Product Management & Strategy -Overview 10.1

8/7/2019 Product Management & Strategy -Overview 10.1

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Product Management and Strategy an Overview

Chandradeep (CD) Mitra

[email protected]

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Setting the Context

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A quick look at the

Marketing Processes

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We start with Market Analysis

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The 4Cs: The Market Participants

Company

Consumer Channel

Competitors

The Market

Participants

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The 5th C the Larger Context

The PESTEL Framework

Political & Bureaucratic Context Economic Context

Social & Cultural Context

Technological Context

Environmental & Ecological Context

Legal & Judicial Context

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The Marketing Processes

5C Analysis

Customer

Competitor

Company

CollaboratorsContext

S-T-P Marketing

SegmentationTargeting

Positioning

4P Marketing Plan

ProductPricing

PromotionPlace

The Functional View

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The Four Ps: The Tools

Marketing

Mix

Product

Price Promotion

Place

The Four Cs: The Ends

Customer

Solution

Customer Communication

Convenience

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Focus on Customers,Deliver Value to Customers

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The Marketing Processes

UnderstandingCustomer

Value

CreatingCustomer

Value

The Process View

CapturingCustomer

Value

DeliveringCustomer

Value

SustainingCustomer

Value

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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 a product offering,

taking into consideration allthe available offerings and prices.

Anderson, Jain and Chintagunta(1993)

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Understanding Customer Value

Psychological

Functional Economic

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What is a Product?

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What is a Product?

A Product is anything that can be offered to a marketfor attention, acquisition, use, or consumption and thatmight satisfy a want or need

Includes: Physical Objects Services

Events

Persons

Places Organizations

Ideas

Combinations of the above

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A Product is a Market Offering

that serves to satisfyCustomer needs & wants,

i.e. provides Customer Value

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Components of the Market Offering

Value-based pricing

Service mixand quality

Product featuresand quality

Attractiveness of

the Market Offering

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What do customersreally want (value)?

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Dont sell me Insurance

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Dont sell me Insurance

Help me gain peace of mind,and a great future

for my family and me!

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Dont sell me a Camera

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Dont sell me a Camera

Help me capture and relivethe most memorable

moments of my life!

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Dont sell me a House

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Dont sell me a House

Fulfill my dream of a home,with security, comfort,

a good investment and

pride of ownership!C PipalMajik


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Dont sell me Clothes

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Dont sell me Clothes

Give me a desirable appearance,style and attractiveness!

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Dont sell me Toys

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Dont sell me Toys

Help me give my childrenhappy moments!

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Dont sell me Things

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Dont sell me Things

Fulfill my need forcomfort, security, pride,

good feelings, happy memories

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A successful

Product DifferentiationStrategy should

ProvidePerceived

Value

Be Difficult

to Copy

Generate

CustomerValue

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Product Quality

Product Features

Product Style& Design

Ability of Product to perform itsfunction; incl. level & consistency

Help to differentiate the Product

from those of the competition

Process of designing a Productsstyle & function

Developing a Product or Service involves

defining the benefits that it will offer such as:

Product Attributes

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Product Classification

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Five Product Levels*

Potential product

Augmented product

Expected product

Basic product

Core benefit

*Increasing Customer ValueC PipalMajik


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The concept of Customer Delight

Exceeding Customer Value Expectations, again & again

A forever moving goalpost!

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Unsought Products

Consumers dont plan to buy these Not seeking, innovation Result of marketers actions Require much advertising & selling Sometimes impulse purchase

i.e. Life insurance, blood donation

Product Classifications -

Consumer Products

Specialty Products

Special purchase efforts High price Unique characteristics Brand identification Exclusive distribution

i.e. organic/boutique products

Shopping Products

Buy less frequently Higher price Selective distribution Comparison shoppingi.e. clothing, furnishing, appliances

Convenience Products

Bought frequently & immediately Consumed often, Low priced Large segment, Mass advertising Intensive distributioni.e. food, soap, newspapers

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Another Classification of

Consumer Products

Nondurables (Including FMCG)

Durables

Services

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Supplies

and

Services

Materials

and

Parts

Capital

Items

Product Classifications -

Industrial Products

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Product Mix

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Product Classification

Product Lines and Mixes Product Line

Product Mix

Benefits of offering a wide variety and deepassortment of products Economies of Scale

Package Uniformity

Standardization Sales and Distribution Efficiency

Equivalent Quality Beliefs

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Product Mix

Width - number ofdifferent product

lines

Length - totalnumber of items

within the lines

Depth - number ofversions of each

product

Product Mix -all the product

lines offered

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Product Mix

Product Mix - The entire assortment of products that a

company offers to a market

Width the number of different product lines

Length the number of items in each product line

Depth The number of variants offered for a product

Consistency how closely the product lines are related

in usage

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Gillette - Product Mix and Product Lines

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Product Line Strategic Options

Line Stretching

Downmarket

Upmarket Two-way

Line Filling

Line Modernization Line Featuring

Line Pruning

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Product Line decisions

Market rationalization

Product rationalization

Product line length

Too long when profits increase by dropping aproduct in the line

Too short when profits increase by adding

products to the product line Line pruning capacity restrictions to decide

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Product Life Cycle(PLC)

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Product Life Cycle

To say that a product has a life cycle asserts four things

1. Products have a limited life

2. Product sales pass through distance stages, each posingdifferent challenges, opportunities, and problems

3. Profits rise and fall at different stages of the PLC

4. Products require different marketing, financial,manufacturing, purchasing, & human resource strategies ineach life-cycle stage

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Applications of the Product Life Cycle

The PLC concept can describe a:

Product class which has the longest life cycles

(i.e. petrol-powered cars)

Product form which tend to have the standard PLC shape(i.e. hatchbacks)

Brand which can change quickly because of changing

competitive attaches and responses (i.e. Maruti Swift)

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

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Stages of the Product Life Cycle

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Marketing Strategy during the


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Marketing Strategy during the

Product Life Cycle

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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 beforedeveloping marketing strategy

The Development Stage

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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 supplyrelationships

Build on availability and visibility Set pricing objectives

The Introduction Stage

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Costs are high

Slow sales volumes to start

Little or no competition competitive

manufacturers watch for acceptance/segmentgrowth or losses

Demand has to be created

Customers have to be prompted to try the

product Makes little or no money at this stage

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Usually limited distribution

The need for immediate profit is not a pressure

Promotion plans depend on limited/soft launch

or Big Bang launch Pricing Skimming price strategy can be

employed. Alternatively attractive introductory

pricing to induce trial

Key Marketing Objectives Awareness,

Enquiries, Trial

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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:

Establish a strong, defensible marketing position

Achieve financial objectives

Growth Stage 1

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Marketing strategy goals in this stage:

Leverage the products 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 products profitability topartners

Find the ideal balance between price and demand

Keep an eye focused on the competition

Growth Stage 2

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The Growth Stage

Costs reduced due to economies of scale

Sales volume increases significantly

Profitability begins to rise

Consumer awareness increases

Competition begins to increase with a few new

players in establishing market Increased competition leads to price decreases

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The Growth Stage

Competitors are attracted into the market with

very similar offerings

Products become more profitable and

companies form alliances, joint ventures andtake each other over

Advertising spend is high and focuses upon

building brand

Market share tends to stabilise

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Few, if any, new firms will enter the market

Still an opportunity for introducing new product

features and variations

Typically the longest stage in the product life cycle

Possibility of consolidation & shakeout

Maturity Stage 1

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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

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The Maturity Stage

Those products that survive the earlier stages tend tospend longest in this phase.

Sales grow at a decreasing rate and then stabilise.

Producers attempt to differentiate products and brands

are key to this.

Price wars and intense competition occur.

At this point the market reaches saturation.

Producers begin to leave the market due to poormargins.

Promotion becomes more widespread and use a greater

variety of media.

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Two options: Attempt to postpone the decline

Accept its inevitability

Harvesting Divesting

Factors to be considered during this stage:

Market segment potential The market position of the product

The firms price and cost structure

The rate of market deterioration

The Decline Stage

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The Decline Stage

Costs become counter-optimal Sales volume decline or stabilize

Prices, profitability diminish

Profit becomes more a challenge ofproduction/distribution efficiency than

increased sales

There is a downturn/shift in the market.

There is intense price-cutting and many moreproducts are withdrawn from the market.

Profits can be improved by reducing marketing

spend and cost cuttingC PipalMajik

Problems Using the PLC


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Problems Using the PLC

Trouble identifying

which stage of thePLC the product is in

Difficult to forecast thesales level, the length

of each stage, andshape of the PLCStrategy is both a

cause and a resultof the Products Life

Cycle

The PLC Concept can help in developing goodMarketing Strategies for different stages of the

Product Life Cycle. However some problems could arise:

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Vertical Integration

Product Growth Strategies

MarketPenetration ProductExpansion

Diversification

Source: H. Igor Anso ff, Strategic Diversification , Harvard Business Review, September-October 1957, pp.113-24

MarketExpansion

New

Markets

Present

Markets

New

Products

Present

Products

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New Product Development

(NPD)

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Most new product development is an

improvement on existing products

Less than 10% of new products are totally new

concepts The success rate of new products is very low

often less than 5%. You have to kiss a lot of

frogs to find a prince!

Product obsolescence is rapid with

improvements in technology

Shorter PLCs

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Creating New Consumers


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Creating New Consumers

Consumer

creatingPotential

Categories

new to the

worldCategories

new to the

companyNew

products in

current

categoriesRestage

Continuous

Innovation

Old business

Retaining Consumers

Low Risk

New business

Creating new Consumers

High Risk

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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

Customerperception of differentiation is critical

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New Product Development Process

Idea

Generation

Concept

Developmentand Testing

MarketingStrategy

Development

Idea

Screening

BusinessAnalysis

ProductDevelopment

Market

Testing

Commercialization

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NPD Idea Generation & Screening


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1. Does the offering have a relative

advantage?

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?

NPD - Idea Generation & Screening

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NPD Business Analysis

The most customer appealing offer is not

always the most profitable to make

Estimate on costs, sales volumes, pricing andprofit levels are made to find out the optimal

price volume mix.

Breakeven and paybacks

Discounted cash flow projections

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NPD - Test Marketing

Which test markets & why?

What test periods & why?

What information to gather?

What action to take?

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NPD - Commercialization

When? (Timing)

Where? (Which geographical markets)

To whom? (Target markets)

How? (Introductory Marketing strategy)

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Challenges in NPD

Idea Shortage

Cost/Capital Shortage

Fragmented Markets

Social & Governmental Constraints

Need for Speed

Shorter Product Life Cycles

Changing consumer needs & preferences

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Why sometimes new products fail


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Why sometimes new products fail

Poor Design

Overestimated Demand

Over Championing

High Development Costs

Poor Marketing Execution

Strong Competitive Reaction

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Changes Affecting Product Management


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Changes Affecting Product Management

Changing consumer needs & expectations

Changes in the balance of market power

Increased importance of customer retention

Technology change - Data explosion

Technology change Internet/Interactivity

Technology change Mass Customization

Increased global competition Increased emphasis of brands

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Thank You

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Product Management & Strategy -Overview 10.1

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