1. Business Marketing Product Management

2. The Six Sources of Competition in a Product Market Downstream Customers Downstream Customers Upstream Suppliers Upstream Suppliers Existing Direct Competitors Current Partners Current Partners Substitutes New Entrants Must monitor current & potential product offerings of each

3. What is a Product? Anything that can be offered to a market to satisfy a want, need, or desire. Can be (individually or combined): –Physical good; autos, tablets, smartphones, etc. –Intangible service; haircut, concert, higher ed., etc. –Person; singer, golfer, presidential candidate, etc. –Place; Hawaii, Venice, etc. –Organization; American Heart Assn, Girl Scouts, etc. –Idea; family planning, no texting driving, etc.

4. What is a Product Offering? The complete package or bundle of benefits that the customer purchases. –Ease of purchase –Purchase payment –Services that aid in buyer receiving full benefit from the product –Assistance with product disposal (if necessary)

5. Product Management Levels The Product Itself –e.g., Canon’s imageRunner 1310 copier The Technology Platform –The core technology that is the basis for a product line –e.g., Canon’s digiting scanner The Product Line –Canon’s complete line of imageRunner copiers The Product Category –e.g., plain paper copiers

6. Product Lines Defined Proprietary or Catalog: –Standard products offered to many customers –usually inventoried in anticipation of sales orders. Custom-built: –Different variations of accessories and options –Complement proprietary or catalog products offered. –Marketer-designed

7. Product Lines Defined Custom-designed: –Products designed a particular user or very limited number of users –User-designed Industrial services: –Intangibles –Maintenance, machine repair, consulting

8. How much does the component contribute to our product’s value image in our customers’ view? Minor Component Major Component Are we good at it? Can we own the market for it? Can we or do we want to protect it? Is it our kind of business? -Financial justification -Risk assessment -Stability of technology Make it! NoYes Is the component unique to our markets? Purchase as a Commodity Yes No Yes No Yes Develop Partnership with qualified supplier(s) Collaborate in development with technology-oriented supplier(s) Make or Buy Decisions

9. New Product Approaches Technology push: –Engineering driven. –Focus on development of a new technology –Market unsure Market pull: –Customer / Market driven. –Focus on fulfilling unmet customer needs/desires. –Market more certain

10. Traditional New Product Development Model Idea Generation Product Screening Business Case Analysis Product/ Strategy/ Plan Dev. Test Market Product Launch Hand off to innovation/ translation team Stage 1 Stage 2Stage 3 Stage 4Stage 5 Stage 6 Stage 7

11. Go/ No-Go Decisions in Product Development Initiative Development Market Test Concept Testing Launch Idea Generation and Screening Business Case Analysis No-go X No-go X No-go X Go Go Go 1 st Go/No-Go Point Quick assessment of market size, growth rate, fit of organization 2 nd Go/No-Go Point Is there sufficient market interest? 3 rd Go/No-Go Point Does market respond positively to “almost finished product” (beta test)?

12. Why Do New Products Fail?  The missing marketing plan  No real need exists  Market size is overestimated or a “Me Too” product fails to penetrate the market  The offering fails to meet needs adequately  Market will not pay needed price  Contrary perceptions of innovation A good marketing plan is a solution to all of these!

13. Factors Influencing New Product Success Close ties to a well-defined market that lead to a product advantage Highly integrated and market-oriented company Competitive advantages –Technology –Production Strong marketing proficiency Strong financial support

14. Marketing’s Role in Product Development  Understand the technology in depth  Define/redefine current & future customer needs  Guide development based on customer needs  Motivate other departments & organizations  Screen & select ideas from all sources  Reward efforts of technical & support staff  Catalyze company resources to get right talent on the job

15. Organization of the New Product Effort Product manager: –Individuals responsible for four P’s marketing mix decisions for specific product line as it travels through life cycle; responsibility often extends to new product development. New product committee: –Part-time interdisciplinary management group reviews new product proposals; advantages outweigh disadvantages because committee is most common form of organizational structure for managing new products.

16. Organization of the New Product Effort New product department: –Specific department generates and evaluates new product ideas, directs and coordinates development work, and implements field testing and precommercialization of new product; allows for maximum effort in new product development, but at expense of major overhead costs. New product venture team: –Task force representing various departments responsible for new product development and implementation; normally dissolved once new product is established in market.

17. Product Life Cycle (PLC) Decline Introduction Growth Maturity Time Sales Revenue/ period Development

18. Technology Adoption Life Cycle (TALC) Technophiles Visionaries Laggards Time Sales from New Adopters/period Pragmatists Conservatives

19. The TALC and PLC Superimposed TALC - Sales from New Adopters/ Period PLC – Total Sales Time

20. Product Life Cycle Actual PLC curves can be any shape product that doesn’t sell at all fad that grows fast but has short life seasonal product regenerated product life cycle “typical” product life cycle

21. When to Terminate a Product Cash usage is excessive and cannot be reduced Contribution to profit insufficient –Unprofitable product –Investment can be diverted to more profitable product(s) Customer demand –Customer needs/desires have changed –Some products are useful because customers do not need multiple vendors. New technology has replaced existing technology

22. 5 Levels of the Product Core Benefit –Fundamental benefit being bought Housing, shelter Basic Product –Actual product providing the core benefit Manufactured home Expected Product –Set of attributes & conditions buyers normally expect when purchasing this type of product Kitchen, living room, bedroom(s), bathroom(s)

23. 5 Levels of the Product Augmented Product –Level of the product that goes beyond customer expectations to satisfy customer desires. –Selling the sizzle, not the steak. Washer/dryer, flower arrangements, higher quality carpeting Potential Product –Future augmentations Built-in wifi, self-cleaning toilets

24. Unique Service Characteristics Intangibility –Difficult for customers to evaluate –Forced to sell a promise –Difficult to advertise & display –Price difficult to set & justify Perishability –Cannot inventory –Difficult to balance supply & demand –Unused capacity lost forever –Demand is very time sensitive

25. Unique Service Characteristics Heterogeneity –Quality difficult to control –Delivery difficult to standardize –Cost/maintenance of automation high Inseparability –Employees critical to delivery –Other customers may affect service outcomes –Service success does not guarantee satisfaction

26. Dis/Confirmation of Expectations Customers enter purchase situations with expectations –Based on needs, personal experience, and secondary experience Customers’ perceptions of product performance are compared to these expectations If perceived performance > expectations, satisfaction If perceived performance < expectations, dissatisfaction Either outcome influences –Future exchanges (and brand loyalty) –Word-of-Mouth

27. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance

28. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance The Result of Satisfaction Shape of the zone remains essentially the same

29. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance Dissatisfaction

30. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance The Result of Dissatisfaction The zone actually widens slightly. o Both expectations are lower. o Drop in AE greater than drop in DE. o Future exchanges at risk due to disloyalty. o Negative word-of- mouth effects future exchanges with others.

31. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance CustomerDelight

32. Zone of Tolerance Adequate Expectations Desired Expectations The Zone Of Tolerance The Result of Customer Delight The zone actually narrows slightly. o Both expectations increase. o Increase in AE greater than increase in DE. o Zone narrows o Future exchanges more likely. o Positive word-of- mouth effects future exchanges with others.