1. Business Marketing Programming
Part Three
Business Marketing Programming

2. Part Three Business Marketing Programming
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display
Part Three
Business Marketing Programming
Part 3 covers the key areas of business marketing programming.
Chapter 8 Developing and Managing Products
Chapter 14 Pricing and Negotiating for Value
Chapter 9 Business Marketing Channels
Chapter 10 Communicating with Customers (IMC)
Particular Communication Vehicles:
Advertising, Trade Shows, and PR (Chapter 11)
Direct mail, Telephone, and Internet (Chapter 12 )
Personal Selling (Chapter 13)

3. Developing and Managing Products: What do Customers Want?
Chapter Eight
Developing and Managing Products:
What do Customers Want?

4. Learning Objectives What is a Product? Managing Products
Copyright The McGraw-Hill Companies, Inc. Permission required for reproduction or display
Learning Objectives
What is a Product?
Managing Products
Key product management decisions
Product management levels
Product management tools (portfolio and product life cycle)
New Product Development
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

5. What is a Product How the Product or Service Satisfies BENEFIT: A Need
A Bundle of Benefits and a Collection of Solutions to Needs and Wants
PRODUCT:
A Benefit That Satisfies a Customer Better than A Competitor’s Product Benefits
COMPETITIVE
ADVANTAGE:

6. Core Product & Augmented Product
Product – A collection of features; A collection of advantages; A collection of buyer benefits including services.
Core Product – the tangible item plus customary services
Augmented Product – the tangible product plus customary and unique/customized services comprises the augmented product.
A means of exceeding customer expectations
Should be done on a customer-by-customer basis
Is accomplished by adding unique/customized services to the core product
Aiding in building strong customer partnerships
E.g., computers + 2 hr free training is a core product or an augmented product?

7. Managing Products Key product management decisions
Product management levels
Management tools
Product Portfolio – BCG and GE matrix
Product Life Cycle

8. Key Product Management Decisions
Which product to introduce
Which products to keep
Which product to promote
What level of promotion to provide (low to high?)
What products to continue or delete

9. Product Management Levels
The product category
The product line
The technology platform
The product itself

10. Product Management Tools
Product Portfolio Management Tools
BCG Matrix
GE Matrix
Product Life Cycle

11. The BCG Matrix
Growth share matrix is a portfolio planning method that evaluates a company’s products in terms of their market growth rate and relative share.
Products are classified as: Stars, Cash Cows, Question marks and Dogs
Marketing efforts, or investments, will change, depending on the product’s classification

12. The BCG Matrix

13. The BCG Matrix
Stars are high-growth, high-share businesses or products requiring heavy investment to finance rapid growth. They will eventually turn into cash cows. Cash cows are low-growth, high-share businesses or products that are established; require less investment to maintain market share in a stable market. Question marks are low-share business units in high-growth markets requiring a lot of cash to hold their share. Dogs are low-growth, low-share businesses and products that may generate enough cash to maintain themselves but do not promise to be large sources of cash. Not worth much investment.

14. The BCG Matrix Problems with Matrix Approaches
Difficulty in defining SBUs and measuring market share and growth
Time consuming
Expensive
Focus on current businesses, not future planning

15. GE Matrix
A more advanced model developed by General Electric: measuring market attractiveness and business strength
Market attractiveness is a composite measure of the potential for sales and profits in a particular market segment
Business strength is the strength of our offering relative to other companies’ products
GE Matrix is an expansion of the BCG matrix. The dimensions are more comprehensive and detailed.

16. GE Matrix GE Matrix 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

17. Product Life Cycle
Product Life Cycle (PLC) – The cycle of product development, introduction, growth, maturity, and decline in sales
PLC describes the sales history of a successful product
The cycle can be applied to individual products or to product platforms or categories
As products go through the life cycle, marketing emphases will change.

18. PLC Decision Points Rapid expansion of distributors
Product line expansion
Niche marketing
Continued heavy promotion
Sales force incentives and management
Search for new sources for supply
Need to balance supply and demand
Stock-out and back-order damage control
Strongly defend home-market niches
Prune product lines
Emphasize gross contribution rather than market share and sales volume
Review logistics: prune costs
Reduce pioneering sale force effort, more telemarketing
More trade than consumer promotion
Introduce flankers, private labels, generics
Reinvest in market research & R&D Use promotions to increase heavy-user loyalty
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
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 a going concern
Sales
Redirect focus & promotion
Invest in expanding production
Build inventory
Expand distributor network
Train expanded sales force
Institute marketing controls
Invest heavily in advertising
Target on best prospects: innovators and enthusiasts
Use most loyal distributors
Use free samples
Use public demonstrations and trade shows
Use publicity and endorsements
Use specialist media & catalogs
Development
Introduction
Growth
Maturity
Decline
Time

19. PLC – A new look Product Develop-ment R&D Test Marketing Introduction
Growth
Maturity
Decline
Kill the product
Find New Uses
Find New Markets
Repeat Life Cycle

20. PLC – Recommendations for each stage
Introduction – Profits are not expected; the focus is on building distribution channels; a truly innovative product must focus on stimulating primary demand Growth – Sales and profits increase at their fastest rate; product differentiation may be employed in an attempt to stimulate secondary demand Maturity – Sales level off; maintain/improve its profit position through product differentiation Decline – seek markets/applications for the product

21. Discussion Question
Some authors have combined the life cycle and portfolio matrices into one model.
How would you do that?
What are some limitations of the model?

22. New Product Development
The most basic decision: go – no go decision
Risks involved in developing new products:
Investment risk – we decide to go ahead with the product, it fails, and we lose some or all of our investment
Opportunity risk – we decide to kill a product and thereby lose all of the revenue we would have gained if it had been a success

23. Product Development Process
EVALUATION
LAUNCH
BETA TESTING
PRODUCT DEVELOPMENT
SPECIFYING FEATURES
SCREENING AND PRELIMINARY
INVESTIGATION
IDEA GENERATION

24. New Product Development Process
Internally developed products:
Begin as an idea that must be screened to determine if it is worth further development (concept test)
Features are specified and then a prototype is created
A small run of the product is manufactured and beta, or field, tested – letting customers use in real-world conditions
The product is launched and evaluated

25. Making a product successful
Five factors are key to success:
Company’s ability to identify needs and satisfy them
Have 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’s ability to market products
Company has a strong marketing proficiency
New product launch adequately financed

26. 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