chapter 4.4 product management
TRANSCRIPT
Chapter 4: product
Powerpoint: chapter 4.1
Powerpoint: chapter 4.2
Powerpoint: chapter 4.3
Powerpoint: chapter 4.4
Chapter 5: place
Powerpoint: chapter 5.1
Powerpoint: chapter 5.2
Chapter 6: price
Chapter 7: promotion
A.What is a product
B. Product categories
C. Product mix
D. Brand decisions
E. Product features
F. Product development
G. Product life cycle
4 classes:
4.1, 4.2, 4.3 and 4.4
4.1
4.2
4.3
4.4
F. Product development
Innovation
Market opportunities
Product development proces
Success or failure?
Case: Mercedes Benz
G. Product life cycle
Introduction
Growth
Maturity
Decline
F.
Innovation
Market opportunities
Product development proces
Success or failure?
Case: Mercedes Benz
Up to you
In pairs, 5’
Think of a newly developed product (innovation)
Was it created because there was a need?
An other reason?
Is it somehow a creative breakthrough?
Due to
Changes in consumer needs
New technologies
Mobile phone => wifi => smart phone
Competitive force
Samsung vs. Apple
Financial risks
Chances to fail are quite big
Even despite extended market research
Growth
Continuity (survival)
Profit
Tackle PLC
Make use of overproduction
Meet the changing needs of the consumers
Advantages innovation vs. Me-too
Early mover advantages: large brand awareness and knowledge
MP3 = iPod
Cost leadership because of large production volume
Registered innovation => production start long before competition
Eg. Senseo pads (ended in 2006)
Eg. Nestlé capsules (ended in 2012)
Nestlé lost an important court case in 2012 against a small British coffee manufacturer (Dualit)
Imitators
Advantages
No R&D costs
Steal part of the market/segmented targets
Disadvantages
Hard to conquer part of the market (‘follower’)
Sometimes only able to take part in the success by means of producing private labels
When do companies innovate?
They offer something rare/hard to find
Only to be found in a unique location
They improve the existing service/product
Locate problem => improve
They create a totally new product
Already in the USA
Practically unknown in the
East of Europe
Step 1: idea generation
Consumers
External developments
Competition
Technological developments
Internal sources (staff, sales managers)
Own research
2. Concept refinement and opportunity assessment
Evaluate the various ideas
How attractive is the potential market
How well can we manage this?
Product evaluation matrix
Various criteria, differences in rating
4. Business case
Turn idea into concrete concept
List product benefits
Define target audience
Concept testing
Make a prototype
Checklist
Check purchase intentions
Example: Google glasses, biochip
5 & 6. Market and customer research
Based on research, develop marketing strategy
USP
Price setting
Place – distribution channels
Communication goals
Budget – financial planning
LT goals for turnover and profit
Google Glass : “sometime this year, £ 1,000, stock (?)
7. Go/ No go
Full financial analysis
Estimation of costs and turnover
Estimation of break-even point
8. Product development
Concept becomes real product
Testing of the prototypes
Functional tests in the company
Consumer tests
9. Launch
Introduce the new product on the market
Good marketing!
Check out how the innovation is accepted by
Consumers
Distrbutors
Check out who they are
Innovators
Early adopters
Extremely popular
Michael Dell’s invitation:
for die-hards only
Failure?
Not a unique concept
Bad or insufficient marketing support
Inferior quality
Bad timing
Other reasons: product features, location, …
The goal:
Development of car running on hydrogen
Fast acceleration
150 km/h
Reach: 450 km
The segment:
Cheaper, 2nd family car: more compact and city-friendly
Middle class sports car for young drivers
‘Green’ car for those who want less pollution, basic transport and low fuel costs
SUV for higher segment which wants bigger car but regrets the high fuel costs
Checklist consumer panel:
Do you understand the concept of a hydrogen engine?
Do you believe in the promised achievements of the car?
What are the advantages of this car when compared to a normal car?
Which improvements can you think of?
What is the ideal price setting according to you?
Who in your family would drive your car? To what purpose?
Would you consider buying a car like this?
Result checklist
An effective, very compact electric car that runs on hydrogen.
Fun to drive, for 4 passengers
Practical and reliable means of transport with hardly any pollution
Can reach up to 150 km/h
And doesn’t need to be charged (as compared to cars with an electric battery system)
Ideal price all-inclusive is 25,000 euro
Development of marketing strategy
Target market is jong, highly educated, with an income above average-high
Couples or small families
Looking for a practical and environment-friendly way of transport
Image to be created:
fuel-efficient,
nicer to drive,
less polluting
has less limits when compared to hybrid or electric cars
Develop strategy:
1st year: sell 100,000 cars, loss: max. 15 mio. Euro
2nd year: sell 120,000 cars, profit: 25 mio. Euro
Three colours
Airco is optional
Price setting: 20,000 Euro
15 % margin for dealers
Advertising budget: 20 mio. Euro
Half for regional advertising
Half for national advertising
Focus on: fuel-efficiency and driving pleasure
Strategy LT:
3% of total car market
Car quality needs to be high as of day 1
Constant improvements
Price will be increased in year 2 and 3 if possible (competition)
Total advertising budget: increase of 10% every year
Up to you
Brainstorm about a new product for one of the following sectors
Health, wellness or lifestyle
Fun (event, culture, leisure time)
Retrospective (bring back something from the past)
Check the feasability
Depict the target audience
Describe your new product
G.
Every product goes through the PLC
Duration depends on type of product
Technological product: 1 year
Others: can last for more than 100 years…
Every phase asks for a different marketingapproach
Every phase: different turnover
Turnover:
Growing slowly
Facilitate adoption
Restraints:
Insufficient manufacturing capacity
Technical problems
Market is fluid, predictions are difficult
Examples: Dixan Megaperls, Omo, Renault Cactus, augmented reality
Costs
Costs > return
R&D
High manufacturing costs
Low sales volume
High advertising costs
No profit yet; financial loss only
Examples: 3D television, holographic projection
Competition:
Hardly any
Marketing objectives
In case of new product category: explain
Create brand awareness
Stimulate trial
Work on distribution network
Product management
Hardly any variation/choice
Mostly 1 type only
Competitors will follow soon if they smell success
Price setting:
Price skimming
Penetration pricing
Normal price setting
Communication strategy:
Depends on budget and size of organization
Introduction new product category
Make sure brand name becomes well-known (brand awareness)
Not just a pen, but a legacy: Montblanc
Sales promotions
Distribution strategy:
You get a chance to be introduced?
Strict conditions
Negotiate
Fight for shelf space
Turnover grows
Evolution of costs:
Manufacturing costs decrease
Economy of scale: more production => lower costs
Learning by doing
Profit grows
Competition grows too (me-too players)
Marketing objectives
Create brand preference
Potential buyers need to become real buyers
Extend distribution network
Make sure the growth phase lasts as long as possible
Create new types of your product
Fill the gaps in the market
Distribution:
New channels – places for distribution
Smaller shops will wait for your product to be truly successful
Price setting:
price skimming
Slow decrease: new customers
Penetration pricing
Reach normal sales volume after initial boost
Communication/advertising:
Focus on strong brand
(Value-) expressive advertising
Focus on product benefits
Sales promotions
Eg. Lego for girls (2013)
Largest part of products are (stuck) in this phase
Market stability
No considerable growth
Turnover:
First slow growth
Followed by plateau
Maximum level of penetration
All possible buyers have been reached
Competition
A lot of competition
Price battle
Margins are smaller
Profit is made because of large sales volume
Marketing objectives
Defend market share
Create brand loyalty
Product management = PLC-stretching
Look for new consumers
Look for new moments of use
Steal consumers from competitors
Increase user frequency
Stimulate replacement
Improve design/style
Improve functionality
Improve quality
Up to you: look for examples
Look for new consumers
Look for new moments of use
Steal consumers from competitors
Increase user frequency
Stimulate replacement
Improve design/style
Improve functionality
Improve quality
Product management
Sometimes: stop product line
No more parts, accessories, service, repair
Eg. Windows 98 after XP launch, Minidisc player
Turnover decreases, due to
Technological evolution
Increasing competition
Changing life styles
Once in decline, now again trendy
Very sudden and brisk death
Photo cameras
Slow death
Video recorders
Decline to marginal level
Survive in the margin