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Product Management and

Strategy
Dr. Prashant Mishra
prashant@iimcal.ac.in

A Business Strategy
Basis
Basis of
of SCAs
SCAs
Assets/Competencies
Assets/Competencies
Synergies
Synergies

Product-Market
Product-Market
InvestmentDecision
Decision
Investment
Product-marketscope
scope
Product-market
Investmentintensity
intensity
Investment
Resourceallocation
allocation
Resource
overbusiness
businessunits
units
over

Functional Area
Area Strategies
Strategies
Functional
Product
Product
Price
Price
Distribution
Distribution
Etc.
Etc.
Figure 1.1

The Four Ps: The Tools


The Four Cs: The Ends
Marketing
Mix
Place

Product
Customer
Solution

Price
Customer
Cost

ConvenPromotion ience
Communication

The Other 4Cs: The Participants


The
Participants
Competitors

Company

Consumer

Channel

Views on the Marketing Processes


5-C Analysis
Customer
Competitor
Company
Collaborators
Context

S-T-P Marketing
Segmentation
Targeting
Positioning

4 Ps Marketing Plan
Product
Pricing
Promotion
Place

The Functional View

Views on the Marketing Processes

Understanding
Customer
Value

Creating
Customer
Value

Capturing
Customer
Value

Delivering
Customer
Value

The Process View

Sustaining
Customer
Value

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
for a product offering, taking into
consideration the available offerings and
prices.
- Anderson, Jain and Chintagunta(1993)

Understanding Customer Value


Psychological

Functional

Economic

Plea From an Anonymous Customer


Dont Sell me Clothes, Sell me a sharp appearance,
style and attractiveness.
Dont Sell me a House, Sell me comfort, contentment,
a good investment and a pride of ownership.
Dont Sell me Toys, Sell my children happy moments.
Dont Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.
Dont Sell me Books, Sell me pleasant hours and the
profits of knowledge.
Dont Sell me Computers, Sell me the pleasure and
profits of the miracles of modern technology.

The Moral is..


Dont Sell me THINGS, Sell me Ideas,
Feelings, Self-respect, Home, Life and
Happiness.

PLEASE DONT SELL ME


THINGS

A successful differentiation
strategy should

Generate
Customer
Value

Provide
Perceived
Value

Be Difficult
to Copy

Growth Strategies
Present
Present
Products
Products

New
New
Products
Products

Present
Present
Markets
Markets

Market
Market
Penetration
Penetration

Product
Product
Expansion
Expansion

New
New
Markets
Markets

Market
Market
Expansion
Expansion

Diversification
Diversification

Vertical
VerticalIntegration
Integration
Figure 2.4

Source: H. Igor Ansoff, Strategic Diversification , Harvard


Business Review, September-October 1957, pp.113-24

12

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

Components of the
Market Offering
Value-based prices

Attractiveness of
the market offering

Product features
and quality

Services mix
and quality

Five Product Levels


Potential product
Augmented product
Expected product
Basic product
Core benefit

Product Classifications
Consumer Products
Convenience Products
Buy frequently & immediately

Low priced
Mass advertising
Many purchase locations
i.e Candy, newspapers

Shopping Products
Buy less frequently

Higher price
Fewer purchase locations
Comparison shop
i.e Clothing, cars,
appliances

Specialty Products

Unsought Products

Special purchase efforts

New innovations

High price
Unique characteristics
Brand identification
Few purchase locations

Products consumers dont


want to think about these products
Require much advertising &
personal selling
i.e Life insurance, blood donation

Product Classifications
Industrial Products
Materials
Materials
and
and
Parts
Parts
Capital
Capital
Items
Items
Supplies
Supplies
and
and
Services
Services

Product Attributes
Developing a Product or Service Involves
Defining the Benefits that it Will Offer Such
as:
Product
Product Quality
Quality
Product
Product Features
Features
Product
Product Style
Style
&
& Design
Design

Ability
Ability of
of aa Product
Product to
to
Perform
Perform Its
Its Functions;
Functions;
Includes
Includes Level
Level &
& Consistency
Consistency
Help
Help to
to Differentiate
Differentiate the
the
Product
Product from
from Those
Those of
of the
the
Competition
Competition
Process
Process of
of Designing
Designing aa
Products
Products Style
Style &
& Function
Function

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

Consistency

Product Mix
Width
Width -- number
number of
of
different
different product
product
lines
lines
Length
Length -- total
total
number
number of
of items
items
within
within the
the lines
lines
Depth
Depth -- number
number of
of
versions
versions of
of each
each
product
product

Product
Product Mix
Mix -all
all the
the product
product
lines
lines offered
offered

Product Lines and


Product Mixes at Gillette

Product-Line Length
Line Stretching
Downmarket
Upmarket
Two-way

Line Filling
Line Modernization
Line Featuring & Line Pruning

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 to the seller.
3. Profits rise and fall at different stages of the
product life cycle.
4. Products require different marketing, financial,
manufacturing, purchasing, and human resource
strategies in each life-cycle stage.

Applications of the Product Life Cycle


The PLC concept can describe a:
Product class which has the longest life cycles (i.e. gaspowered cars),
Product form which tend to have the standard PLC
shape (i.e. minivans),
Brand which can change quickly because of changing
competitive attaches and responses (i.e. Ford Taurus),
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.

Stages of the Product Life Cycle

Exhibit 7.2

Marketing Strategy During


the Product Life Cycle

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

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

Growth Stage

(1 of 2)

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:
(1) Establish a strong, defensible marketing
position
(2) Achieve financial objectives

Growth Stage

(2 of 2)

Marketing strategy goals in this stage:


Leverage the products 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 products profitability to
partners
Find the ideal balance between price and demand
Keep an eye focused on the competition

Maturity Stage

(1 of 2)

Few, if any, new firms will enter the


market
Still an opportunity for new product
features and variations
Typically the longest stage in the
product life cycle

Maturity Stage

(2 of 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

Decline Stage
Two options:
(1) Attempt to postpone the decline
(2) Accept its inevitability
Harvesting
Divesting

Factors to be considered during this


stage:
Market segment potential
The market position of the product
The firms price and cost structure
The rate of market deterioration

Problems Using the PLC


The PLC Concept
Trouble
Can Help in
identifying Which
Developing Good
Stage of the PLC
Marketing Strategies
the Product Is In
for Different Stages
Difficult to Forecast
of the Product Lifethe Sales Level, the
Cycle, However
Length of Each
Some Problems Can Stage, and Shape
of the
Arise:
Strategy is Both
a PLC
Cause and a
Result of the
Products Life
Cycle

CREATING NEW CONSUMERS

Consumer
creating
potential

New to
the world
New to the categories
company
New products category
in current
Restage categories
Continuous
innovation

Old business
Retaining consumers
Low risk

New business
Creating new consumers
High risk

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

New Product Development Process


Marketing
Strategy
Development
Concept
Development
and Testing
Idea
Screening
Idea
Generation

Business
Analysis
Product
Development

Market
Testing

Commercialization

New-Product Development Process


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?

Why New Products Fail

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

Challenges in NPD

Idea Shortage
Fragmented Markets
Social & Governmental Constraints
Cost
Capital Shortage
Need for Speed
Shorter Product Life Cycles