Product Definition

Product Definition Basis: Targeted market segment (phase of TALC) Technology Value Proposition Whole (Complete) Product Concept, including: Service & support Ancillary products Documentation Future Potential

Basis:

Targeted market segment (phase of TALC)

Technology

Value Proposition

Whole (Complete) Product Concept, including:

Service & support

Ancillary products

Documentation

Future Potential

Whole Product Concept Products are complex; they have many dimensions It is the totality of what a customer buys A product is the physical object (hardware, food, medicine), software or service from which customer gets direct utility plus a number of other factors, services and perceptions that make the product: Useful Desirable Convenient

Products are complex; they have many dimensions

It is the totality of what a customer buys

A product is the physical object (hardware, food, medicine), software or service from which customer gets direct utility plus a number of other factors, services and perceptions that make the product:

Useful

Desirable

Convenient

Whole Product Concept Restaurant’s product is: food + ambiance + service + cleanliness + other things Definition of all the above depends on the market segment Supermarket’s canned soup is: soup + the can’s label + store’s display + store’s cleanliness + the type of store (Safeway, gourmet food store, gas station convenient store,.)

Restaurant’s product is: food + ambiance + service + cleanliness + other things

Definition of all the above depends on the market segment

Supermarket’s canned soup is: soup + the can’s label + store’s display + store’s cleanliness + the type of store (Safeway, gourmet food store, gas station convenient store,.)

Whole Product Concept Computer Operating System is: software + development environment (hardware and software) + documentation to use it + training program + suppliers service & troubleshooting capabilities + availability of hardware drivers + suppliers enhancement plans Example: Linux Another SW examples: SmallTalk, Java, ..

Computer Operating System is: software + development environment (hardware and software) + documentation to use it + training program + suppliers service & troubleshooting capabilities + availability of hardware drivers + suppliers enhancement plans

Example: Linux

Another SW examples: SmallTalk, Java, ..

Whole Product Concept CVD product is: Reactor/ technology + wafer transfer platform + system software + process control hardware & software + application recipe + system packaging + company’s service & spares capabilities + ability/desire to do continuous improvement + operation & maintenance manual + presale demo + post-sale installation and qualification + customer’s confidence in the supplier Example: Helicon plasma CVD equipment

CVD product is: Reactor/ technology + wafer transfer platform + system software + process control hardware & software + application recipe + system packaging + company’s service & spares capabilities + ability/desire to do continuous improvement + operation & maintenance manual + presale demo + post-sale installation and qualification + customer’s confidence in the supplier

Example: Helicon plasma CVD equipment

Whole Product Concept Ascend (now part of Lucent) lost share due to poor marketing strategy Ascend has some of the best products in the industry They introduce products as devices: “here is our sexy new box, rather than this is our strategy for “voice” communication” “ Customers did not understand the significance of a newly launched product”

Ascend (now part of Lucent) lost share due to poor marketing strategy

Ascend has some of the best products in the industry

They introduce products as devices: “here is our sexy new box, rather than this is our strategy for “voice” communication”

“ Customers did not understand the significance of a newly launched product”

Whole Product Concept A product, to the potential customer, is value satisfaction The generic “thing” or “device” is not itself the product. It is the minimum necessary to get into the “game” A product has meaning only from the viewpoint of the customer or the ultimate user. Only the buyer or the user can assign value

A product, to the potential customer, is value satisfaction

The generic “thing” or “device” is not itself the product. It is the minimum necessary to get into the “game”

A product has meaning only from the viewpoint of the customer or the ultimate user. Only the buyer or the user can assign value

Whole Product Concept Generic Product Expected Product Augmented Product Potential Product value

The Generic Product The generic product is the rudimentary “thing” without which there is no chance to participate in the market: for a bank: loanable funds for a realtor: “for sale” properties for a lawyer: the bar exam certificate for WebTV: the box for satellite TV: the antenna and receiver box

The generic product is the rudimentary “thing” without which there is no chance to participate in the market:

for a bank: loanable funds

for a realtor: “for sale” properties

for a lawyer: the bar exam certificate

for WebTV: the box

for satellite TV: the antenna and receiver box

The Expected Product The expected product represents the customer’s minimal expectations Delivery conditions, installation services, post-sale services, spare parts, training, packaging conveniences the bank: the loan officer who is cooperative the realtor: who is on your side the lawyer: who protects you the WebTV: that only connects to a few home shopping channels the Satellite TV retailer: that does not offer installation support to an old man

The expected product represents the customer’s minimal expectations

Delivery conditions, installation services, post-sale services, spare parts, training, packaging conveniences

the bank: the loan officer who is cooperative

the realtor: who is on your side

the lawyer: who protects you

the WebTV: that only connects to a few home shopping channels

the Satellite TV retailer: that does not offer installation support to an old man

The Expected Product, cont’d The expected attributes vary by customers and industries They could be sources of product differentiation depending on how well suppliers do them

The expected attributes vary by customers and industries

They could be sources of product differentiation

depending on how well suppliers do them

The Augmented Product Customer may be offered more than what she thinks she needs or expects Computer that comes with “Office 2000” already installed Offer two year warranty for semiconductor process equipment where the “norm” is one year Optical store that replaces customer’s lost contact lenses nights & weekends and delivers them to customer’s home Augmentations are means of product differentiation They could also create customer dependency on the supplier

Customer may be offered more than what she thinks she needs or expects

Computer that comes with “Office 2000” already installed

Offer two year warranty for semiconductor process equipment where the “norm” is one year

Optical store that replaces customer’s lost contact lenses nights & weekends and delivers them to customer’s home

Augmentations are means of product differentiation

They could also create customer dependency on the supplier

The Augmented Product Product augmentations can educate the customer about what is reasonable for him to expect This raises the competitive bar; augmented benefits may turn into customer expectations (and move into the inner circle) Not all customers can be attracted to by an ever widening circle of augmented benefits They may prefer lower prices to more augmentation

Product augmentations can educate the customer about what is reasonable for him to expect

This raises the competitive bar; augmented benefits may turn into customer expectations (and move into the inner circle)

Not all customers can be attracted to by an ever widening circle of augmented benefits

They may prefer lower prices to more augmentation

The Potential Product The Potential Product consists of everything potentially feasible to get and keep customers what may remain to be done what is possible in the future Suppliers, and customers, can compete more effectively with the Potential Product in the changed conditions of future

The Potential Product consists of everything potentially feasible to get and keep customers

what may remain to be done

what is possible in the future

Suppliers, and customers, can compete more effectively with the Potential Product in the changed conditions of future

The Potential Product In high tech markets, customers desire extendibility for the product so that the platform and basic technology can last over several generations of technology progressions e.g. semiconductor technology cycles Product Roadmap is important

In high tech markets, customers desire extendibility for the product so that the platform and basic technology can last over several generations of technology progressions

e.g. semiconductor technology cycles

Product Roadmap is important

Product Definition High Tech markets are different than consumer markets, requiring different definition of the whole product point of sale (sold directly to customers by sales persons) function (emphasized) pre-sale evaluation (customers spend a lot of time, sometimes more than one year) post-sale support (documentation, customer training, service) risk in purchasing decision (is high) intangible factors (trust, reputation,references) product/technology roadmap (extendibility)

High Tech markets are different than consumer markets, requiring different definition of the whole product

point of sale (sold directly to customers by sales persons)

function (emphasized)

pre-sale evaluation (customers spend a lot of time, sometimes more than one year)

post-sale support (documentation, customer training, service)

risk in purchasing decision (is high)

intangible factors (trust, reputation,references)

product/technology roadmap (extendibility)

Whole Product Concept The cost of creating a complete product is often many times the cost of developing the generic product (hardware, or software, or drug)

The cost of creating a complete product is often many times the cost of developing the generic product (hardware, or software, or drug)

Whole Product Concept If the product cannot be made to work by the customer, it is useless The reason may be It inherently does not work user is not adequately trained and does not know how to use it documentation telling the user how to install and operate the product is inaccurate product is not serviced & supported

If the product cannot be made to work by the customer, it is useless

The reason may be

It inherently does not work

user is not adequately trained and does not know how to use it

documentation telling the user how to install and operate the product is inaccurate

product is not serviced & supported

Whole Product Concept Products are multidimensional A whole product is one that can be functional (technology and design meeting spec) manufactured (materials & tools available, be manufacturable) serviced & supported (trained people, fast response, be serviceable) applied (documentation, process recipe) sold (distribution channels, sales collateral)

Products are multidimensional

A whole product is one that can be

functional (technology and design meeting spec)

manufactured (materials & tools available, be manufacturable)

serviced & supported (trained people, fast response, be serviceable)

applied (documentation, process recipe)

sold (distribution channels, sales collateral)

Whole Product Concept Customers’ needs and wants define products Depending on the targeted market segment, the definition of the product must change The product must be defined differently in different phases of the Technology Adoption Life Cycle

Customers’ needs and wants define products

Depending on the targeted market segment, the definition of the product must change

The product must be defined differently in different phases of the Technology Adoption Life Cycle

Whole Product Concept Innovators want to be part of the supplier’s product development, do not mind inadequate documentation or even not fully functioning product PC’s & application software in the hands of engineers in 1980 Late Majority on the other hand, are conservatives and for them cost of mistake is huge. They have no tolerance for malfunction or documentation error PC & application software in a travel agency in 1998

Innovators want to be part of the supplier’s product development, do not mind inadequate documentation or even not fully functioning product

PC’s & application software in the hands of engineers in 1980

Late Majority on the other hand, are conservatives and for them cost of mistake is huge. They have no tolerance for malfunction or documentation error

PC & application software in a travel agency in 1998

Whole Product Concept IBM PC’s dominated the market over Apple because: IBM label made it a “complete product” for business applications IBM PC’s open architecture allowed rapid development of a myriad of applications, that were missing on Apple (e.g. business application software) We saw examples of Ascend products: now the customers are requesting different “products” because they are CEO’s and VP’s of muti-billion dollar companies (GTE, Deutsche Telekom)

IBM PC’s dominated the market over Apple because:

IBM label made it a “complete product” for business applications

IBM PC’s open architecture allowed rapid development of a myriad of applications, that were missing on Apple (e.g. business application software)

We saw examples of Ascend products: now the customers are requesting different “products” because they are CEO’s and VP’s of muti-billion dollar companies (GTE, Deutsche Telekom)

Whole Product Concept When you are positioning yourself against competition, it is important to compare complete products not just devices A product will achieve a commanding position within a segment only if it is complete

When you are positioning yourself against competition, it is important to compare complete products not just devices

A product will achieve a commanding position within a segment only if it is complete

Whole Product Concept Marketing organization is responsible to ensure that products are complete for the targeted market segment guarantee that the product remains complete as the customer base evolves and competition sets new standards for completeness

Marketing organization is responsible to

ensure that products are complete for the targeted market segment

guarantee that the product remains complete as the customer base evolves and competition sets new standards for completeness

Product Definition Products are marketing inventions Product invention / definition is a continuous process Starts at the intersection of new technology capability and perceived market opportunity Continues during the market research and definition of Market Requirements Specification (MRS) device development and demonstration product launch

Products are marketing inventions

Product invention / definition is a continuous process

Starts at the intersection of new technology capability and perceived market opportunity

Continues during the

market research and definition of Market Requirements Specification (MRS)

device development and demonstration

product launch

Product Definition Continues past product introduction thru discovery of new applications (not envisioned by the original developers) Continues further as product marches down the Technology Adoption Life Cycle and product is redefined for new groups of customers as the company diversifies into new market segments to capture more market share

Continues past product introduction thru discovery of new applications (not envisioned by the original developers)

Continues further

as product marches down the Technology Adoption Life Cycle and product is redefined for new groups of customers

as the company diversifies into new market segments to capture more market share

Product Life Cycle T o =opportunity Occurs T p =opportunity is Perceived T b =project activity Begins T f =project definition &plans Freeze(eng spec) T r =product Release to manufacturing T s =first customer Satisfied BET=Break-Even Time

Product Costs In High Tech, cost of marketing, selling (distribution) and supporting the product is often more than the cost of manufacturing the product Manufacturing cost (Software products cost almost nothing to make) Support cost R&D cost amortized over life of product Marketing, sales and distribution costs Successful companies get products to customers in the most cost-effective fashion(not necessarily lowest price!)

In High Tech, cost of marketing, selling (distribution) and supporting the product is often more than the cost of manufacturing the product

Manufacturing cost (Software products cost almost nothing to make)

Support cost

R&D cost amortized over life of product

Marketing, sales and distribution costs

Successful companies get products to customers in the most cost-effective fashion(not necessarily lowest price!)

Whole Product Development for Competitive Advantage Segmenting the market and inventing complete products enable you to gain superiority in the market place The device a company sells may not be particularly superior to the competition’s (PC v.s. Mac), but if the whole product is better overall, no competitor can effectively challenge it

Segmenting the market and inventing complete products enable you to gain superiority in the market place

The device a company sells may not be particularly superior to the competition’s (PC v.s. Mac), but if the whole product is better overall, no competitor can effectively challenge it