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PRODUCT STRATEGY Presentation Transcript
1.PRODUCT STRATEGY
2.What is a product?
A product is any offering by a company to a market that serves to satisfy customer needs and wants.
It can be an object, service, idea,etc.
A product is any offering by a company to a market that serves to satisfy customer needs and wants.
It can be an object, service, idea,etc.
3.New Product Development
Most new product development is an improvement on existing products
Less than 10% of new products are totally new concepts.
Most new product development is an improvement on existing products
Less than 10% of new products are totally new concepts.
4.Success rate of new products
The success rate of new products is very low – less than 5%. ‘You have to kiss a lot of frogs to find a prince.”
Product obsolescence is rapid with improvements in technology
Shorter PLCs
The success rate of new products is very low – less than 5%. ‘You have to kiss a lot of frogs to find a prince.”
Product obsolescence is rapid with improvements in technology
Shorter PLCs
5.Product Development Stages
Idea generation
Idea screening
Concept development and testing
Concept testing
Conjoint analysis – to find out the best valued attributes by consumers
Idea generation
Idea screening
Concept development and testing
Concept testing
Conjoint analysis – to find out the best valued attributes by consumers
6.Business analysis
The most customer appealing offer is not always the most profitable to make
Estimate on costs, sales volumes,pricing and profit levels are made to find out the optimal price – volume mix.
Breakeven and paybacks
Discounted cash flow projections
The most customer appealing offer is not always the most profitable to make
Estimate on costs, sales volumes,pricing and profit levels are made to find out the optimal price – volume mix.
Breakeven and paybacks
Discounted cash flow projections
7.Market testing
Test markets
Test periods
What information to gather?
What action to take?
Test markets
Test periods
What information to gather?
What action to take?
8.Commercialization
When? (Timing)
Where? (Which geographical markets)
To whom? (Target markets)
How? (Introductory Marketing strategy)
When? (Timing)
Where? (Which geographical markets)
To whom? (Target markets)
How? (Introductory Marketing strategy)
9.Product Levels
Customer value hierarchy
Core benefit
Basic product
Expected product
Augmented product
Potential product
Customer value hierarchy
Core benefit
Basic product
Expected product
Augmented product
Potential product
10.Customer Delight
When you exceed customer expectations
When you exceed customer expectations
11.Product Hierarchy
Need
Product family
Product class
Product Line
Product type
Brand
Item
Need
Product family
Product class
Product Line
Product type
Brand
Item
12.Product classification
Durable
Non – durable
Services
Durable
Non – durable
Services
13.Consumer goods classification
Convenience goods
Shopping goods
Specialty goods
Unsought goods
Convenience goods
Shopping goods
Specialty goods
Unsought goods
14.Industrial goods classification
Materials and Parts
- raw materials
- manufactured materials and parts
Capital items
Supplies and business services
Materials and Parts
- raw materials
- manufactured materials and parts
Capital items
Supplies and business services
15.Product Mix
The assortment of products that a company offers to a market
Width – how many different product lines?
Length – the number of items in the product mix
Depth – The no. of variants offered in a product line
Consistency – how closely the product lines are related in usage
The assortment of products that a company offers to a market
Width – how many different product lines?
Length – the number of items in the product mix
Depth – The no. of variants offered in a product line
Consistency – how closely the product lines are related in usage
16.Product Line decisions
Product rationalization
Market rationalization
Product line length
too long – when profits increase by dropping a product in the line
too short – when profits increase by adding products to the product line
Line pruning – capacity restrictions to decide
Product rationalization
Market rationalization
Product line length
too long – when profits increase by dropping a product in the line
too short – when profits increase by adding products to the product line
Line pruning – capacity restrictions to decide
17.Product Life Cycle
Product Life Cycle – shows the stages that products go through from development to withdrawal from the market
Product Portfolio – the range of products a company has in development or available for consumers at any one time
Managing product portfolio is important for cash flow
Product Life Cycle – shows the stages that products go through from development to withdrawal from the market
Product Portfolio – the range of products a company has in development or available for consumers at any one time
Managing product portfolio is important for cash flow
18.Product Life Cycle (PLC):
Each product may have a different life cycle
PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash flow
Each product may have a different life cycle
PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash flow
19.Stages of Product Life Cycle
20.Introduction/Launch
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time – type of product
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time – type of product
21.Growth
Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable costs, profits may be made
Monitor market – competitors reaction?
Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable costs, profits may be made
Monitor market – competitors reaction?
22.Maturity
Sales reach peak
Cost of supporting the product declines
Ratio of revenue to cost high
Sales growth likely to be low
Market share may be high
Competition likely to be greater
Price elasticity of demand?
Monitor market – changes/amendments/new strategies?
Sales reach peak
Cost of supporting the product declines
Ratio of revenue to cost high
Sales growth likely to be low
Market share may be high
Competition likely to be greater
Price elasticity of demand?
Monitor market – changes/amendments/new strategies?
23.Decline
Product outlives/outgrows its usefulness/value
Fashions change
Technology changes
Sales decline
Cost of supporting starts to rise too far
Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
Product outlives/outgrows its usefulness/value
Fashions change
Technology changes
Sales decline
Cost of supporting starts to rise too far
Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
24.The BCG Matrix
1. A means of analysing the product portfolio and informing decision making about possible marketing strategies
2. Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968
3. Links growth rate, market share and cash flow
1. A means of analysing the product portfolio and informing decision making about possible marketing strategies
2. Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968
3. Links growth rate, market share and cash flow
25. WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
26.BCG MATRIX WITH CASH FLOW
27. MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of each SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
Classifying the SBU’S on the basis of BCG matrix.
Developing strategic objectives for each SBU.
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of each SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
Classifying the SBU’S on the basis of BCG matrix.
Developing strategic objectives for each SBU.
28.The Boston Matrix
Classifies Products into four simple categories:
Stars – products in markets experiencing high growth rates with a high or increasing share of the market
- Potential for high revenue growth
Classifies Products into four simple categories:
Stars – products in markets experiencing high growth rates with a high or increasing share of the market
- Potential for high revenue growth
29.The Boston Matrix
Cash Cows:
High market share
Low growth markets – maturity stage of PLC
Low cost support
High cash revenue – positive cash flows
Cash Cows:
High market share
Low growth markets – maturity stage of PLC
Low cost support
High cash revenue – positive cash flows
30.The Boston Matrix
31.Problem Child:
Products having a low market share in a high growth market
Need money spent to develop them
May produce negative cash flow
Potential for the future?
Products having a low market share in a high growth market
Need money spent to develop them
May produce negative cash flow
Potential for the future?
32.BENEFITS
BCG MATRIX is simple and easy to understand.
It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.
It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.
BCG MATRIX is simple and easy to understand.
It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.
It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.
33.LIMITATIONS
34.BCG MATRIX uses only two dimensions, Relative market share and market growth rate.
Problems of getting data on market share and market growth.
High market share does not mean profits all the time.
Business with low market share can be profitable too.
Problems of getting data on market share and market growth.
High market share does not mean profits all the time.
Business with low market share can be profitable too.
35.Product Life Cycles and the Boston Matrix
Introduction/Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time – type of product
Introduction/Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time – type of product
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