Part ThreeBusiness Marketing Programming• Chapter 8 Developing and Managing Products• Chapter 9 Business Marketing Channels• Chapter 10 Creating Customer Dialogue• Chapter 11 Communicating via Advertising, Trade Shows, and PR• Chapter 12 The One-to-One Media• Chapter 13 Sales and Sales Management• Chapter 14 Pricing and Negotiating for Value
Chapter 8Developing and Managing Offerings: What do Customers Want?
THE OFFERING CONCEPT BENEFIT: How the Product or Service Satisfies a Need PRODUCT: A Bundle of Benefits and a Collection of Solutions to Needs and WantsCOMPETITIVE A Benefit That Satisfies a CustomerADVANTAGE: Better than a Competitor’s Product Benefits 8-5
ACTIVITIES IN MANAGING PRODUCTS• UNDERSTAND THE PRODUCT LIFE CYCLE (PLC) AND APPLY IT TO PRODUCT STRATEGY• UNDERSTAND THE CONCEPT OF PRODUCT PORTFOLIOS• KNOW WHEN TO HARVEST A PRODUCT 8-6
Product Levels: The Customer Value Hierarchy• In planning its market offering, the marketer needs to address five product levels. Each level adds more customer value, and the five constitute a customer value hierarchy. Figure 12.2 Five Product Levels 12-7
PRODUCT LIFE CYCLE DECISION POINTS Rapid expansion of distributors Product line expansion Niche marketing Strongly defend home-market Cut low-gross-margin products Continued heavy promotion niches from the line Sales force incentives and Prune product lines Withdraw from channels in order management Emphasize gross contribution of their unprofitability Search for new sources for rather than market share and Freeze R& D and product supply sales volume modifications Need to balance supply and Review logistics: prune costsSales Freeze advertising and demand Reduce pioneering sale force promotions Stock-out and back-order effort, more telemarketing Attempt to maintain price to the damage control More trade than consumer end promotion Buy back remaining stock and Introduce flankers, private redistributeRedirect focus & promotion labels, generics Maintain spare parts and serviceInvest in expanding production Reinvest in market research Consider divesting while it is aBuild inventory & R&D going concernExpand distributor network Use promotions to increaseTrain expanded sales force heavy-user loyaltyInstitute marketing controls Freeze investment in plantInvest heavily in advertising Productivity reviewTarget on best prospects: Special trade promotions to innovators and enthusiasts keep channels happyUse most loyal distributors Focused attacks on vulnerableUse free samples competitorsUse public demonstrations Long-term price reduction or and trade shows at least a short-term priceUse publicity and endorsements promotionUse specialist media & catalogs Keep plant at maximum capacity and subcontract excess Development Introduction Growth Maturity Decline Time Exhibit 8-2 8-9
THE BCG MATRIX: MEASURING MARKET GROWTH AND MARKET SHARE BCG Matrix Question Stars Marks Market Growth Rate Cash Dogs Cows Market Share Relative to Nearest Competitor Exhibit 8-3 8-10
GE MATRIX MEASURING MARKETATTRACTIVENESS AND BUSINESS STRENGTH GE Matrix Strong Market Attractiveness • Growth • Diversity • Competitive Attractive Unattractive • Structure Change • Technology Change Weak • Social Environment Business Strength • Size of Market & Share • Company Growth Rate • Profit • Margins • Technology Platform Exhibit 8-3 • Image • People 8-11
PRODUCT DEVELOPMENT PROCESS: A NEW LOOK EVALUATION LAUNCH BETA TESTING PRODUCT DEVELOPMENT SPECIFYING FEATURES SCREENING AND PRELIMINARY INVESTIGATIONIDEA GENERATION Exhibit 8-4 8-12
QUALITY FUNCTION DEPLOYMENTCustomers’ Linked to Broken down Process Production desired product into Characteristics Controls benefits characteristics component part characteristics Exhibit 8-5 8-13
MAKING A PRODUCT SUCCESSFUL1. HAVE CLOSE TIES WITH A WELL DEFINED MARKET TO ANTICIPATE CUSTOMER NEEDS.2. COMPANY IS HIGHLY INTEGRATED AND MARKET- ORIENTED3. COMPANY HAS A COMPETITIVE ADVANTAGE IN TECHNOLOGY AND PRODUCTION CAPABILITY4. COMPANY HAS A STRONG MARKETING PROFICIENCY5. STRONG FINANCIAL SUPPORT Exhibit 8-8 8-14
KEYS TO PRODUCT INNOVATION AN INNOVATIVE COMPANY MUST HAVE• A CORPORATE CULTURE THAT SUPPORTS INNOVATION – a desire for growth, improvement• A FOCUS ON OPPORTUNITY RISK INSTEAD OF INVESTMENT RISK• A VISION OF WHAT THE NEW PRODUCT IS TO ACCOMPLISH• A STRUCTURED DEVELOPMENT PROCESS• A LONG-TERM PERSPECTIVE 8-15
KEY PRODUCT MANAGEMENT DECISIONS1. WHICH PRODUCT TO INTRODUCE2. WHICH PRODUCTS TO KEEP3. WHICH PRODUCTS TO PROMOTE4. WHAT LEVEL OF PROMOTION TO PROVIDE (LOW TO HIGH)5. WHAT PRODUCTS TO CONTINUE OR DELETE 8-16
WINNING THE NEW PRODUCT CONTEST • FOCUS ON CORE COMPETENCY (WHAT YOU DO BEST FOR A COMPETITIVE ADVANTAGE) PLUS • PROVIDE GREATEST VALUE TO CUSTOMER EQUALS • SUCCESSFUL PRODUCT 8-17
Discussed questions2. A big issue for salespeople who work on straight commission is this: On what products will they place their emphasis during a sales call? For these salespeople, time with the customer is their most important resource, so they have to choose how to use that time. Draw a blank product portfolio matrix and decide how much time should be spent on products within each square, assuming equal numbers of products in each of the quadrants. What are your reasons for each decision?3. Can a product enjoy multiple life cycles? If so, how? If you were a salesperson with a product in each stage of the product life cycle, what percentage of your selling time would you allocate to each product?4. Some authors have combined the life cycle and portfolio matrices into one model. How would you do that? What are some limitations of the model?
Discussed Questions5. The chief engineer for Portland Purifiers, a maker of industrial water filters with annual sales of $5 million, has an idea for a new product that would represent a major (and patentable) improvement over current market offerings. She estimates that the development of the product will cost half a million dollars, including tooling the manufacturing line. The last product launch cost about $200,000 in marketing and promotion costs. She thinks the product would sell for about $50,000 and should sell 75 units in year 1, 140 in year 2, and then level out at 200 per year. Contribution margin is 40 percent. Should the company continue with this project? What do you need to know about the company in order to understand its decision to go or not go ahead? What is the payback period?