Product Management and New Products

Business Marketing

Dawne Martin, Ph.D.

October 16, 2012

Learning Objectives Schedule

Exam 2: Thursday, October 25, Chap 5-10 Case: Makrolan – Due Nov. 1 Project 2 – Due Nov 8 Case: Dow Chemical – Due: Nov. 15 For Next Time: Chap 9 & 10

Learning Objectives To apply the principles of the product life cycle to high

and low learning product commericialization To investigate the product development process To apply product management concepts

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

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Business New Product Development New Product Approaches

Technology Push - When perceived value of particular technology is great; firm has only a vague notion of possible applications, and usually not much more.

Market Pull - Primarily the result of marketing research methodologies of interviewing potential users about their needs, then developing solutions to those perceived market needs.

Keys To Product Innovation

Entrepreneurial Marketing Innovation Proactivity Controlled Risk Taking Opportunity Seeking

Corporate Culture that Supports Innovation – a desire for growth, improvement

Focus on Opportunity Risk not Investment Vision of What the New Product Should Accomplish A Structured Development Process A Long-term Perspective

8-4

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

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Rugged Tablet Computer runs Microsoft® Windows 7 or WES 7.AAEON Technology Inc Taipei TaiwanOct 15, 2012 Powered by 1.5 GHz Intel® Atom™ Z670 processor, 7 in. Model RTC-700T features 1 GB DDR2 SDRAM and 400 nits TFT LCD with anti-scratch Gorilla™ glass and 5-point projected capacitive multi-touch panel. Unit includes G-sensor, light sensor, GPS navigation, front and rear camera, optional barcode scanner, and micro SD card slot. Connectivity options include 802.11b/g/n WiFi, Bluetooth™ 2.1, and 3G. Operating from -20 to +60°C, IP65-rated unit is suited for field operations in harsh environments.

Low Learning Product

Introduction

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Horizon's HydroFill is made to convert water into hydrogen, and hydrogen into juice for your gadgets. CNET explains: "The HydroFill extracts hydrogen gas from water and stores it in Hydrostik cartridges with a metal alloy that absorbs the hydrogen. To then charge electronic devices, people use a pocket-size fuel cell charger, called a MiniPak, which pulls hydrogen from the cartridges and a produces an electrical current."

High Learning Product

Introduction

The Product Adoption-Diffusion Process Awareness - Buyer learns of new product or service, but

lacks information. Interest - Buyer seeks out or requests additional

information. Evaluation - Buyer (or member of buying team)

considers/evaluates usefulness of product/s Trial - Buyer adopts product or service on limited basis. Adoption - If trial purchase worked, then buyer decides to

make regular use of product/service. Diffusion Process – goes beyond the adoption process

and represents the spread of a new product, innovation, or service throughout an industry over time.

Redirect focus and promotion

Invest in expanding production

Build inventory

Expand distributor network

Train expanded sales force

Institute marketing controls

Invest heavily in advertising

Target best prospect: innovators and enthusiasts

Use most loyal distributors

Use free samples

Public demonstrations and trade shows

Publicity and endorsements

Quality control

Product/service modifications

Specialist media and catalogs

Freeze investment in plant

Productivity review

Special trade promotions to keep channels happy

Focused attacks on vulnerable competitors

Long-term price reduction or at least a short-term price promotion

Keep plant at maximum capacity and subcontract excess

Strongly defend home-market niches

Prune product lines

Emphasize gross contribution rather than market share and sales volume

Review logistics: prune costs

Reduce pioneering sales force effort, more telemarketing

More trade than consume promotion

Introduce flankers, private labels, generics

Reinvest in market research and R&D

Use promotions to increase heavy-user loyalty

Cut low gross margin products from the line

Withdraw from channels in order of their unprofitability

Freeze R&D and product modifications

Freeze advertising and promotions

Attempt to maintain price to the end

Buy back remaining stock and redistribute

Maintain spare parts and service

Consider divesting while it is still a going concern

Rapid expansion of distributors

Product line expansion

Niche marketing

Heavy promotion

Sales incentives and management

Encourage referrals

Search for new sources of supply

Need to balance supply and demand

Stock out and back order damage control

Product Life-Cycle Stages and Marketing Tactics

Sales

Launch Takeoff Rapid Growth Shakeout Maturity Decline Time

Figure 7.11Why is new product growth a driver on profitability?

Winning The New Product Contest

Focus On Core Competency(What You Do Best For A Competitive Advantage)

PLUS

Provide Greatest Value To Customer

EQUALS

Successful Product

8-10

Question

Why would Compaq invest in developing the second fastest

supercomputer?

Determinants of the Product Mix

Technology Competition Changes in Levels of Business Activity Operating Capacity Market Factors

GE Matrix Measuring Market Attractiveness And Business Strength

Market Attractiveness Growth Diversity Competitive Structure

Change Technology Change Social Environment

Business Strength• Size of Market &

Share• Company Growth Rate• Profit• Margins• Technology Platform• Image• People

GE Matrix

Exhibit 8-3

Unattractive

Weak

Strong

Attractive

8-13

Key Product Management Decisions

1. Which Product To Introduce

2. Which Products To Keep

3. Which Products To Promote

4. What Level Of Promotion To Provide (Low To High)

5. What Products To Continue Or Delete

8-14

Product Positioning & Differentiation Customer’s perceptions of product’s price and

benefits relative to competitor’s products – target market specific

Goal of Positioning Create product/price position that is attractive to target

market and creates good cash flow and profitability for the company.

Goal of Positioning – Create competitive advantage to gain market share

Differentiation strategies Based on customer needs and value placed on

differentiation Goal of Differentiation – create customer value.

Product Management Levels of Analysis Product Category-- Major grouping of

related products in industry Product Technology Platform -- Core

technology that is basis for product line Product Line -- Grouping of related

products within a company – technology platform

Product -- Evaluation of a single product

Figure 7.3Product-Price Position, Marketing Effort, and Market Share

Differentiation and Product Positioning Strategies

Product Differentiation Service Differentiation Brand Differentiation Low Cost of Purchase Low-Price Position Lower Transaction Costs

Figure 7.5Differentiation and Customer Value

Dimensions of Product Quality

Killers:Reliability Conformance

Drivers:PerformanceDurability

Enhancers:FeaturesServiceability

Aesthetics:AppearanceReputation

Key Dimensions of Service Quality

Reliability Responsiveness Assurance Empathy Tangibles

Product Line Management & Positioning

Plus One Product Positioning – equal competitor’s on all areas of product & service quality – find one area for clear superiority – Volvo

Product Line Positioning Broad line allows more ways to attract & satisfy

potential customers Narrow line is more focused & cost effective.

Question – When is a broad product line most profitability?

Product Line Management & Positioning

Product Line Extensions New brands, extensions of existing brands or flanking brands Economies of scale in sales force and manufacturing – New

brands or extensions of existing brands Umbrella Branding – core product – leverage

awareness & image of flagship Product Bundling – create complete customer

solutions and value to attract customers Pure Product Bundling – sale of two or more products at an

overall price lower then individual elements Mixed Bundling – choose of purchasing products separately

at sale price, or together at lower price

Figure 7.10Product Line, Branding, and Differentiation Strategy

Product Management Strategies

Product Positioning & Differentiation

Product Line Positioning and Extension Strategies New Product

Development

Low Price/cost of purchase

Product Differentiation

Service/Brand

Product Line Positioning

Product Line Extensions

Product Bundling

New Product Sales

New Product Innovation

Development Process

Question

Hewlett-Packard is working on a health monitoring system. The product features sensors and devices to measure a patient’s vital signs in a hospital – or home – and relay data directly to a doctor’s computer. What steps can HP take to ensure that the new product is responsive to customer needs and will be adopted?