Characteristics & Strategic Implications
Marcellous Curtis
Product Lines De ned
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• Proprietary or catalog: Standard products offered to many customers and usually inventoried in anticipation of sales orders.
• Custom-built: Different variations of accessories and options to complement proprietary or catalog products offered.
Product Lines De ned
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• Custom-designed: Products designed for (and usually only for) a particular user. • Industrial services: Intangibles, i.e., maintenance, machine repair, consulting.
New Product Approaches • Technology push:
– When perceived value of particular technology is great; rm has only a vague notion of possible applications, and usually not much more.
• Market pull:
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– Primarily the result of marketing research methodologies of interviewing potential users about their needs, then developing solutions to those perceived market needs.
Phases of New Product Development Idea and concept generation Screening and evaluation Business analysis Product development Product testing
Product commercialization and introduction
Organization of the New Product E ort • Product manager:
– Individuals responsible for four P’s marketing mix decisions for speci c product line as it travels through life cycle; responsibility often extends to new product development.
• New product committee:
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– Part-time interdisciplinary management group reviews new product proposals; advantages outweigh disadvantages because committee is most common form of organizational structure for managing new products.
Organization of the New Product E ort • New product department:
– Speci c department generates and evaluates new product ideas, directs and coordinates development work, and implements eld testing and precommercialization of new product; allows for maximum e ort in new product development, but at expense of major overhead costs.
• New product venture team:
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– Task force representing various departments responsible for new product development and implementation; normally dissolved once new product is established in market.
Product Life Cycle
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Actual PLC curves can be any shape—from product that doesn’t sell at all, to fad that grows fast but has short life, to seasonal product, etc. Company depends on its marketers to understand what factors determine success and to make appropriate strategic decisions. It is often tempting for new students to want to learn PLC super cially, but in real world many people depend on in-depth understanding.
Stages in Adoption Process • Awareness:
– Buyer learns of new product, but lacks information.
• Interest:
– Buyer seeks out or requests additional information.
• Evaluation:
– Buyer (or member of buying team) considers/ evaluates usefulness of product; consideration might be given to value-analysis project or makebuy situation. • Trial:
– Buyer adopts product on limited basis. • Adoption:
– If trial purchase worked, then buyer decides to make regular use of product.
Factors In uencing Rate of Adoption-Di usion • Diffusion:
– Spread of new product, innovation, or service throughout an industry over time.
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• Di usion speed varies among industries – fast in electronics, slow in domestic steel. • As the marketer you must know, evaluate impact of, monitor, and where possible a ect factors that in uence adoption/di usion rate.
BCG SBU Portfolio Business Strategy High Growth rate, Cash use Low Moo!
Low
High
Relative Market share, Cash generation
Characteristics & Strategic Implications of Each BCG Quadrant Quadrant Stars
Continue to expand capacity
Cash Cows
Capacity maintenance expenditures
Question Marks
Dogs
Investment Earning Characteristics Characteristics Low to High
High
Heavy initial capacity costs Negative to Low High R&D Deplete capacity to meet demand
High to Low
Cash-Flow Characteristics
Strategy Implication
Negative to Break-even
Heavy promotions
Positive
Maintain market share
Negative
Promotions & distribution
Positive to Break-even to Negative
Reduce distribution; max cash
BCG Business SBU Portfolio Strategy
High Growth rate,
Use cash to make into star
Defend position
Cash use
Low
Nurture to feed cash to? Fix or abandon High
Low Relative Market share, Cash generation
Problems with Using the BCG Matrix
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• Only measures revenues, not pro tability • Only focuses on the rm as a source of capital – ignores capital markets • Market growth rate is an inadequate descriptor of overall industry attractiveness • O ers strategies, but not means of implementation
Important Characteristics of Business Services • Intangibility:
– Freight forwarding, consulting, repair, etc. can seldom be tried out/tested in advance of purchase; instead, buyers must view advertising copy, listen to sales presentation, or consult current users to gain insight into expected performance.
• Heterogeneity:
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– A service is an experience and thus cannot be duplicated; di cult to standardize and thus output quality may vary.
• Perishability: – Services cannot be stored and markets uctuate by day, week, or season; idle service capacity is business that is lost forever—no inventory bu er.
• Simultaneity (Inseparability):
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– Production and consumption of services are inseparable; this typically puts marketer in very close contact with customer, requiring them to be highly professional.
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Important Characteristics of Business Services
• Core Benefit: The fundamental service or benefit that the customer is really buying.
• Basic Product:
Actual product that offers the core benefit
5 Levels of a Product
5 Levels of a Product
A set of attributes and conditions that buyers normally expect and agree to when they purchase this product.
• Augmented Product:
Product that meets customers’ desires beyond their expectations.
• Expected Product:
Thank You