Developing a Product strategy

Product- riskiest of the marketing mix Effect of increased pace of technology

Become obsolete before you recover money

We cover Need to understand Product Product strategies over PLC Managing the industrial product line

Core & Augmented Product

Augmented properties

Core Product Compt Enhanced properties

Product strategies involve continual change: Any change in the consumer need Change in technology Change in law Change in economics Changes in culture Changes in PLC any modification at maturity

 Product strategy also involves Whether changes are required in existing product? Whether products should be added / dropped?

 INDUSTRIAL PRODUCT MANAGEMENT Industrial product manager is very vital in this:

Forecasts Does market sensing Does customer linking

Product and marketing managers When? Series of product & one market One product line several markets What is hybrid

Sales & Profit Life Cycles

Sales & profits ($)

Introduction
visionaries

Growth
Pragmatist

Maturity
Conservatives

Decline
laggards

Time

The Product Life Cycle

Offering Development Stage-TECHNOPHILES

No sales volume offering still being developed. Product is not yet completely defined. Profits do not exist. Development at whose insistence? Promotion may be oriented towards publicity about technological developments. Heavy investment to prepare the offering to satisfy customer needs.

Offering Introduction Stage-visionaries

Low Product sales volume. is somewhat basic little need for competitive differentiation. Profits are typically negative. Supplier experiments growing pain and customer pains of uncertainty Low learning- OK (electronic calculator) New offering a logical extension of existing- it must be OK with the customer (Int Mktg) High learning- takes time (Elec typewriter)

Offering Growth Stage- pragmatist

Good news- Product is accepted Bad news- likely to attract competition Improve design Market penetration pricing may be appropriate as competitors bring pressure on high margins. Profits increase - new adopters accept product. Accordingly, product differentiation becomes important to distinguish the offering from competitors (and to help protect margins.) Promotion serves to remind/reinforce decisions. Distribution is often important in the training and education of customers.

Offering Maturity StageConservatives

Profits have peaked, competition fights over market share. Promotion reinforces buyer decisions and focuses on supplier reputation and value. Distribution strives to serve all market sub-segments. Time to think of new product offerings Price is a major component of the marketing mix. New customers do not replace sales volumes as old customers move to newer products- value migrations

Offering Decline Stage

laggards

Consolidation usually occurs among suppliers Product line is reduced to minimize product variation efforts are made by remaining competitors to operate at productive rates. Promotion reduced to minimal levels to accommodate existing customers. Price, particularly associate with a long-term contracts, is a major part of the marketing mix.

 Develop and review trend information for the past cycles. Profit / sales ratio Examine changes in the number and nature of competitors. South Korea into LA why not I as well Review short-term competitive tactics are competitors pricing to utilize new capacity or improve short term sales volume? Are new product introductions aimed at segments currently served by existing offerings? Will a competitor innovate your product out of business? It is better to obsolete yourself instead of getting it done by competitors Do unto yourself what you would have done to others

How Can You Determine Where an Offering Is in the PLC?

Perceptual Map
1.0 0.8 0.6 0.4

0.2

-1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 -0.2 -0.4 -0.6 -0.8

0.2

0.4

0.6 0.8 1.0 1.2 1.4 1.6

Introduction
Sales Low

Growth

Maturity
Growth rate redn Peak sales

Decline
Declining

Rapid

Profit

Loss Investment in prodn & mktg

Reaches peak

Increased competition reduces profits and cuts into total profits

Pushes cost up

Competit Nil ors

Growing

Many fight for same Few . Shakeout pie of weak

Custome Innovative rs 2.5% Visionaries

Early adopter 13.5% Pragmatists

Mass Mkt 68 % Conservatives

Laggards 16%

Overall strategy

Product

Price

Distribution

Promotion

Mkt acceptance. Foster product awareness and trial Mkt Penetration. Persuade mass Mkt to prefer your brand
Defend brand. Stop competitors from entry

Basic Design low learning products

Skim Pen Cost+ Cmp High

Selective

Informative. Perhaps publicity

Product /design Improvement. Expand line

Differentiate. Full line Find new users keep current satisfied Minimal changes to product. Line reduces to best servers

Intensive

Persuasive. Loyalties

Market prices. Avoid war

Intensive

More user/ usage. Loyalties

Redn of expenses. Prepare for removal of prod. Squeeze all benefits of the

Low selective enough to permit liquidation of

Minimal to none. Perhaps negative

Strategies for existing products

Do nothing If you have a huge customer base, but is in the process of being replaced, lower OH and cost of production Change the product? If things wont work, drop the product. Why not?

Product elimination decisions

Customers have no alternatives despite changes in environment- CRDI- do not eliminate Will relationship gets jeopardized Will it hurt the profitability of other products Corporate image-raise doubts on the reliability of the firm