Part Three

Business Marketing Programming

Part Three
Business Marketing Programming
Part 3 covers the key areas of business marketing programming.
Chapter 8 Developing and Managing Products
Chapter 14 Pricing and Negotiating for Value
Chapter 9 Business Marketing Channels
Chapter 10 Communicating with Customers (IMC)
Particular Communication Vehicles:
Advertising, Trade Shows, and PR (Chapter 11)
Direct mail, Telephone, and Internet (Chapter 12 )
Personal Selling (Chapter 13)
8-2

Chapter Eight
Developing and Managing Products:
What do Customers Want?

Learning Objectives
What is a Product?
Managing Products
Key product management decisions
Product management levels
Product management tools (portfolio and product life
cycle)
New Product Development
Identify the process of developing products internally
Discuss the importance of lead users to the product
development process
Indicate what partnering, with both suppliers and
customers, means to the product development process
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What is a Product
BENEFIT:

How the Product or Service Satisfies

A Need

PRODUCT:

A Bundle of Benefits and a Collection

of Solutions to Needs and Wants

A Benefit That Satisfies a Customer

COMPETITIVE
Better than A Competitors Product
ADVANTAGE:
Benefits

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Core Product & Augmented Product

Product A collection of features; A collection of advantages;
A collection of buyer benefits including services.
Core Product the tangible item plus customary services
Augmented Product the tangible product plus customary and
unique/customized services comprises the augmented
product.
A means of exceeding customer expectations
Should be done on a customer-by-customer basis
Is accomplished by adding unique/customized services to the core
product
Aiding in building strong customer partnerships
E.g., computers + 2 hr free training is a core product or an augmented
product?
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Managing Products

Key product management decisions

Product management levels

Management tools
1. Product Portfolio BCG and GE matrix
2. Product Life Cycle

8-7

Key Product Management Decisions

1.
2.
3.
4.

Which product to introduce

Which products to keep
Which product to promote
What level of promotion to provide (low to
high?)
5. What products to continue or delete

8-8

Product Management Levels

The product category

The product line
The technology platform
The product itself

8-9

Product Management Tools

1. Product Portfolio Management Tools

BCG Matrix
GE Matrix

2. Product Life Cycle

8-10

The BCG Matrix

Growth share matrix is a portfolio planning method that

evaluates a companys products in terms of their market
growth rate and relative share.

Products are classified as: Stars, Cash Cows, Question

Marketing efforts, or investments, will change, depending on

the products classification

marks and Dogs

8-11

The BCG Matrix

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The BCG Matrix

Stars are high-growth, high-share businesses or products
requiring heavy investment to finance rapid growth.
They will eventually turn into cash cows.
Cash cows are low-growth, high-share businesses or
products that are established; require less investment to
maintain market share in a stable market.
Question marks are low-share business units in high-growth
markets requiring a lot of cash to hold their share.
Dogs are low-growth, low-share businesses and products that
may generate enough cash to maintain themselves but do
not promise to be large sources of cash. Not worth much
investment.
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The BCG Matrix

Problems with Matrix Approaches

Difficulty in defining SBUs and measuring market

share and growth
Time consuming
Expensive
Focus on current businesses, not future planning

8-14

GE Matrix

A more advanced model developed by General Electric:

measuring market attractiveness and business strength

Market attractiveness is a composite measure of the

potential for sales and profits in a particular market segment

Business strength is the strength of our offering relative to

other companies products

GE Matrix is an expansion of the BCG matrix. The

dimensions are more comprehensive and detailed.

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GE Matrix
Market Attractiveness
Growth
Diversity
Competitive
Structure Change
Technology Change
Social Environment

GE Matrix

Business Strength
Size of Market & Share
Company Growth Rate
Profit
Margins
Technology Platform
Image
People

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Product Life Cycle

Product Life Cycle (PLC) The cycle of product

development, introduction, growth, maturity, and decline in
sales

PLC describes the sales history of a successful product

The cycle can be applied to individual products or to product

platforms or categories

As products go through the life cycle, marketing emphases

will change.

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PLC Decision Points

Sales

Rapid expansion of distributors

Product line expansion
Niche marketing
Continued heavy promotion
Sales force incentives and
management
Search for new sources for
supply
Need to balance supply and
demand
Stock-out and back-order
damage control

Redirect focus & promotion

Invest in expanding production
Build inventory
Expand distributor network
Train expanded sales force
Institute marketing controls
Invest heavily in advertising
Target on best prospects:
innovators and enthusiasts
Use most loyal distributors
Use free samples
Use public demonstrations
and trade shows
Use publicity and endorsements
Use specialist media & catalogs

Development

Introduction

Strongly defend home-market

niches
Prune product lines
Emphasize gross contribution
rather than market share and
sales volume
Review logistics: prune costs
Reduce pioneering sale force
effort, more telemarketing
More trade than consumer
promotion
Introduce flankers, private
labels, generics
Reinvest in market research
& R&D
Use promotions to increase
heavy-user loyalty
Freeze investment in plant
Productivity review
Special trade promotions to
keep channels happy
Focused attacks on vulnerable
competitors
Long-term price reduction or
at least a short-term price
promotion
Keep plant at maximum
capacity and subcontract
excess

Growth

Maturity

Cut low-gross-margin products

from the line
Withdraw from channels in order
of their unprofitability
Freeze R& D and product
modifications
Freeze advertising and
promotions
Attempt to maintain price to the
end
Buy back remaining stock and
redistribute
Maintain spare parts and service
Consider divesting while it is a
going concern

Decline

Time

8-18

PLC A new look

Product
Development
R&D
Test
Marketing

Kill the
product
Introduction

Growth Maturity Decline

Find New Repeat Life

Uses
Cycle
Find New
Markets

8-19

PLC Recommendations for each stage

Introduction Profits are not expected; the focus is on
building distribution channels; a truly innovative product
must focus on stimulating primary demand
Growth Sales and profits increase at their fastest rate;
product differentiation may be employed in an attempt to
stimulate secondary demand
Maturity Sales level off; maintain/improve its profit
position through product differentiation
Decline seek markets/applications for the product

8-20

Discussion Question
Some authors have combined the life cycle and portfolio
matrices into one model.
1.

How would you do that?

2.

What are some limitations of the model?

8-21

New Product Development

The most basic decision: go no go decision
Risks involved in developing new products:

Investment risk we decide to go ahead with the

product, it fails, and we lose some or all of our
investment
Opportunity risk we decide to kill a product and
thereby lose all of the revenue we would have gained if it
had been a success

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Product Development Process

EVALUATION
LAUNCH
BETA TESTING
PRODUCT DEVELOPMENT
SPECIFYING FEATURES
SCREENING AND PRELIMINARY
INVESTIGATION
IDEA GENERATION

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New Product Development Process

Internally developed products:
1.

Begin as an idea that must be screened to determine if it is worth

further development (concept test)

2.

Features are specified and then a prototype is created

3.

A small run of the product is manufactured and beta, or field,

tested letting customers use in real-world conditions

4.

The product is launched and evaluated

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Making a product successful

Five factors are key to success:
Companys ability to identify needs and satisfy them
1.

Have close ties with a well defined market to anticipate customer needs.

2.

Company is highly integrated and market-oriented

3.

Company has a competitive advantage in technology and production

capability

Companys ability to market products

4.

Company has a strong marketing proficiency

5.

New product launch adequately financed

8-25

Winning the new product contest

FOCUS ON CORE COMPETENCY(WHAT YOU DO BEST
FOR A COMPETITIVE ADVANTAGE)

PLUS
PROVIDE GREATEST VALUE TO CUSTOMER
EQUALS
SUCCESSFUL PRODUCT

8-26