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A Business StrategyA Business Strategy
Product-Market
Investment Decision
• Product-market scope
• Investment intensity
• Resource allocation over business units
Product-Market
Investment Decision
• Product-market scope
• Investment intensity
• Resource allocation over business units
Basis of SCAs
• Assets/Competencies
• Synergies
Basis of SCAs
• Assets/Competencies
• Synergies
Functional Area Strategies
• Product
• Price
• Distribution
• Etc.
Functional Area Strategies
• Product
• Price
• Distribution
• Etc.
Figure 1.1
The Four Ps: The ToolsThe Four Ps: The Tools
MarketingMix
Product
Price Promotion
Place
The Four Cs: The EndsThe Four Cs: The Ends
CustomerSolution
CustomerCost
Communication
Conven-ience
The Other 4Cs: The Participants
Company
Consumer Channel
Competitors
The Participants
Views on the Marketing Processes
3-C AnalysisCustomer
CompetitorCompany
S-T-P MarketingSegmentation
TargetingPositioning
4 P’s Marketing PlanProductPricing
PromotionPlace
The Functional View
Views on the Marketing Processes
Understanding Customer
Value
Creating Customer
Value
The Process View
Capturing Customer
Value
Delivering Customer
Value
Sustaining Customer
Value
Understanding Customer Value
• Value is defined as the perceived worth in monetary units of the of the set of economic functional / technical and psychological benefits received by the customer in exchange for the price paid for for a product offering, taking into consideration the available offerings and prices.- Anderson, Jain and Chintagunta(1993)
Understanding Customer Value
Psychological
Functional Economic
Plea From an Anonymous Customer
• Don’t Sell me Clothes, Sell me a sharp appearance, style and attractiveness.
• Don’t Sell me a House, Sell me comfort, contentment, a good investment and a pride of ownership.
• Don’t Sell me Toys, Sell my children happy moments.• Don’t Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.• Don’t Sell me Books, Sell me pleasant hours and the
profits of knowledge.• Don’t Sell me Computers, Sell me the pleasure and
profits of the miracles of modern technology.
The Moral is…..
• Don’t Sell me THINGS, Sell me Ideas, Feelings, Self-respect, Home, Life and
Happiness.
PLEASE DON’T SELL ME THINGS
A successful differentiation strategy should
ProvidePerceived
Value
Be Difficultto Copy
GenerateCustomer
Value
12
Vertical IntegrationVertical Integration
Growth Strategies
MarketPenetration
MarketPenetration
Product ExpansionProduct
Expansion
DiversificationDiversification
Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957, pp.113-24
MarketExpansion
MarketExpansion
NewMarkets
NewMarkets
PresentMarketsPresentMarkets
NewProducts
NewProducts
PresentProducts
PresentProducts
Figure 2.4
What is a Product?
• A ProductProduct is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.
• Includes:– Physical Objects– Services– Events– Persons– Places– Organizations– Ideas– Combinations of the above
Components of theMarket Offering
Value-based prices
Services mixand quality
Product featuresand quality
Attractiveness ofthe market offering
Five Product Levels
Potential product
Augmented product
Expected product
Basic product
Core benefit
Unsought ProductsUnsought Products
New innovations Products consumers don’t want to think about these products Require much advertising &personal selling i.e Life insurance, blood donation
Product ClassificationsConsumer Products
Specialty ProductsSpecialty Products
Special purchase efforts High price Unique characteristics Brand identification Few purchase locations
Shopping ProductsShopping Products
Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances
Convenience ProductsConvenience Products
Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers
Suppliesand
Services
Suppliesand
Services
Materialsand
Parts
Materialsand
Parts
CapitalItems
CapitalItems
Product ClassificationsIndustrial Products
Product Quality Product Quality
Product FeaturesProduct Features
Product Style & Design
Product Style & Design
Ability of a Product to Perform Its Functions;
Includes Level & Consistency
Ability of a Product to Perform Its Functions;
Includes Level & Consistency
Help to Differentiate the Product from Those of the
Competition
Help to Differentiate the Product from Those of the
Competition
Process of Designing a Product’s Style & Function
Process of Designing a Product’s Style & Function
Developing a Product or Service Involves Defining the Benefits that it Will Offer Such
as:
Product Attributes
Product Classification
• Product Lines and Mixes– Product Line– Product Mix
• Benefits of offering a wide variety and deep assortment of products:– Economies of Scale– Package Uniformity– Standardization– Sales and Distribution Efficiency– Equivalent Quality Beliefs
Product Mix
WidthWidth - number of different
product lines
WidthWidth - number of different
product lines
LengthLength - total number of itemswithin the lines
LengthLength - total number of itemswithin the lines
Depth Depth - number of versions of each product
Depth Depth - number of versions of each product
Product Mix - Product Mix - all the product
lines offered
Product Mix - Product Mix - all the product
lines offered
Co
nsi
sten
cy
Product Lines andProduct Mixes at Gillette
Product-Line Length
• Line Stretching– Downmarket– Upmarket– Two-way
• Line Filling
• Line Modernization
• Line Featuring & Line Pruning
Product Life Cycle
• To say that a product has a life cycle asserts four things1.Products have a limited life.2.Product sales pass through distance stages, each
posing different challenges, opportunities, and problems to the seller.
3.Profits rise and fall at different stages of the product life cycle.
4.Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.
Applications of the Product Life Cycle
• The PLC concept can describe a:– Product class which has the longest life cycles (i.e. gas-
powered cars), – Product form which tend to have the standard PLC
shape (i.e. minivans),– Brand which can change quickly because of changing
competitive attaches and responses (i.e. Ford Taurus),– Style which is a basic and distinctive mode of
expression,– Fashion which is a popular style in a given field,– Fad which is a fashion that enters quickly, is adopted
quickly and declines fast.
Stages of the Product Life Cycle
Exhibit 7.2
Marketing Strategy Duringthe Product Life Cycle
• No sales revenue during this stage• Components of the product concept:
– An understanding of desired uses and benefits– A description of the product– The potential for creating a complete product line– An analysis of the feasibility of the product
concept
• Customer needs should be discerned before developing marketing strategy
Development Stage
• Begins when development is complete• Ends when customers widely accept the
product• Marketing strategy goals during this stage:
– Attract customers by raising awareness and interest
– Induce customers to try and buy– Engage in customer education activities– Strengthen or expand channel and supply
relationships– Build on availability and visibility– Set pricing objectives
Introduction Stage
• Be ready for sustained sales increases
• Rapid increase in profitability early in the growth stage that decreases at the end of this stage
• Length depends on nature of product and competitive reactions
• Two strategies:– (1) Establish a strong, defensible marketing
position– (2) Achieve financial objectives
Growth Stage (1 of 2)
• Marketing strategy goals in this stage:– Leverage the product’s perceived differential
advantages– Establish a clear product and brand identity– Create unique positioning– Maintain control over product quality– Maximize availability of the product– Maintain or enhance the product’s profitability to
partners– Find the ideal balance between price and demand– Keep an eye focused on the competition
Growth Stage (2 of 2)
• Few, if any, new firms will enter the market
• Still an opportunity for new product features and variations
• Typically the longest stage in the product life cycle
Maturity Stage (1 of 2)
• Four general goals in this stage:– (1) Generate Cash Flow– (2) Hold Market Share– (3) Steal Market Share– (4) Increase Share of Customer
• Four options to achieve these goals:– (1) Develop a new product image– (2) Find and attract new users to the product– (3) Discover new applications for the product– (4) Apply new technology to the product
Maturity Stage (2 of 2)
• Two options:– (1) Attempt to postpone the decline– (2) Accept its inevitability
• Harvesting• Divesting
• Factors to be considered during this stage:– Market segment potential– The market position of the product– The firm’s price and cost structure– The rate of market deterioration
Decline Stage
Problems Using the PLC
Trouble identifying Which Stage of the PLC the Product Is In
Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLCStrategy is Both a
Cause and a Result of the Product’s Life
Cycle
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
CREATING NEW CONSUMERS
Consumer
creating
potential
Consumer
creating
potential
Old business
Retaining consumers
Low risk
Old business
Retaining consumers
Low risk
New business
Creating new consumers
High risk
New business
Creating new consumers
High risk
Continuous
innovation
Continuous
innovation
RestageRestage
New products
in current
categories
New products
in current
categories
New to the
company
category
New to the
company
category
New to
the world
categories
New to
the world
categories
New Product Development
• Six strategic product development options:– (1) New-to-the-world products
(discontinuous innovations)
– (2) New product lines– (3) Product line extensions– (4) Improvements or revisions of existing
products– (5) Repositioning– (6) Cost reductions
• Customer perception of differentiation is critical
New Product Development Process
IdeaIdeaGenerationGeneration
ConceptConceptDevelopmentDevelopmentand Testingand Testing
MarketingMarketingStrategyStrategy
DevelopmentDevelopment
IdeaIdeaScreeningScreening
BusinessBusinessAnalysisAnalysis
ProductProductDevelopmentDevelopment
MarketMarketTestingTesting
CommercializationCommercialization
1. Does the offering have a relativeadvantage?
4. Can the offering be tested on a limited basis prior to actual purchase?
2. Is the offering compatible with buyers’ use or consumption behavior?
3. Is the offering simple enough for buyers to understand and use?
5. Are there immediate benefits from the offering, once it is used or consumed?
New-Product Development ProcessNew-Product Development ProcessIdea Generation & ScreeningIdea Generation & Screening
Why New Products Fail
• “Over Championing”
• Overestimated Demand
• Poor Design
• Poor Marketing Execution
• High Development Costs
• Strong Competitive Reaction
Challenges in NPD
• Idea Shortage
• Fragmented Markets
• Social & Governmental Constraints
• Cost
• Capital Shortage
• Need for Speed
• Shorter Product Life Cycles