Product Management

UCD Michael Smurfit Scoil Ghnó

School of Business Michael Smurfit UCD
Agenda

• What is a product?
• Total Product Concept
• Product Line Management
• Product Life Cycle
• Stage Gate process for new offerings
• Consumer Resistance
What is a Product?

• Product: A good, service or idea offered to the

market for exchange.
• Good: A physical (tangible) offering capable of
being delivered to a customer.
• Service: Intangible offering that does not
involve ownership.
• Idea: Concept, issue or philosophy offered to
the market.
 Product

• Total product concept

• Describes the core product,
expected product, augmented
product and potential product in
order to analyse how the product
creates value for the customer.
What is a product?

5
 Profitable Product Line Management
• Product Portfolio- all products offered by a
company
– Set of All Product Lines That a Seller Offers to
Buyers
– Product Line- group of related products sold by a
company
– Product Portfolio width- number of different
product lines offered
– Kraft
• Beverages – Coffee & Refreshment Beverages
• Cheese eg Philadelphia
• Snacks – Confectionery, Salty Snacks, Biscuits
• Convenience Meats eg Lunchables
1/13/2023• Grocery – Desserts, Cereals, Enhancers
 Profitable Product Line Management

• Product Portfolio length-

• Total number of items in the mix (i.e. number across
each product line
• Product Line depth
– The number of variants offered for each product in the
line
– Nestle Instant Coffee Lines

• Challenge: Manage Mix and Line to Match Customer

Needs & Wants

1/13/2023
 Profitable Product Line Management

• Context of Product Management Decisions

– Length Depends Upon
• Degree of Segmentation in Market
• Stage of Market Evolution
– Breakfast Cereals
– Short Lines
• Vulnerable to Competitor Re-segmentation
Product Categories can be vertical or horizontal

1/13/2023
Profitable Product Line Management

– Long Lines
– Trend Today as Firms Pursue Product Expansion
• Minimize Competitive Threats
• Customer Demands for Single Brand Solution (toothpaste)
• Protect Shelf Space

1/13/2023
Profitable Product Line Management

• Line Filling – Lengthens Product Line By Adding Items

Within Present Range
• Head and Shoulders

1/13/2023
 Profitable Product Line Management

• Line Stretching – Lengthening Product Line Beyond

Current Range of Variables- upmarket or downmarket

1/13/2023
Profitable Product Line Management
• Brand Extensions – Use Established Brand Name to Enter
Another Product Class
The Product Life Cycle

13
Product Management- The PLC

• Products Exist in a Dynamic Environment

• Understand This Via PLC
• A co.’s product, market, and competitors change
over time.
• Assumes-
– Products have a limited life
– Product sales pass through different stages
– Profits rise and fall at the different stages
– Products require different strats at the different stages
• Does not tell us about duration of a product but tells
us about likely sales patterns
– E.g. Mobiles, PC’S long time in introductory stage
• Can be used for product category (retail banking),
product form (current accounts), a product (no fee
current accounts), or a brand (UOB)
• 4 stage model
 Product Management- Stages of
PLC
• Stages-
• Introduction : Low Sales/ High Costs
– High costs- developing distribution, MComm, staff
training
– Likely to have none or few competitors
– Have to decide when to enter the market
– Trying to create awareness and trial and secure
distribution
• Options :
• Rapid Skimming- High price, heavy advertising
investment. Target premium segments Trying to recoup
some part of investment- e.g. Ultra HDTv
• Rapid Penetration- low price, heavy advertising
investment- trying to gain market share- e.g. Sky Digital+
capture market share for future long-term revenues, Nord
VPN
 Product Management- Stages of
PLC
• Growth: Rising Sales/ Profit Achieved

– Early adopters like and others start to purchase

– New Competitors enter
– Prices the same or else slightly fall
– Promotional expenditure still high but offset by
profitability
– As opposed to awareness shift emphasis to
product conviction
– Look for greater distribution
– Product Enhancement, new models- appeal to
more segments in search for Market Share –
Apple Watch latest series
Product Management- Stages of PLC

• Maturity : Sales Growth Levels Off, Low Costs

• Longest lasting stage
• Sales at highest and costs at lowest
• About maximizing profits and maintaining share
• Most potential customers have tried product- future sales
governed by population growth and replacement demand
• Have fierce competition
– Further segmentation and get multiple niche products-
e.g. Soft Drinks
– Often have shakeout of weaker competitors- e.g. Laptops
– Will often have a quality leader (e.g. Singapore Airlines)
and a cost leader (Ryanair, Air Asia)
• Lots of competition- often growth by trying to steal market
share from others
 Product Management- Stages of
PLC
• Maturity : (continued)
• Strategies at this stage include-
• Market Modification- About expanding market
– Convert Non-users (dental floss- US only 24% of households use-
GSK developed Aquafresh Floss’n’Cap), enter new market
segments (Gap), try to get people to use more often- e.g. OJ not
just for breakfast.
• Product Modification- quality, feature or style
improvements. E.g. Online Newspapers- addition of podcasts,
vodcasts, infographics etc.
• Marketing Mix Modifications-
• Price – higher (to show quality) or lower to increase sales
• Distribution- might look to develop new channels or invest
further in existing channels
• MCOMM and Advertising- invest further, modify or change
brand image?
• Sales Promos- try to increase volumes through promotions?
Product Management- Stages of PLC
• Decline: Sales and Profits Decline
• Fewer competitors- withdrawing from market (e.g. DVD
players)
• Carrying a weak product can be costly (e.g. time for
management, frequent price and inventory changes,
sales force attention
• Get price cutting and profit erosion
• Ever decreasing promotion
• Try to harvest any remaining profit from product
Product Management- Stages of PLC
• Critique-
• Do All Products Have a Limited Life- many product classes
have unlimited life (although brands and product forms can
change)
• Is the PLC an S-shaped Curve- can have pattern of growth-
slump-maturity, growth e.g. Fashions (cyclical) or fads
(e.g. pet rocks, furbies, Fidget Spinners, Air-Up)
• Are There Distinct Stages- often difficult to know at time at
what stage a product is in. Also maturity stage for many
products has lasted for long time for many (think about
current accounts in financial services)
• Are there distinct strategies for each stage?
– Cannot prescribe for certain what strategies to follow in
each stage
 Product Management- PLC

• For Long PLC- meet continuing customer needs

• Challenge- Develop Brand and Differentiate in a
product class
• PLC- An aid for forecasting and Planning
• About monitoring and lengthening life of product.
Product Life Cycle

INTRODUCTION GROWTH MATURITY DECLINE

Sales Low sales Rapidly rising Peak Sales Declining Sales

sales

Costs High cost per Average Cost per Low cost per Low cost per
customer customer customer customer

Profits Negative Rising Profits High Profits Declining Profits

Customers Innovators Early Adopters Middle Majority Laggards

Competition Few Growing Number Stable Number Declining Number

OBJECTIVES

Create awareness Max Market Share Maximising Profits Reduce

and trial while deepening Expenditure and
mkt share milk the brand
Strategies
INTRODUCTION GROWTH MATURITY DECLINE

Product Offer a basic Offer product Modify products Phase out weak
product extensions, through quality, items
service warranty feature, style
improvement
Price Use Cost-Plans Price to Lower or raise to Cut price
penetrate signify higher
market quality
Distribution Build Selective Build intensive Build more Go selective,
Distribution distribution intensive phase out
distribution certain outlets
Advertising Build awareness Build awareness Stress brand Reduce to level
among early in the mass differences and to retain hard
adopters and market benefits core loyals
dealers
Sales Promotion Use heavy sales Reduce to take Increase to Reduce to
promo to entice advn of heavy encourage minimum level
trial demand WOM
What is a New Product?

Product
replacements Additions to
existing
lines

New
Products

New-to-the- New
world product
products lines

24
What is a New
Product?

Product Additions to
replacements existing
lines

New
Products

New-to-the-world New
products product
lines
New Market Offerings

• Key to maintaining growth is innovation and the

development of new market offerings

• What is an innovation-
– A product, service, idea that consumers,
within a market segment perceive as new and
that has an effect on existing consumption
patterns
• Exist on a continuum from
incremental/continuous to dynamically
continuous to discontinuous/disruptive
innovations.
New Market Offerings: Stage gate
approach to developing new product
offerings
• Stage Gate Approach-
• Sequence of actions (stages) separated by
hurdles (gates) that need to be overcome
Stage Gate Approach

• Idea Generation- coming with ideas to about how

to fulfill unmet needs
• Concept Development- once idea is validated
development of a prototype. Then validated by
assessing tech feasibility and fulfill uncovered
needs.
• Business Model Design- validated concept then
becomes core of the a business model that
defines tgt mkt, value created by offering in the
mkt and the key attributes of the offering. Then
validated on basis on the degree to which it is
able to fulfill the customer needs in way that is
benefits both co. and collaborators.
Stage Gate Approach

• Offering Implementation: Company develops the

resources needed to create offering and then
develop a market ready version of it.
• Commercial Deployment: Market ready version of
the offering is then commercially deployed,
meaning that it is communicated and made
available to target customers. Often initially
launch in selected markets.
 New Product Success?
• Note many of the ideas are from Gourville (2006)
• Probability of Success-
• Most new products fail- consumer packaged goods
industry (FMCG’s, footware and apparel etc)- 70-90%
failure rate of product introductions in first 12 months
(depending on category) (Gourville, 2006)
• 47% of first movers in a category failed (Golder and Tellis,
1996) i.e. Half of companies that pioneered a category left
that category at some point
• Time and Money-
• innovations (depending on the type) inherently require
time and money (e.g. 10-15 years to take a new drug to
market and multi-million/billion investments(depending on
therapy)
• PS3- $1.7 billion spend on computer (cell) chip alone
• Or PureCircle- 2001-2008, 000’s of millions for Reb A to
Consumers and Innovations

• Gourville (2006)
• Consumers evaluate not on objective or actual value but on its
subjective perceived value
• We evaluate new products relative to a reference point, usually
something we own or consume
• We view any improvement relative to this reference point and treat
all shortcomings as losses

Innovation What consumers What do they

gain by buying? lose?
Online Groceries Home Delivery Ability to select
freshest products
Screw-top wine Less spoilage Elegance of
experience

• Losses have far greater impact than similar sized gains (i.e. Tend to
overestimate by a factor of the 3- i.e. Overweight incumbent
benefits by a factor of 3)
Consumers and Innovation

Gourville 2006
Firms and Innovation
• Companies also biased in favour of their new
products
• Work in a world where their innovation maybe
their reference point- i.e. Months, years
developing. True believers
• Convinced it works, recognize need for it and too
aware of shortcomings of competing alternatives
• They can greatly overvalue the benefits of their
innovation.
• Expect consumers to see the same value that
they do
• So instead of anticipating difficult sales, shocked
when sales don’t materialize
Consumer vs Firm View

Gourville 2006
 Perceived value and New Products
• Attractiveness of a product is largely driven by perception
• Product and product characteristics for consumers- can have great
impact on adoption

• Trialability-
– An unknown product service can have high perceived risk. If it can
be tried on a limited basis before it is purchased or after purchase-
higher chance of adoption. Eg latest Apple Watch, laser eye surgery

• Complexity-
– Degree to which a product is difficult to understand or use. E.g.
Digital Photography- initial perceived complexity
• Compatibility-
– Degree to which a product is consistent with existing values and
experiences- eg Bathroom wipes, compatible with cleaning
behaviour, hair remover instead of shaving foam? Beauty products
for men? Clean meat?
 Perceived value and products

• Observability-
– Degree to which a product usage and impact is
observable to others. More observable more likely
to spread. Electric cars?
• Relative Advantage-
– Degree to which a product is better then the
product it seeks to replace.
– . Eg Mobile banking, Dyson, Digiscent, Juiceroo
Perceived value and products

• We can analyze the objective advantage of one product over

another but what really matters is the “relative advantage” as
perceived by potential adopters
• E.g. High-tech band aid objective utility of quicker healing, less
infection might have little R.A because have preconceptions about
what a band aid should cost (50 cents vs 5 cents)
• Or sliced peanut butter- prejudice that should come in jar
• i.e We bring prejudices and preconceptions about all types of
products and services! i.e. we have reference points
 Prerequisites for Successful Adoption

Innovation should be compatible with

Compatibility consumers’ lifestyles

People are more likely to adopt an

Trialability innovation if they can experiment with it
prior to purchase

A product that is easy to understand will

Complexity be chosen over competitors

Innovations that are easily observable

Observability are more likely to spread

Relative Product should offer relative advantage

Advantage over other alternatives

14-38
 Conclusion

• What is a product
• Total Product Concept
• Product Line Management
• Concept of the Product Life Cycle
• Stage Gate process for new offerings
• Consumer Resistance.

39
Appendix : Services, Service
Innovation and Service
Blueprints (for your own
study)
 Challenge of Services vs Products-

1. Customer contact- with products customer may be unaware

of (or may not care) how the product came about. With
services production and consumption at the same time (and
also can be involved in the production)
2. Quality- measures of Servqual tend to be much more
qualitative than for products. As a result there is greater
variability in service quality, and less ability to control for
that variability.
3. Tangibility- can touch a product, cannot really touch a
service. They only exist for customers at moment of
delivery. Even though results or effects may be visible, the
service remains inherently intangible.
4. Storability- Often impossible to store them for future use eg.
Empty seat on a plane loses its value once the plane has
left- but car in showroom can be sold whenever.
5. As well as 4 P’s for marketing you need to take into account
People, processes, and physical evidence.
 Differences between Service Design vs
Product Design
1. Number of customers/stakeholders is significantly larger
for service design than in manufacturing products. Makes
design of successful products more difficult and project
management much more demanding.
2. Often time complexity inherent in service design and
delivery is not appreciated by corporations. Often see a
product manager overseeing a product, but how often
does one see a service manager responsible for a
particular service?
3. Greater emphasis on time in a service and all the
interactions within a service happen over a period of time
and the user accumulates these services over this time.
4. IP in services is more difficult to protect hence easier to
copy services This in turn lays greater emphasis on
continuing service innovation as a point of differentiation
for companies
 Differences between Service Design vs
Product Design
6. There are often a greater number of touchpoints in services. For example- If a
client has to visit you to receive the service and you are innovating then your
experiments are run between the actual staff and the actual customer How to
manage incentives of actual staff and how to protect the brand from failures
with actual customers becomes an important challenge in incremental service
design. How to manage failures is critical

7. People used to design services require breadth as well as depth

8. Intangibility of services means trying to make the intangible tangible- therefore

large number of tools used for prototyping and implementation are focused on
precisely that- methods like customer journeys, storyboarding, and even
prototyping are all done to flesh out intangibles

9. Experimentation as implementation approach. Get a continual incremental

experiments that get scaled up as they start to stick or become effective.
Cannot really be done with products which have to be standardized and make
uniform in order to be manufactured.
Management of Services: Servqual
Model
Management of Services - Servqual
• Gap 1: Gap between customer expectations and
management perception
• Gap 2: Gap between management perception
and service-quality specification
• Gap 3: Gap between service quality specifications
and service delivery
• Gap 4: Gap between service quality specifications
and service delivery
• Gap 5: Gap between perceived and expected
service
 Service Design and Innovation: Innovation is different….

• How?

• Dependent on human, interpersonal delivery systems

– They are fluid, dynamic and frequently co-produced by
customers, employees & tech. Often have few static
properties
– As such many of the invention protocols & prototype design
techniques used for goods or hard technologies & software
do not do well or demand adaptation for service innovation
• Differentiation often based on creating meaningful, memorable
customer experiences
– Moving into realm of customer experience management
– With focus on creating value through experience suggests
need for innovative methods, techniques and R&D practices
for services
 What is Service Blueprinting?

• Graphic representation of a service offering

• If launching a new service innovation you need to think
through the steps, actors and processes involved in delivering
that service.

• Customer-focused approach to service innovation,

improvement and understanding

• Allows visualization of service processes, points of customer

contact & physical evidence associated with services from the
customer perspective

• Blueprints illuminate and connect underlying support

processes that drive and support customer-focused service
execution
• At a basic level provide a focal point to understand what you
offer to the marketplace
 Service Innovation Challenges and need
for Blueprinting
• Number of characteristics that provide challenges in
service innovation, marketing, and management:
• Services as processes
• They are dynamic, unfold over a period of time
through a sequence of constellation of events and
steps

• So they are chains or constellations of activities

allow the service to function effectively

• Need for coordination and management of the

sequence

• Emphasize the steps that create customer value

 Service Innovation Challenges
and need for Blueprinting
• Service as customer experiences
• Orchestration of memorable events for customers is
key to differentiation of offering can be B to B
(Dow Corning) or B to C (e.g. United Airlines, Vans)
• Customers cannot avoid experiences
• Main issue for managers is if company has the
capability to systematically manage that experience
or whether it is left to chance
• Delivery of value through distinctive memorable
experiences requires a cross-functional perspective
• About exceeding customers expectations
• So all parts of organization should be focused on
creating favourable customer experiences
 Service Innovation Challenges and need
for Blueprinting
• Service development and design

• Temptation for service design to be ad hoc in the

absence of development tools
• Need to prepare and move systematically form
estb of clear obj., to idea generation, to concept
development, service design, prototyping, service
launch and customer feedback.
• Service design- need an understanding of the
customer outcome and customer process, the way
the customer experience unfolds over time through
interaction at many touchpoints.
• Roles and responsibilities of customers and service
providers must be drafted, clarity is imperative
 Five Components of service blueprint
1. Customer actions

– All of the steps the customers take as part of the service

delivery process

2. Onstage/visible contact employee actions

– Actions of frontline contact employees that occur as part

of the face-to-face encounters (onstage contact
employee actions)
– Every time the line of interaction is crossed via a link
from the customer to a contact employee (or co. self
service tech) a moment of truth has occurred
Five Components of service blueprint
3. Backstage/invisible contact employee
actions

– All of the other actions taken by contact

employees that involve non-visible interaction
with customers or anything done to prepare to
serve customers or that are part of their role
responsibilities

4. Support processes

– All of the activities carried out within the

company, but not by contact employees, that
are needed for the service to be delivered
Five Components of service blueprint

5. Physical evidence

– All of the tangibles that customers are exposed to

that can influence their quality perceptions

– Examples of Service Blueprints-

– Express Mail Service
Service Blueprint- Hotel Stay
Service Blueprint Components

Physical Evidence

• Customer Actions

Onstage/Visible
• Contact
Line of Employee Action
Interaction

Line of Visibility

Backstage/Invisible Contact Employee

Actions

Line of internal Interaction

Support Processes
Steps in Building a Blueprint

1.Identify the service to be blueprinted.

-basic business concept
-a service within a family of services
-a specific service component
2. Identify the customer segment that receives the
service- e.g. business class vs economy class
3. Map the service from the customer’s point of
view.
4. Draw the line of interaction.
Steps in building a Blueprint

5. Draw the line of visibility.

6. Map the service from the customer contact
person’s point of view distinguishing visible
(“onstage”) activities from invisible (“backstage”)
activities.
7. Draw the line of internal interaction.
8. Link customer and contact person activities to
needed support functions.
9. Add the physical evidence.
Insights gained from Service
Blueprints
• Provides a common platform for service innovation-
– Gives employees an overview of the entire service process and see
how they fit into an integrated whole
• Recognition of roles and interdependencies-
– Generates insights into various roles and relational
interdependencies throughout the organization
– Customers actions and interactions are highlighted revealing the
points where they experience quality as well as what is missing
• Facilitates tactical and strategic innovations
– Can be used at varying levels of analysis- e.g. at micro for one
part of a service to macro- the whole service
• Enables transfer and storage of innovation knowledge
• i.e. can be drawn up and stored and modified through time
• Improves the design of moments of truth by identifying
what customers should see and which employees should
be in contact
Service Blueprints and service
innovation

• Clarifying competitive positioning-

– i.e. the level and type of service being offered by
you and identify points of parity and difference

• Understanding the ideal service experience

– Can be used in market research. Overcome
problem of asking customers what ideal customer
service would be like (limitation of verbal
question). Can get them to map it out visually