product Quality
Ability of a Product to Perform
Its Functions; Includes Level &
Consistency
Product Features
Help to Differentiate the Product
from Those of the Competition
Product Style
& Design
Process of Designing a Product’s
Style & Function
Product Classification
• Product Lines and Mixes
– Product Line
– Product Mix
• Benefits of offering a wide variety and
deep assortment of products:
– Economies of Scale
– Package Uniformity
– Standardization
– Sales and Distribution Efficiency
– Equivalent Quality Beliefs
Product Mix
Width - number of
different product
lines
Length - total
number of items
within the lines
Depth - number of
versions of each
product
Product Mix all the product
lines offered
Product Lines and
Product Mixes at Gillette
Product Line Decisions
• Product Line managers are concerned with
length.
• Too short if profits increase by adding
• Too long if profits increase by dropping items.
• Product line is influenced by company
objectives.
• High market share & market growth, long
Product line
• High profitability, short product line
Product-Line Length: a company
strengthens its PL in two ways
• Line Stretching: occurs when a company lengthens its
product line beyond its current range.
– Downmarket: A Co. positioned in the middle market
may want to introduce a lower price due to strong
growth in the segment & opportunities in the
downmarket. e.g HUL sunlight & wheel.
– Upmarket: Co. may enter high end of the market for
more growth, higher margins, or to add prestige.e.g.
Toyota introduced, Lexus
– Two-way: means stretching its line in both directions.
• Line Filling: A product line can also be lengthened by
•
•
•
•
adding more items within the present range which is
called line filling.
Motives are:
Incremental profits.
Satisfy dealers who complain about lost sales due to
missing lines.
E.g. Maruti introduced Swift Dizire between Swift and
SX4
Product Life Cycle
• The course of a product’s sales and profits
over its lifetime.
• Product development: begins when the
company finds and develops a new-product
idea. Here, sales are zero and costs mount.
• Introduction: It is a period of slow sales
growth as the product is introduced in the
market. Profits are nonexistent in this stage
because of the heavy expenses of product
introduction.
• Growth: it is a period of rapid market acceptance
and increasing profits.
• Maturity is the period of slowdown in sales
growth because the product has achieved
acceptance by most potential buyers. Profits
decline due to increased marketing outlays to
defend the product against competition.
• Decline is the period when sales fall off and
profits drop.
Stages of the Product Life Cycle
Exhibit 7.2
Marketing Strategy During
the Product Life Cycle
Development Stage
• No sales revenue during this stage
• Components of the product concept:
– An understanding of desired uses and
benefits
– A description of the product
• Customer needs should be discerned
before developing marketing strategy
Introduction Stage
• Begins when development is complete
• Ends when customers widely accept the
product
• Marketing strategy goals during this stage:
– Attract customers by raising awareness and
interest
– Induce customers to try and buy
– Engage in customer education activities
– Build on availability and visibility
– Set pricing objectives
Growth Stage
(1 of 2)
• Be ready for sustained sales increases
• Rapid increase in profitability early in the
growth stage that decreases at the end of
this stage
• Length depends on nature of product and
competitive reactions
• Two strategies:
– (1) Establish a strong, defensible marketing
position
– (2) Achieve financial objectives
Growth Stage
(2 of 2)
• Marketing strategy goals in this stage:
– Leverage the product’s perceived differential
advantages
– Establish a clear product and brand identity
– Create unique positioning
– Maintain control over product quality
– Maximize availability of the product
– Find the ideal balance between price and demand
– Keep an eye focused on the competition
Maturity Stage
(1 of 2)
• Few, if any, new firms will enter the
market
• Still an opportunity for new product
features and variations
• Typically the longest stage in the
product life cycle
Maturity Stage
(2 of 2)
• Strategies pursued:
– (1) Modifying the market
– (2) Modifying the product
– (3) Modifying the marketing mix
Decline Stage
• Two options:
– (1) Attempt to postpone the decline
– (2) Accept its inevitability
• Harvesting: reducing various costs
• Divesting: dropping the product
Introduction Stage of the
PLC
Sales
Low sales
Costs
High cost per customer
Profits
Negative
Create product awareness
and trial
Marketing Objectives
Product
Offer a basic product
Price
Use cost-plus
Distribution
Build selective distribution
Build product awareness among
early adopters and dealers
Advertising
Growth Stage of the PLC
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Price
Maximize market share
Offer product extensions,
service, warranty
Price to penetrate market
Distribution
Build intensive distribution
Advertising
Build awareness and interest in
the mass market
Product
Maturity Stage of the PLC
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits
Marketing Objectives
Product
Price
Distribution
Advertising
Maximize profit while defending
market share
Diversify brand and models
Price to match or best
competitors
Build more intensive distribution
Stress brand differences and
benefits
Decline Stage of the PLC
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Marketing Objectives
Product
Price
Distribution
Advertising
Reduce expenditure and milk the
brand
Phase out weak items
Cut price
Go selective: phase out
unprofitable outlets
Reduce to level needed to retain
hard-core loyal customers
Problems Using the PLC
The PLC Concept Can
Help in Developing
Good Marketing
Strategies for Different
Stages of the Product
Life-Cycle, However
Some Problems Can
Arise:
Trouble identifying
Which Stage of the
PLC the Product Is
In
Difficult to Forecast
the Sales Level, the
Length of Each Stage,
and Shape of the PLC
Strategy is Both a
Cause and a Result
of the Product’s Life
Cycle
New Product Development
• Six strategic product development
options:
– (1) New-to-the-world products
(discontinuous
innovations)
– (2) New product lines
– (3) Product line extensions
– (4) Improvements or revisions of existing
products
– (5) Repositioning
– (6) Cost reductions
New Product Development Process
Marketing
Strategy
Development
Concept
Development
and Testing
Idea
Screening
Idea
Generation
Business
Analysis
Product
Development
Market
Testing
Commercialization
New-Product Development Process
Idea Generation & Screening
1. Does the offering have a relative
advantage?
2. Is the offering compatible with buyers’
use or consumption behavior?
3. Is the offering simple enough for buyers to
understand and use?
4. Can the offering be tested on a limited
basis prior to actual purchase?
5. Are there immediate benefits from the
offering, once it is used or consumed?
Why New Products Fail
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“Over Championing”
Overestimated Demand
Poor Design
Poor Marketing Execution
High Development Costs
Strong Competitive Reaction
Challenges in NPD
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Idea Shortage
Fragmented Markets
Social & Governmental Constraints
Cost
Capital Shortage
Need for Speed
Shorter Product Life Cycles