Unit J: Product Marketing

COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

What you’ll learn to do: describe the new-product development process

We have considered the role of new products throughout this module. It is important to introduce new products in order to have a balanced portfolio containing products at the various stages of the product life cycle. We have not yet focused on ways of creating successful new products.

In this module we will discuss a standard, somewhat fixed new-product development process. The logic behind this rather rigid process is that it requires a great deal of discipline to create new products. It’s expensive to launch a successful new product—but it’s far more expensive to launch an unsuccessful products. For these reasons, organizations invest a lot in the creation and refinement of their new-product development processes. It helps them raise the odds that they’ll be successful.

Consider the following dramatic product failures that, in hindsight, should have been screened out much earlier in the product development process.

In 1998 Frito-Lay introduced WOW! chips. These snack chips contained significantly less fat and fewer calories than other snack foods thanks to the fat substitute Olestra. Initially, the product performed well, generating $347 million in 1998 and making WOW! the best-selling potato chip brand that year. The success was short lived, though. Olestra had an unpleasant side-effect: soon customers complained of cramping, incontinence, and diarrhea—in some cases requiring hospitalization—after eating the chips. Frito-Lay’s parent company, PepsiCo, spent $35 million on an advertising campaign to turn things around, but sales plummeted nonetheless.^[1]

In 2011 Hewlett Packard launched a product designed to go head-to-head with Apple’s iPad. The product boasted a higher number of performance features than the iPad, but it had none of the “cool factor” that drew customers to Apple. MarketWatch reported, “Despite large-scale press events and promotions, the HP TouchPad was a colossal failure and was discontinued almost immediately. As a result of the TouchPad’s failure, the company wrote off $885 million in assets and incurred an additional $755 million in costs to wind down its webOS operations, ending all work on the TouchPad’s failed operating system.”

To repeat: developing new products creates opportunity and risk.

The specific things you’ll learn in this section include:

• Explain how new products are planned
• Identify approaches to generate new product ideas
• Identify methods to evaluate new product ideas
• Explain the process to create and commercialize new products

The New-Product Development Process

There are probably as many varieties of new-product development systems as there are types of companies, but most of them share the same basic steps or stages—they are just executed in different ways. Below, we have divided the process into eight stages, grouped into three phases; subsequent readings will discuss these phases in greater detail.  Many of the activities are performed repeatedly throughout the process, but they become more concrete as the product idea is refined and additional data are gathered. For example, at each stage of the process the product team is asking, “Is this a viable product concept?” but the answers change as the product is refined and more market perspectives can be added to the evaluation.

Phase I: Generating and Screening Ideas	Phase II: Developing New Products	Phase III: Commercializing New Products
Stage 1: Generating New Product Ideas	Stage 4: Business Case Analysis	Stage 6: Test Marketing
Stage 2: Screening Product Ideas	Stage 5: Technical and Marketing Development	Stage 7: Launch
Stage 3: Concept Development and Testing		Stage 8: Evaluation

Stage 1: Generating New Product Ideas

Generating new product ideas is a creative task that requires a particular way of thinking. Coming up with ideas is easy, but generating good ideas is another story. Companies use a range of internal and external sources to identify new product ideas. A SWOT analysis might suggest strengths in existing products that could be the basis for new products or market opportunities. Research might identify market and customer trends. A competitive analysis might expose a hole in the company’s product portfolio. Customer focus groups or the sales team might identify unmet customer needs. Many amazing products are also the result of lucky mistakes—product experiments that don’t meet the intended goal but have an unintended and interesting application. For example, 3M scientist Dr. Spencer Silver invented Post-It Notes in a failed experiment to create a super-strong adhesive.^[2]

The key to the idea generation stage is to explore possibilities, knowing that most will not result in products that go to market.

Stage 2: Screening Product Ideas

The second stage of the product development process is idea screening. This is the first of many screening points. At this early stage much is not known about the product and its market opportunity. Still, product ideas that do not meet the organization’s objectives should be rejected at this stage. If a poor product idea is allowed to pass the screening stage, it wastes effort and money in later stages until it is abandoned. Even more serious is the possibility of screening out a worthwhile idea and missing a significant market opportunity. For this reason, this early screening stage allows many ideas to move forward that may not eventually go to market.

At this early stage, product ideas may simply be screened through some sort of internal rating process. Employees might rate the product ideas according to a set of criteria, for example; those with low scores are dropped and only the highest ranked products move forward.

Stage 3: Concept Development and Testing

Today, it is increasingly common for companies to run some small concept test in a real marketing setting. The product concept is a synthesis or a description of a product idea that reflects the core element of the proposed product. Marketing tries to have the most accurate and detailed product concept possible in order to get accurate reactions from target buyers.  Those reactions can then be used to inform the final product, the marketing mix, and the business analysis.

New tools for technology and product development are available that support the rapid development of prototypes which can be tested with potential buyers. When concept testing can include an actual product prototype, the early test results are much more reliable. Concept testing helps companies avoid investing in bad ideas and at the same time helps them catch and keep outstanding product ideas.

Stage 4: Business Case Analysis

Before companies make a significant investment in a product’s development, they need to be sure that it will bring a sufficient return.

The company seeks to answer such questions as the following:

1. What is the market opportunity for this product?
2. What are the costs to bring the product to market?
3. What are the costs through the stages of the product life cycle?
4. Where does the product fit in the product portfolio and how will it impact existing product sales?
5. How does this product impact the brand?
6. How does this product impact other corporate objectives such as social responsibility?

The marketing budget and costs are one element of the business analysis, but the full scope of the analysis includes all revenues, costs, and other business impacts of the product.

Stage 5: Technical and Marketing Development

A product that has passed the screening and business analysis stages is ready for technical and marketing development. Technical development processes vary greatly according to the type of product. For a product with a complex manufacturing process, there is a lab phase to create specifications and an equally complex phase to develop the manufacturing process. For a service offering, there may be new processes requiring new employee skills or the delivery of new equipment. These are only two of many possible examples, but in every case the company must define both what the product is and how it will be delivered to many buyers.

While the technical development is under way, the marketing department is testing the early product with target customers to find the best possible marketing mix. Ideally, marketing uses product prototypes or early production models to understand and capture customer responses and to identify how best to present the product to the market. Through this process, product marketing must prepare a complete marketing plan—one that starts with a statement of objectives and ends with a coherent picture of product distribution, promotion, and pricing integrated into a plan of marketing action.

Stage 6: Test Marketing and Validation

Test marketing is the final stage before commercialization; the objective is to test all the variables in the marketing plan including elements of the product. Test marketing represents an actual launching of the total marketing program. However, it is done on a limited basis.

Initial product testing and test marketing are not the same. Product testing is totally initiated by the producer: he or she selects the sample of people, provides the consumer with the test product, and offers the consumer some sort of incentive to participate.

Test marketing, on the other hand, is distinguished by the fact that the test group represents the full market, the consumer must make a purchase decision and pay for the product, and the test product must compete with the existing products in the actual marketing environment. For these and other reasons, a market test is an accurate simulation of the broader market and serves as a method for reducing risk. It should enhance the new product’s probability of success and allow for final adjustment in the marketing mix before the product is introduced on a large scale.

Stage 7: Launch

Finally, the product arrives at the commercial launch stage. The marketing mix comes together to introduce the product to the market. This stage marks the beginning of the product life cycle.

Stage 8: Evaluation

The launch does not in any way signal the end of the marketing role for the product. To the contrary, after launch the marketer finally has real market data about how the product performs in the wild, outside the test environment. These market data initiate a new cycle of idea generation about improvements and adjustments that can be made to all elements of the marketing mix.

Generating and Screening Ideas

The first phase of the new product development process is creating a viable product concept that can move through the development phase. This phase includes the following:

• Stage 1: Generating New Product Ideas
• Stage 2: Screening Product Ideas
• Stage 3: Concept Development and Testing

This early phase of the process differs from later phases in several ways. First, it requires immense creativity. Each of the later phases focuses on screening out ideas, but this is a generative stage whose goal is the production of new ideas. Second, the early phase of the process is difficult to plan and manage. On what day will the innovative product idea emerge? That can’t be planned or scheduled.

The Fuzzy Front End

Researcher Peter Koen refers to this first phase as the Fuzzy Front End (FFE) of the product development process. In his work he has identified a number of characteristics that differentiate the FFE from later phases of product development. These are shown in the table below.

Difference Between the Fuzzy Front End and the New-Product Development Process^[3]

	Fuzzy Front End (FFE)	New-Product Development (NPD)
Nature of Work	Experimental, often chaotic. “Eureka” moments.	Can schedule work—but not invention. Disciplined and goal oriented with a project plan.
Commercialization Date	Unpredictable or uncertain.	High degree of certainty.
Funding	Variable—in the beginning phases many projects may be “bootlegged,” while others will need funding to proceed.	Budgeted.
Revenue Expectations	Often uncertain, with a great deal of speculation.	Predictable, with increasing certainty, analysis, and documentation as the product release date gets closer.
Activity	Individuals and team conducting research to minimize risk and optimize potential.	Multifunction product and/or process development team.
Measures of Progress	Strengthened concepts.	Milestone achievement.

As the product concept moves through the stages of the product development process, everything will become more refined and more certain. The time line, the budget, and the performance expectations will all become more concrete, but in the early phase it is important to allow for the ambiguity that supports creativity.

Creating Successful Product Concepts

How can businesses influence the success of the new business idea? Koen suggests a number of factors that play a role: the corporation’s organizational capabilities, customer and competitor influences, the outside world’s influences, and the depth and strength of enabling sciences and technology.^[4]

Organizational Capabilities

You may have noticed that some companies are able to launch one dominant product after another. Other companies struggle to create any products that compete well or have one amazing product and then disappear. Companies develop processes to manage new products, hire leaders to manage new-product development, and develop a culture based on their institutional values and norms around new products. All of these factors tip the scale toward success or failure. If leaders ask employees to take risks with cutting-edge product ideas but fire those whose ideas are not successful, they will not draw out risky ideas that might lead to the greatest success. Also, the best ideas are often refinements of and enhancements to other ideas. If individual performance is rewarded over team success, there is less likelihood of idea sharing and collaboration.

Customer and Competitor Influences

Innovation by a competitor can spur new ideas and possibilities across the industry.  Similarly, customers seeking innovation who are willing to share ideas with their vendors can accelerate the generation of new product ideas and bring a voice of reality that increases the chance of success.

Outside World Influences

There are a range of influences outside of the company that affect the ease with which new ideas can be developed. Government regulations can positively or negatively influence new-product and idea generation. Society, culture, and the economic environment can create a rich environment for new ideas.

Enabling Sciences and Technologies

Enabling technologies refer to those technologies that can be used to develop new products. When employees have access to technologies that expose them to new ideas, or technologies that allow rapid development and iteration of new ideas, this can be instrumental in sparking the development of new products. Often companies invest in technology components that can be reused across multiple products. Such technology has the effect of both speeding the new-product development process and facilitating the addition of refinements and enhancements to existing products.

Evaluating Product Concepts

The goal of the initial product development process is to generate ideas, actively evaluate the ideas, and create a viable product concept. In the past it was difficult to get a clear reading on how products might perform until late in the product development process. That is less true today. Consider the following examples of innovations that accelerate market feedback on new products:

Kickstarter is a crowd-funding platform that allows entrepreneurs to pitch a new product concept to potential funders. The entrepreneur receives immediate feedback on the idea from a broad market and, if it generates enough support, funding to bring the product to market.

Etsy offers an e-commerce platform from which entrepreneurs can sell products on the Internet without having to develop their own e-commerce Web sites to present products or process payments.

3-D printers create physical products from digital files. These products can be tested and refined with users much more quickly and economically than traditionally manufactured prototypes and products. The video below demonstrates a number of interesting examples.

On a larger scale, there are a number of Web application frameworks that allow programmers to quickly develop Internet applications, significantly speeding the pace at which software companies can prototype and develop new features.

Once a product concept has been successfully evaluated, it moves to the next phase of development.

Developing New Products

The second phase of the new-product development process focuses on the actual development of the new product. This phase includes the following:

• Stage 4: Business Case Analysis
• Stage 5: Development

Making the Business Case

The business case is often the most challenging screening process in the new-product development process. It is not uncommon for a product team to get excited about an idea, get positive feedback on the concept from target buyers, and then fail to make the numbers work in the business case. Usually the business case review results in a “go, no-go” decision for the product concept.

The business case doesn’t only need to answer the question “Can this product make money?” It’s also trying to answer a more complicated question: “Will the product provide the greatest total return out of all the potential strategies we could pursue?” In addition, the business case is looking at the expected performance of the product—financial and otherwise—over the entire product life cycle. For these reasons, the business case takes into account a broad range of factors.

One common tool for presenting a summary of the business case is called the “business model canvas” (see Figure 1, below). The canvas doesn’t cover all of the analysis that must be done, but it does provide a nice structure for identifying the different components that are important to the success of the product or business.

You will notice that the center of the canvas focuses on the value proposition of the product, whereas the lower segments specify the costs to create value and the revenue earned by delivering the value. In the analysis of the business case, the key questions are the following:

1. Does the product provide sufficient unique value to the target customer?
2. Can that be achieved at a cost that supports the value?
3. Does that value appeal to a large enough target market to generate sufficient revenue?

If the product development team can demonstrate satisfactory answers to these questions, without introducing other objections, then the product will move into development.

Developing the Product

Regardless of the type of product—a tangible good, a service, a business-to-business product—someone needs to define the marketing requirements for the product. This is the role of a product marketing manager. Product marketing isn’t usually tasked with the technical specifications for the product but is focused on specifying the needs of the target buyer. Product marketing addresses the following question: “What problem does this product solve for the target buyer?” The answers to this question are typically presented in a marketing-requirements document, which also includes a full buyer persona. (Recall that a buyer persona describes the needs, experiences, feelings, and preferences of a specific buyer.)

Defining Market Requirements

Let’s say your new product is a packaged meal item, and you’re the product marketer. Your marketing-requirements document would explain who the buyer is, what she needs, and which particular features of the product will best address her needs. Your buyer persona is a woman named Aleisha. She has three kids and works part time as a nurse. She feels stretched between her job and her kids’ busy schedule and the demands of keeping up the house. She needs to be able to come home from work and get dinner on the table in twenty minutes, yet not feel like she’s cutting corners. It’s important to her to provide her family with a healthy home-cooked meal.

This description of target-buyer Aleisha suggests and guides a set of product requirements that will inform the design and development of the product. Whether the product is a food item, a fashion accessory, a software program, or a banking service, defining the marketing requirements based on the buyer persona will increase the chances that the final product meets the market need.

Defining Product Requirements

The marketing requirements become an input to the product team to define the technical product requirements for the product. In the packaged meal example, someone will need to decide whether there are visible solids in Aleisha’s sauce and how much ground oregano should be added. Those will become product requirements that drive the production process.

With more technical products or products that include a complex manufacturing process, the translation from marketing requirements to technical requirements can be a daunting task. For example, in the manufacturing of semiconductors that power computers and electronics, there is significant interplay between the marketing requirements, the technical requirements, and the manufacturing process. The factory cannot deliver products that exceed their technical capabilities regardless of the market desires. In that case, the limits of the manufacturing process are set, and the role of product marketing is to identify the most attractive products given a fixed manufacturing capability.

In all cases, the product team seeks a tight match between the market need and the product that is designed, developed, and delivered.

Creating the Go-to-Market Plan

The marketing requirements drive the technical product requirements that will be used to develop the product, but they have a second purpose, too. The market requirements are the major input to the marketing plan that will be used during the product launch.

In answering what problem a product solves for the target buyer, we gain information about the messaging and promotion strategy. By understanding the alternatives that the target buyer might select and the unique value that our product provides, we can begin to understand the pricing dynamics. In knowing how she wants to buy the product we have options to analyze for the distribution strategy. The initial marketing mix for the product launch is driven from the information in the marketing requirements document.

Commercializing New Products

The final phase of the new-product development process focuses on commercializing the new product. This phase includes:

• Stage 6: Test Marketing
• Stage 7: Launch
• Stage 8: Evaluation

At last the product is ready to go. It has survived the development process and is now, you hope, on the way to commercial success. How can it be guided to reach that marketing success?

The different stages in this phase include a common set of activities performed on increasingly larger scale. In all three stages the marketer is implementing, evaluating, and improving the marketing plan, which includes the full marketing mix.

Test Marketing

The goal of test marketing is to improve the success of the product launch. The marketer will launch the marketing plan to a smaller subset of the market, quickly analyze how the plan can be improved, refine the plan, and then launch to the full market.

Test marketing provides a wonderful opportunity to get feedback from buyers in a realistic buying situation in which they experience the full marketing mix—but it’s a challenge to do it right. Because of the special expertise needed to conduct test markets, and the associated expenses, many large manufacturers employ independent marketing research agencies that specialize in test marketing. Among the challenging decisions are the following:

• Duration of testing: the product should be tested long enough to account for market factors to even out, but a long test cycle delays the broad launch and may diminish the impact of the product announcement.
• Selection of test markets: the test market should reflect the norms for the new product in such areas as advertising, competition, distribution system, and product usage.
• Sample size determination: the number of markets and tests must account for the different variables in the market, while allowing for the fact that each test market adds cost to the launch budget and time to the product release cycle.

The test data drives evaluation and refinement of the marketing plan. Even after all the test results are in, adjustments to the product and other elements of the marketing mix may still be made. Additional testing may be required, or the product may be canceled.

The Launch

The product launch is truly the beginning of the implementation of a sustained marketing plan—a plan that will be analyzed, evaluated, and adjusted throughout the product life cycle. That said, there certain marketing techniques that figure more prominently during the launch phase.

Press Strategies

Often companies issue press releases about new products in order to increase visibility through earned media. The press release can be sent to targeted press outlets, posted on the company Web site, sent as an information message to customers, and distributed to industry influencers. The goal of the press strategy is to build broad visibility for the product, backed up by the credibility of the media outlet.

Price Discounts

Companies will sometime offer a price discount during a product launch. When we cover pricing in more detail in the next module, we will discuss when this can be an effective strategy.

Channel Partner Incentives

If the company depends on a partner to sell or distribute the pricing, it might choose to offer pricing discounts and incentives to the distribution partner. A new product carries some risk, and an incentive at launch can encourage channel partners that might be reluctant to add the new product or to sell it aggressively.

Evaluation

Though we are identifying “evaluation” here as the final stage of the development process, it should be clear that product evaluation is a recurring activity that begins with the idea-screening stage. Careful, objective evaluation of the product at every stage leads to better investment decisions and better products. The difference in this final stage of the process is that the marketer has the benefit of significant market data for the evaluation, which can help improve the marketing plan going forward. It is only at this stage—after the product launch—when the marketer can see which buyers purchase the product, how competitors respond, and how the new product interacts with the company’s other products in the marketplace.

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COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

What you’ll learn to do: explain product portfolio management and how it relates to the organization’s marketing strategy and tactics

Our last example showed the importance of marketing a diverse set of products and using new products to gain strategic advantage. Defining and managing this collection of products is called product portfolio management.

Think of an artist’s portfolio. The artist will use her portfolio to display a range of work. She will try to select works that showcase her strengths in different areas so that someone reviewing her portfolio can see the range of different things she can do well.

Similarly, a product portfolio requires diversity in order to be effective. In this module we will talk about what the product portfolio is and how a marketer can use the power of a product portfolio to achieve marketing objectives.

The specific things you’ll learn in this section include:

• Define the product portfolio and explain its use in marketing
• Identify marketing strategies and tactics used to achieve portfolio objectives
• Explain why new products are crucial to an organization’s success

The Product Portfolio

Throughout this course we have discussed a number of ways that organizations market products successfully. How does an organization decide which products to offer? When should a company add new products, and when should it discontinue existing ones? Product portfolio management answers these questions.

Organizing for Effective Product Marketing

Before we dive into the product portfolio it is important to understand how products are organized in most businesses.

Typically, organizations group like products into product lines, and then group lines of business targeting a common set of customers into something called strategic business units (SBUs).

A product line is a group of products marketed by an organization to one general market. The products have some characteristics, customers, and uses in common, and may also share technologies, distribution channels, prices, services, etc. There are often product lines within product lines.^[1]

Before we take a look at an example, let’s review some definitions within product organizations:

• A product is a bundle of attributes (features, functions, benefits, and uses) that a person receives in an exchange. In essence, the term “product” refers to anything offered by a firm to provide customer satisfaction—tangible or intangible. Thus, a product may be an idea (recycling) , a physical good (a pair of jeans), a service (banking), or any combination of the three.
  • An example of a product is Tylenol pain reliever.
• A product line is a group of products marketed by an organization to one general market. The products have some characteristics, customers, and/or uses in common, and may also share technologies, distribution channels, prices, services, etc. There are often product lines within product lines.
  • An example of a product line is the full range of Tylenol products, or over-the-counter medicines.
• A strategic business unit or SBU is a self-contained planning unit for which discrete business strategies can be developed.
  • An example of a strategic business unit is consumer health care products.

Managing the Product Portfolio

The goal of product portfolio management is to ensure that the company’s investment in products meets objectives. In order to do this, portfolio management must understand the needs and contributions of the products and allocate resources across product lines and SBUs to optimize their market performance.

Analyzing SBU Performance

Should Johnson & Johnson invest equally in all of its SBUs and product lines? The table below shows Johnson & Johnson’s 2014 financial results.^[2]

SBU	2014 revenue	Revenue growth from 2013	% profit	Research and Development spending
Consumer health care	$14.5 billion	1%	13.4%	$629 million
Medical devices	$27.5 billion	1.6%	28.9%	$1.7 billion
Prescription products	$32.3 billion	16.5%	36.2%	$6.2 billion

You can see that Johnson & Johnson is spending ten times more on research and development (R&D) for prescription products than for consumer health care products. Given the higher growth rates and profit margins for prescription products, this looks like a good decision.

Within the SBUs, managers also make important decisions about where to invest. For example, in 2013, the lowest-growth product line in medical devices was diagnostics, which decreased by 8.9 percent from 2012 to 2013. In 2014, Johnson & Johnson sold a major diagnostic product from that product line to another company for $4 billion. This eliminated a product that was not contributing to the portfolio objectives, and it generated new capital that could be invested in higher-growth product lines.

The examples here demonstrate a simple review of SBU performance, but companies can also perform a deep analysis of an SBU and product performance in order to understand past performance and identify future growth opportunities.

Analyzing Market Opportunities

Beyond the internal performance data, portfolio analysis considers broader market factors. In the marketing planning module, we discussed the Boston Consulting Group’s growth-share matrix, which is a tool to used analyze the product portfolio. You’ll recall that this model considers the attractiveness of the market by studying the growth potential in the market, and it includes company performance by showing the product’s current market share. These are both important factors to consider in determining the future growth opportunities.

In its annual report, Johnson & Johnson shared the following information with investors about its largest prescription-drug product line:

Immunology products achieved sales of $10.2 billion in 2014, representing an increase of 10.9 percent as compared to the prior year. The increased sales of STELARA® (ustekinumab) and SIMPONI® /SIMPONI ARIA® (golimumab) were primarily due to market growth and market share gains. REMICADE® (infliximab) growth was primarily due to market growth.

A very simplistic analysis of this information suggests that Stelara and Simponi are stars (high market growth and high market share) while Remicade is a question mark. It is benefiting from market growth but is not achieving gains in market share.

Knowing about the product life cycle is also important to understanding market growth. During the introduction phase, the market growth rate is low, and the longer-term potential is unknown. As the market moves into the growth phase, it moves up the market growth axis and creates opportunities for products that are gaining market share and becoming stars. Those that don’t perform well in gaining market share will become question marks. As the market moves into maturity and decline, the market growth moves back down the axis and products will become either cash cows or dogs.

If we add the data from the iPod product life cycle to the growth-share matrix, as shown above, we can see how Apple’s products might be analyzed. In the growth-share matrix, the size of product sphere is determined by the total sales. Obviously, this diagram is not perfectly sized, but it gives a picture of the way in which product life cycle can be used to inform product portfolio management.

Achieving Portfolio Objectives

In our discussion of the product life cycle, we saw that competition generally increases as more competitors are drawn to high-growth markets. As more brands enter the marketplace and lock into a particular share of the market, it becomes more difficult to win and hold buyers. Apart from these competitive factors, other market factors can shift, too. For example:

• Changes in consumer tastes
• Changes in the size and characteristics of particular market segments
• Changes in availability or cost of raw materials and other production or marketing components

Internally, a company might have a proliferation of small-share brands that were introduced to address market opportunities but never saw significant growth. This can reduce efficiencies in production, marketing, and servicing for existing brands.

In product portfolio management there is an assumption that a company has an existing set of products. The number may be small or large, but each brand, product, and product line has an impact on the external market view of the others and on the internal resources available to the others. For this reason, portfolio management requires marketers to consider each product individually but also understand the way the products fit together collectively.

In order to optimize the product portfolio, marketers may change the marketing mix for a product, change a product line, delete products, or introduce new products.

Marketing Mix Strategies

When a product is introduced, it’s not locked down forever. Marketers continually gather market data about products so they can refine the product and its position in the marketplace.

Product Modification

It is normal for a product to be changed several times during its life. Certainly, a product should be equal or superior to those of principal competitors. If a change can provide superior satisfaction and win more initial buyers and switchers from other brands, then a change is probably warranted.

However, the decision to make a significant product change introduces risk and cannot be approached in a haphazard manner. First, the marketer must answer the question “What specific attributes of the product and competing products are perceived to be most important by the target customer?” Factors such as quality, features, price, services, design, packaging, and warranty may all be determinants. Each change introduces the risk that it may not align with customer needs. For example, a dramatic increase in product quality might drive the price too high for the existing target consumer, or it might cause him to perceive the product differently and unfavorably. Similarly, the removal of a particular product feature might be the one characteristic that’s regarded as most important by a market segment.

The product modification decision can only be made if the marketer has a strong understanding of the target customer. What new information is the marketer learning about the buyer persona? Perhaps additional market research is needed to understand the improvements buyers want, to evaluate the market reception of competitors’ products, and evaluate improvements that have been developed within the company. In determining product improvements, sales teams and distributors can provide valuable information. Sales is likely to hear objections from target customers or learn the reasons why they are choosing not to buy. Distributors often deal with a range of products in a category and provide helpful insights into what is tipping the purchase process toward a competitor’s product.

Repositioning

In an earlier module we discussed product positioning, which requires finding the right marketing mix for a product in order to distinguish it from competitors and give it a unique position in the market. As competitors’ offerings and customer preferences change, marketing may need to make a significant change to the marketing mix to reposition the product. This involves changing the market’s perceptions of a product or brand so that the product or brand can compete more effectively in its present market or in other market segments.

For example, since its heyday in the late seventies and early eighties, Cadillac sales have dropped by more than 50 percent as the Cadillac customer base aged. In order to restore sales, General Motors is trying to redefine the Cadillac product and brand for a new generation of consumers. This is a dramatic example in which a substantial change is needed. Product repositioning can also involve a very subtle change, such as updating the packaging or tweaking the pricing approach, but it is an important way to shift perceptions as market factors change.

Product-Line Decisions

A product line can contain one product or hundreds of products. The number of products in a product line refer to its depth, while the number of separate product lines owned by a company is the product line width.

There are two overarching strategies that deal with product line coverage. With a full-line strategy the company will attempt to carry every conceivable product needed and wanted by the target customer. Few full-line manufacturers attempt to provide items for every conceivable market niche. Instead, they provide many products for a particular market segment.

Companies that employ a limited-line strategy will carry selected items. Limited-line manufacturers will add an item if the demand is great enough, but they make that decision based on the market opportunity for the product rather than on a desire to meet all customer needs with their product line.

Line-Extension Strategies

A line-extension strategy involves adding new products under an already established and well-known brand name. The objective is to serve different customer needs or market segments while taking advantage of the widespread name recognition of the original brand.^[3]

When Frito-Lay added Dinamita Mojo Criollo Flavored Rolled Tortilla Chips to its Doritos line, that was an example line-extension strategy. Frito-Lay is able to take advantage of a strong brand with existing shelf space and add a new product that has an appeal to shoppers seeking a spicier snack than the traditional nacho cheese flavor. Similarly, Clinique provides high-end skin care products and has extended its line to provide anti-acne products.

Generally, line-extension strategies are lower risk because they introduce a product change but are able to take advantage of other proven elements of the marketing mix. Still, there is a risk of cannibalizing the market for existing products or, if the product is not well received, damaging the brand. Also there a danger in overextending the product line by offering so many products that consumers can’t find unique value, and company resources get stretched across many, low-volume products.

Line-Filling Strategies

Line-filling strategies involve increasing the number of products in an existing product line to take advantage of marketplace gaps and to reduce competition. Many businesses use line filling to round out an already well-established product line and to help increase the market success of new related products.^[4]

Before considering such a strategy several key questions should be answered:

• Can the new product support itself?
• Will it cannibalize existing products?
• Will existing outlets be willing to stock it?
• Will competitors fill the gap if we do not?
• What will happen if we do not act?

Assuming that a company decides to fill out the product line further, there are several ways of going about it. The following three are most common:

1. Product proliferation: the introduction of new varieties of the initial product or products that are similar (e.g., a ketchup manufacturer introduces hickory-flavored and pizza-flavored barbecue sauces and a special hot dog sauce).
2. Brand extension: strong brand preference allows the company to introduce the related product under the brand umbrella (e.g. Jell-O introduces pie filling and diet desserts under the Jell-O brand name).
3. Private branding: producing and distributing a related product under the brand of a distributor or other producers (e.g., Firestone producing a less expensive tire for Costco).

In addition to the demand from consumers or pressure from competitors, there are other legitimate reasons to engage in these tactics. First, the additional products may have a greater appeal and serve a greater customer base than did the original product. Second, the additional product or brand can create excitement both for the manufacturer and distributor. Third, shelf space taken by the new product means it cannot be used by competitors. Finally, the danger of the original product becoming outmoded is hedged. Yet, there is serious risk that must be considered as well: unless there are markets for the proliferations that will expand the brand’s share, the newer forms will cannibalize the original product and depress profits.

Product Deletion

Eventually a product reaches the end of its life. There are several reasons for deleting a mature product. First, when a product is losing money, it is a prime deletion candidate. In regard to this indication, it is important to make sure that the loss is truly attributable to the product. If the product appears not to be profitable when it is actually covering costs of other products, then deleting the product could negatively impact other products in the portfolio.

Second, there are times when a company with a long product line can benefit if the weakest of these products is dropped. This thinning of the line is referred to as product-line simplification. Product overpopulation spreads a company’s productive, financial, and marketing resources very thin. Moreover, an excess of products in the line, some of which serve overlapping markets, not only creates internal competition among the company’s own products but also creates confusion in the minds of consumers. Consequently, a company may apply several criteria to all its products and delete those that are faring worst.

A third reason for deleting a product is that problem products absorb too much management attention. Many of the costs incurred by weak products are indirect: management time, inventory costs, promotion expenses, decline of company reputation, and so forth.

Missed-opportunity costs constitute the final reason for product deletion. Even if a mature product is making a profit contribution and its indirect cost consequences are recognized and considered justifiable, the company might still be better off without the product. Each product requires focus and resources that are not available to grow other products or create new ones.

New Products in the Portfolio

Factors Influencing the Pace of Product Development

New-product introductions are an important component of the product portfolio. This has always been the case, but there have been a number of changes since 2000 that have increased the pace of new-product development and, with it, the importance of new products in the portfolio.

The Internet has fundamentally changed the way that we think about new products. We could devote an entire course to exploring and substantiating this statement, but for our purposes here, we’ll concentrate on the following notable developments:

1. The Internet increases our ability to find new products. In the past, if a local store carried version 3.0 of any product, a buyer could consider the attributes of version 3.0 and make a purchase decision. Today, the buyer may enter the store, but she’s more likely to know the improvements incorporated in version 4.0 and the new features expected in version 5.0.
2. The Internet supports real-time comparisons of competitive products, including their features and users’ experience with the products.
3. The Internet enables new products and services that have changed expectations for service delivery.
4. The Internet enables customers to recommend new products and experiences to others.

In addition to these Internet-related developments, there are many new tools, technologies, and methodologies that are speeding the pace of new product development. For example, software development frameworks make it possible to launch, test, and refine a new Web-based service in a fraction of the time that it required in the past. A new retail offering that, in the past, would have required a team of programmers to bring to market can be launched on Etsy today in less than an hour.

New products have never been faster and easier to launch.

New Products Bring Risk

Still, new products are risky. In the strategic opportunity matrix section we reviewed a number of strategies that include new and existing products. Why is it important to consider whether the product and/or market is new in this strategic context? Current products in current markets are known, and new products and new markets are not known.

In this section we have discussed a couple of examples of new products in the context of company strategies. Apple launched five major iPod models in six years, and then followed them with a total of twenty different versions of those models. Perhaps most interesting, Apple launched three different iPod models—the Classic, the Mini, and the Shuffle—before it saw significant sales growth.

The Johnson & Johnson medical practices unit launched more than fifty new products between 2012 and 2014 but has seen only a 0.5 percent increase in sales during that period. With the 2014 sale of a diagnostics product that was showing declining sales numbers, the SBU is better poised to show growth in its 2015 sales numbers.

Both of these examples show that new products do not guarantee new sales, and they certainly don’t guarantee immediate success.

Role of New Products in the Portfolio

New products bring greater risk to the product portfolio but also greater potential reward. The goal of portfolio management is to balance risk in order to create strong performance today and in the future. Though new products can drain resources in the short run, they are positioned to generate new sales in the long run—and to take off when other products are entering stages of maturity and decline.

The early investment in multiple new iPod models that were not growing quickly created a future base for the growth of the iPod. That, in turn, generated returns and positioned the Apple brand for the development and release of the iPhone. Johnson & Johnson’s medical products division has aggressively invested in new products that can spur growth and divested from products with declining sales. Still, in the first three quarters of 2015, overall growth for the division is down. It is not yet clear whether the new products will generate enough growth to replace the growth of their predecessors.^[5]

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This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

What you’ll learn to do: discuss the product life cycle and its implications for marketing

We just considered the case of Apple launching a new product (the Apple Watch). A particular set of marketing strategies and tactics was needed to define a product that did not exist, to create it, and introduce it to the world. If we were instead focused on marketing the iPhone, which was introduced in 2007, would the strategies and tactics be different? The answer is yes.

In this section we will look at how marketing approaches for a product change over time. Nabisco introduced Wheat Thins crackers in 1947, yet the brand continues to be strong (it generated $344.8 million in revenue in 2015). The cracker even has more than 250,000 Twitter followers. In contrast, other products like children’s toys and trendy clothing are designed for a single sales season and have to be quickly replaced with the next model, in order to draw sales. While the length of time is different, there are common patterns across the product life cycle that we will discuss in this section.

The specific things you’ll learn in this section include:

• Identify the stages of the product life cycle
• Explain the unique marketing requirements of each stage
• Identify challenges with using product lifecycle in marketing

Stages of the Product Life Cycle

A company has to be good at both developing new products and managing them in the face of changing tastes, technologies, and competition. Products generally go through a life cycle with predictable sales and profits. Marketers use the product life cycle to follow this progression and identify strategies to influence it. The product life cycle (PLC) starts with the product’s development and introduction, then moves toward withdrawal or eventual demise. This progression is shown in the graph, below.

The five stages of the PLC are:

1. Product development
2. Market introduction
3. Growth
4. Maturity
5. Decline

The table below shows common characteristics of each stage.

	Common Characteristics
0. Product development stage	investment is made sales have not begun new product ideas are generated, operationalized, and tested
1. Market introduction stage	costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product makes little money at this stage
2. Growth stage	costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases
3. Maturity stage	costs are lowered as a result of increasing production volumes and experience curve effects sales volume peaks and market saturation is reached new competitors enter the market prices tend to drop due to the proliferation of competing products brand differentiation and feature diversification is emphasized to maintain or increase market share profits decline
4. Decline stage	costs increase due to some loss of economies of scale sales volume declines prices and profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales

Using the Product Life Cycle

The product life cycle can be a useful tool in planning for the life of the product, but it has a number of limitations.

Not all products follow a smooth and predictable growth path. Some products are tied to specific business cycles or have seasonal factors that impact growth. For example, enrollment in higher education tracks closely with economic trends. When there is an economic downturn, more people lose jobs and enroll in college to improve their job prospects. When the economy improves and more people are fully employed, college enrollments drop. This does not necessarily mean that education is in decline, only that it is in a down cycle.

Furthermore, evidence suggests that the PLC framework holds true for industry segments but not necessarily for individual brands or projects, which are likely to experience greater variability.^[1]

Of course, changes in other elements of the marketing mix can also affect the performance of the product during its life cycle. Change in the competitive situation during each of these stages may have a much greater impact on the marketing approach than the PLC itself. An effective promotional program or a dramatic lowering of price may improve the sales picture in the decline period, at least temporarily. Usually the improvements brought about by non-product tactics are relatively short-lived, and basic alterations to product offerings provide longer benefits.

Whether one accepts the S-shaped curve as a valid sales pattern or as a pattern that holds only for some products (but not for others), the PLC concept can still be very useful. It offers a framework for dealing systematically with product marketing issues and activities. The marketer needs to be aware of the generalizations that apply to a given product as it moves through the various stages.

Marketing through the Product Cycle

There are some common marketing considerations associated with each stage of the PLC. How marketers think about the marketing mix and the blend of promotional activities–also known as the promotion mix–should reflect a product’s life-cycle stage and progress toward market adoption. These considerations cannot be used as a formula to guarantee success, but they can function as guidelines for thinking about budget, objectives, strategies, tactics, and potential opportunities and threats.

Keep in mind that we will discuss the new-product development process later in this module, so it is not covered here.

Market Introduction Stage

Think of the market introduction stage as the product launch. This phase of the PLC requires a significant marketing budget. The market is not yet aware of the product or its benefits. Introducing a product involves convincing consumers that they have a problem or need which the new offering can uniquely address. At its core, messaging should convey, “This product is a great idea! You want this!”  Usually a promotional budget is needed to create broad awareness and educate the market about the new product. To achieve these goals, often a product launch includes promotional elements such as a new Web site (or significant update to the existing site), a press release and press campaign, and a social media campaign.

There is also a need to invest in the development of the distribution channels and related marketing support. For a B2B product, this often requires training the sales force and developing sales tools and materials for direct and personal selling. In a B2C market, it might include training and incentivizing retail partners to stock and promote the product.

Pricing strategies in the introduction phase are generally set fairly high, as there are fewer competitors in the market. This is often offset by early discounts and promotional pricing.

It is worth noting that the launch will look different depending on how new the product is. If the product is a completely new innovation that the market has not seen before, then there is a need to both educate the market about the new offering and build awareness of it.

While we often think of an introduction or launch as a single event, this phase can last several years. Generally a product moves out of the introduction stage when it begins to see rapid growth, though what counts as “rapid growth” varies significantly based on the product and the market.

Growth Stage

Once rapid growth begins, the product or industry has entered the growth stage. When a product category begins to demonstrate significant growth, the market usually responds: new competitors enter the market, and larger companies acquire high-growth companies and products.

These emerging competitive threats drive new marketing tactics. Marketers who have been seeking to build broad market awareness through the introduction phase must now differentiate their products from competitors, emphasizing unique features that appeal to target customers. The central thrust of market messaging and promotion during this stage is “This brand is the best!” Pricing also becomes more competitive and must be adjusted to align with the differentiation strategy.

Often in the growth phase the marketer must pay significant attention to distribution. With a growing number of customers seeking the product, more distribution channels are needed. Mass marketing and other promotional strategies to reach more customers and segments start to make sense for consumer-focused markets during the growth stage. In business-to-business markets, personal selling and sales promotions often help open doors to broader growth. Marketers often must develop and support new distribution channels to meet demand. Through the growth phase, distribution partners will become more experienced selling the product and may require less support over time.

The primary challenges during the growth phase are to identify a differentiated position in the market that allows the product to capture a significant portion of the demand and to manage distribution to meet the demand.

Maturity Stage

When growth begins to plateau, the product has reached the maturity phase. In order to achieve strong business results through the maturity stage, the company must take advantage of economies of scale. This is usually a period in which marketers manage budget carefully, often redirecting resources toward products that are earlier in their life cycle and have higher revenue potential.

At this stage, organizations are trying to extract as much value from an established product as they can, typically in a very competitive field. Marketing messages and promotions seek to remind customers about a great product, differentiate from competitors, and reinforce brand loyalty: “Remember why this brand is the best.” As mentioned in the previous section, this late in the life cycle, promotional tactics and pricing discounts are likely to provide only short-term benefits. Changes to product have a better chance of yielding more sustained results.

In the maturity stage, marketers often focus on niche markets, using promotional strategies, messaging, and tactics designed to capture new share in these markets. Since there is no new growth, the emphasis shifts from drawing new customers to the market to winning more of the existing market. The company may extend a product line, adding new models that have greater appeal to a smaller segment of the market.

Often, distribution partners will reduce their emphasis on mature products. A sales force will shift its focus to new products with more growth potential. A retailer will reallocate shelf space. When this happens the manufacturer may need to take on a stronger role in driving demand.

We have repeatedly seen this tactic in the soft drink industry. As the market has matured, the number of different flavors of large brands like Coke and Pepsi has grown significantly. We will look at other product tactics to extend the growth phase and manage the maturity phase in the next section.

Decline Stage

Once a product or industry has entered decline, the focus shifts almost entirely to eliminating costs. Little if any marketing spending goes into products in this life stage, because the marketing investment is better spent on other priorities. For goods, distributors will seek to eliminate inventory by cutting prices. For services, companies will reallocate staff to ensure that delivery costs are in check. Where possible, companies may initiate a planned obsolescence process. Commonly technology companies will announce to customers that they will not continue to support a product after a set obsolescence date.

Often a primary focus for marketers during this stage is to transition customers to newer products that are earlier in the product life cycle and have more favorable economics. Promotional activities and marketing communications, if any, typically focus on making this transition successful among brand-loyal segments who still want the old product. A typical theme of marketing activity is “This familiar brand is still here, but now there’s something even better.”

Challenges in the Product Life Cycle

In theory, the product life cycle follows a predictable path that is easy to understand. This might suggest that the marketer just needs to gear up for the ride and be ready to adjust tactics as the product moves through its life cycle. To the contrary, a marketer’s job is much less passive—instead, the marketer’s goal is to influence the life cycle. An effective marketer tries to extend the growth stage in order to maximize revenue and profits and to extend the maturity stage in order to fund the development and introduction of new products.

Apple’s iPod Life-Cycle Strategies

It is easier to understand the complexity of the product life cycle in the context of a real-life example. The total sales of Apple’s iPod across all models follow a classic product life-cycle curve (see Figure 1, below).

Remember, these data include all models of iPods. One strategy that Apple employed to increase growth was to introduce new models often. The new models had fairly similar functions but offered significantly different styling. This drove multiple sales to the same buyer. A buyer was less likely to say, “I already have an iPod,” than to say, “I have an iPod Classic but I want an iPod Nano.” From the initial launch in October 2002 through 2007, Apple introduced five major iPod models, with multiple versions of each. The graph below shows the sequence of releases, with large dots representing the initial release of each new model. In September of 2008 and 2010, Apple released new versions of three different iPod models at the same time.

Apple’s rapid product releases kept it on the cutting edge of design and made it difficult for competitors to take market share during the product’s growth stage. In September 2006, Apple CEO Steve Jobs reported that iPods held 75.6 percent market share.

Throughout the growth period Apple chose not to sell old versions of new devices. Once the company introduced the third generation of the iPod Nano, it stopped selling new second-generation iPod Nanos (though it did still offer refurbished versions of the older products). This allowed the company to quickly make the older versions obsolete, which drove new sales and reduced the ongoing support costs for older models.

When companies talk about “cannibalizing” their market, they mean that one product takes market share from another. In effect, one of the company’s products is eating the other product’s market share. Each new model of the iPod took market share from its predecessors, but collectively the iPod products dominated their market. The greatest cannibal of all in the Apple story is the iPhone, which was first released in June 2007.

The Smartphone Product Life Cycle

A smartphone is a mobile phone that performs many of the same functions as a computer. Prior to the introduction of the smartphone, most people used cell phones—which are now referred to as “feature phones.” Feature phones provide phone and text capabilities but lack an operating system that can support the more advanced capabilities of today’s smartphones.

Early smartphones saw broad adoption in Japan in 2001, but mass adoption of smartphones did not reach the U.S. until business users fell in love with the Blackberry in 2003. Today, smartphones from a range of providers use primarily Google’s Android operating system, Apple’s iOS, or Microsoft Mobile.

Global sales of smartphones have grown rapidly, as shown in Figure 3, below.

Marketers are using many different strategies to drive the growth of smartphones, but perhaps the greatest impact has been the opening of the technology platform to allow other vendors to offer applications for them. Apple, Samsung, Microsoft, and other players have not tried to imagine every possible use for a smartphone and build it themselves. Instead they have created the technology infrastructure and an open marketplace for applications. Programmers can develop applications that can run on any phone, and smartphone owners can select and buy the apps that are of interest.

Through this broad range of applications, the smartphone brings together a number of different functions on one device. Before the first release of the smartphone, many people carried a feature phone to answer calls and a personal digital assistant to manage email and calendars. With the smartphone, these two functions came together, and as the device has matured, it has taken over many other tasks that were formerly performed on a separate device.

Adoption of smartphones has had tremendous impact on the product life cycle of a range of other products. When Apple introduced the iPhone in 2007, the company was cannibalizing its market for iPods. Today, most Apple customers play their media on a phone rather than on a separate media-dedicated device. There are still sales of iPods, but the company, in effect, initiated the decline of the market with its own introduction of the iPhone—a market in which it had more than 75 percent market share.

The markets for digital cameras (especially the low-end models) and personal navigation systems (GPS systems) have also been impacted. The product life-cycle graph for digital camera purchases, shown in Figure 4, below, shows a striking resemblance to that of the iPod.

While smartphone cameras have lagged behind digital cameras in terms of features and performance, they provide two distinct benefits:

1. The smartphone adds the camera to an existing device that the user already carries with him
2. The smartphone makes it easier to use and share photos through other applications on the phone

Smartphones are a dominant factor in the product life cycle of digital cameras, iPods, and a number of other products.

Lessons from the Smartphone Life Cycle

This example shows some benefits of considering the product life cycle in marketing strategies but also some significant limitations.

The product life cycle is not forward looking. At any point on the graph, a marketer can see what has already occurred but not what is ahead. In planning a product strategy, it is important to understand the past sales performance of the product and the industry broadly, but the role of marketing is to shape future performance, and the product life cycle doesn’t offer many tools to inform that proactive work.

The product life cycle can focus a marketer on a defined set of products and competitors in the current market—but miss broad trends or innovations in adjacent markets and products. A marketer looking for the next feature to add to a digital camera to extend the maturity phase could easily miss the impact that the smartphone would have on the digital camera market. We can learn from Apple’s description of a product marketing manager position in its own company: One of the product marketing manager’s responsibilities is to “closely follow emerging technology, consumer, and societal trends and make recommendations for how products will leverage or fit into those emerging trends.” This broad view is critical to successful marketing.

Finally, this example demonstrates the importance of creating a diverse set of products. When the iPod lost market share to the iPhone, Apple won. Other companies that have lost market on account of the transition to smartphones—Nikon and Canon in cameras, Garmin in navigation devices, etc.—have not fared as well.

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COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

 

Why It Matters: Product Marketing

COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

 

COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

Instructions

Write a post for the Discussion on this topic, addressing the questions below. You may use either written paragraph or bullet-point format. Part 1 should be 2–3 paragraphs in length or an equivalent amount of content in bullet-point form. Responses to your classmates’ posts should be 1–2 paragraphs or several bullet points in length.

Part 1: Product Strategy

Briefly describe your product or service. Where is it in the product development life cycle? What recommendations do you have for improving the offering to fit your target market’s needs? Be sure to consider the following:

• What level of quality and consistency does the offering have?
• How many features does it have and can they be removed or added?
• Does the design and/or service deliver what the customer values? If not, how can it improve?
• What improvements would help your offering compete more effectively?

Part 2: Respond to Classmates’ Posts

After you have created your own post, look over the discussion posts of your classmates and respond to at least two of them.

Part 3: Incorporate Feedback

Review the feedback you receive from classmates and your instructor. Use this feedback to revise and improve your work before submitting it as part of the “Complete Marketing Plan” assignment.

Grading Rubric for Discussion Posts

The following grading rubric may be used consistently for evaluating all discussion posts.

Discussion Grading Rubric

Criteria	Response Quality: Not Evident	Response Quality: Developing	Response Quality: Exemplary	Point Value Possible
Submit your initial response	No post made – 0 pts	Post is either late or off-topic – 2 pts	Post is made on time and is focused on the prompt – 5 pts	Point value possible – 5 pts
Respond to at least two peers’ presentations	No response to peers – 0 pts	Responded to only one peer – 2 pts	Responded to two peers – 5 pts	Point value possible –5 pts

Total Points Possible for Discussion Assignment: 10pts.

COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

In this module we’ve covered a wide range of topics related to the role of the product in the marketing mix. As you’ve seen, creating clear value for the customer, understanding the product life cycle, and creating a balanced product portfolio are all interrelated aspects of thinking about the customer and market behavior.

At the beginning of this module we discussed the success of Uber’s ride-sharing product. Let’s take another look at it from the viewpoint of the new-product development process.

Recall that the business model canvas is a tool companies use to lay out the business case for a new product concept. Figure 1, below, is an example of how Uber’s business model canvas might have looked when the founders cooked up the idea for their ride-sharing offering. Given what we know now about the product’s success, it’s pretty clear that Uber hit its mark: the company identified and delivered on a value proposition with incredible product-market fit.

The successful definition, development, and delivery of the product reduced risk in other elements of the marketing mix, though Uber’s affordable and predictable pricing is an important part of the value proposition. The product has been successful and is continuing to grow in the market. In 2018 the company reported revenue growth of 43 percent year over year.^[1]

Uber’s market may be reaching maturity. In terms of the adoption cycle, Uber has moved far past the innovators and early adopters and likely past most of the early majority. Now it needs to attract late majority customers and fight to hold on to its existing customers in a very competitive marketplace. As you think about Uber’s product and market, will laggards ever use the service? Should the company try to influence them?

Chris Nicholson, from FutureAdvisor, explains the impact of this trend on Uber and its competitor, Lyft: “They both feel that the only way to maintain their growth rate in the U.S. is to grab each other’s market share.” As the market reaches maturity, competition is getting more fierce. The companies have to fight to keep their customers and try to lure customers from competitors if they want to sustain their growth.^[2]

In using more of the tools and frameworks that we have discussed in this module, you are better able to understand a product’s success, identify risks to its future success, and use effective marketing to influence the course of that product’s success.

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COPYRIGHT

This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations.  See our Copyright and Attribution page for additional details.  For details about permission to use please contact me at c@vanosterhout.com with the phrase  Courseware Usage Inquiry.  If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject.  Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com