1. MKT4 - Slide 1 to 19 1 4. Product Planning & Screening MKT4

2. 2MKT4 - Slide 1 to 19 Primary Strategic Orientation Starting point to developing a product development strategy; must focus on 6 primary product development orientations: Time-to-Market – getting the product to the market fast. Typical of rapidly changing technologies/fashions. Trade offs: product optimisation, performance, cost & reliability Time-to-Market – getting the product to the market fast. Typical of rapidly changing technologies/fashions. Trade offs: product optimisation, performance, cost & reliability Lower Production Cost – lowest cost or highest value. Usually for commodity types or products reaching maturity or where there is a consolidation/shrinking market Lower Production Cost – lowest cost or highest value. Usually for commodity types or products reaching maturity or where there is a consolidation/shrinking market

3. 3MKT4 - Slide 1 to 19 Primary Strategic Orientation (contd) Low Development Cost – involves tradeoffs with product performance, innovation, cost & reliability Low Development Cost – involves tradeoffs with product performance, innovation, cost & reliability Product Performance, Technology & Innovation – focuses on highest level of performance, functionality & features. Involves high risk with newer technologies. Trade offs: time & cost involved Product Performance, Technology & Innovation – focuses on highest level of performance, functionality & features. Involves high risk with newer technologies. Trade offs: time & cost involved

4. 4MKT4 - Slide 1 to 19 Primary Strategic Orientation (Contd) Quality, Reliability, Robustness – assures high level of these, i.e., where safety, reliability issues are important, e.g., pharmaceuticals Service, Responsiveness & Flexibility – focuses on providing a high level of responsiveness to customer requirements. Requires additional resources

5. 5MKT4 - Slide 1 to 19 Product Development Process Again?! 5 Step Process: Idea generation Idea generation Idea screening & evaluaProduct development Idea screening & evaluaProduct development Commercialisation Commercialisation

6. 6MKT4 - Slide 1 to 19 Product Development Process (contd) Idea generation – can be from customers/users of company products, from market research, ideas from competitors, from employees/dealers Idea Screening & evaluation - this step should consider how attractive product is form long term & short term perspective; how it will affect consumers over time. Need to screen against company’s marketing strategies/strategic plan Need to screen against company’s marketing strategies/strategic plan Against company sales/profitability requirements Against company sales/profitability requirements Against customer/buyers info collected in first stage Against customer/buyers info collected in first stage

7. 7MKT4 - Slide 1 to 19 Product Development Process (contd) Idea development – Need for customer feedback again, thru market research, i.e., concept testing. Allows company to identify potential market, estimate cost, revenue, profitability (idea can be dropped at this stage) Idea development – Need for customer feedback again, thru market research, i.e., concept testing. Allows company to identify potential market, estimate cost, revenue, profitability (idea can be dropped at this stage) Product development – first stage product makes physical appearance (could be on CAD system) Product development – first stage product makes physical appearance (could be on CAD system)

8. 8MKT4 - Slide 1 to 19 Product Development Process (contd) Commercialisation – choose marketing mix and go ahead!

9. 9MKT4 - Slide 1 to 19

10. 10MKT4 - Slide 1 to 19 Strategic Implications of PLC Embryonic (or introduction): sale rises slowly as customers try new product. Need to spend more (say on advertising) than earnings Growth: Product is successful and growth accelerates. Experience curve effect lowers costs. Need to keep spending on promotion. Cash inflows may only equal outflows

11. 11MKT4 - Slide 1 to 19 Strategic Implications of PLC (Contd) Shakeout: imitators come in, and weaker similar products leave Maturity: market saturation and sales stop rising. The product (if still in the market) starts paying off, and profits rise further if organization has good share Decline: Technical advancement brings new products. There is a decline. Need to spend minimal money and strategy of harvest

12. 12MKT4 - Slide 1 to 19 PLC Since the profits (& cashflows) vary according to stage of growth of the product, the organization should have a mix of products at different stages in the PLC Many doubt validity of this tool – may not apply to branded goods which have a very long & profitable life

13. 13MKT4 - Slide 1 to 19 Why extend the PLC? To gain more sales thru longer presence By extending each stage of the PLC, there is a better chance of exposure of the product to relevant customer groups

14. 14MKT4 - Slide 1 to 19 Product Management Strategies for Extending the PLC Product diversification – creating different product variants (e.g., newer versions of WINDOWS) New Product uses – applying core products to different uses (e.g., using Macintosh computer for desktop publishing), MP3 players, etc Changing product layers – altering product features to create different product families (e.g., HP ink let and laser printers)

15. 15MKT4 - Slide 1 to 19 Product Marketing Strategies for Extending the PLC Re-positioning – changing the perceived value/intent of product Co-branding – enhancing (or diluting) the products brand by associating with another strong brand Re-packaging - e.g., Colgate toothpaste in a new dispenser Re-branding – a drastic/costly measure to disassociate the brand from the previous values attached e.g., - DATSUN to NISSAN Increase frequency of use – e.g., CHIVAS REGAL, from special occasions to drink more often

16. 16MKT4 - Slide 1 to 19 Product Marketing Strategies for Extending the PLC (contd) New markets and segments – e.g., Eastern Europe & Africa to senior citizens and women Pricing & special offers – this is a positioning tool

17. 17MKT4 - Slide 1 to 19 Strategy Application Within the PLC Model Introduction – Increasing frequency of use, pricing Growth – Pricing, product diversification, new product uses, changing product layers Maturity – Re-packaging, Co-branding, Pricing, Product diversification, New product uses Decline – Re-branding, Re-positioning, Increase frequency of use, New markets & segments, Pricing

18. 18MKT4 - Slide 1 to 19 PLC – Limitations & Benefits Limitations difficult to foresee transitions in stages; may cause incorrect application of strategies difficult to foresee transitions in stages; may cause incorrect application of strategies Not all products/services go thru every stage Not all products/services go thru every stage Products do not spend the same amount of time at each stage Products do not spend the same amount of time at each stage Inefficient when dealing with Brands and services Inefficient when dealing with Brands and services

19. 19MKT4 - Slide 1 to 19 PLC – Limitations & Benefits (Contd) Managers need a predictive tool for strategy and dealing with competitors Good for strategies application on a macro basis