SEMESTER : PRODUCT MANAGEMENT (PM) PRODUCT MANAGEMENT...

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© IMM Graduate School of Marketing Assignment: 1

st Semester 2013 PM / PM001

ASSIGNMENT 1ST SEMESTER : PRODUCT MANAGEMENT (PM) PRODUCT MANAGEMENT (PM001) CHAPTERS COVERED : CHAPTERS 1, 3 - 6

DUE DATE : 3:00 p.m. 19 March 2013

TOTAL MARKS : 100

CASE STUDY : BIC

INSTRUCTIONS TO CANDIDATES FOR COMPLETING AND SUBMITTING

ASSIGNMENTS The complete ‘Instructions to Students for Completing and Submitting Assignments’ must be collected from any IMM GSM office, or the relevant Student Support Centre or can be downloaded from the IMM GSM website. It is essential that the complete instructions be studied prior to commencing your assignment. The following points highlight only a few important notes.

1. You are required to submit ONE assignment per subject.

2. The assignment will contribute 20% towards the final examination mark, and the other 80% will be contributed by the examination, however, the examination papers will count out of 100%.

3. Although your assignment will contribute towards your final examination mark, you do not have to earn credits for admission to the examinations; you are automatically accepted on registering for the exam.

4. Number all the pages of your assignment (e.g. page 1 of 4) and write your name and surname, student number and subject at the top of each page.

5. The IMM GSM requires assignments to be presented in a typed format, on plain A4 paper. Unless otherwise specified, this assignment must be completed within a limit of 1500 words, excluding the bibliography. Students who exceed the word limit may find that only part of the submitted assignment will be marked.

6. A separate assignment cover, which is provided by the IMM GSM, must be attached to the front of each assignment.

7. Retain a copy of each assignment before submitting, in case the original does not reach the IMM GSM.

8. The assignment due date refers to the day up to which assignments will be accepted for marking purposes. The deadline is 3:00 p.m. on 19 March 2013. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark if received after 3:00 p.m. on 19 March 2013 and up to 5:00 p.m. the following day, after which no assignments will be accepted.

9. If you fail to follow these instructions carefully, the IMM Graduate School of Marketing cannot accept responsibility for the return of the assignment. It may even result in your assignment not being marked.

Results will be available on the IMM GSM website, www.immgsm.ac.za, on Friday, 3 March 2013.

http://www.imm.co.za/

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Specific instructions:

1. Answer ALL the questions in detail.

2. Use your own words to answer the questions!

3. Read each question carefully to determine exactly what is required before attempting the answer.

4. Answers must be set out in a systematic way under appropriate headings and sub-headings. Number your answers clearly.

5. Do not simply give theoretical discussions. Practical application is essential for all questions and should form the bulk of your answers.

6. Take note that 10 marks are allocated to the presentation and layout of your assignment.

7. Make sure that you give a bibliography at the end of the assignment and provide references in the body of your answers where you have referred to other sources. Use the correct referencing method (Harvard system).

8. All answers must be based on the attached case study on BIC or the ‘Treats in trouble’ article as indicated in the various questions.

9. Refer to BIC’s website (http://www.bicworld.com/) for more information on the product in the case study. (Questions 1, 3-4).

10. Refer to the following website to download the article you will need to consult when answering Question 2: http://www.supermarket.co.za/flipbooks/Super market_Retailer/May%202012/index.html (pp. 29-32). The article is also included after the case study in this document.

.Answer all of the following questions after having read the attached case study on BIC and the ‘Treats in trouble’ article. You are also advised to research the companies in question in more detail to enable you to give more insightful answers.

QUESTION 1 [15] Refer to the BIC case study in order to answer this question. The kinds of tasks product managers perform are highly related to how marketing is organised. Required: Practically describe the three organisational structures for marketing that can be considered for use by BIC. In your practical discussion, you must clearly identify the role and tasks of the product manager under each organisational structure and show how BIC is structured according to the information in the case study. Give your opinion (with reasons) on which structure is best suited for BIC. Make sure that you also clarify why the other structures are not appropriate.

http://www.bicworld.com/

http://www.supermarket.co.za/flipbooks/Super%250Bmarket_Retailer/May%202012/index.html

http://www.supermarket.co.za/flipbooks/Super%250Bmarket_Retailer/May%202012/index.html

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QUESTION 2 [35]

Refer to the article entitled ‘Treats in trouble’ in order to answer this question. The article looks at the state of the sweets and confectionary category in the South African market. It outlines the key trends in the category and the problems it is facing. Required: Using the information in the article, conduct a category attractiveness analysis of the sweets and confectionary category in the South African market. Your analysis should focus only on the aggregate market factors (18 marks) and the category factors (17 marks). You must not discuss any theory in your answer. Your entire answer must be practical application. Make sure that you address all aspects and explain the implications of the points made in your analysis. [Hint: Make sure that you discuss your answer from the perspective of how each factor influences the operations and marketing of products in the category and thus the attractiveness of the category]. QUESTION 3 [20] In customer analysis, certain key questions need to be asked by the product manager in order to ensure he/she has an in-depth understanding of the customer and how they make their purchase decisions. Required: Using BIC as your point of reference, explain how a product manager would go about analysing ‘what customers buy and how they use it’. [It is important that you outline the theoretical issues and then give a detailed practical application.] QUESTION 4 [20]

Companies need to continuously develop their product offerings in order to remain competitive in the markets in which they operate. Required: Write an essay on the topic of the new product development process where you clearly explain what the process is and describe the steps in the process. Throughout your answer you should apply your discussion to the development of BIC’s Cristal Gel pens by explaining how it would have passed through the various stages of the process. Make assumptions where necessary.

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[Note: It is essential that you conduct further research on this topic when answering this question. You will not find sufficient information in the prescribed textbook. Consult additional textbooks, read articles, conduct Internet searches, and use any other resources at your disposal when researching this topic. Use the correct referencing method.] PRESENTATION [10]

ASSIGNMENT TOTAL: 100

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CASE STUDY: BIC Read the case study on BIC carefully before attempting to answer questions 1,3 & 4. This is an unfamiliar product to many of you so it is advisable to research it further – this is part of the learning process. Source: Adapted from The Times 100. Honour the Past … Invent the Future. [Online] Available at: http://businesscasestudies.co.uk/bic/honour-the-past-invent-the-future/challenges.html [Accessed: 28 May 2012].

HONOUR THE PAST – INVENT THE FUTURE BIC was founded in 1950 by Marcel Bich with the introduction of the first high quality ballpoint pen at an affordable price. In 1975 BIC launched the first one-piece shaver and become a market leader within that sector too. In the early days, BIC concentrated on a core range of products which mainly included: BIC Cristal® and Orange Ball Pen and the Classic Shaver. In the 1990s the company realised it needed to develop its product range to meet changing consumer needs and to compete with new competitors entering the writing and shaver categories.

CHALLENGES In the highly competitive modern global market place, no organisation can afford to stand still. As global markets are so competitive, large companies can no longer produce hundreds of different products in lots of different product categories. That approach is inefficient and spreads resources too thinly. Big companies recognise the importance of focusing on their power brands, i.e. on those lines in which they have the greatest competitive advantage relative to rivals and which offer opportunities for profitable growth. It pays firms to:

invest in these products and concentrate resources on them

support them with sufficient marketing, product development, advertising and promotional efforts.

In recent years, BIC has reaffirmed that its ongoing success depends on key factors.

http://businesscasestudies.co.uk/bic/honour-the-past-invent-the-future/challenges.html

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ORGANISATIONAL EFFICIENCY

BIC has simplified its product range. This has involved focusing from 9,000 SKUs to 150 products in customer-relevant packaging, and reorganising itself in the process. Production has been rationalised to a limited number of 'super-factories’ that are the sole sites for manufacturing particular products for global distribution. This way of operating creates huge economies of scale whereby massive quantities can be produced at very low unit cost. For example by operating continuous flow production, where the shaver factory's production line runs for 24 hours every day, using highly automated machinery that minimises labour costs. CUSTOMER FOCUS BIC focuses on two sets of customers:

the retailers to whom it sells directly

the end consumers that the retailers supply.

BIC carries out detailed market research to discover the wishes of these two groups e.g. the best mix of products, delivery patterns and promotions to support its products in the shops for retailers as well as final consumers' expectations and requirements for BIC products. In one city in Poland, for example, BIC supplies not only a 24hr/7day supermarket but also 100 small kiosks. To do this well, BIC had to identify the needs of both retailers and consumers. It then had to satisfy them. INNOVATION Many BIC trademarks are well known e.g. BIC, BALLOGRAF, SHEAFFER, CONTÉ, TIPP-EX, BIC WITE-OUT. However, as well as building on the success of existing brands constantly improving the quality of the core products, the company is constantly developing new products to meet consumers' expectations and aspirations. For example, in 2002, 20 per cent of the company's stationery sales came from new products and line extensions. In a carefully controlled programme, BIC designs and launches new products that offer greater value-added technology. For example, as mentioned earlier, the BIC

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Cristal is the world's leading selling pen. The number one growing category in writing instruments is gel ink. It is essential that the company offers products with gel ink. BIC has combined these two ideas to create the BIC Cristal pen (the highest quality pen of its kind, and thanks to BIC's efficient methods available at an affordable price) offering the smooth writing of gel pens at a BIC price. Conversion from the traditional point-and-ink system to the new Smooth Gel Ink system (offering greater writing comfort) involved significant modifications in manufacturing processes for inks and colourings in addition to re-tooling the machines that make the points. These changes required two years of research and a further year to implement in pilot plants (in France and the Americas), thus reflecting the large investments made by the Group in its core categories. THE BOSTON MATRIX AND BIC PRODUCTS Multi-product businesses like BIC are aware of how products in their entire portfolio contribute to the overall growth of the business. Established profitable lines make a vital contribution that enables a company to invest in the development and promotion of new lines. The Boston matrix can be applied to BIC products:

The Cristal Ball Pen and Classic Shaver are popular and well established products with very high unit sales. BIC produces them on a large scale. They provide excellent cash profits for the company.

The Cristal Grip and Cristal Gel Pens, and Twin Lady shavers are stars with well established growth patterns. For example, the Twin Lady filled the gap in the market for shavers for women.

Problem Children that have recently entered their respective markets include Cristal Colours and Cristal Pocket Scents in the pen market, and Comfort 3 and Soleil in the shavers market. Currently BIC is investing in these products. Over the next two or three years the company will decide whether these products have succeeded (moved into the star category) and warrant continued support. Products such as Soleil (a shaver for women) are rapidly moving into the star category.

Of course, some products fail to take off sufficiently and/or go into decline. The 'Tough Beard' shaver has not warranted further development and BIC has taken it out of production.

DEVELOPING THE PRODUCT RANGE The Cristal range of pens demonstrate how to inject new life into a product range:

BIC's Cristal Ball pen was launched in 1951. It has over 30% market share and is the UK's best-selling ball pen.

In 1964 BIC launched BIC Orange. This is a fine-point version of the Cristal pen, easily recognised by its orange barrel.

In the 1990s, as the Cristal and Orange Ball pens became more mature and encountered fierce competition from lower priced brands, BIC invested in developing the Cristal range to attract new users and to differentiate itself from the competition.

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This led to the launch of a range of new products:

Cristal Grip, for more comfort

Cristal Colours, for fashionable colours

Cristal Pocket, for a more convenient size

Cristal Pockets Scents, for fun and fruity inks

Cristal Gel, for smoother writing. By continually adding to the range, BIC manages to inject new life into the product life cycle of the overall range. BIC now offers a full range of Cristal pens using both ballpoint and gel ink technology. The range's development has also helped to support the enhancements of the core brand, and each year sales of Cristal pens increase. THE PRODUCT LIFE CYCLE AND PROMOTIONAL ACTIVITY BIC analyses its products, and promotes and supports these in line with their stage in the product life cycle. For example, BIC Cristal and the Classic shaver have a long life cycle and although they have had technological improvements over the years and are produced using more advanced manufacturing techniques, the style and design of these products have not changed. They are still recognisable worldwide. Initially, when these products were launched, promotional activity would have focused on generating awareness and encouraging consumers to trial the products. Now that these products have become well-established icons, the promotional emphasis is on rewarding loyal customers who continue to buy these products.

The illustration shows the way in which promotional activity is tailored to stages in the product life cycle. With Cristal Gel, BIC carried out a large amount of below the line activity. To build awareness of the new product, BIC supplied existing Cristal Ball pen users with Cristal Gel samples through special promotional packs and other sampling campaigns to office users. This was supported by advertising and direct marketing. During a product's growth period, BIC continues to use market research data to help it better understand market developments and consumer requirements. It also continues to support the product so that more and more consumers try it out and are converted into regular users. At this stage, advertising and special offers encourage new users to try the product.

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As a product moves towards maturity, BIC's marketing experts need to identify ways of injecting new life into it. They must also identify new product developments that can meet similar consumer needs. This explains why, for example, BIC has developed extensions to the Cristal range. Once a product has saturated a market, sales will stagnate. However, it is important to continue to support cash cows because they play a vital role in injecting profits that sustain new product development. Once a product has moved into decline, a company like BIC will look to replace it with new products that meet existing and evolving consumer needs. BRAND DEVELOPMENT BIC has invested heavily in brand development, to strengthen the recognition of the brand and its reputation among consumers. BIC has also developed co-branding operations with Disney, and produces a range of writing instruments (mechanical pencils, etc) that feature Disney characters, and targeted to young children, a colouring range under the Disney Magic Artist BIC brand. FUNDAMENTAL VALUES AND COMPANY STRUCTURE A company's values are the guiding principles that determine the way it behaves. BIC's values relate to its products, which ensure they are:

functional: designed to perform a specific function well e.g. to draw a line, produce a flame, shave hair. The key to achieving functionality is to adopt the most appropriate design, engineering and technology.

affordable: achieved by using appropriate design, materials production and distribution channels.

universal: capable of being used by anyone worldwide e.g. the ballpoint pen, the pocket lighter, the one-piece shaver.

Building on these fundamental values, BIC has established three core categories for products, based on a global range, designed for mass appeal. BIC then helps local retailers to select the products that best suit their own customers' needs from this range. Each of the three product categories is managed by a Category General Manager, who has the overall responsibility for the marketing, development, and manufacturing worldwide. In recent years manufacturing operations have been simplified so that huge outputs can be produced from super-factories that serve very large geographical markets. Product distribution is then organised by continent, with country managers reporting to their continental manager. The organisation thus has a matrix structure based on two main lines of communication - (1) by product category, (2) by geographical region. This means that an employee working, say, in a pen manufacturing plant in France would be accountable both within the Western European division and the stationery category.

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This matrix structure allows combining the benefits of a strong product expertise, together with strong operational structures per geographic area. CUSTOMERS/CONSUMERS BIC's customers (retailers) are not the final consumers who buy from retailers. The Group has therefore built up strong relationships with its retailers to ensure that its products are placed in the most attractive and suitable shop locations, and that the products are attractive and eye catching. This suits both parties; retailers want products to sell well too. Today, markets in most advanced economies are characterised by fewer, larger retailers and especially supermarkets that want sales of mature product categories like pens and shavers to continue growing. BIC supports retailers by innovating to stimulate growth and extend full product lifestyle providing bright, eye-catching displays of attractive products.

SEGMENTATION When marketing a product category, firms need to identify the different market segments. Segmentation involves identifying sets of characteristics that distinguish particular groups of customers from others. For example this may be based on:

Demographics, i.e. to divide the population into groups based on age, gender etc. BIC uses this approach to some extent, recognising that different retailers appeal to different types of consumer based on age profiles and income, and that different groups of end consumers seek different products e.g. male and female shaver requirements. Promotion, advertising and presentation of products are therefore tailored to these differences.

Usage, in addition to its world-leading range of pocket lighters, BIC introduced BIC Megalighter designed to light BBQs and BIC Megalighter for candles in 2004.

BIC also uses a segmentation approach looking at the behaviour or needs of consumers. For example, BIC's research into its stationery product category shows that there are three distinct types of writing instrument shopper. 1. Best value for money - This type is typically bought by offices and households

that have writing instruments in virtually every room. Everyone is allowed to use any available pen, so there's no great problem if one is misplaced. Households tend to seek lower priced pens, and regularly make new purchases of assortments of writing instruments based on current needs.

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2. Seeking specific benefits - Here consumers are looking for a more personalised item; something they regard as 'my pen'. It will be kept in a private place belonging to that individual, who may be reluctant to let anyone borrow it. Buying decisions will typically take longer, and involve careful consideration over choice. Key features looked for will include the pen being comfortable to hold and its capacity for producing smooth, writing that reflects the individual e.g. by colour or handwriting style. Marketing activity therefore needs to focus on these more sophisticated individual needs.

3. Impulse buy - Impulse buys are unplanned. Innovative designs will attract this segment, largely because the consumer is buying for pleasure. Purchasing in this segment is far more emotional and so the skilful marketer will seek to create 'objects of desire'. Attention grabbing Point of Sale displays are essential to stimulate impulse buys.

BIC aims to create a balanced product portfolio, including:

reliable, value for money products for regular household purchasers

premium high quality products for the consumer that wants 'something special'

novel, attractive products, sometimes with a fairly short life cycle. CONCLUSION BIC sustains its leading position by communicating and adhering to some fundamental business principles and practices. By focusing on its three product categories (stationery, lighters and shavers) and by identifying the various market segments the company is able to produce relevant products, some of which combine tried and tested products e.g. the BIC Cristal, and others that are genuinely innovative e.g. BIC Cristal Gel pens. At the same time, BIC looks to move into new growth areas e.g. triple blade shavers, BBQ lighters and kayaks. In this way BIC is able to live up to its aim to "honour the past while inventing the future". ARTICLE DOWNLOAD Read the following article before answering Question 2. A copy of the article can be found at the following link:

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Durham, L. Treats in trouble? [Online] Supermarket & Retailer, March 2012, pp. 29-32. Available from: http://www.supermarket.co.za/flipbooks/Supermarket_Retailer/May%202012/index.html [Accessed: 5 November 2012]

http://www.supermarket.co.za/flipbooks/Supermarket_Retailer/May%202012/index.html

http://www.supermarket.co.za/flipbooks/Supermarket_Retailer/May%202012/index.html

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