CHAPTER 8 Developing and Managing Products: What do Customers Want?

Chapter 8 - Developing and Managing Products THE BUSINESS MARKET PRODUCT A product is a collection of benefits There are core products and augmented products Augmented products attempt to customize a product to exceed customer expectations

Chapter 8 - Developing and Managing Products MANAGING PRODUCTS The product life cycle Portfolio Management – getting the best product mix BCG Matrix GE Matrix New product development

Chapter 8 - Developing and Managing Products 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 to each? 5. Where should we distribute each product?

Chapter 8 - Developing and Managing Products PRODUCT LIFE CYCLE DECISION POINTS Rapidly expand distributors Product line expansion Niche marketing Promote heavy Sales force incentives Search for new supplier sources Balance supply and demand Control stock-outs and back-orders Development IntroductionGrowth Maturity Decline Time Strongly defend home- market Prune product lines Prune logistic costs Reduce pioneering sale force effort More trade than consumer promotion Introduce private label, generic brands Reinvest in market research & R&D Use promotions to increase loyalty Provide trade promotions Focused attacks on vulnerable competitors Consider price reductions Keep plant at maximum capacity Cut low-gross-margin products Withdraw from unprofitable channels Freeze R& D Freeze promotions Attempt to maintain price Buy back remaining stock and redistribute Maintain spare parts and service Sales Redirect focus & promotion Expand production Build inventory Expand distribution network Expand sales force Invest in promotion Target best prospects Find loyal distributors Use trade shows Use publicity and endorsements Use specialist media & catalogs

Chapter 8 - Developing and Managing Products THE BCG MATRIX: MARKET GROWTH AND MARKET SHARE Market Growth Rate Stars Cash Cows Dogs Question Marks Market Share BCG Matrix

Chapter 8 - Developing and Managing Products GE MATRIX: 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

Chapter 8 - Developing and Managing Products HARVESTING A PRODUCT Harvesting – to stop producing and reallocate resources Resource costs – can they be better used elsewhere? Contribution to profit (consider the overall impact of costs – some costs will not be recovered) Understand customer demand

Chapter 8 - Developing and Managing Products NEW PRODUCT DEVELOPMENT 1. Idea Generation – start with the customer (End Users) 2. Screening and Preliminary Investigation – examine the worth of ideas 3. Specifying Features – identify customer desired features and their importance 4. Product Development – get early supplier involvement 5. Beta Testing – field or test marketing 6. Launch – is their a first mover advantage? 7. Evaluation

Chapter 8 - Developing and Managing Products PRODUCT SUCCESS FACTORS Close ties with a well defined market to anticipate customer needs. Company is highly integrated and market-oriented Company has a competitive advantage in technology and production capability Company has a strong marketing proficiency New product launch adequately financed

Chapter 8 - Developing and Managing Products PRODUCT SUCCESS CHALLENGES Marketing Issues: Inadequate product launch support Inappropriate pricing Wrong distribution channel (system) Incorrect target market