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.