Presentation on theme: "Business Marketing Programming"— Presentation transcript:
1Business Marketing Programming Part ThreeBusiness Marketing Programming
2Part Three Business Marketing Programming Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or displayPart ThreeBusiness Marketing ProgrammingPart 3 covers the key areas of business marketing programming.Chapter 8 Developing and Managing ProductsChapter 14 Pricing and Negotiating for ValueChapter 9 Business Marketing ChannelsChapter 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)
3Developing and Managing Products: What do Customers Want? Chapter EightDeveloping and Managing Products:What do Customers Want?
4Learning Objectives What is a Product? Managing Products Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or displayLearning ObjectivesWhat is a Product?Managing ProductsKey product management decisionsProduct management levelsProduct management tools (portfolio and product life cycle)New Product DevelopmentIdentify the process of developing products internallyDiscuss the importance of lead users to the product development processIndicate what partnering, with both suppliers and customers, means to the product development process
5What is a Product How the Product or Service Satisfies BENEFIT: A Need A Bundle of Benefits and a Collection of Solutions to Needs and WantsPRODUCT:A Benefit That Satisfies a Customer Better than A Competitor’s Product BenefitsCOMPETITIVEADVANTAGE:
6Core 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 servicesAugmented Product – the tangible product plus customary and unique/customized services comprises the augmented product.A means of exceeding customer expectationsShould be done on a customer-by-customer basisIs accomplished by adding unique/customized services to the core productAiding in building strong customer partnershipsE.g., computers + 2 hr free training is a core product or an augmented product?
7Managing Products Key product management decisions Product management levelsManagement toolsProduct Portfolio – BCG and GE matrixProduct Life Cycle
8Key Product Management Decisions Which product to introduceWhich products to keepWhich product to promoteWhat level of promotion to provide (low to high?)What products to continue or delete
11The BCG MatrixGrowth share matrix is a portfolio planning method that evaluates a company’s products in terms of their market growth rate and relative share.Products are classified as: Stars, Cash Cows, Question marks and DogsMarketing efforts, or investments, will change, depending on the product’s classification
13The BCG MatrixStars 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.
14The BCG Matrix Problems with Matrix Approaches Difficulty in defining SBUs and measuring market share and growthTime consumingExpensiveFocus on current businesses, not future planning
15GE MatrixA more advanced model developed by General Electric: measuring market attractiveness and business strengthMarket attractiveness is a composite measure of the potential for sales and profits in a particular market segmentBusiness strength is the strength of our offering relative to other companies’ productsGE Matrix is an expansion of the BCG matrix. The dimensions are more comprehensive and detailed.
17Product Life CycleProduct Life Cycle (PLC) – The cycle of product development, introduction, growth, maturity, and decline in salesPLC describes the sales history of a successful productThe cycle can be applied to individual products or to product platforms or categoriesAs products go through the life cycle, marketing emphases will change.
18PLC Decision Points Rapid expansion of distributors Product line expansionNiche marketingContinued heavy promotionSales force incentives and managementSearch for new sources for supplyNeed to balance supply and demandStock-out and back-order damage controlStrongly defend home-market nichesPrune product linesEmphasize gross contribution rather than market share and sales volumeReview logistics: prune costsReduce pioneering sale force effort, more telemarketingMore trade than consumer promotionIntroduce flankers, private labels, genericsReinvest in market research & R&D Use promotions to increase heavy-user loyaltyFreeze investment in plantProductivity reviewSpecial trade promotions to keep channels happyFocused attacks on vulnerable competitorsLong-term price reduction or at least a short-term price promotionKeep plant at maximum capacity and subcontract excessCut low-gross-margin products from the lineWithdraw from channels in order of their unprofitabilityFreeze R& D and product modificationsFreeze advertising and promotionsAttempt to maintain price to the endBuy back remaining stock and redistributeMaintain spare parts and serviceConsider divesting while it is a going concernSalesRedirect focus & promotionInvest in expanding productionBuild inventoryExpand distributor networkTrain expanded sales forceInstitute marketing controlsInvest heavily in advertisingTarget on best prospects: innovators and enthusiastsUse most loyal distributorsUse free samplesUse public demonstrations and trade showsUse publicity and endorsementsUse specialist media & catalogsDevelopmentIntroductionGrowthMaturityDeclineTime
19PLC – A new look Product Develop-ment R&D Test Marketing Introduction GrowthMaturityDeclineKill the productFind New UsesFind New MarketsRepeat Life Cycle
20PLC – 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
21Discussion QuestionSome authors have combined the life cycle and portfolio matrices into one model.How would you do that?What are some limitations of the model?
22New Product Development The most basic decision: go – no go decisionRisks 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 investmentOpportunity risk – we decide to kill a product and thereby lose all of the revenue we would have gained if it had been a success
23Product Development Process EVALUATIONLAUNCHBETA TESTINGPRODUCT DEVELOPMENTSPECIFYING FEATURESSCREENING AND PRELIMINARYINVESTIGATIONIDEA GENERATION
24New 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 createdA small run of the product is manufactured and beta, or field, tested – letting customers use in real-world conditionsThe product is launched and evaluated
25Making a product successful Five factors are key to success:Company’s ability to identify needs and satisfy themHave close ties with a well defined market to anticipate customer needs.Company is highly integrated and market-orientedCompany has a competitive advantage in technology and production capabilityCompany’s ability to market productsCompany has a strong marketing proficiencyNew product launch adequately financed
26Winning the new product contest FOCUS ON CORE COMPETENCY(WHAT YOU DO BEST FOR A COMPETITIVE ADVANTAGE)PLUSPROVIDE GREATEST VALUE TO CUSTOMEREQUALSSUCCESSFUL PRODUCT