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Ch. 8: Developing Product, Service and Value of The Offering

Ch. 8: Developing Product, Service and Value of The Offering. Product Life Cycle (PLC). Exhibit 8-1. Maturity. Sales Revenue/ period. Growth. Decline. Introduction. Time. Development. Conservatives. Pragmatists. Sales from New Adopters/ period. Visionaries. Laggards. Technophiles.

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Ch. 8: Developing Product, Service and Value of The Offering

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  1. Ch. 8: Developing Product, Service and Value of The Offering

  2. Product Life Cycle (PLC) Exhibit 8-1 Maturity Sales Revenue/ period Growth Decline Introduction Time Development

  3. Conservatives Pragmatists Sales from New Adopters/ period Visionaries Laggards Technophiles Time Technology Adoption Life Cycle (TALC) Exhibit 8-2

  4. PLC: Development Stage Continuous period between development and introduction • No sales volume • Product is not yet completely defined • profits do not exist • Price/value are being determined. • Promotion may be oriented towards publicity about technological developments • Heavy investment to prepare the offering satisfying customer needs

  5. PLC: Introduction Stage • Low sales volume • Product is somewhat basic • Profits are typically negative • Price/value are being determined • Promotion is used to build awareness • If offering elements are outsourced or first-time value network, logistical process experiences a learning curve

  6. PLC: Growth Stage • Profits increase, new adopters and pragmatists accept product • Market penetration pricing • Product differentiation is important • Distribution is often important in the training and education of customers

  7. Issues with Growth Stage • Product acceptance by Pragmatists and the need for differentiation • Significant changes from economies of scale when crossing the chasm Example: Sensacon Corporation

  8. PLC: Maturity Stage • Profits have peaked • Promotion reinforces buyer decisions and focuses on supplier reputation and value • Remaining major players compete in an oligopoly • Distribution serves market sub-segments • Price is a major component of the marketing mix • New customers do not replace sales volumes as old customers move to newer products

  9. PLC: Decline Stage • Consolidation usually occurs among suppliers • Product line is reduced to minimize product variation • Promotion reduced to minimal levels to accommodate existing customers • Price in relation to long-term contracts, is a major part of the marketing mix

  10. Traditional New Product Development Model Stage 1 Stage 4 Stage 5 Stage 7 Stage 2 Stage 3 Stage 6

  11. Notes on Product Development:Customer/Market Orientation Two development approaches: • Engineering Driven • Market/Customer Driven

  12. Notes on Product Development:Team Approach • Avoid Silos—cross functional approach • Product “Champion” often required

  13. Notes on Product Development:Invest in Early Stages Market Driven Standards: • New Ideas often question marks • Concept must fit and support the organization

  14. Notes on Product Development:Stage Gates • Checkpoints on path of product development • Multi-disciplinary review of product development • Stage Gates shadow milestones to ensure: • Original goals and objectives still viable • Offering still meets expectations initially approved

  15. Role of Marketing in Product Development • Understand the technology in depth • Define and redefine current and future customer needs and guide development with this process • Motivate other company departments and organizations • Screen and select ideas from all sources • Reward the efforts of the technical and support staff • Catalyze company resources to get the right talent on the job

  16. Why Do New Products Fail? • The Missing Marketing Plan • No Real Need Exists • The Market Size is Overestimated or a “Me Too” Product Fails to Penetrate the Market • The Offering Fails to Meet Needs Adequately • Market Will Not Pay • Contrary Perceptions of Innovation A good marketing plan is a solution to all of these!

  17. Minor How much does the component contribute to our product’s value Is the component Image in our customers’ view? unique to our markets? Major Yes No No Are we good at it? Purchase as a Yes Commodity No Can we own the market for it? Yes No Develop Partnership Can we or do we want to protect it? with qualified supplier(s) Yes Is it our kind of business? -Financial justification -Risk assessment Collaborate in -Stability of technology No development with technology-oriented Yes supplier(s) Make it! Make or Buy Decisions Exhibit 8-4

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