profitable product management module 2 course director: pete laver
TRANSCRIPT
Profitable Product Management
Module 2Course Director: Pete Laver
Profitable Product
Management
An opportunity to review your current approaches and compare these with best practice and manage the most common product management challenges. The course has eight modules:
Profitable Product Management agenda
Module 2
Day 4ReviewProject PlaybackPricing and Value
Day 5Getting the message Out ThereGrowing the range (NPD)Review and Close
Review of Module One
Case learning points
Smiths CabinetsThe value of auditingStructured approach:
ExaminationThe audit
PrognosisA prediction about how something will develop
DiagnosisIdentifying the nature or cause after appropriate tests
The importance of quantitative data: market share over time
The value of models
The Planning process
MAT48946
Market total
3537 3833 3931 4412 3565 3689 4392 4294 4215 4224 4247 3992 4132+17%yoy
19.9 Brand One
22.0 20.8 19.3 18.9 19.0 19.4 20.7 20.1 19.7 20.8 21.2 20.8 17.5
0.5 Brand Two
0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.4 0.5 0.5 0.5 0.5 0.6
4.6 Brand Three
4.4 4.3 4.3 4.7 5.2 4.9 5.1 4.8 4.6 3.9 4.4 4.5
0.5 Brand Four
0.3 0.3 0.6 0.7 0.9 1.0 1.2 1.8 0.4 0.2 0.1 0.1 0.1
17.7 Brand Five
18.1 18.2 17.3 17.4 17.2 18.0 17.3 17.4 16.9 16.1 10.6 18.2 22.0
2.4 Brand Six
1.9 2..1 1.9 2.0 2.0 2.0 2.2 2.6 2.7 2.6 2.8 2.6 3.1
1.6 Brand Seven
1.1 1.0 1.0 1.3 1.3 1.5 1.6 1.6 1.7 2.3 2.2 2.2 1.0
42.6 Own Label
42.4 43.1 45.6 46.1 45.4 44.5 44.3 46.4 47.7 47.8 47.8 47.7 47.7
6.8 Other 13.8 9.7 9.0 8.9 9.1 7.9 7.3 5.0 5.6 5.1 4.9 3.5 3.3
Oct 2013
Latest year
Oct 2012
Nov 2012
Dec 212
Jan 2013
Feb 2013
Mar 2013
April 2013
May 2013
June 2013
July 2013
Aug2013
Sept 2013
Oct 2013
Star Traffic driver
Review
High sales value but intense competition pushing down prices
Poor performer. What’s wrong?
Strong contribution on modest sales. Can we improve?
High sales and contribution. Invest to grow
Repair or discard
Develop Existing Business:•Product adjustments•Price amendments•Fill distribution gaps•Develop marketing communications
LEAST RISK, BUSINESS AS USUAL
Develop New products
MEDIUM RISK
Develop New markets:•Macro (completely new)•Micro (new segments)
MEDIUM RISK
Innovation:
•Diversification (new businesses)•Innovation (new products creating new markets)
HIGH RISK, HIGH RETURN
The Growth/ Market Share Matrix
Star
DogCash cow
Question mark
Rapid growth, High share
Slow or static growth, High share Declining sales, weak share
Rapid growth, Low share
Product/ Market Growth Matrix
Star Repair
Review
Attractive market but poor performance from us.Re-think
Put the price up and reduce costs. Consider withdrawal
Currently poor prospects. Hold and review performance.
Promote and grow
Maintain
Product Capability/ Market Strength Matrix
The Volume / Value Matrix
??
Growth
Share
Volume
Value
Market strength Product
capability
Productdevelopment Market development
Four box models
Leppard Bathrooms
POTENTIAL MARKET ADD VALUE-
REVENUE
ADD VALUE-
REDUCE COSTS
ADD VALUE-
EMOTIONAL FACTORS
Consumers Saves and frees up time Pride – beautiful clean
bathrooms, toilets, etc.
Hospitality
Hotels, etc.
Sparkling bathrooms
improve occupancy rates
Reduced cleaning costs
Improved productivity
allowing more time for
other tasks
Less management
problems, maintaining
standards, etc.
Appearance and
aesthetics
Brand image
Health care
Hospitals, care homes
Reduced infection
Reduced costs
Peace of mind
Reduced management
problems
Government buildings Cost savings Image
Manchester United
S.T.P(segmentation, targeting and positioning)
The marketing master strategy
The value of segmentsThe importance of targeting and prioritisation
PositioningThe key to an integrated mix plan
Jordan A/S
Improve the mix
Increase retention
Grow the category
Re-segment
Gain share
Change usage
New customers
Launch Improve volume Improve value Rationalise
Product line extension
Innovation
Product replacement
Alliance /takeover
Barriers entry/exit
New channels
Add new range
Re-position
Re-align prices
Increase pricesFind premium/niche price pointsReduce prices
Cost Reduction
Cut variable costs
Improve quality
Cut fixed costs
Time
Introductory stage Growth stage Maturity stage Decline stageSale
s
an
d
pro
fit
s
Build awareness
Win trial
Attract attention / int.
Identify all possible growth strategies and asses prior to final decision
Pretty Pots
The profit and loss account (P&L) is sometimes called “The Financial History Book”
A record of transactions that allows for a gross and net contribution to be calculated.
Profitability and cash need to be managed separately.
Project Presentations
Pricing and Value
Channels
Channel differences?
Differential pricing?
How much do they charge?What market position do we want?Where is our differentiation?
Competitors
Customers
How much are they willing to pay?
Segment differences?
Company
How much will it cost?
What mark-up will we use?
Pricing
Pricing
Pricing is generally the most important factor in buying decisions. It’s a powerful signal conveying image effects and reflecting brand equity.It can be a competitive tool but it directly influences profits and revenue.•Principles:
– Must fit into acceptable range for the category– Must reflect image and market position– Must accommodate segment differentials– Must account for inevitable deals and offers
•Industry structure– Oligopoly or fragmented?– Price leaders e.g. IBM in IT and Argos in retailing– Specification pricing e.g. TDI, Compressor, GTi
•External factors– Elasticity– Politics and Law
•Internal factors– Life cycle position, Hurdle rates, Share targets, Lifetime value. Portfolio
issues•Value proposition
– Prestige, premium, parity, discount
High fixed cost generally means a volume loaded approach
High fixed costs means a high BE
The profit cone is wide angle, more sales quickly translate into profit
Volume can be loaded by discounts after passing BE
High variable cost generally means a value loaded approach
Low fixed costs means a lower break even
Discounts badly damage profit
Tactics involve added value or niche positioning
Fixed costs
Variable costs
Sales
Value of sales and costs
Business level
Profit
cone
BE
Fixed costs
Variable costs
Sales
Profit cone
BE
Optimisation
Tactics
• Penetration and skimming
• Line pricing– Reflect the market not
the cost e.g. Clothing sizes Sometimes affected by step changes
– Overlaps and migration• Dual pricing
– Seiko and Lorus Bosch and Skil
– Bait, hooks and loss leaders
• Known Value items (KVI)• Timing• Price points• Marginal cost
If you cut your prices by
And your present Gross Margin (%) is ...
10% 15% 20% 25% 30% 35% 40%
5% 50%33.3
%25% 20%
16.7%
14.3%
6% 150%66.7
%42.9
%31.6
%25%
20.7%
17.6%
8% 400%114.3
%66.7
%47.1
%36.4
%29.6
%25%
10% 200% 100%66.7
%50% 40%
33.3%
12% 400% 150%92.3
%66.7
%52.2
%42.9
%
15% 300% 150% 100% 75% 60%
Stage 1Company Audit
Price value proposition Cost model
Our strategy and cost limitations
Stage 3Competitor
(Industry) Analysis
Stage 4Channels to market
Stage 5Objectives
Stage 6Strategy
Growth planContingencies
Price list, Price pointsForecast
Competitive strategy, PositioningOur positioning and competitive
strategy
Stage2Customer Strategy
Internal analysis, Strategic intentCost management, Mix alignment
Industry structureCompetitor analysis
Channel evaluationPromotional plan
Market analysis, Customer cost and use, Customer economics
Value share
Segmentation, TargetingWho are our customers and
what can they afford?
Tactics and timing, Promotions/ Incentives, Marginal cost
Our tactical arrangements
Short medium termVolume and value
Defined financial targetsQuantify the plan
Stages OutcomeIssues
Stage 7Tactics
Marketing planContingencies
Promotional plan, Response plansForward Planning
Schedules and timing
Pricing checklist
Natural high
Price
Them Us
competitive
premium
economy
valuechemical
Product
Them
Us
high
low
immature maturebrand image
taste
Promotion
Them
Us
Channelshighlow
Media
high
low
Place
Them
Us
Specialist/ regional highlow
Mainstream
National
high
low
Value differentiation Revenue gains, Cost reduction or Emotional difference
ReusableContainer,Sampling,on pack
Pence off
Free Draw
Next Purchase,Cash back
Value
Price
Immediate Delayed
Incentives
Adding value
Getting the Message Out There
Effective advertising should follow a plan. There is no one best way to planning an advertising campaign, but in general, Marketers/Product Managers should gave good answers to the following eight questions:
Preparing for the advertising campaign: the 8M formula
1. The management question: Who will manage the advertising programme?
2. The money question: How much should be spending on advertising as opposed to other forms of communication?
3. The market question: To whom should the advertising be directed?
4. The message question: What should the ad say about the product?
5. The media question: What types and combinations of media should be used?
6. The macro-scheduling question: How long should the advertising campaign be in effect before changing ads or themes?
7. The micro-scheduling question: At what times and dates would it best for ads to appear during the course of the campaign?
8. The measurement question: How will the effectiveness of the advertising campaign be measured and how will the campaign be evaluated and controlled?
ReusableContainer,Sampling,on pack
Pence off
Free Draw
Next Purchase,Cash back
Value
Price
Immediate Delayed
Three elements objective, creative, mechanic
Sales promotions - mechanics
Traditional approach
Above the lineAdvertising
display classified
Terrestrial television, press, satellite T.V., cinema, outdoor radio, cyberspace, ambient
Below the lineMerchandisingCustomer servicePublic relationsDirect marketingSales promotion and samplingPersonal selling
Exhibitions and demonstrations Sponsorship
Product audit
Medium term – positioning and value
Customer relationshipShort term - products and services
Expression of brand identity
Staff, buildings, environment, everything
Business plan
Long term equity growth
On and off-line integration
Marketing plan
Communication planHub and spoke
Traditional and non-traditional
Revised
Communications and mix planning
Agency brief example
• Requirements:– What do you want them to do?
• Provide three options for launch including name and logo and images on storyboards for print or TV
• Reason for brief:– What are we changing?
• Launch brand X• Communication objectives:
– What new ideas or benefits do you want them to know?
• Remind them how skin blemishes spoil their life and show them the fun and freedom they will enjoy following treatment
• Target audience:– Avoiding jargon, describe the audience in positive
and straightforward ways• 20-40 women, pre-menstrual who suffer from low
self-esteem and deserve to have fun back in their lives
Assessing the creative work
Does it follow the brief?–Does it create an emotional response?–Is it single minded?–Is it involving and clear?–Does it have impact?–Is it campaign able? –Does it have a customer insight?–Is it consistent across media?
The top ten most influential marketing mediums:
1. Word-of-mouth2. TV3. Coupons4. Newspaper inserts5. Read article6. Direct mail7. Magazines8. In-store promotions9. Cable TV10.Online advertising
Advertising Age January 2nd 2006
WOM– Consumers giving
information to other consumers
• WOM Marketing:– Giving them reasons to
talk and facilitating the process
• Elements:1. Educate them on your
products2. Identify most likely
sharers.3. Provide them with tools to
do it4. Study where, how, when
opinions are shared5. Respond to supporters,
detractors and neutrals
WOM Marketing Typology:
– Buzz high profile entertainment or news to encourage talk
– Viral creating exponential messages often electronic
– Community marketing forming and supporting niche communities to share brand information (user groups, fan clubs, forums, etc.)
– Grassroots marketing motivating volunteers to engage in local and personal outreach
– Evangelists Finding and encouraging leaders to influence others
– Cause related support social issues to earn respect and support
– Conversational fun, catch phrases and entertainment to kick off WOM
– Brand Blogging join the blogosphere in open and transparent communications sharing information that blogger’s value
Measurement
Awareness:– Familiar beats unfamiliar– Four levels:
1. DominanceThe only one they can think of2. Top of Mind (TOM)The first one they think of3. RecallThe others in the set following
TOM4. Recognition(have you heard of Lamborghini?)
Image source: Ikira, I. (2009) Available at: http://en.wikipedia.org/wiki/File:Plutchik%27s_Wheel_of_Emotions.png
Source: Plutchik, R. (2001) The Nature of emotions. American Scientist. Vol. 89, p349, July/August.
Growing the range (NPD)
• Where does creativity come from?
Market needs and demands
Technology push
Market pull
• Understanding the customer
• Brainstorming
• Research labs
• Applying technology
• Developing a better, simpler, easier, cheaper way of doing things
4C innovation Audit
Questions Answers
Internal audit questions
Do we understand how the opportunity is improved by adding value?Describe the product functions and reframe as customer benefits
Develop the product offer:--add value unobtainable elsewhere -can value be added beyond its functional worth?
How will it enhance brand value? Integrate into long term brand strategy
Find a common thread down through the supply chain creating a platform
What are the benefits we have to offer?
Are they strong enough?
Go No Go
Market audit Define the market and establish the scale and financial potential of the opportunity
What customer needs are met?Do we have segments?
Which customers will need to buy our product?
Go No Go
4C Innovation Audit
Questions Answers
Industry auditHow do potential customers currently get their needs met? Define the competitive set
How is it different and better than alternative offers (if any)?
Go No Go
Value chain audit Is the value chain accessible to us and can we bring enough influence to bear to yield useful results?
Can the value chain be identified and managed?
Moneyo How does money flow through the
value chain and where will we take our profit
Product o What steps does the product
travel through on the way to market and how can we influence this flow
Informationo How does information permeate
the system and where should we place our own educational effort
Influenceo Who are the key influencers and
how will we approach winning their trust
Are we in position to bring it to market?
Go No Go
4C Innovation Audit Questions Answers
Go
Create the strategy Set financial and share targets
Position the new product as a solution to customers problems
What does the brand contain?What does the brand do for the user?How does the brand make the user feel?What “space” does the brand occupy?
Design the Marketing Mix Product design and packaging
Price plan
Re-organising around the value chain
Understand and use knowledge of how information is passed around Providing the right linkages for customers to find you when needed
Re-designing the customer experience Building a knowledge network and using it
Incorporate the brand strategy
Design performance metrics How will we know we have succeeded?
4C Audit Questions Answers
Stage-Gate®
Emerging from Chemical engineering, Stage-Gate® was developed by Robert Cooper and is widely applied in new product development. It is a tool for funnelling a new product through as series of gates which decide whether the project is still viable or whether it should be stopped to preserve funds for other, more opportune, projects. The areas between the gates are idea generation, feasibility, capability, testing, validation and launch. Passing a gate normally requires a formal process involving senior management. Front end loading is the engineering term for the stage gate process.
The stage-gate® roadmap consists of five gates:1.Scoping2.Build the business case3.Development4.Testing and validation5.LaunchThe preliminary phase prior to scoping is referred to as discovery and a post-launch review is normally carried out to review lessons learned. An Xpress version can be used for less risky projects and stage-gate lite for modifications, etc.Each stage comprises activities, integrated analysis and deliverables. A cross-functional product team gather information, analyse it and develop deliverables applicable to the next stage.Each gate an assessment of quality of work, continuing validity of the business opportunity and an action plan to go forward with the necessary resources. The project team provide the deliverables (pre-set from the previous stage) which need to meet the criteria (metrics on which the project is judged) and the output is the decision (Go, kill, hold, recycle).
Stages Product idea submission
Stage 1: Scoping
Stage 2: Build business case
Stage 3: Development
Stage 4: Testing and validation
Stage 5: Full production and market launch
Output of stage
Reasons why this idea is a good one
Preliminary project definition
A well-founded project and business plan
Product and production plans ready for testing
Validated production and launch plans
A profitable business and lessons learned
Report templates
Idea submission form
stage1-template.doc
stage2-template.doc
stage3-template.doc
stage4-template.doc
stage5-template.doc
Go/kill decision criteria
Criteria for idea evaluation
Criteria for going into detailed investigation
Criteria for business case approval
Criteria for post development review
Criteria for product release
Criteria for post launch review
Gate decisions
Decision to do a preliminary investigation
Decision to build a business case
Decision to go into development
Decision to go into testing and validation
Decision to go into full production and market launch
Project termination
http://www.stage-gate.eu/stage-gate-templates.asp
Stage-Gate®
Intellectual PropertyAll training materials provided by CIM Learning and Development remain the intellectual property of The Chartered Institute of Marketing or its partners, who assert their right to worldwide copyright unless specifically agreed otherwise in writing.© Pete Laver and The Chartered Institute of Marketing 2015
If you have any questions arising from this course, please email me at this address:
Any Questions…