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Product Definition


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Product Definition

  1. 1. Product Definition
  2. 2. Product Definition <ul><li>Basis: </li></ul><ul><ul><li>Targeted market segment (phase of TALC) </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Value Proposition </li></ul></ul><ul><li>Whole (Complete) Product Concept, including: </li></ul><ul><ul><li>Service & support </li></ul></ul><ul><ul><li>Ancillary products </li></ul></ul><ul><ul><li>Documentation </li></ul></ul><ul><ul><li>Future Potential </li></ul></ul>
  3. 3. Whole Product Concept <ul><li>Products are complex; they have many dimensions </li></ul><ul><li>It is the totality of what a customer buys </li></ul><ul><li>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: </li></ul><ul><ul><li>Useful </li></ul></ul><ul><ul><li>Desirable </li></ul></ul><ul><ul><li>Convenient </li></ul></ul>
  4. 4. Whole Product Concept <ul><li>Restaurant’s product is: food + ambiance + service + cleanliness + other things </li></ul><ul><ul><li>Definition of all the above depends on the market segment </li></ul></ul><ul><li>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,.) </li></ul>
  5. 5. Whole Product Concept <ul><li>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 </li></ul><ul><ul><li>Example: Linux </li></ul></ul><ul><ul><li>Another SW examples: SmallTalk, Java, .. </li></ul></ul>
  6. 6. Whole Product Concept <ul><li>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 </li></ul><ul><ul><li>Example: Helicon plasma CVD equipment </li></ul></ul>
  7. 7. Whole Product Concept <ul><li>Ascend (now part of Lucent) lost share due to poor marketing strategy </li></ul><ul><ul><li>Ascend has some of the best products in the industry </li></ul></ul><ul><ul><li>They introduce products as devices: “here is our sexy new box, rather than this is our strategy for “voice” communication” </li></ul></ul><ul><ul><li>“ Customers did not understand the significance of a newly launched product” </li></ul></ul>
  8. 8. Whole Product Concept <ul><li>A product, to the potential customer, is value satisfaction </li></ul><ul><li>The generic “thing” or “device” is not itself the product. It is the minimum necessary to get into the “game” </li></ul><ul><li>A product has meaning only from the viewpoint of the customer or the ultimate user. Only the buyer or the user can assign value </li></ul>
  9. 9. Whole Product Concept Generic Product Expected Product Augmented Product Potential Product value
  10. 10. The Generic Product <ul><li>The generic product is the rudimentary “thing” without which there is no chance to participate in the market: </li></ul><ul><ul><li>for a bank: loanable funds </li></ul></ul><ul><ul><li>for a realtor: “for sale” properties </li></ul></ul><ul><ul><li>for a lawyer: the bar exam certificate </li></ul></ul><ul><ul><li>for WebTV: the box </li></ul></ul><ul><ul><li>for satellite TV: the antenna and receiver box </li></ul></ul>
  11. 11. The Expected Product <ul><li>The expected product represents the customer’s minimal expectations </li></ul><ul><ul><li>Delivery conditions, installation services, post-sale services, spare parts, training, packaging conveniences </li></ul></ul><ul><ul><ul><li>the bank: the loan officer who is cooperative </li></ul></ul></ul><ul><ul><ul><li>the realtor: who is on your side </li></ul></ul></ul><ul><ul><ul><li>the lawyer: who protects you </li></ul></ul></ul><ul><ul><ul><li>the WebTV: that only connects to a few home shopping channels </li></ul></ul></ul><ul><ul><ul><li>the Satellite TV retailer: that does not offer installation support to an old man </li></ul></ul></ul>
  12. 12. The Expected Product, cont’d <ul><li>The expected attributes vary by customers and industries </li></ul><ul><li>They could be sources of product differentiation </li></ul><ul><ul><li>depending on how well suppliers do them </li></ul></ul>
  13. 13. The Augmented Product <ul><li>Customer may be offered more than what she thinks she needs or expects </li></ul><ul><ul><li>Computer that comes with “Office 2000” already installed </li></ul></ul><ul><ul><li>Offer two year warranty for semiconductor process equipment where the “norm” is one year </li></ul></ul><ul><ul><li>Optical store that replaces customer’s lost contact lenses nights & weekends and delivers them to customer’s home </li></ul></ul><ul><li>Augmentations are means of product differentiation </li></ul><ul><li>They could also create customer dependency on the supplier </li></ul>
  14. 14. The Augmented Product <ul><li>Product augmentations can educate the customer about what is reasonable for him to expect </li></ul><ul><li>This raises the competitive bar; augmented benefits may turn into customer expectations (and move into the inner circle) </li></ul><ul><li>Not all customers can be attracted to by an ever widening circle of augmented benefits </li></ul><ul><ul><li>They may prefer lower prices to more augmentation </li></ul></ul>
  15. 15. The Potential Product <ul><li>The Potential Product consists of everything potentially feasible to get and keep customers </li></ul><ul><ul><li>what may remain to be done </li></ul></ul><ul><ul><li>what is possible in the future </li></ul></ul><ul><li>Suppliers, and customers, can compete more effectively with the Potential Product in the changed conditions of future </li></ul>
  16. 16. The Potential Product <ul><li>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 </li></ul><ul><ul><li>e.g. semiconductor technology cycles </li></ul></ul><ul><li>Product Roadmap is important </li></ul>
  17. 17. Product Definition <ul><li>High Tech markets are different than consumer markets, requiring different definition of the whole product </li></ul><ul><ul><li>point of sale (sold directly to customers by sales persons) </li></ul></ul><ul><ul><li>function (emphasized) </li></ul></ul><ul><ul><li>pre-sale evaluation (customers spend a lot of time, sometimes more than one year) </li></ul></ul><ul><ul><li>post-sale support (documentation, customer training, service) </li></ul></ul><ul><ul><li>risk in purchasing decision (is high) </li></ul></ul><ul><ul><li>intangible factors (trust, reputation,references) </li></ul></ul><ul><ul><li>product/technology roadmap (extendibility) </li></ul></ul>
  18. 18. Whole Product Concept <ul><li>The cost of creating a complete product is often many times the cost of developing the generic product (hardware, or software, or drug) </li></ul>
  19. 19. Whole Product Concept <ul><li>If the product cannot be made to work by the customer, it is useless </li></ul><ul><li>The reason may be </li></ul><ul><ul><li>It inherently does not work </li></ul></ul><ul><ul><li>user is not adequately trained and does not know how to use it </li></ul></ul><ul><ul><li>documentation telling the user how to install and operate the product is inaccurate </li></ul></ul><ul><ul><li>product is not serviced & supported </li></ul></ul>
  20. 20. Whole Product Concept <ul><li>Products are multidimensional </li></ul><ul><li>A whole product is one that can be </li></ul><ul><ul><li>functional (technology and design meeting spec) </li></ul></ul><ul><ul><li>manufactured (materials & tools available, be manufacturable) </li></ul></ul><ul><ul><li>serviced & supported (trained people, fast response, be serviceable) </li></ul></ul><ul><ul><li>applied (documentation, process recipe) </li></ul></ul><ul><ul><li>sold (distribution channels, sales collateral) </li></ul></ul>
  21. 21. Whole Product Concept <ul><li>Customers’ needs and wants define products </li></ul><ul><ul><li>Depending on the targeted market segment, the definition of the product must change </li></ul></ul><ul><li>The product must be defined differently in different phases of the Technology Adoption Life Cycle </li></ul>
  22. 22. Whole Product Concept <ul><li>Innovators want to be part of the supplier’s product development, do not mind inadequate documentation or even not fully functioning product </li></ul><ul><ul><li>PC’s & application software in the hands of engineers in 1980 </li></ul></ul><ul><li>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 </li></ul><ul><ul><li>PC & application software in a travel agency in 1998 </li></ul></ul>
  23. 23. Whole Product Concept <ul><li>IBM PC’s dominated the market over Apple because: </li></ul><ul><ul><li>IBM label made it a “complete product” for business applications </li></ul></ul><ul><ul><li>IBM PC’s open architecture allowed rapid development of a myriad of applications, that were missing on Apple (e.g. business application software) </li></ul></ul><ul><li>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) </li></ul>
  24. 24. Whole Product Concept <ul><li>When you are positioning yourself against competition, it is important to compare complete products not just devices </li></ul><ul><li>A product will achieve a commanding position within a segment only if it is complete </li></ul>
  25. 25. Whole Product Concept <ul><li>Marketing organization is responsible to </li></ul><ul><ul><li>ensure that products are complete for the targeted market segment </li></ul></ul><ul><ul><li>guarantee that the product remains complete as the customer base evolves and competition sets new standards for completeness </li></ul></ul>
  26. 26. Product Definition <ul><li>Products are marketing inventions </li></ul><ul><li>Product invention / definition is a continuous process </li></ul><ul><ul><li>Starts at the intersection of new technology capability and perceived market opportunity </li></ul></ul><ul><ul><li>Continues during the </li></ul></ul><ul><ul><ul><li>market research and definition of Market Requirements Specification (MRS) </li></ul></ul></ul><ul><ul><ul><li>device development and demonstration </li></ul></ul></ul><ul><ul><ul><li>product launch </li></ul></ul></ul>
  27. 27. Product Definition <ul><ul><li>Continues past product introduction thru discovery of new applications (not envisioned by the original developers) </li></ul></ul><ul><ul><li>Continues further </li></ul></ul><ul><ul><ul><li>as product marches down the Technology Adoption Life Cycle and product is redefined for new groups of customers </li></ul></ul></ul><ul><ul><ul><li>as the company diversifies into new market segments to capture more market share </li></ul></ul></ul>
  28. 28. 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
  29. 29. Product Costs <ul><li>In High Tech, cost of marketing, selling (distribution) and supporting the product is often more than the cost of manufacturing the product </li></ul><ul><ul><li>Manufacturing cost (Software products cost almost nothing to make) </li></ul></ul><ul><ul><li>Support cost </li></ul></ul><ul><ul><li>R&D cost amortized over life of product </li></ul></ul><ul><ul><li>Marketing, sales and distribution costs </li></ul></ul><ul><li>Successful companies get products to customers in the most cost-effective fashion(not necessarily lowest price!) </li></ul>
  30. 30. Whole Product Development for Competitive Advantage <ul><li>Segmenting the market and inventing complete products enable you to gain superiority in the market place </li></ul><ul><li>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 </li></ul>