developing and managing offerings
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developing and managing offeringsTRANSCRIPT
DEVELOPING AND MANAGING OFFERINGSTopic 8
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TOPIC OVERVIEW Having the right product is the most
important factor in marketing strategy. Without the right product, no one will buy
twice. All of the rest of the marketing mix might get
someone to buy once, but if the product is not good, no one will buy again.
For companies that wish to compete effectively over the long term, developing products that deliver value is essential .
Developing products that deliver value by serving organizational buyers needs is best accomplished when strong relationships exist between manufacturer and buyer.
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LECTURE OUTLINE
1.0 Introduction2.0 What is an Offering 2.1 Service-dominant Logic3.0 Managing products and Services 3.1 product life-cycle product portfolios 3.2 Harvesting a Product 3.3 Challenges to harvesting4.0 New product Development 4.1 Risk and New product Designs 4.2 New Product Development process5.0 Success or failure 5.1 Components of success 5.2 Accelerating the Development process.
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LECTURE OUTLINE…CONT’D
5.3 Keys to Innovation 6.0 Summary
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LEARNING OBJECTIVES
After this lecture students should be able to : Apply portfolio and product life cycle
approaches to managing existing products. Identify the process of developing products
internally. Discuss the importance of lead users to the
product development process. Indicate what partnering, with both suppliers
and customers, means to the product development process.
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1.0 INTRODUCTION
Satisfying customer needs is an important objective in product management
Successful product management depends on the successful integration of many areas.
Pricing, promotion, selling, and manufacturing are just of the few organizations strategic areas that must operate in concert with product management in order for the firm to enjoy success.
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2.0 WHAT IS AN OFFERING
Product is a collection of features, or physical characteristics of the tangible item or service.
Product is also a collection of advantages , or reasons for having those features.
What is more important to a buyer is the benefit, or how a product or service satisfies a need.
Therefore , product is a bundle of benefits, a collection of solutions to needs and wants.
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2.0 WHAT IS AN OFFERING…CONT’D
2.1 Service – dominant Logic Whilst the core product is important , it is the
services that often separate one vendor from another.
Services are defined as the application of specialized competencies (skills and knowledge) through acts or processes for the benefit of another.
Services are not separate or distinct from tangible products because what customers buy is an offering, the complete package or bundle of benefits.8
Note that in business, many manufacturers partition their services into presales and postsales service.
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2.0 WHAT IS AN OFFERING…CONT’D
2.1 Service – dominant Logic …cont’d Presales – those services that help the buyer
make a decision and would include financial services such as ;
- credit terms - engineering services involved in designing the product into customers product , and other such services. Postsales – services would include such services as ; - customer support to ensure smooth installation - technical support or maintenance for full use of a product.
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3.0 MANAGING PRODUCTS AND SERVICES Few companies exist on just one product or
services. Most have several lines of products and services
designed to work together to satisfy a broad range of needs and desires.
An important element of business marketing is deciding which products to introduce or keep, which products to promote heavily, and which products to cut or market less vigorously.
There are several different tools that mangers use to manage their company’s products;
- product development - product life cycle - product portfolio .
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.1 Product Life Cycle Product have been likened to living organisms. They are introduced to the market or have a
birth. Then they grow (in sales) mature, and at some
point die out. This cycle of development, introduction,
growth, maturity and decline in sales, is called the ; Product life Cycle (PLC) Products can have multiple lives A product may fall out of favor in one market,
but may find new life in another.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.1 Product Life Cycle…cont’d When this occurs , the product begins a new
life, with all of the same strategy issues that any new product faces.
Products may also die young. There is no guarantee that a product will live to maturity or even make it to the introduction stage.
And unlike living organisms that have similar life cycles, products can go through the stages at very different rates.
The PLC , does offer a useful tool for understanding product strategy.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.2 PLC and Product Strategy Products have a development stage ,that stage in
the product’s life when it is designed and readied for market.
Some products are never brought to market simply because someone else gets there first or leapfrogs.
A product is leapfrogged when a competitor brings out a product that is at least one step better technologically.
Leapfrogging can have serious consequences when it occurs so early in the life of a product, but leapfrogging can also occur in the development phase.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios There are several types of product portfolios. A common example is the Boston Consulting
Group called the BCG Grid or BCG Matrix . Product portfolio management suggests
managing all products simultaneously as you would a financial portfolio , balancing risk and return among all product investments.
The BCG grid is the simplest of the grid models with dimensions of market share and market growth.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios…cont’d Product Portfolio Matrices – BCG Matrix or BCG
Grid Relative Market Share
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★ ☆ ✰
StarsQuestion
Marks
Cash Cows Dogs
HIGH LOW
Mark
et
Gro
wth
Rate
High growth & shareProfit potential
May need heavy investment to grow
High growth, Low market share
Build into stars or phased outRequire cash to build market
share
Low growth, high shareEstablished successfully –
SBU’s Produce cash.
Low growth and shareLow profit potential
3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios…cont’d 1. STARS (high growth, high market share) - Stars are defined by having high market
share in a growing market.- Stars are the leaders in the business but still need a lot of support for promotion a placement.- If market share is kept, Stars are likely to grow into cash cows.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios…cont’d2. QUESTION MARKS (high growth, low market share) - These products are in growing markets but have low
market
share.- Question marks are essentially new products where buyers have yet to discover them.- The marketing strategy is to get markets to adopt these products.- Question marks have high demands and low returns due to low market share.- These products need to increase their market share quickly or they become dogs.- The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios…cont’d
3. CASH COWS (low growth, high market share) - Cash cows are in a position of high market
share in a mature market.- If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow.- Because of the low growth, promotion and placement investments are low.- Investments into supporting infrastructure can improve efficiency and increase cash flow more.- Cash cows are the products that businesses strive for.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.3 Product Portfolios…cont’d4. DOGS (low growth, low market share) - Dogs are in low growth markets and have
low market share.- Dogs should be avoided and minimized.- Expensive turn-around plans usually do not help.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D
3.4 Harvesting a Product At some point all good things must come to an
end. It is the same with a product’s life. When product no longer contributes to the firms
success, then it is time to stop production and turn resources to more profitable ventures.
3.4.1 When to harvest a Product? Product are not terminated just because they are
unprofitable or because they are classified as dogs.
Some considerations must be reviewed, between product and cash investment.
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3.0 MANAGING PRODUCTS AND SERVICES…CONT’D3.4 Harvesting a Product ..cont’d3.4.2 Challenges to Harvesting … Products are managed by people, and sometime people
overinvest their egos in a particular product. This may make it difficult to halt producing a product,
particularly if the product was designed by the owner. Also a product may not be eliminated because of the
jobs that might be lost. Situations can occur in companies unwilling to lose good
personnel Political difficulties can make harvesting products a
challenge.
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4.0 NEW PRODUCT DEVELOPMENT New product are launched and old products
withdrawn from the market at an increasing rapid rate.
Estimates are that more than one-third of new products ultimately fail.
New product development and the costs associated with launching a product are so great that a single product launch can mean the difference between profit and loss for many companies.
As the result of this intense risk associate with new products, many marketing strategies believe that the key to success lies in the solid planning.
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4.0 NEW PRODUCT DEVELOPMENT…CONT’D
4.1 Risk and New product Decisions There are two types of risk associated with
this decisions- investment risk and opportunity risk.
Investment Risk - is the risk that we decide to go ahead with the product, if it fails, then we lose some or all of our investment.
Opportunity Risk - is the risk we decide to kill a product and thereby lose all of the revenue we would have gained if it had been a success.
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4.0 NEW PRODUCT DEVELOPMENT…CONT’D
4.2. New Product Development Process The essential steps of an internal product development
process are shown below, in a seven- step process.
1. Idea generation – In this step the basic idea
is created.
- can come from many sources; suppliers,
customers, salespeople, marketing research,
and competitors.
2. Screening and preliminary investigation –
- In this stage ideas are examined for fit with
corporate objectives, current product offerings, and other
factors to see if it is worthwhile to continue developing the
ideas into product.
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4.0 NEW PRODUCT DEVELOPMENT…CONT’D4.2. New Product Development Process…cont’d 2. Screening and preliminary investigation – cont’d
- Information is gathered to determine development costs and
time, potential sales, and other factors that influence
whether the process should continue.
3. Specifying features - detailed specifications of the
product are developed. These specifications should be
centered around features that lead to desired benefits , as
expressed by customers and channel members.
- Quality Functional Deployment – link customer needs
to product attributes. (QFD - also called House of Quality)
- QFD – is a process to describe how benefits are linked to
product, component part, and process characteristics, as
well as production controls.
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4.0 NEW PRODUCT DEVELOPMENT…CONT’D4.2. New Product Development Process…cont’d
4.Product Development – The purpose of this step is to
develop and test a prototype of the product in the lab ,
based on the specifications developed in the previous step
5. Beta Testing - Beta testing is field testing , or
testing the product at the customer’s location, to see
if the product will work under real-world conditions.
6. Launch - Finally, the product is brought to market.
7. Evaluation – The product is evaluated and elements
of the marketing program are adapted to fit
changing market conditions.
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5.0 SUCCESS OR FAILURE
The ability to develop successful new products is necessary for a company to thrive over the long term.
Yet nearly one in three new products will fail, and research finds that having customers involved doesn’t necessarily improved the processes.
The following are some of the factors that have been found to be related to a particular product’s success or failure;
- components of success - accelerating the development process - keys to innovation.
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5.0 SUCCESS OR FAILURE…CONT’D
5.1 Components of Success There are five key component to success; - close ties to a well-defined market that
lead to a product advantage - Highly integrated and market-oriented company - Competitive advantages in technology and production - Strong marketing proficiency - Strong financial support.
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5.0 SUCCESS OR FAILURE…CONT’D
5.2 Accelerating the Development Process One important element in successful new product
development is findings ways to bring products to the market more quickly.
Accelerating the development process can significantly improve an organization chances to achieve a first-mover advantage ( to be first in the market) , an advantage that can be retained for many years.
Four strategies is found to shorten the process;
- streamline each stage of the development
- develop products in parallel
- launch product simultaneously in world
markets
- Use upgrades strategically
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5.0 SUCCESS OR FAILURE…CONT’D
5.2 Accelerating the Development Process5.2.1 Streamline each stage - means being as
efficient as possible in each stage of the design process e.g
- screening each product idea within 24 hour of receipt at the central location than at quarterly
idea review meeting. - streaming also include simplifying the
process, sometimes as easily as by reducing the number of people who have to approve designs before work can proceed.
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5.0 SUCCESS OR FAILURE…CONT’D
5.2 Accelerating the Development Process5.2.2 Develop products in parallel The high level of communication between each team of
designers required by Quality Functional Deployment ( QFD ), improves the likelihood that the modules can be assembled without fear of a lack of fit e.g.
- Hitachi uses several software and other types of
design firms to design portions of products.
- Satyam Computer in India, develop software that controls the electronics of Hitachi product while another vendor creates the circuitry. Therefore instead of developing one module at a time, simultaneous development in parallel results in significantly faster product development.
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5.0 SUCCESS OR FAILURE…CONT’D
5.2 Accelerating the Development Process5.2.3 Launch Products Worldwide. Rolling Launches give competitors the
opportunity to capture markets with copycat products.
Best is to speed up the launching, when launching new products into global markets , reaching as many buyers as quickly as possible is critical to success.
A global launch means faster sales acceleration , which leads to a faster return on the new product investment.
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5.0 SUCCESS OR FAILURE…CONT’D
5.2 Accelerating the Development Process5.2.4 Use Upgrades Strategically Many companies can launch a product more
quickly that meets the most important need than if they try to fine-tune the product to meet every need.
By launching quickly , a product will meet the most important need, therefore gain the first-mover ( first in the market) advantage.
Then upgrade regularly, to maintain that advantage.
The key is to incorporate planned upgrades in the product strategy from the beginning; otherwise you may get leapfrogged.
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5.0 SUCCESS OR FAILURE…CONT’D
5.3 Keys to Innovation – The focus of this topic –is the new product development
( product offerings) , which is dependent on creativity leading to innovation, or the creation of market- changing products.
Some companies are better at innovating than others. A research revealed that innovative companies were found
to have a corporate culture that supported innovation. The culture is dominated by the desire for;
- the firm to grow ( align with the mission & vision )
- to improve
- take advantage of all possible opportunities
- focus on opportunity risk ( non-innovative companies focus
on investment risk)
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6.0 SUMMARY
New products are essence of growth for most companies
Managing products well and creating processes for continuous product development are important aspects of business marketing , particularly in today’s market of short product life-cycles.
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THE END
TOPIC 8 : DEVELOPING AND MANAGING OFFERINGS
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