Product Management and Strategy

Dr. Prashant Mishra

prashant@iimcal.ac.in

A Business StrategyA Business Strategy

Product-Market

Investment Decision

• Product-market scope

• Investment intensity

• Resource allocation over business units

Product-Market

Investment Decision

• Product-market scope

• Investment intensity

• Resource allocation over business units

Basis of SCAs

• Assets/Competencies

• Synergies

Basis of SCAs

• Assets/Competencies

• Synergies

Functional Area Strategies

• Product

• Price

• Distribution

• Etc.

Functional Area Strategies

• Product

• Price

• Distribution

• Etc.

Figure 1.1

The Four Ps: The ToolsThe Four Ps: The Tools

MarketingMix

Product

Price Promotion

Place

The Four Cs: The EndsThe Four Cs: The Ends

CustomerSolution

CustomerCost

Communication

Conven-ience

The Other 4Cs: The Participants

Company

Consumer Channel

Competitors

The Participants

Views on the Marketing Processes

3-C AnalysisCustomer

CompetitorCompany

S-T-P MarketingSegmentation

TargetingPositioning

4 P’s Marketing PlanProductPricing

PromotionPlace

The Functional View

Views on the Marketing Processes

Understanding Customer

Value

Creating Customer

Value

The Process View

Capturing Customer

Value

Delivering Customer

Value

Sustaining Customer

Value

Understanding Customer Value

• Value is defined as the perceived worth in monetary units of the of the set of economic functional / technical and psychological benefits received by the customer in exchange for the price paid for for a product offering, taking into consideration the available offerings and prices.- Anderson, Jain and Chintagunta(1993)

Understanding Customer Value

Psychological

Functional Economic

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

A successful differentiation strategy should

ProvidePerceived

Value

Be Difficultto Copy

GenerateCustomer

Value

12

Vertical IntegrationVertical Integration

Growth Strategies

MarketPenetration

MarketPenetration

Product ExpansionProduct

Expansion

DiversificationDiversification

Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957, pp.113-24

MarketExpansion

MarketExpansion

NewMarkets

NewMarkets

PresentMarketsPresentMarkets

NewProducts

NewProducts

PresentProducts

PresentProducts

Figure 2.4

What is a Product?

• A ProductProduct 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

Components of theMarket Offering

Value-based prices

Services mixand quality

Product featuresand quality

Attractiveness ofthe market offering

Five Product Levels

Potential product

Augmented product

Expected product

Basic product

Core benefit

Unsought ProductsUnsought Products

New innovations Products consumers don’t want to think about these products Require much advertising &personal selling i.e Life insurance, blood donation

Product ClassificationsConsumer Products

Specialty ProductsSpecialty Products

Special purchase efforts High price Unique characteristics Brand identification Few purchase locations

Shopping ProductsShopping Products

Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances

Convenience ProductsConvenience Products

Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers

Suppliesand

Services

Suppliesand

Services

Materialsand

Parts

Materialsand

Parts

CapitalItems

CapitalItems

Product ClassificationsIndustrial Products

Product Quality Product Quality

Product FeaturesProduct Features

Product Style & Design

Product Style & Design

Ability of a Product to Perform Its Functions;

Includes Level & Consistency

Ability of a Product to Perform Its Functions;

Includes Level & Consistency

Help to Differentiate the Product from Those of the

Competition

Help to Differentiate the Product from Those of the

Competition

Process of Designing a Product’s Style & Function

Process of Designing a Product’s Style & Function

Developing a Product or Service Involves Defining the Benefits that it Will Offer Such

as:

Product Attributes

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

WidthWidth - number of different

product lines

WidthWidth - number of different

product lines

LengthLength - total number of itemswithin the lines

LengthLength - total number of itemswithin the lines

Depth Depth - number of versions of each product

Depth Depth - number of versions of each product

Product Mix - Product Mix - all the product

lines offered

Product Mix - Product Mix - all the product

lines offered

Co

nsi

sten

cy

Product Lines andProduct Mixes at Gillette

Product-Line Length

• Line Stretching– Downmarket– Upmarket– Two-way

• Line Filling

• Line Modernization

• Line Featuring & Line Pruning

Product Life Cycle

• To say that a product has a life cycle asserts four things1.Products have a limited life.2.Product sales pass through distance stages, each

posing different challenges, opportunities, and problems to the seller.

3.Profits rise and fall at different stages of the product life cycle.

4.Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.

Applications of the Product Life Cycle

• The PLC concept can describe a:– Product class which has the longest life cycles (i.e. gas-

powered cars), – Product form which tend to have the standard PLC

shape (i.e. minivans),– Brand which can change quickly because of changing

competitive attaches and responses (i.e. Ford Taurus),– Style which is a basic and distinctive mode of

expression,– Fashion which is a popular style in a given field,– Fad which is a fashion that enters quickly, is adopted

quickly and declines fast.

Stages of the Product Life Cycle

Exhibit 7.2

Marketing Strategy Duringthe Product Life Cycle

• No sales revenue during this stage• Components of the product concept:

– An understanding of desired uses and benefits– A description of the product– The potential for creating a complete product line– An analysis of the feasibility of the product

concept

• Customer needs should be discerned before developing marketing strategy

Development 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– Strengthen or expand channel and supply

relationships– Build on availability and visibility– Set pricing objectives

Introduction Stage

• 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 (1 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– Maintain or enhance the product’s profitability to

partners– Find the ideal balance between price and demand– Keep an eye focused on the competition

Growth Stage (2 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 (1 of 2)

• Four general goals in this stage:– (1) Generate Cash Flow– (2) Hold Market Share– (3) Steal Market Share– (4) Increase Share of Customer

• Four options to achieve these goals:– (1) Develop a new product image– (2) Find and attract new users to the product– (3) Discover new applications for the product– (4) Apply new technology to the product

Maturity Stage (2 of 2)

• Two options:– (1) Attempt to postpone the decline– (2) Accept its inevitability

• Harvesting• Divesting

• Factors to be considered during this stage:– Market segment potential– The market position of the product– The firm’s price and cost structure– The rate of market deterioration

Decline Stage

Problems Using the PLC

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 PLCStrategy is Both a

Cause and a Result of the Product’s Life

Cycle

The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:

CREATING NEW CONSUMERS

Consumer

creating

potential

Consumer

creating

potential

Old business

Retaining consumers

Low risk

Old business

Retaining consumers

Low risk

New business

Creating new consumers

High risk

New business

Creating new consumers

High risk

Continuous

innovation

Continuous

innovation

RestageRestage

New products

in current

categories

New products

in current

categories

New to the

company

category

New to the

company

category

New to

the world

categories

New to

the world

categories

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

• Customer perception of differentiation is critical

New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

1. Does the offering have a relativeadvantage?

4. Can the offering be tested on a limited basis prior to actual purchase?

2. Is the offering compatible with buyers’ use or consumption behavior?

3. Is the offering simple enough for buyers to understand and use?

5. Are there immediate benefits from the offering, once it is used or consumed?

New-Product Development ProcessNew-Product Development ProcessIdea Generation & ScreeningIdea Generation & Screening

Why New Products Fail

• “Over Championing”

• Overestimated Demand

• Poor Design

• Poor Marketing Execution

• High Development Costs

• Strong Competitive Reaction

Challenges in NPD

• Idea Shortage

• Fragmented Markets

• Social & Governmental Constraints

• Cost

• Capital Shortage

• Need for Speed

• Shorter Product Life Cycles