theory of product development in reference to plc

Product theory which relates to the product development

1. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.1
The product in theory
and practice

2. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.2
Marketing is all about success

3. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.3
Ineverydaylifeweusetheword‘product’freelyasanounwhich
describes‘athingorsubstanceproducedbynaturalprocessor
manufacture’(ConciseOxfordDictionary)withitsassociated
connotationsof‘artefact,good(s),produce,commodity,output,
merchandise,offering,work’(OxfordThesaurus).
Incommonparlance‘product’hascometoembraceallkindsofoffering
includingservicesdespitethefactthatservicespossessanumberof
distinctivefeatureswhichoftendiscriminatestronglybetweenphysical
productsandnon-physicalservices,especiallyintermsoftheir
marketing.
What is Product

4. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.4The ‘market’ is the place where Adam
Smith’s ‘invisible hand’ achieves an
equilibrium between demand and supply.
Traditionally, demand has exceeded supply so
it has determined which products are wanted
most and for which most will be offered in
exchange.

5. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.5
Price
Quantity
The traditional demand curve

6. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.6
Price elasticity
Inelastic
Elastic
Infinitely elastic
Elasticity of demand
Price
Quantity

7. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.7Melvin Copeland’s (1923) classification
of goods:
•Convenience
•Shopping
•Specialty

8. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.8
Specialty
Differentiated
Convenience
Price
Quantity
Copeland’s classification of goods

9. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.9
Convenience goods are those with which the consumer
is familiar and ‘as soon as he recognises the want, the
demand becomes clearly defined in his mind.
Furthermore, he usually desires the prompt satisfaction
of the want’.
Convenience goods tend to be of low unit price and are
purchased frequently. They are sometimes referred to as
‘low involvement’. The widest possible distribution is
necessary to maximize sales opportunities.

10. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.10
‘Shopping goods are those for which the consumer desires
to compare prices, quality and style at the time of purchase’.
Shopping goods differ from convenience goods in several ways:
1.The exact nature of the want may not be defined clearly in advance,
i.e. you may know the product categorybut need to establish what
is on offer before making a decision.
2.Therefore : A special shopping trip may be organised and
several outlets visited before reaching a decision. Alternatively,
customers collect information in the course of other shopping
trips (window shopping) until they have enough
background information to make a shopping trip.
3.Except in the case of distress purchases (where an immediate
replacement is required) the decision can be delayed.
4.There is low frequency of purchase.

11. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.11
‘Specialty goods are those which have some particular
attraction for the consumer, other than price,
which induces him to put forth special effort to visit
the store in which they are sold and to make
the purchase without shopping’.
What distinguishes specialty goods is that the
consumers have pre-determined what it is they want
to buy and will make a special effort to source the
product. Such products are sometimes called
‘high involvement’ products.

12. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.12
Different categories of goods call for different
marketing strategies:
Convenience = Undifferentiated (Cost leadership)
Shopping = Differentiated
Specialty = Concentrated (Focus)

13. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.13
Strategic options
•Marketing mix strategies:
Promotion Distribution priceProduct Strategy
Mass IntensiveLow Standardizes Undifferentiated
(cost leadership)
Targeted by
segment
Extensive What the market
will bear
Different for each
market segment
Differentiated
Direct Highly selective Premium Customized Concentrated
(focus)

14. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.14

15. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.15
The Buygrid framework
8. Performance feedback and evaluation
7. Selection of an order routine
6.Evaluation of proposals and selection
of supplier(s)
5. Acquisition and analysis of proposals
4.Search for and qualification of potential
sources
3.Description of characteristics and quantity
of needed items
2.Determination of characteristics and
quantity of needed items
1.Anticipation or recognition of a problem
(need) and a general solution
Straight
rebuy
Modified
rebuy
New
task
Buy phases
Buy classes

16. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.16
Adam Smith (1776) distinguished between the production
of tangible objects and the intangible outputs of persons
like lawyers and doctors.The latter he described as
‘unproductive of any value’.
However, Marshall (1890) recognised that while services
might be intangible they created ‘utility’ and so had value.
Today, services are regarded as essentially intangible
activities or benefits provided by one party to another
that do not result in the ownership of anything. They may
or may not be associated with a tangible product.
Products and Services

17. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.17

18. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.18

19. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.19

20. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.20

21. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.21
‘Pure’ services are seen as having a number of
characteristics that distinguish them from physical
products, namely:
•Intangibility
•Inseparability
•Variability
•Perishability
•Impossibility of ownership ( Zomato Example)

22. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.2272% of customers will pay a 20% premium for their
preferred brand.
50% will pay 25% more
40% will pay 30% more
25% say that price doesn’t matter
Over 70% use brands to guide a buying decision
And 50% are brand driven.
Davis 2002

23. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.23
Davis (2002) cites the following benefits
of a strong brand:
•Brand-based price premiums allow for higher margins
•Strong brands lend immediate credibility to new product
introductions
•Strong brands allow for greater shareholder and
stakeholder value
•Strong brands embody a clear, valued, and sustainable
point of differentiation

24. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.24
•Loyalty drives repeat business
•Strong brands mandate clarity in internal focus and
brand execution
•The more loyal the customer base and the stronger
the brand, the more likely customers will be forgiving
if a company makes a mistake
•Brand strength is a lever for attracting the best
employees and keeping satisfied employees
•70 per cent of customers use a brand to guide a
purchase

25. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.25

26. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.26
Successful brands have 4 key attributes:
1.Quality
2.Superior service
3.First to market :
–new technology
–new positioning concept
–new distribution channel
–new market segment
–exploitation of a new gap
4.Differentiation (ID Foods)

27. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.27
Booz Allen and Hamilton (1982) identified
six kinds of new products:
1.
New to the world
2.
New product lines
3.
Additions to existing product lines
4.
Improvements and revisions to existing products
5.
Repositionings
6.
Cost reductions.

28. Michael Baker and Susan Hart, Product Strategy and Management, 2
nd
Edition, © Pearson Education Limited 2007
Slide 2.28