Business Marketing Product Management The Six Sources

Business Marketing Product Management

The Six Sources of Competition in a Product Market Must monitor current & potential product offerings of each Current Partners Substitutes Existing Direct Competitors Upstream Suppliers Downstream Customers New Entrants

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 image. Runner 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 image. Runner 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

Make or Buy Decisions Minor Component How much does the component contribute to our product’s value image in our customers’ view? Is the component unique to our markets? Major Component No Are we good at it? Yes No Purchase as a Commodity Yes No Can we own the market for it? Yes Can we or do we want to protect it? No Yes Is it our kind of business? -Financial justification -Risk assessment -Stability of technology Yes Make it! No Develop Partnership with qualified supplier(s) Collaborate in development with technology-oriented supplier(s)

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 Idea Generation Stage 4 Stage 5 Product/ Strategy/ Plan Dev. Test Market Stage 7 Product Screening Stage 2 Business Case Analysis Stage 3 Product Launch Stage 6 Hand off to innovation/ translation team

Go/ No-Go Decisions in Product Development Idea Generation and Screening Business Case Analysis Launch Go 1 st Go/No-Go Point Quick assessment of market size, growth rate, fit of organization Go Concept Testing Initiative Development 3 rd Go/No-Go Point Does market respond positively to “almost finished product” (beta test)? Go No-go 2 nd Go/No-Go Point Is there sufficient market interest? X No-go Market Test X

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 in Product 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) Maturity Sales Revenue/ period Growth Decline Introduction Time Development

Technology Adoption Life Cycle (TALC) Pragmatists Sales from New Adopters/period Conservatives Visionaries Laggards Technophiles Time

The TALC and PLC Superimposed PLC – Total Sales TALC - Sales from New Adopters/ Period Time

Product Life Cycle Actual PLC curves can be any shape ü product that doesn’t sell at all ü fad that grows fast but has short life ü seasonal product ü regenerated product life cycle ü “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 Desired Expectations Customer Perceptions of Performance The Zone Of Tolerance Adequate Expectations Satisfaction

Zone of Tolerance The Result of Satisfaction Desired Expectations The Zone Of Tolerance Adequate Expectations Shape of the zone remains essentially the same

Zone of Tolerance Desired Expectations Customer Perceptions of Performance The Zone Of Tolerance Adequate Expectations Dissatisfaction

Zone of Tolerance The Result of Dissatisfaction Desired Expectations o. Both expectations are lower. o. Drop in AE greater than drop in DE. The Zone Of Tolerance o. Future exchanges at risk due to disloyalty. o. Negative word-ofmouth effects future exchanges with others. Adequate Expectations The zone actually widens slightly.

Zone of Tolerance Customer Delight Desired Expectations Customer Perceptions of Performance The Zone Of Tolerance Adequate Expectations

Zone of Tolerance The Result of Customer Delight Desired Expectations o. Both expectations increase. o. Increase in AE greater than increase in DE. o. Zone narrows The Zone Of Tolerance Adequate Expectations o. Future exchanges more likely. o. Positive word-ofmouth effects future exchanges with others. The zone actually narrows slightly.