1. McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

2. Part Three
Business Marketing
Programming

3. Part Three
Business 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

4. Chapter 8
Developing and Managing Offerings:
What do Customers Want?

5. 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 Wants
COMPETITIVE A Benefit That Satisfies a Customer
ADVANTAGE: Better than a Competitor’s Product
Benefits
8-5

6. 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

7. 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

8. Product Levels: The Customer Value Hierarchy
• Core benefit: Service customer buys
• Turned into basic product
• Expected product - attributes expected
• Augmented product - exceeds expectations
• Potential product- all possible future
augmentations & transformations of product
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12-8

9. 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 costs
Sales 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 redistribute
Redirect focus & promotion labels, generics Maintain spare parts and service
Invest in expanding production Reinvest in market research Consider divesting while it is a
Build inventory & R&D going concern
Expand distributor network Use promotions to increase
Train expanded sales force heavy-user loyalty
Institute marketing controls Freeze investment in plant
Invest heavily in advertising Productivity review
Target on best prospects: Special trade promotions to
innovators and enthusiasts keep channels happy
Use most loyal distributors Focused attacks on vulnerable
Use free samples competitors
Use public demonstrations Long-term price reduction or
and trade shows at least a short-term price
Use publicity and endorsements promotion
Use specialist media & catalogs Keep plant at maximum
capacity and subcontract
excess
Development Introduction Growth Maturity Decline Time
Exhibit 8-2
8-9

10. 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

11. GE MATRIX MEASURING MARKET
ATTRACTIVENESS 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

12. PRODUCT DEVELOPMENT PROCESS:
A NEW LOOK
EVALUATION
LAUNCH
BETA TESTING
PRODUCT DEVELOPMENT
SPECIFYING FEATURES
SCREENING AND PRELIMINARY
INVESTIGATION
IDEA GENERATION
Exhibit 8-4
8-12

13. QUALITY FUNCTION DEPLOYMENT
Customers’ Linked to Broken down Process Production
desired product into Characteristics Controls
benefits characteristics component
part
characteristics
Exhibit 8-5
8-13

14. MAKING A PRODUCT SUCCESSFUL
1. HAVE CLOSE TIES WITH A WELL DEFINED MARKET TO
ANTICIPATE CUSTOMER NEEDS.
2. COMPANY IS HIGHLY INTEGRATED AND MARKET-
ORIENTED
3. COMPANY HAS A COMPETITIVE ADVANTAGE IN
TECHNOLOGY AND PRODUCTION CAPABILITY
4. COMPANY HAS A STRONG MARKETING PROFICIENCY
5. STRONG FINANCIAL SUPPORT
Exhibit 8-8
8-14

15. 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

16. KEY PRODUCT
MANAGEMENT DECISIONS
1. WHICH PRODUCT TO INTRODUCE
2. WHICH PRODUCTS TO KEEP
3. WHICH PRODUCTS TO PROMOTE
4. WHAT LEVEL OF PROMOTION TO
PROVIDE (LOW TO HIGH)
5. WHAT PRODUCTS TO CONTINUE OR
DELETE
8-16

17. 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

18. Discussed questions
2. 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?

19. Discussed Questions
5. 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?