Business Marketing
Product Management
The Six Sources of Competition
in a Product Market
Must monitor current & potential product offerings
of each
Current
Partners
Substitutes
Existing Direct
Competitors
Upstream
Suppliers
Downstream
Customers
New
Entrants
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.
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)
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
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
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
Make or Buy Decisions
Minor Component
How much does the component
contribute to our product’s value
image in our customers’ view?
Is the component
unique to our markets?
Major Component
No
Are we good at it?
Yes
No
Purchase as a
Commodity
Yes
No
Can we own the market for it?
Yes
Can we or do we want to protect it?
No
Develop Partnership
with qualified
supplier(s)
Yes
Is it our kind of business?
-Financial justification
-Risk assessment
-Stability of technology
Yes
Make it!
No
Collaborate in
development with
technology-oriented
supplier(s)
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
Traditional New Product
Development Model
Stage 1
Idea
Generation
Stage 4
Stage 5
Product/
Strategy/
Plan Dev.
Test
Market
Stage 7
Product
Screening
Stage 2
Business
Case
Analysis
Stage 3
Product
Launch
Stage 6
Hand off to
innovation/
translation
team
Go/ No-Go Decisions in
Product Development
Idea
Generation and
Screening
Business
Case Analysis
Launch
Go
1st Go/No-Go Point
Quick assessment of
market size, growth
rate, fit of
organization
Go
Concept
Testing
Initiative
Development
3rd Go/No-Go Point
Does market respond
positively to “almost
finished product”
(beta test)?
Go
No-go
2nd Go/No-Go Point
Is there sufficient
market interest?
X
No-go
X
No-go
Market Test
X
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!
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
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
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.
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.
Product Life Cycle (PLC)
Maturity
Sales
Revenue/
period
Growth
Decline
Introduction
Time
Development
Technology Adoption Life
Cycle (TALC)
Pragmatists
Sales from New
Adopters/period
Conservatives
Visionaries
Laggards
Technophiles
Time
The TALC and PLC Superimposed
PLC – Total
Sales
TALC - Sales from
New Adopters/
Period
Time
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
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
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)
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
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
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
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
Zone of Tolerance
Desired Expectations
The
Zone
Of
Tolerance
Adequate Expectations
Zone of Tolerance
The Result of Satisfaction
Desired Expectations
The
Zone
Of
Tolerance
Adequate Expectations
Shape of the zone remains essentially the same
Zone of Tolerance
Desired Expectations
The
Zone
Of
Tolerance
Adequate Expectations
Dissatisfaction
Zone of Tolerance
The Result of Dissatisfaction
Desired Expectations
oBoth expectations are
lower.
oDrop in AE greater
than drop in DE.
The
Zone
Of
Tolerance
oFuture exchanges at
risk due to disloyalty.
oNegative word-ofmouth effects future
exchanges with others.
Adequate Expectations
The zone actually widens slightly.
Zone of Tolerance
Customer
Delight
Desired Expectations
The
Zone
Of
Tolerance
Adequate Expectations
Zone of Tolerance
The Result of Customer Delight
Desired Expectations
oBoth expectations
increase.
oIncrease in AE greater
than increase in DE.
oZone narrows
The
Zone
Of
Tolerance
oFuture exchanges
more likely.
oPositive word-ofmouth effects future
exchanges with others.
Adequate Expectations
The zone actually narrows slightly.