3. R&H: Key Lessons
• Value to the customers needs to be
carefully measured
• Value based pricing are common in B2B
markets
• Offered value needs to be aligned with
the interests of the value chain
4. Key questions for your new
product
• Where are you in the value chain
– Understand the value of your product
• Who are your customers
• What is the business model
– Distribution channel
– Organizational buying process
– Supply chain management
• How is the competition
– Existing competitors (incumbents)
– Potential new competitors (entrants)
– Competitive reactions
5. Product Life Cycle
Beyond idiosyncratic factors, the demand of each product/category/brand
follows a systematic (“bell-shaped”) pattern over time.
Time
Sales/
Period
Sales
Profits
Introduction Growth Maturity Decline
6. The PLC-story
• Introduction (no competition, uncertainty)
– invest/ manage cash flow
– find/educate customers
• Growth (entry, “tornado”)
– compete for resources
– build market share, brand, loyalty..
• Maturity (shake-out)
– tough competition for customers
– leverage distribution /differentiation/scale
• Decline (few large players, low margins)
– milk product/brand
– improve efficiency
7. Theory behind PLC
The diffusion of products, brands and innovations in general is
mainly driven by a social process similar to the spread of an
epidemic.
Key elements:
– “innovators”
– “imitators”
– “word of mouth” communication
9. Industrial innovators
• Larger firms
• Financially powerful
• Faster growing
• With high R&D spending
• With a younger CEO
10. What promotes diffusion?
(consumer markets)
• homogeneity of social system
– cultural norms (religion)
– language
– ethnic homogeneity
– social mobility
• “density” of social system
• physical and social mobility within the social system
• wealth
11. What promotes diffusion in industrial markets?
• Homogeneity of customer base
• Industry concentration/globalization
• “Intermediate” level of competition
• Level of professionalization
• Mobility of employees
