Part Three

1
Part Three

• Business Marketing Programming

2
Part Three

• Business Marketing Programming
• Part 3 covers the key areas of business marketing
  programming.
• Chapter 8 Developing and Managing Products
• Chapter 14 Pricing and Negotiating for Value
• Chapter 9 Business Marketing Channels
• Chapter 10 Communicating with Customers (IMC)
• Particular Communication Vehicles
• Advertising, Trade Shows, and PR (Chapter 11)
• Direct mail, Telephone, and Internet (Chapter 12
  )
• Personal Selling (Chapter 13)

3
Chapter Eight

• Developing and Managing Products
• What do Customers Want?

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Learning Objectives

• What is a Product?
• Managing Products
• Key product management decisions
• Product management levels
• Product management tools (portfolio and product
  life cycle)
• New Product Development
• Identify the process of developing products
  internally
• Discuss the importance of lead users to the
  product development process
• Indicate what partnering, with both suppliers and
  customers, means to the product development
  process

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What is a Product

How the Product or Service Satisfies A Need
BENEFIT
A Bundle of Benefits and a Collectionof
Solutions to Needs and Wants
PRODUCT
A Benefit That Satisfies a CustomerBetter than A
Competitors ProductBenefits
COMPETITIVE ADVANTAGE
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Core Product Augmented Product

• Product A collection of features A collection
  of advantages A collection of buyer benefits
  including services.
• Core Product the tangible item plus customary
  services
• Augmented Product the tangible product plus
  customary and unique/customized services
  comprises the augmented product.
• A means of exceeding customer expectations
• Should be done on a customer-by-customer basis
• Is accomplished by adding unique/customized
  services to the core product
• Aiding in building strong customer partnerships
• E.g., computers 2 hr free training is a core
  product or an augmented product?

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Managing Products

• Key product management decisions
• Product management levels
• Management tools
• Product Portfolio BCG and GE matrix
• Product Life Cycle

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Key Product Management Decisions

• Which product to introduce
• Which products to keep
• Which product to promote
• What level of promotion to provide (low to high?)
• What products to continue or delete

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Product Management Levels

• The product category
• The product line
• The technology platform
• The product itself

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Product Management Tools

• Product Portfolio Management Tools
• BCG Matrix
• GE Matrix
• Product Life Cycle

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The BCG Matrix

• Growth share matrix is a portfolio planning
  method that evaluates a companys products in
  terms of their market growth rate and relative
  share.
• Products are classified as Stars, Cash Cows,
  Question marks and Dogs
• Marketing efforts, or investments, will change,
  depending on the products classification

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The BCG Matrix
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The BCG Matrix

• Stars are high-growth, high-share businesses or
  products requiring heavy investment to finance
  rapid growth. They will eventually turn into cash
  cows.
• Cash cows are low-growth, high-share businesses
  or products that are established require less
  investment to maintain market share in a stable
  market.
• Question marks are low-share business units in
  high-growth markets requiring a lot of cash to
  hold their share.
• Dogs are low-growth, low-share businesses and
  products that may generate enough cash to
  maintain themselves but do not promise to be
  large sources of cash. Not worth much investment.

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The BCG Matrix

• Problems with Matrix Approaches
• Difficulty in defining SBUs and measuring market
  share and growth
• Time consuming
• Expensive
• Focus on current businesses, not future planning

15
GE Matrix

• A more advanced model developed by General
  Electric measuring market attractiveness and
  business strength
• Market attractiveness is a composite measure of
  the potential for sales and profits in a
  particular market segment
• Business strength is the strength of our offering
  relative to other companies products
• GE Matrix is an expansion of the BCG matrix. The
  dimensions are more comprehensive and detailed.

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GE Matrix
GE Matrix

• Market Attractiveness
• Growth
• Diversity
• Competitive
• Structure Change
• Technology Change
• Social Environment

• Business Strength
• Size of Market Share
• Company Growth Rate
• Profit
• Margins
• Technology Platform
• Image
• People

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Product Life Cycle

• Product Life Cycle (PLC) The cycle of product
  development, introduction, growth, maturity, and
  decline in sales
• PLC describes the sales history of a successful
  product
• The cycle can be applied to individual products
  or to product platforms or categories
• As products go through the life cycle, marketing
  emphases will change.

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PLC Decision Points
Rapid expansion of distributors Product line
expansion Niche marketing Continued heavy
promotion Sales force incentives and
management Search for new sources for
supply Need to balance supply and
demand Stock-out and back-order damage control
Strongly defend home-market niches Prune
product lines Emphasize gross contribution
rather than market share and sales
volume Review logistics prune costs Reduce
pioneering sale force effort, more
telemarketing More trade than consumer
promotion Introduce flankers, private labels,
generics Reinvest in market research RDUse
promotions to increase heavy-user
loyalty Freeze investment in plant Productivity
review Special trade promotions to keep
channels happy Focused attacks on vulnerable
competitors Long-term price reduction or at
least a short-term price promotion Keep plant
at maximum capacity and subcontractexcess
Cut low-gross-margin products from the
line Withdraw from channels in order of their
unprofitability Freeze R D and product
modifications Freeze advertising and
promotions Attempt to maintain price to the
end Buy back remaining stock and
redistribute Maintain spare parts and
service Consider divesting while it is a going
concern
Sales
Redirect focus promotion Invest in expanding
production Build inventory Expand distributor
network Train expanded sales force Institute
marketing controls Invest heavily in
advertising Target on best prospects
innovators and enthusiasts Use most loyal
distributors Use free samples Use public
demonstrations and trade shows Use publicity
and endorsements Use specialist media catalogs
Decline
Development
Introduction
Growth
Maturity
Time
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PLC A new look
Product Develop-ment RD Test Marketing Introduction Growth Maturity Decline Kill the product Find New Uses Find New Markets Repeat LifeCycle
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PLC Recommendations for each stage

• Introduction Profits are not expected the
  focus is on building distribution channels a
  truly innovative product must focus on
  stimulating primary demand
• Growth Sales and profits increase at their
  fastest rate product differentiation may be
  employed in an attempt to stimulate secondary
  demand
• Maturity Sales level off maintain/improve its
  profit position through product differentiation
• Decline seek markets/applications for the
  product

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Discussion Question

• 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?

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New Product Development

• The most basic decision go no go decision
• Risks involved in developing new products
• Investment risk we decide to go ahead with the
  product, it fails, and we lose some or all of our
  investment
• Opportunity risk we decide to kill a product
  and thereby lose all of the revenue we would have
  gained if it had been a success

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Product Development Process

• EVALUATION
• LAUNCH
• BETA TESTING
• PRODUCT DEVELOPMENT
• SPECIFYING FEATURES
• SCREENING AND PRELIMINARY
• INVESTIGATION
• IDEA GENERATION

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New Product Development Process

• Internally developed products
• Begin as an idea that must be screened to
  determine if it is worth further development
  (concept test)
• Features are specified and then a prototype is
  created
• A small run of the product is manufactured and
  beta, or field, tested letting customers use in
  real-world conditions
• The product is launched and evaluated

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Making a product successful

• Five factors are key to success
• Companys ability to identify needs and satisfy
  them
• Have close ties with a well defined market to
  anticipate customer needs.
• Company is highly integrated and market-oriented
• Company has a competitive advantage in technology
  and production capability
• Companys ability to market products
• Company has a strong marketing proficiency
• New product launch adequately financed

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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