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Five Product Levels
Potential product – all possible

Augmented product – fresh flowers
Expected product – clean bed
Basic...
Product Mix
Width - number of
different product lines

Length - total number of
items
within the lines

Depth - number of
...
Brand

Equity
Devoted
to Brand

Values the Brand

(brand as friend)
Satisfied & Switching Cost
Satisfied Customer
(no reas...
Types of Consumer Products

11-5
The Buyer Decision Process for New
Products
• The adoption process is the mental process
that an individual passes through...
– interest: the consumer seeks information about the
new product.
– evaluation: the consumer considers whether trying
the ...
Individual Differences in
Innovativeness
• People differ in their readiness to try new products.
After a slow start, an in...
–

–

–
–

unfamiliar things, rely more on their own values and
judgement, are less brand loyal and more likely to tae
adv...
Adopter categorization on the basis of relative
time of adoption of innovations

13.5 %
early
innovators
2.5%

34%
34%
ear...
BCG & GE Matrix
Relative Position
Business Strength

Market Attractiveness

Market Growth

(Market Share)
About GE Matrix
 Developed by McKinsey & Company in
1970’s.
 GE is a model to perform business portfolio
analysis on the...
Classification
Business Strength
Strong

Medium

Weak

High
Medium

3.67

2.33

Low

Market Attractiveness

5.00

5.00

3....
Market Attractiveness
 Annual market growth rate
 Overall market size
 Historical profit margin
 Current size of marke...
Business Strength
 Current market share
 Brand image
 Brand equity
 Production capacity
 Corporate image
 Profit mar...
THE BCG GROWTH-SHARE
MATRIX
• It is a portfolio planning model which is based on the
observation that a company’s business...
STARS
High growth, High market share

• Stars are leaders in business.
• They also require heavy investment, to
maintain i...
CASH COWS
Low growth , High market share
• They are foundation of the company and
often the stars of yesterday.
• They gen...
DOGS
Low growth, Low market share
• Dogs are the cash traps.
• Dogs do not have potential to bring in
much cash.
• Number ...
QUESTION MARKS
High growth , Low market share
• Most businesses start of as question marks.
• They will absorb great amoun...
WHY BCG MATRIX ?
To assess :
 Profiles of products/businesses
 The cash demands of products
 The development cycles of ...
LIMITATIONS
• BCG MATRIX uses only two dimensions,
Relative market share and market growth rate.
• Problems of getting dat...
BCG Matrix
(Three Paths to Success)
• Continuously generate cash cows and use the
cash throw-up by the cash cows to invest...
Three Paths to Success (cont’d)
Relative Market Share
High
Low
High

Market
Growth
Rate
Low
BCG Matrix
(Three Paths to Failure)
• Over invest in cash cows and under invest
in question marks
– Trade further opportun...
Three Paths to Failure (cont’d)
Relative Market Share
High
Low
High

Market
Growth
Rate
Low
GE Multifactor Portfolio Matrix
Industry Attractiveness
High

High

Medium

Protect
Position

Build
selectively

Medium
In...
Major Stages in New-Product
Development (Fig. 9.1, p. 340)
Marketing
Strategy
Concept
Development
and Testing

Idea
Screen...
New Product Development Process
New Product Development Process Step 1.

Idea Generation
Idea Generation is the Systematic...
Step 1: Idea Generation/ NewProduct Strategies
Strategies for Obtaining New Product Ideas
Acquired
Companies

Original
Pro...
New Product Development Process Step 2.

Idea Screening
• Process to spot good ideas and drop poor ones as
soon as possibl...
New Product Development Process Step 3.

Concept Development
1. Develop New Product Ideas
into Alternative Detailed
Produc...
New Product Development Process Step 4.

Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Posi...
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Do Projected Sales, Costs, & Profits Meet Company ...
New Product Development Process

Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing
Progra...
New Product Development Process
Step 7. Test Market Types
Standard
Test Market

Controlled
Test Market

Full marketing cam...
Step 7: Test Marketing
• Characteristics of Good Test Markets
– .2 to 1.5% of the population

–
–
–
–

Good media coverage...
New Product Development Process

Step 8. Commercialization
Commercialization is the Introduction of
the New Product into t...
Product management misc
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Product management misc

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Product management misc

  1. 1. Five Product Levels Potential product – all possible Augmented product – fresh flowers Expected product – clean bed Basic product – hotel room Core benefit - Sleep
  2. 2. Product Mix Width - number of different product lines Length - total number of items within the lines Depth - number of versions of each product Product Mix all the product lines offered
  3. 3. Brand Equity Devoted to Brand Values the Brand (brand as friend) Satisfied & Switching Cost Satisfied Customer (no reason to change) No Brand Loyalty (customer will change)
  4. 4. Types of Consumer Products 11-5
  5. 5. The Buyer Decision Process for New Products • The adoption process is the mental process that an individual passes through from first learning about a new product to final adoption (making the decision to become a regular user). • Consumers go through five stages in the process of adopting a new product; – awareness: the consumer becomes aware of the new product but does not have information.
  6. 6. – interest: the consumer seeks information about the new product. – evaluation: the consumer considers whether trying the new product is a good idea. – trial: the consumer tries the new product to understand its value. – adoption: the consumer decides to make regular use of the new product. (AIETA)
  7. 7. Individual Differences in Innovativeness • People differ in their readiness to try new products. After a slow start, an increasing number of people adopt the new product. The number of adopters reaches a peak and then drops off as very little adopters remain. • There are five adopter categorization on the basis of time of adoption of innovations; – Innovators: are the first 2.5 percent of the buyers, they are adventurous, take risk, relatively younger, better educated, have higher income, are more receptive to
  8. 8. – – – – unfamiliar things, rely more on their own values and judgement, are less brand loyal and more likely to tae advantage of special promotions e.g. discounts. Early adopters: are the next 13.5 percent, are opinion leaders in their communities and adopt new ideas early but carefully. Early majority: are rarely leaders but adopt new ideas before the average person. Late majority: adopt an innovation only after a majority of people have tried it. Laggards: are suspicious of changes and adopt the innovation only when it has become tradition.
  9. 9. Adopter categorization on the basis of relative time of adoption of innovations 13.5 % early innovators 2.5% 34% 34% early late majority majority adopters 16% laggards
  10. 10. BCG & GE Matrix Relative Position Business Strength Market Attractiveness Market Growth (Market Share)
  11. 11. About GE Matrix  Developed by McKinsey & Company in 1970’s.  GE is a model to perform business portfolio analysis on the SBU’s.  GE is rated in terms of ‘Market Attractiveness & Business Strength’  It is an Enlarged & Sophisticated version of BCG.
  12. 12. Classification Business Strength Strong Medium Weak High Medium 3.67 2.33 Low Market Attractiveness 5.00 5.00 3.67 2.33 1.00
  13. 13. Market Attractiveness  Annual market growth rate  Overall market size  Historical profit margin  Current size of market  Market structure  Market rivalry  Demand variability  Global opportunities
  14. 14. Business Strength  Current market share  Brand image  Brand equity  Production capacity  Corporate image  Profit margins relative to competitors  R & D performance  Managerial personal  Promotional effectiveness
  15. 15. THE BCG GROWTH-SHARE MATRIX • It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories:  Stars  Question marks  Cash cows  Dogs • It is based on the combination of market growth and market share relative to the next best competitor.
  16. 16. STARS High growth, High market share • Stars are leaders in business. • They also require heavy investment, to maintain its large market share. • It leads to large amount of cash consumption and cash generation. • Attempts should be made to hold the market share otherwise the star will become a CASH COW.
  17. 17. CASH COWS Low growth , High market share • They are foundation of the company and often the stars of yesterday. • They generate more cash than required. • They extract the profits by investing as little cash as possible • They are located in an industry that is mature, not growing or declining.
  18. 18. DOGS Low growth, Low market share • Dogs are the cash traps. • Dogs do not have potential to bring in much cash. • Number of dogs in the company should be minimized. • Business is situated at a declining stage.
  19. 19. QUESTION MARKS High growth , Low market share • Most businesses start of as question marks. • They will absorb great amounts of cash if the market share remains unchanged, (low). • Why question marks? • Question marks have potential to become star and eventually cash cow but can also become a dog. • Investments should be high for question marks.
  20. 20. WHY BCG MATRIX ? To assess :  Profiles of products/businesses  The cash demands of products  The development cycles of products  Resource allocation and divestment decisions
  21. 21. LIMITATIONS • BCG MATRIX uses only two dimensions, Relative market share and market growth rate. • Problems of getting data on market share and market growth. • High market share does not mean profits all the time. • Business with low market share can be profitable too.
  22. 22. BCG Matrix (Three Paths to Success) • Continuously generate cash cows and use the cash throw-up by the cash cows to invest in the question marks that are not selfsustaining • Stars need a lot of reinvestments and as the market matures, stars will degenerate into cash cows and the process will be repeated. • As for dogs, segment the markets and nurse the dogs to health or manage for cash
  23. 23. Three Paths to Success (cont’d) Relative Market Share High Low High Market Growth Rate Low
  24. 24. BCG Matrix (Three Paths to Failure) • Over invest in cash cows and under invest in question marks – Trade further opportunities for present cash flow • Under invest in the stars – Allow competitors to gain share in a high growth market • Over milked the cash cows
  25. 25. Three Paths to Failure (cont’d) Relative Market Share High Low High Market Growth Rate Low
  26. 26. GE Multifactor Portfolio Matrix Industry Attractiveness High High Medium Protect Position Build selectively Medium Invest to Build Selectively manage for earnings Low Build selectively Limited expansion or harvest Invest/Grow Selectivity /earnings Low Protect & refocus Manage for earnings Divest Harvest /Divest
  27. 27. Major Stages in New-Product Development (Fig. 9.1, p. 340) Marketing Strategy Concept Development and Testing Idea Screening Idea Generation Business Analysis Product Development Test Marketing Commercialization 29
  28. 28. New Product Development Process New Product Development Process Step 1. Idea Generation Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From: Customers Competitors Distributors Suppliers 30
  29. 29. Step 1: Idea Generation/ NewProduct Strategies Strategies for Obtaining New Product Ideas Acquired Companies Original Products Acquired Patents Product Improvements Acquired Licenses Product Modifications New Brands 31
  30. 30. New Product Development Process Step 2. Idea Screening • Process to spot good ideas and drop poor ones as soon as possible. • Many companies have systems for rating and screening ideas which estimate: – – – – – Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return • Then, the idea is evaluated against a set of general company criteria. 32
  31. 31. New Product Development Process Step 3. Concept Development 1. Develop New Product Ideas into Alternative Detailed Product Concepts Product Image is the Way Consumers Perceive an Actual or Potential Product 2. Concept Testing - Test the New Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers 33
  32. 32. New Product Development Process Step 4. Marketing Strategy Part One Describes Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two Describes First-Year: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Term: Sales & Profit Goals Marketing Mix Strategy 34
  33. 33. Step 5. Business Analysis Step 6. Product Development Business Analysis Do Projected Sales, Costs, & Profits Meet Company Objectives? Methods: payback, ROI, BE, NPV, IRR, project numbers If No, Eliminate Product Concept If Yes, Move to Product Development 35
  34. 34. New Product Development Process Step 7. Test Marketing Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings. Budget Levels Packaging Product Elements that May be Test Marketed by a Company Branding Positioning Advertising Pricing Distribution 36
  35. 35. New Product Development Process Step 7. Test Market Types Standard Test Market Controlled Test Market Full marketing campaign in a small number of representative cities. A few stores that have agreed to carry new products for a fee. Electronic Test Market Simulated Test Market Use split-cable technology and scanner data Test in a simulated shopping environment to a sample of consumers. 37
  36. 36. Step 7: Test Marketing • Characteristics of Good Test Markets – .2 to 1.5% of the population – – – – Good media coverage Appropriate demographics * Isolated media and distribution * Length of the test = repurchase cycle – – – – – Expensive Delays to market Sabotage Artificial Industrial products • Limitations of Test Markets 38
  37. 37. New Product Development Process Step 8. Commercialization Commercialization is the Introduction of the New Product into the Marketplace. When is the Right Time to Introduce Product? Where to Launch a New Product? 39

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