B2B MKTG

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2002 Edition

Vitale and Giglierano

Chapter 8Planning and Positioning the Value Offer

Prepared by John T. Drea, Western Illinois University

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Exhibit 8-1 The Product Life Cycle

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Exhibit 8-2 The Technology Adoption Life Cycle

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Basic Assumptions About the Product Life Cycle

• All products and offerings have a limited life.• All products pass through different stages of

evolution– For each stage, there is an idealized marketing

mix that best fits the environment in that stage.

• Different stages offer different opportunities and threats – – Segmentation and targeting should reflect the

changes

• Profits vary over the product life cycle.

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Offering Development Stage

•No sales volume – offering still being developed.•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 to satisfy customer needs.

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Offering Introduction Stage

•Low sales volume.•Product is somewhat basic – little need for competitive differentiation.•Profits are typically negative.•Price/value are being determined•Promotion is used to build awareness.•If many offering elements have been outsourced or are part of a first-time value network, the logistical process experiences a learning curve.

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Offering Growth Stage

•Profits increase - new adopters accept product. •Market penetration pricing may be appropriate as competitors bring pressure on high margins.•Accordingly, product differentiation becomes important to distinguish the offering from competitors (and to help protect margins.)•Promotion serves to remind/reinforce decisions.•Distribution is often important in the training and education of customers.

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Key Issues As a Product Enters the Growth Stage

Product Acceptance

Product Acceptance

Market pragmatists must now play catch-up or attempt to leap-frog market visionaries.

Product Differentiation

Product Differentiation

Total offering attributes are important to differentiate the product.

Economiesof Scale

Economiesof Scale

Growth is likely the function of a B2B customer specifying the product for inclusion in its offering. This creates a sudden growth in volume that will require economies of scale.

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Offering Maturity Stage

•Profits have peaked, competition fights over market share. •Promotion reinforces buyer decisions and focuses on supplier reputation and value.•Distribution strives to serve all 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

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Offering Decline Stage

•Consolidation usually occurs among suppliers•Product line is reduced to minimize product variation – efforts are made by remaining competitors to operate at productive rates.•Promotion reduced to minimal levels to accommodate existing customers.•Price, particularly associate with a long-term contracts, is a major part of the marketing mix.

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How Can You Determine Where an Offering Is in the PLC?

• Develop and review trend information for the past 3-5 years or business cycles.

• Examine changes in the number and nature of competitors.

• Review short-term competitive tactics – are competitors pricing to utilize new capacity or improve short term sales volume?

• Are new product introductions aimed at segments currently served by existing offerings?

• How many years before a major consolidation occurs among suppliers?

• Will a competitor innovate your organization out of business?

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The New Product

Development Process

Stage1:Idea Generation

Stage1:Idea Generation

Stage 2:Product Screening

Stage 2:Product Screening

Stage 3:Business Case Analysis

Stage 3:Business Case Analysis

Stage 5:Test Market

Stage 5:Test Market

Stage 6:Product Launch

Stage 6:Product Launch

Stage 7:Hand-off to Customer Education

Stage 7:Hand-off to Customer Education

Stage 4:Product/Strategy/Plan Development

Stage 4:Product/Strategy/Plan Development

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Two Approaches to Developing New Products

Focus on theTechnology orProduct First

Focus on theTechnology orProduct First

Extensively Involve

Existing and Prospective Customers

Extensively Involve

Existing and Prospective Customers

Engineering-driven philosophies minimize customer input:A customer orientation maximizes customer input.

….product concept…. ….marketing concept….

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Team Approaches to New Product Development

Companies have moved from separate silos (marketing, engineering, sales, customer service, etc.) to small cross-functional teams.

Potential problemswith a team approach

New products usually need a champion

Team process requireshigh-level support

Different levels ofmanagement need input

Team composition mustreflect many demands

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Stage Gates

• Stage Gates– They are checkpoints after each stage of

the product development process.– The new product development process is

interrupted at certain milestones to ensure that

• the original goals and objectives are still viable,• The new product development is still forecast to

meet the expectations that were created as part of its initial approval.

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Concurrent Development

Sequential Development (not concurrent)NewProduct

DevelopmentEngineering + Production + Marketing + Sales

1. Concurrent development reduces development time.2. Teams are critical to effective concurrent development.3. There are no short-cuts in new product development.

NewProduct

Development

Marketing

Production

Engineering

Sales

Etc.

Concurrent Development

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Marketing and the Product Development Process

• In a market-driven organization, marketing continuously reviews customer needs and develops new offerings to meet those needs.

• However, many organizations minimize resources for marketing throughout the process.– 22% of new product development projects

reported no marketing study.– Another 46% reported poorly developed marketing

plans.– Test marketing was omitted in 58% of studied

projects

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How Should Marketing Serve the Organization?

Understand theTechnology in

Depth

Understand theTechnology in

Depth

Guide NewProduct

Developmentwith

CustomerNeeds

Guide NewProduct

Developmentwith

CustomerNeeds

Screen andSelect Ideas

from All Sources

Screen andSelect Ideas

from All Sources

Motivate OtherCompany

Departments &Organizations

Motivate OtherCompany

Departments &Organizations

Define and Redefine Current

and FutureCustomer Needs

Define and Redefine Current

and FutureCustomer Needs

Reward theEfforts of

Technical &Support

Staff

Reward theEfforts of

Technical &Support

Staff

CatalyzeCompany Resources to Get the

Right Resources

CatalyzeCompany Resources to Get the

Right Resources

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Reasons Why New

Products Fail

No RealNeed

Existed

No RealNeed

Existed

MarketWould Not

Pay

MarketWould Not

Pay

MissingMarketing

Plan

MissingMarketing

Plan

OfferingDidn’t MeetNeeds

Adequately

OfferingDidn’t MeetNeeds

Adequately

OverestimatedMarket Size orA “Me-Too”

Product Didn’tPenetrate

OverestimatedMarket Size orA “Me-Too”

Product Didn’tPenetrate

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Exhibit 8-3 Make-or-Buy Decisions

How much does the componentcontribute to our product’s valueimage in our customer’s view?

Is it our kind of business?-Financial justification-Risk assessment-Stability of technology

Are we good at it?

Can we own the market for it?

Can we or do we want to protect it?

Major

Yes

Yes

Yes

Yes Make it!

Is the component uniqueto our markets?

Purchase as acommodity.

Developpartnership with

qualified supplier(s).

Collaborate inDevelopment with

Technology-orientedSupplier(s).

No

Minor

No

No

No

No Yes

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Connecting the Supply Chain through Metrics

• The collected metrics should be extended to the firms suppliers and customers

• Customer needs to get the true metrics• Involves TRUST & TECHNOLOGY• Metrics should be shared in the Supply Chain• Ultimately the Supply Chain will be ‘transparent’• Dot.coms failed to do this• Visibility of the Supply Chain will be made real-time by

technology and aggressive channel members