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Product Management and

Strategy

Dr. Prashant Mishra


prashant@iimcal.ac.in
A Business Strategy

Basis of SCAs
Product-Market
• Assets/Competencies
Investment Decision
• Synergies
• Product-market scope
• Investment intensity
• Resource allocation Functional Area Strategies
over business units • Product
• Price
• Distribution
• Etc.
Figure 1.1
The Four Ps: The Tools
The Four Cs: The Ends

Marketing
Mix

Place
Product

Customer Conven-
Solution Price Promotion ience

Customer Communication
Cost
The Other 4Cs: The Participants

The
Participants

Competitors
Company

Consumer Channel
Views on the Marketing Processes

3-C Analysis S-T-P Marketing 4 P’s Marketing Plan


Customer Segmentation Product
Competitor Targeting Pricing
Company Positioning Promotion
Place

The Functional View


Views on the Marketing Processes

Understanding Capturing Delivering Sustaining


Creating
Customer Customer Customer Customer
Customer
Value Value Value Value
Value

The Process View


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
• Don’t Sell me Clothes, Sell me a sharp appearance,
style and attractiveness.
• Don’t Sell me a House, Sell me comfort, contentment,
a good investment and a pride of ownership.
• Don’t Sell me Toys, Sell my children happy moments.
• Don’t Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.
• Don’t Sell me Books, Sell me pleasant hours and the
profits of knowledge.
• Don’t Sell me Computers, Sell me the pleasure and
profits of the miracles of modern technology.
The Moral is…..

• Don’t Sell me THINGS, Sell me Ideas,


Feelings, Self-respect, Home, Life and
Happiness.

PLEASE DON’T SELL ME


THINGS
A successful differentiation
strategy should

Generate
Be Difficult
Customer
Provide to Copy
Value
Perceived
Value
Growth Strategies

Present New
Products Products

Present Market Product


Markets Penetration Expansion

New Market
Diversification
Markets Expansion

Vertical Integration
12
Source: H. Igor Ansoff, “Strategic Diversification” , Harvard
Figure 2.4 Business Review, September-October 1957, pp.113-24
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 Services mix


and quality and quality
Five Product Levels

Potential product
Augmented product
Expected product
Basic product
Core benefit
Product Classifications
Consumer Products
Convenience Products Shopping Products
 Buy frequently & immediately  Buy less frequently
 Low priced  Higher price
 Mass advertising  Fewer purchase locations
 Many purchase locations  Comparison shop
i.e Candy, newspapers i.e Clothing, cars,
appliances
Specialty Products Unsought Products

 Special purchase efforts  New innovations


 High price  Products consumers don’t
 Unique characteristics want to think about these products
 Brand identification  Require much advertising &
 Few purchase locations personal selling
i.e Life insurance, blood donation
Product Classifications
Industrial Products

Materials
and
Parts

Capital
Items

Supplies
and
Services
Product Attributes

Developing a Product or Service Involves


Defining the Benefits that it Will Offer Such
as:
Ability of a Product to
Product Quality Perform Its Functions;
Includes Level & Consistency
Help to Differentiate the
Product Features Product from Those of the
Competition
Product Style Process of Designing a
& Design Product’s Style & 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
Product Mix

Width - number of
different product
lines
Consistency

Length - total Product Mix -


number of items all the product
within the lines lines offered

Depth - number of
versions of each
product
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. gas-
powered 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 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
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 firm’s price and cost structure
– The rate of market deterioration
Problems Using the PLC
The PLC Concept
Can Help in Trouble
Developing Good identifying Which
Marketing Strategies Stage of the PLC
the Product Is In
for Different Stages
Difficult to Forecast
of the Product Life- the Sales Level, the
Cycle, However Length of Each
Some Problems Can Stage, and Shape
Arise: of the
Strategy is Both a PLC
Cause and a
Result of the
Product’s Life
Cycle
CREATING NEW CONSUMERS
New to
the world
New to the categories
company
New products category
Consumer
in current
creating Restage categories
potential
Continuous
innovation

Old business New business


Retaining consumers Creating new consumers
Low risk 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 Business
Strategy Analysis
Development
Concept Product
Development Development
and Testing

Idea Market
Screening Testing

Idea
Generation Commercialization
New-Product Development Process
Idea Generation & Screening

1. Does the offering have a relative


advantage?
1. Is the offering compatible with buyers’
use or consumption behavior?
1. Is the offering simple enough for buyers to
understand and use?
1. Can the offering be tested on a limited
basis prior to actual purchase?
1. 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