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 2

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 5 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 b/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

6 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."CNET 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 7.11 Why 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 7.3 Product-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 7.5 Differentiation and Customer Value

Dimensions of Product Quality Killers: Reliability Conformance Drivers: Performance Durability Enhancers: Features Serviceability Aesthetics: Appearance Reputation

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 7.10 Product 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?