Product Management and Strategy

– an Overview

Chandradeep (CD) Mitra

cd.mitra@gmail.com
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 Setting the Context

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 A quick look at the
Marketing Processes

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 We start with Market Analysis

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 The 4Cs: The Market Participants

The Market
Participants

Competitors
Company

Consumer Channel

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 The 5th C – the Larger Context

The PESTEL Framework

• Political & Bureaucratic Context
• Economic Context
• Social & Cultural Context
• Technological Context
• Environmental & Ecological Context
• Legal & Judicial Context

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 The Marketing Processes

5C Analysis
S-T-P Marketing 4P Marketing Plan
Customer
Competitor Segmentation Product
Company Targeting Pricing
Collaborators Positioning Promotion
Context
Place

The Functional View

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 The Four Ps: The Tools
The Four Cs: The Ends

M a r ke t i n g
Mix

Product Place

Convenience
Customer
Solution Price Promotion

Customer Communication
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 Focus on Customers,
Deliver Value to Customers

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 The Marketing Processes

Understanding Creating Capturing Delivering Sustaining

Customer Customer Customer Customer Customer
Value Value Value Value Value

The Process View

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 Understanding Customer Value

Value is defined as the perceived worth

in monetary units of the of the set of
economic, functional, technical and psychological
benefits received by the customer
in exchange for the price paid for a product offering,
taking into consideration all
the available offerings and prices.

Anderson, Jain and Chintagunta(1993)

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 Understanding Customer Value
Psychological

Functional Economic
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 What is a Product?

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 What is a Product?
• A Product is anything that can be offered to a market
for attention, acquisition, use, or consumption and that
might satisfy a want or need
• Includes:
– Physical Objects
– Services
– Events
– Persons
– Places
– Organizations
– Ideas
– Combinations of the above

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 A Product is a Market Offering
that serves to satisfy
Customer needs & wants,
i.e. provides Customer Value

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 Components of the Market Offering

Value-based pricing

Attractiveness of
the Market Offering

Product features Service mix

and quality and quality
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 What do customers
really want (value)?

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 Don‟t sell me Insurance…

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 Don‟t sell me Insurance…

Help me gain peace of mind,

and a great future
for my family and me!

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 Don‟t sell me a Camera…

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 Don‟t sell me a Camera…

Help me capture and relive

the most memorable
moments of my life!

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 Don‟t sell me a House…

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 Don‟t sell me a House…

Fulfill my dream of a home,

with security, comfort,
a good investment and
pride of ownership!
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 Don‟t sell me Clothes…

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 Don‟t sell me Clothes…

Give me a desirable appearance,

style and attractiveness!

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 Don‟t sell me Toys…

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 Don‟t sell me Toys…

Help me give my children

happy moments!

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 Don‟t sell me Things…

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 Don‟t sell me Things…

Fulfill my need for

comfort, security, pride,
good feelings, happy memories…
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 A successful
Product Differentiation
Strategy should

Generate
Be Difficult
Customer
Provide to Copy
Value
Perceived
Value

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 Product Attributes
Developing a Product or Service involves
defining the benefits that it will offer such as:

Ability of Product to perform its

Product Quality
function; incl. level & consistency

Help to differentiate the Product

Product Features
from those of the competition

Product Style Process of designing a Product‟s

& Design style & function

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 Product Classification

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 Five Product Levels*

Potential product
Augmented product
Expected product
Basic product
Core benefit

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 The concept of Customer Delight

Exceeding Customer Value Expectations, again & again…

A forever moving goalpost!

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 Product Classifications -
Consumer Products
Convenience Products
 Bought frequently & immediately
 Consumed often, Low priced
 Large segment, Mass advertising
 Intensive distribution
i.e. food, soap, newspapers
Specialty Products
 Special purchase efforts
 High price
 Unique characteristics
 Brand identification
 Exclusive distribution
i.e. organic/boutique products
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Shopping Products
 Buy less frequently
 Higher price
 Selective distribution
 Comparison shopping
i.e. clothing, furnishing, appliances
Unsought Products
 Consumers don‟t plan to buy these
 Not seeking, innovation
 Result of marketer‟s actions
 Require much advertising & selling
 Sometimes impulse purchase
i.e. Life insurance, blood donation
 Another Classification of
Consumer Products

• Non–durables (Including FMCG)

• Durables

• Services

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 Product Classifications -
Industrial Products

Materials
and
Parts

Capital
Items

Supplies
and
Services
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 Product Mix

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 Product Classification

• Product Lines and Mixes

– Product Line
– Product Mix
• Benefits of offering a wide variety and deep
assortment of products
– Economies of Scale
– Package Uniformity
– Standardization
– Sales and Distribution Efficiency
– Equivalent Quality Beliefs

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 Product Mix

Width - number of
different product
lines

Length - total Product Mix -

number of items all the product
within the lines lines offered

Depth - number of
versions of each
product

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 Product Mix

• Product Mix - The entire assortment of products that a

company offers to a market
• Width – the number of different product lines
• Length – the number of items in each product line
• Depth – The number of variants offered for a product
• Consistency – how closely the product lines are related
in usage

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 Gillette - Product Mix and Product Lines

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 Product Line – Strategic Options

• Line Stretching
– Downmarket
– Upmarket
– Two-way
• Line Filling
• Line Modernization
• Line Featuring
• Line Pruning

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 Product Line decisions
• Market rationalization
• Product rationalization
• Product line length
Too long – when profits increase by dropping a
product in the line
Too short – when profits increase by adding
products to the product line
• Line pruning – capacity restrictions to decide

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 Product Life Cycle
(PLC)

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 Product Life Cycle

To say that a product has a life cycle asserts four things

1. Products have a limited life

2. Product sales pass through distance stages, each posing

different challenges, opportunities, and problems

3. Profits rise and fall at different stages of the PLC

4. Products require different marketing, financial,

manufacturing, purchasing, & human resource strategies in
each life-cycle stage
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 Applications of the Product Life Cycle
The PLC concept can describe a:

• Product class which has the longest life cycles

(i.e. petrol-powered cars)
• Product form which tend to have the standard PLC shape
(i.e. hatchbacks)
• Brand which can change quickly because of changing
competitive attaches and responses (i.e. Maruti Swift)
• Style which is a basic and distinctive mode of expression
• Fashion which is a popular style in a given field
• Fad which is a fashion that enters quickly, is adopted quickly
and declines fast

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 Stages of the Product Life Cycle

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 Marketing Strategy during the
Product Life Cycle

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 The Development Stage

• No sales revenue during this stage

• Components of the product concept:
– An understanding of desired uses and benefits
– A description of the product
– The potential for creating a complete product line
– An analysis of the feasibility of the product concept
• Customer needs should be discerned before
developing marketing strategy

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 The Introduction Stage
• Begins when development is complete
• Ends when customers widely accept the product
• Marketing strategy goals during this stage:
– Attract customers by raising awareness and interest
– Induce customers to try and buy
– Engage in customer education activities
– Strengthen or expand channel and supply
relationships
– Build on availability and visibility
– Set pricing objectives

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 The Introduction Stage
• Costs are high
• Slow sales volumes to start
• Little or no competition – competitive
manufacturers watch for acceptance/segment
growth or losses
• Demand has to be created
• Customers have to be prompted to try the
product
• Makes little or no money at this stage

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 The Introduction Stage
• Usually limited distribution
• The need for immediate profit is not a pressure
• Promotion plans depend on limited/soft launch
or Big Bang launch
• Pricing – Skimming price strategy can be
employed. Alternatively attractive introductory
pricing to induce trial
• Key Marketing Objectives – Awareness,
Enquiries, Trial

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 Growth Stage 1

• Be ready for sustained sales increases

• Rapid increase in profitability early in the growth
stage that decreases at the end of this stage
• Length depends on nature of product and
competitive reactions
• Two strategies:
– Establish a strong, defensible marketing position
– Achieve financial objectives

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 Growth Stage 2

Marketing strategy goals in this stage:

• Leverage the product‟s perceived differential advantages
• Establish a clear product and brand identity
• Create unique positioning
• Maintain control over product quality
• Maximize availability of the product
• Maintain or enhance the product‟s profitability to
partners
• Find the ideal balance between price and demand
• Keep an eye focused on the competition

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 The Growth Stage

• Costs reduced due to economies of scale

• Sales volume increases significantly
• Profitability begins to rise
• Consumer awareness increases
• Competition begins to increase with a few new
players in establishing market
• Increased competition leads to price decreases

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 The Growth Stage
• Competitors are attracted into the market with
very similar offerings
• Products become more profitable and
companies form alliances, joint ventures and
take each other over
• Advertising spend is high and focuses upon
building brand
• Market share tends to stabilise

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 Maturity Stage 1

• Few, if any, new firms will enter the market

• Still an opportunity for introducing new product
features and variations
• Typically the longest stage in the product life cycle
• Possibility of consolidation & shakeout

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 Maturity Stage 2
Four general goals in this stage:
1. Generate Cash Flow
2. Hold Market Share
3. Steal Market Share
4. Increase Share of Customer

Four options to achieve these goals:

1. Develop a new product image
2. Find and attract new users to the product
3. Discover new applications for the product
4. Apply new technology to the product

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 The Maturity Stage
• Those products that survive the earlier stages tend to
spend longest in this phase.
• Sales grow at a decreasing rate and then stabilise.
• Producers attempt to differentiate products and brands
are key to this.
• Price wars and intense competition occur.
• At this point the market reaches saturation.
• Producers begin to leave the market due to poor
margins.
• Promotion becomes more widespread and use a greater
variety of media.

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 The Decline Stage

Two options:
• Attempt to postpone the decline
• Accept its inevitability
– Harvesting
– Divesting

Factors to be considered during this stage:

• Market segment potential
• The market position of the product
• The firm‟s price and cost structure
• The rate of market deterioration

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 The Decline Stage
• Costs become counter-optimal
• Sales volume decline or stabilize
• Prices, profitability diminish
• Profit becomes more a challenge of
production/distribution efficiency than
increased sales
• There is a downturn/shift in the market.
• There is intense price-cutting and many more
products are withdrawn from the market.
• Profits can be improved by reducing marketing
spend and cost cutting
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 Problems Using the PLC
The PLC Concept can help in developing good
Marketing Strategies for different stages of the
Product Life Cycle. However some problems could arise:
Trouble identifying
which stage of the
PLC the product is in

Difficult to forecast the

sales level, the length
of each stage, and
Strategy is bothshape
a of the PLC
cause and a result
of the Product’s Life
Cycle
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 Product Growth Strategies

Present New
Products Products

Present Market Product

Markets Penetration Expansion

New Market
Diversification
Markets Expansion

Vertical Integration

Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957, pp.113-24
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 New Product Development
(NPD)

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 New Product Development
• Most new product development is an
improvement on existing products
• Less than 10% of new products are totally new
concepts
• The success rate of new products is very low –
often less than 5%. „You have to kiss a lot of
frogs to find a prince!”
• Product obsolescence is rapid with
improvements in technology
• Shorter PLCs
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 Creating New Consumers
Categories
new to the
Categories world
new to the
New
company
products in
Consumer current
categories
creating Restage
Potential Continuous
Innovation

Old business New business

Retaining Consumers Creating new Consumers
Low Risk High Risk
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 New Product Development

Six strategic product development options:

1. New-to-the-world products (discontinuous innovations)

2. New product lines
3. Product line extensions
4. Improvements or revisions of existing products
5. Repositioning
6. Cost reductions

Customer perception of differentiation is critical

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 New Product Development Process

Marketing Business
Strategy Analysis
Development
Concept Product
Development
Development
and Testing

Idea Market
Screening Testing

Idea
Generation Commercialization
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 NPD - Idea Generation & Screening

1. Does the offering have a relative

advantage?
2. Is the offering compatible with buyers’
use or consumption behavior?
3. Is the offering simple enough for buyers to
understand and use?
4. Can the offering be tested on a limited
basis prior to actual purchase?
5. Are there immediate benefits from the
offering, once it is used or consumed?
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 NPD – Business Analysis

• The most customer appealing offer is not

always the most profitable to make
• Estimate on costs, sales volumes, pricing and
profit levels are made to find out the optimal
price – volume mix.
• Breakeven and paybacks
• Discounted cash flow projections

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 NPD - Test Marketing

• Which test markets & why?

• What test periods & why?
• What information to gather?
• What action to take?

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 NPD - Commercialization

• When? (Timing)
• Where? (Which geographical markets)
• To whom? (Target markets)
• How? (Introductory Marketing strategy)

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 Challenges in NPD
• Idea Shortage
• Cost/Capital Shortage
• Fragmented Markets
• Social & Governmental Constraints
• Need for Speed
• Shorter Product Life Cycles
• Changing consumer needs & preferences

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 Why sometimes new products fail

• Poor Design
• Overestimated Demand
• “Over Championing”
• High Development Costs
• Poor Marketing Execution
• Strong Competitive Reaction

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 Changes Affecting Product Management

• Changing consumer needs & expectations

• Changes in the balance of market power
• Increased importance of customer retention
• Technology change - Data explosion
• Technology change – Internet/Interactivity
• Technology change – Mass Customization
• Increased global competition
• Increased emphasis of brands

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 Thank You 

cd.mitra@gmail.com
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