Principles of Marketing BS2101: Product Portfolio Strategy

Principles of Marketing BS2101
Lecture 6 Product Portfolio Strategy
2012/2013
Author: Dr P. Harborne
4 3 5
Week 1 Principles of Marketing 11 6
10 7 8 9
2012/2013 Author: Dr P. Harborne 2
Product Portfolio Strategy

Objectives
To understand:
What constitutes a product The importance of customer perception The issues behind and approach to product mix The impact of cycles on product strategy Portfolio Management Brand Management
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Product Strategy
1. 2. 3. 4. 5. Specifying the product The product mix Customization Product life cycle Branding
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SPECIFYING THE PRODUCT
2012/2013
What is a product?
Consumer Industrial Services Places People
Ideas
Organisations
2012/2013
Classifying products
Durable/non-durable Convenience/shopping/speciality Businesses buy raw material, processed material, components, subsystems etc Goods product/service product
Products do not come in one shape or size!

Augmented Product
What is the customer buying?
2012/2013
Alessis rocket-style juicer, designed by Philippe Starck, 199091
2012/2013
What is the offer or augmented product?

Is a watch a single function device that has outlived its usefulness?
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Drivers of Augmentation
Product
Service
Augmented Product
Personnel
Image
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Branding an Example
Head and Shoulders is one of the brands sold by Proctor & Gamble. What other brands do they sell?
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Proctor &Gamble Brands

Note that the products seem to group into a number of families Fabric care
Home care
Hair products Beauty products

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Food & drink

Author: Dr P. Harborne 19
PRODUCT MIX
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Product Portfolio Components

Product Mix is the Total Set of all Products a Firm Offers for Sale
Laundry & Cleaning Products
Health Care Products
Beauty Products
Product Lines Width of Product Mix

Product Portfolios
Consider What is the Nike product mix?
Nike HQ Mexico
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Product Portfolio
Consider What is Boston Consulting Groups product mix? Expertise in a number of industries e.g. automotive,energy, media, retail Expertise in a number of functions e.g branding, innovation,IT, Strategy, marketing http://www.bcg.com/our_expertise/expertise.jsp
Principles of Marketing
Product Strategy
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Product Strategy
Takes place at all levels Product Mix strategy Product Line Strategy Product Group Strategy Product Strategy
Should be integrated often only driven by budget setting!

Product Mix Strategy

Decisions
Adding a Product Line Deleting a Product Line
Influences
Resources (both quantity and type) Competition Strategic Objectives
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Product Line Strategies

Product Line Extensions
Stretching Adding new items to line Downward
Filling
Adding sizes or styles
Contracting a Product Line Dropping items
Upward
Two-way
Danger of Cannibalization
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Product Group/Product Strategy

Basic choices to be made
Customised vs mass market (Fashion for segment of one)
ICT had enabled drive to personalise as much as possible

Personalised communication Mass customisation
What gives a sustainable advantage?

Mass Customisation
Visionary definition
Mass customisation is the ability to provide your customers with anything they want profitably, at any time they want it, anywhere they want it, and in anyway they want it.
Realistic definition
The use of flexible processes and organisational structures to provide varied and often individually customised products and services at the low cost of a standardised, mass production system.
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Types of customisation
Cosmetic customisation Customisation without adapting the core product (e.g. Levis Jeans) Adaptive customisation Offer product with many options; customer creates customised product (e.g. Dell) Collaborative customisation Customisation based on asking questions to customers (e.g. Haircut) Transparent customisation Customisation without asking (e.g. Car insurance)
Product Decisions
Launching a new product is not the end May need
Fixes (e.g. Microsoft issue 1) Improvements ( performance, MMI, price, quality) Replacement But Apple have found regular replacements are anticipated sales of iPhone 4 in Q1&Q2 2012 slowed waiting for iPhone5
Product Life Decisions

Many Products Are Doomed to Become Obsolete
Is there a role for Payphones now there is the mobile phone? Is there a role for CDs now there is MP3? Is there a role for cheques now there is ecommerce? Is there a role for Blockbuster now that there is LoveFilm or I-Tunes? Amazon now (2012) sell more e-books than print!
2012/2013 Author: Dr P. Harborne
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Product Life Cycle
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Fashion Cycles & Strategy
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Recurring Product Life Cycles

The Cyclic Nature of Fashion
Consider the mini skirt which has returned every decade since the 1960s!
Is fashion different to Fads?

Fads ??
Something that experiences high demand For a short period and then becomes obsolete.
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Portfolio Management
When considering multiple products to be included in the marketing plan it is essential that they have strategic fit & leverage fit what the business wishes to do enable the business to achieve its objectives have synergy with other products and projects have synergy with business capabilities
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Portfolio Management
Portfolio management involves detailed actions covering: harvesting (minimal investment) products farming (limited investment) products; withdrawing products; evolving products;
developing new products/ product line extensions There are a number of tools to help e.g. the BCG matrix
Portfolio Management Tools

The BCG Matrix
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Portfolio Growth Strategies

Note The implications for the firm
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Portfolio Growth Strategies

Implications
All 4 strategies may require development of new products Innovation and NPD are high risk, expensive activities Innovation may be
discontinuous/continuous Radical/incremental Disruptive/sustaining
Standardised processes are now common Interdisciplinary teamworking is now common Research continues to identify best practice
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INNOVATION AND NEW PRODUCT DEVELOPMENT
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Innovation and NPD

Current focus on: Collaboration & Co-opetition Open innovation
- Open Source e.g. Linux - Collaborative Innovation Network (COIN) - group of self motivate people working towards a common goal Innovation networks (better for support?)
Reducing innovation timescales

Product lives are shortening Value of platforms e.g. Football Manager
Extrapolating ??
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Extrapolating ??
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Extrapolating ??
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Extrapolating ??
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Commercial Networks
InnoCentive (www.innocentive.com)- founded in 2001, connects organizations, with a global network of more than 200,000 individuals in an Open Innovation Marketplace. Creative thinkers join the InnoCentive Solver community to solve some of the world's toughest challenges. Seeker organizations post their challenges on the InnoCentive web site, and offer registered Solvers significant financial awards for the best solutions. Seeker and Solver identities are kept completely confidential and secure, and InnoCentive manages the entire IP process.
InnoCentive examples
The Seeker is looking for a novel means of manufacturing and assembling a new type of aluminum beverage can. The Seeker is looking for a cleaning protocol for human hair tresses that can remove deposited materials such as silicone, fatty alcohols, and polymers. The method must be non-damaging to the hair, not utilize highly hazardous materials, and be fast and cost effective.(reward $10k) The Seeker requires metrological approaches to improve Measurement Systems Analysis (MSA) within data generated during destructive testing procedures of physical specimens. (reward $8k).
PACKAGING AND BRANDING
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Product Strategy
Product or Offer? Customer perception of products includes packaging and branding Is packaging important? Consider
Does packaging make the product more attractive? Does it protect it during transport and storage? Does it show legally required information? Does it make the product more recognisable?
What about disposal of packaging?

Sustainable Marketing
Why does this affect products? Legislation Consumer demand How does this affect products? Harmful chemicals in manufacture or product SC Johnson (Pledge, Mr Muscle) reformulating products Is Coca-Colas use of water an issue? Waste material Nike are recycling shoes, recycling waste, reducing solvent use, reducing energy use Packaging Wal-Mart & Super Sandwich Bale Amazon from 2009, recyclable packaging, less packaging Unilever concentrated detergent to reduce bulk, packaging, storage and transport (but needs more water in use??)
Author: Dr P. Harborne 56
2012/2013
Packaging
What do these packages add
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Branding
Creating an Image Brand Decisions A Brand is a Name, a Term, a Symbol, or Any Other Unique Element of a Product that Identifies One Firms Product(s) and Sets Them Apart From the Competition.
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Establishing a brand
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Creating a Brand 118 118 the new DQ

Why was this necessary?
Was it successful? What problems did it experience?
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Worlds most valuable brands
http://www.interbrand.com/best_global_brands.aspx
Branding messages
A well managed brand conveys up to 6 levels of meaning:
The products attributes The products benefits The producers values Culture Personality, and
Consider Nike!
Characteristics of the user.

When buyers can visualise all six levels of meaning for a brand, the brand is considered a deep brand. If buyers can only visualise one level, it is a shallow brand.
Brand values
Sustainable Marketing
Fish from sustainable sources Wood from sustainable sources FairTrade For these to work, what level of brand meaning is needed?
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Nike the symbol
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Elements of a strong brand name

Distinctiveness: identifies supplier and distinguishes from competition eg. Shell, Virgin. Relevance: conveys something about the products benefits and qualities eg. Kleenex. Memorable: understood and recalled with ease eg. Tango. Flexibility: scope to cover business expansion (translatable). Legal protection. Can changing a brand help a firm recover?
Logo Recognisability?
.
Brand Decisions
BRAND EQUITY
Awareness
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Preference
Loyalty
Portfolios
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Summary
We have explored:
What constitutes a product The importance of customer perception The issues behind and approach to product mix The impact of cycles on product strategy PLCs, fashions, fads Portfolio Management Product, packaging, brand Brand Management

Principles of Marketing BS2101: Product Portfolio Strategy

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Principles of Marketing BS2101: Product Portfolio Strategy

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Principles of Marketing BS2101

Lecture 6 Product Portfolio Strategy

Week 1 Principles of Marketing 11 6

Product Portfolio Strategy

SPECIFYING THE PRODUCT

Products do not come in one shape or size!

What is the customer buying?

Alessis rocket-style juicer, designed by Philippe Starck, 199091

What is the customer buying?

What is the offer or augmented product?

What is the customer buying?

Is a watch a single function device that has outlived its usefulness?

Proctor &Gamble Brands

Hair products Beauty products

Food & drink

Product Portfolio Components

Health Care Products

Product Lines Width of Product Mix

Should be integrated often only driven by budget setting!

Product Mix Strategy

Product Line Strategies

Stretching Adding new items to line Downward

Adding sizes or styles

Contracting a Product Line Dropping items

Product Group/Product Strategy

ICT had enabled drive to personalise as much as possible

What gives a sustainable advantage?

Product Life Decisions

Product Life Cycle

Fashion Cycles & Strategy

Recurring Product Life Cycles

Is fashion different to Fads?

Portfolio Management Tools

Portfolio Growth Strategies

Portfolio Growth Strategies

INNOVATION AND NEW PRODUCT DEVELOPMENT

Innovation and NPD

Reducing innovation timescales

PACKAGING AND BRANDING

What about disposal of packaging?

Creating a Brand 118 118 the new DQ

Worlds most valuable brands

Characteristics of the user.

Nike the symbol

Elements of a strong brand name

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