Product and Brand Management

MODULE-II

1. Product lifecycle Management

2. Product Portfolio Analysis and Management
3. Product line Management
4. Industrial Products and Services
5. Consumer Products & Services (Durables & FMCG),
6. Marketing and Management of information products and services.

1. Product lifecycle Management:

• Product lifecycle management (PLM) is the process of managing the entire

lifecycle of a product from its conception, through design and manufacture, to
service and disposal .

• Product life cycle management (PLCM) is to do with the life of a product in the
market with respect to business/commercial costs and sales measures.

Sales
Development Introduction Growth Maturity Saturation Decline

Time
(PLC Diagram)

A. Introduction Stage
Sales grow slowly Profit is minimal or negative
Create awareness Stimulate trial
High production costs Limited product models

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 Frequent product modification Penetration pricing
Skimming pricing Little competition
High failure rate, High marketing costs
Promotion strategy focuses on primary demand for the product category
developing product awareness Informing about product benefits.
Intensive personal selling to retailers and wholesalers is required.
B. Growth Stage
Characteristics
Sales grow at an increasing rate. Many competitors enter the market.
Large companies may acquire small
Profits are healthy
pioneering firms.
Promotion emphasis
heavy brand advertising Differences between brands.
Gaining wider distribution is a key goal
Toward the end of this stage
prices normally fall Profits reach their peak.
Sales volume has created economies of
Development costs have been recovered
scale.
C. Maturity Stage

Sales continue to increase but at a

The marketplace is approaching saturation
decreasing rate
An emphasis on product style rather than
Annual models of many products
function
Marginal competitors begin dropping out
Product lines are widened or extended
of the market.
Heavy promotions to both the dealers and
Prices and profits begin to fall.
consumers are required.

D. Decline Stage
Falling demand forces many competitors out
Signaled by a long-run drop in sales.
of the market
The rate of decline is governed by how
A few small specialty firms may still
rapidly consumer tastes change or how
manufacture the product.
rapidly substitute products are adopted.
Strategies
Dropping a product from the company’s
Deletion.
product line, is the most drastic strategy.

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 Company retains the product but reduces
Harvesting
marketing support
Promote more frequent use of the product by
current customers
Find new target markets for the product
Find new uses for the product
To prevent slipping into decline Price the product below the market
Develop new distribution channels
Add new ingredients
Delete old ingredients
Make a dramatic new guarantee

MANAGING THE PRODUCT LIFE CYCLE

A. Role of a Product Manager:
Product manager is responsible for marketing products through the successive stages
of their life cycles.
Product (or brand) manager manages the marketing efforts for a close-knit family of
products or brands.
Three ways to manage:
a. modify the product
b. modify the market
c. reposition the product.
B. Modify the Product:
Altering a product’s characteristic to try to increase and extend the product’s sales.
A. quality B. performance C. appearance,
C. Modify the Market Market:
Finding new users.
Modification strategies
Increasing use among existing users.
involve:
Creating new use situations.

D. Reposition the Product:

Changing the place a product occupies in a consumer’s mind
Product relative to competitive products.
repositioning Reposition a product by changing one of four marketing mix
elements.
Four factors that trigger a repositioning action are:
Reacting to a Competitor’s position is adversely affecting sales and market
Competitor’s Position. share.
Reaching a New Market. Repositioning a product allows it to reach a new market.

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 Changing consumer trends can also lead to repositioning a
product.
Catching a Rising Trend. For example, consumer interest in “functional foods” that
offer health and dietary benefits beyond nutrition inspired
repositioning of oatmeal.
adding value to the product (or line)
Trading up Additional features
Higher quality materials.
Changing the Value Reducing the number of features
Offered. Lower quality
Trading Lower price.
down Reducing the content of packages without
changing package size and maintaining the
package price.

2. Product Portfolio Analysis & Management:

The business portfolio is the collection of businesses and products that make up the
company. The best business portfolio is one that fits the company's strengths and helps
exploit the most attractive opportunities.

The company must:

(1) Analyze its current business portfolio and decide which businesses should receive
more or less investment, and

(2) Develop growth strategies for adding new products and businesses to the portfolio,
whilst at the same time deciding when products and businesses should no longer be
retained.

Methods of Portfolio Planning

The two best-known portfolio planning methods are from the Boston Consulting Group
(the subject of this revision note) and by General Electric/Shell. In each method, the first
step is to identify the various Strategic Business Units ("SBU's") in a company portfolio.
An SBU is a unit of the company that has a separate mission and objectives and that can
be planned independently from the other businesses. An SBU can be a company division,
a product line or even individual brands - it all depends on how the company is
organized.

A. The Boston Consulting Group Box ("BCG Box")

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Using the BCG Box (an example is illustrated above) a company classifies all its SBU's
according to two dimensions:

On the horizontal axis: relative market share - this serves as a measure of SBU strength
in the market

On the vertical axis: market growth rate - this provides a measure of market
attractiveness

By dividing the matrix into four areas, four types of SBU can be distinguished:

Stars - Stars are high growth businesses or products competing in markets where they are
relatively strong compared with the competition. Often they need heavy investment to
sustain their growth. Eventually their growth will slow and, assuming they maintain their
relative market share, will become cash cows.

 Investment
 Further Growth
 Maintain Market Position
 Cash flow
 Self-sustaining: Fund their own growth
 Require funds from other SBUs (Cash Cows)
 Assure the future of the company
 Grow into Cash Cows

Cash Cows - Cash cows are low-growth businesses or products with a relatively high
market share. These are mature, successful businesses with relatively little need for
investment. They need to be managed for continued profit - so that they continue to
generate the strong cash flows that the company needs for its Stars.

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  Investment
 Maintain market share
 Maintain capacity
 Cash Flow
 Positive cash flow
 Provides funding to support Stars and “?”
 No potential for profit growth

Question marks - Question marks are businesses or products with low market share but
which operate in higher growth markets. This suggests that they have potential, but may
require substantial investment in order to grow market share at the expense of more
powerful competitors. Management have to think hard about "question marks" - which
ones should they invest in? Which ones should they allow to fail or shrink?

 Investment
 Increase market share
 Selectively develop into Stars
 Cash Flow
 Require funds from other SBUs (Cash Cows)
 Unrealized future opportunities

Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low
relative share in unattractive, low-growth markets. Dogs may generate enough cash to
break-even, but they are rarely, if ever, worth investing in.

 Investment
 Divestiture strategy
 Reduce capacity to free up resources
 Cash Flow
 Goal of Positive Cash Flow
 Negative Cash Flow = Divestment
 No real growth opportunities

Using the BCG Box to determine strategy

Once a company has classified its SBU's, it must decide what to do with them. In the
diagram above, the company has one large cash cow (the size of the circle is proportional
to the SBU's sales), a large dog and two, smaller stars and question marks.

Conventional strategic thinking suggests there are four possible strategies for each SBU:

(1) Build Share: here the company can invest to increase market share (for example
turning a "question mark" into a star)

(2) Hold: here the company invests just enough to keep the SBU in its present position

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(3) Harvest: here the company reduces the amount of investment in order to maximize
the short-term cash flows and profits from the SBU. This may have the effect of turning
Stars into Cash Cows.

(4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use
the resources elsewhere (e.g. investing in the more promising "question marks").
Source: Das Boston-Consulting-Group-Portfolio Dipl.-Ing. Holger
Blumhof
Mature Phase
“Cash Cow”
Sales Volume

Growth Decline
Phase “Star” Phase “Dog”

Introductory
Phase “?”

Time

Evaluation of BCG Matrix: Pros

 Simple and rapid
 Solid basis for decision-making
 Good measurability of market share and growth
 Provides information about efficient resource allocation within the organization
 Generator for strategic options
Evaluation of BCG Matrix: Cons
 Oversimplifies complex decisions
 Only 2 factors considered = creates risk
 Uncertainty in market and SBU definition
 Only considers current businessesà no dynamics
 Does not recognize possible synergies between SBUs
 Can fall prey to the “GIGO” syndrome

Conclusion:

As long as management understands that the BCG Growth/Share Matrix generates

options which require further analysis and validation, this tool can greatly enhance
strategic decision making.

B. Strategy - portfolio analysis - GE matrix

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The business portfolio is the collection of businesses and products that make up the
company. The best business portfolio is one that fits the company's strengths and helps
exploit the most attractive opportunities.

The company must:

(1) Analyze its current business portfolio and decide which businesses should receive
more or less investment, and

(2) Develop growth strategies for adding new products and businesses to the portfolio,
whilst at the same time deciding when products and businesses should no longer be
retained.

The two best-known portfolio planning methods are the Boston Consulting Group
Portfolio Matrix and the McKinsey / General Electric Matrix (discussed in this revision
note). In both methods, the first step is to identify the various Strategic Business Units
("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate
mission and objectives and that can be planned independently from the other businesses.
An SBU can be a company division, a product line or even individual brands - it all
depends on how the company is organized.

The McKinsey / General Electric Matrix

The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box.
Firstly, market attractiveness replaces market growth as the dimension of industry
attractiveness, and includes a broader range of factors other than just the market growth
rate. Secondly, competitive strength replaces market share as the dimension by which
the competitive position of each SBU is assessed.

The diagram below illustrates some of the possible elements that determine market
attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK
retailing market:

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Factors that Affect Market Attractiveness

Whilst any assessment of market attractiveness is necessarily subjective, there are several
factors which can help determine attractiveness. These are listed below:

- Market Size
- Market growth
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Opportunity to differentiate products and services
- Segmentation
- Distribution structure (e.g. retail, direct, wholesale

Factors that Affect Competitive Strength

Factors to consider include:

- Strength of assets and competencies

- Relative brand strength
- Market share
- Customer loyalty
- Relative cost position (cost structure compared with competitors)
- Distribution strength
- Record of technological or other innovation
- Access to financial and other investment resources

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3. Product line Management:

Product line management is about controlling the definition and release planning for a
product line. Market requirements, development capacities, strategic corporate decisions
are all harmonized, and the product's chances on the market are evaluated in a business.

More generally, many marketers (and most sales forces) often argue that a broad product
line is required to fully cover all (or most) customer / market requirements, and to erect
barriers to fend off competition. So, there is a prevalent tendency to add product lines,
extend product lines to more categories (e.g. drills, then saws, then sanders), add products
to lines (corded drills, cordless drills, cordless screwdrivers, etc.), and add basic product
choices (e.g. features, size, color, package) or quality variants geared to hit different price
points (good-better-best, industrial vs. consumer).

Many of these line extensions do, in fact, provide meaningful strategic or tactical
benefits. For example, a longer product line may allow a company to:

(1) Leverage costs via economies of scale and scope

(2) Insulate customers from competitors by enabling one-stop shopping

(3) Offer more choices that are more closely tailored to specific customer requirements

(4) Access incremental profit opportunities (e.g. add-on sales)

Traditional financial analysis, and most compensation systems, tend to encourage line
extensions. When assessed on a marginal cost basis, individual line extensions are
typically appealing. The logic is simple: since the overhead and infrastructure (e.g.
manufacturing facilities, sales force) is already in place, any contribution (excess of price
over variable cost) that is generated falls directly through to the bottom line.

Unfortunately, the logic isn't quite right. Each and every item added to a line has
associated costs. Some of these costs are visible, some are hidden in traditional financial
accounting, including:

(1) Administration: the cost of setting items up for processing, reviewing their status,
and placing purchase orders

(2) Cannibalization: diverting sales from other models rather than generating true
incremental volume

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(3) Inventory: disproportionate safety stock is required to maintain service levels when
volume is spread across multiple models (the reverse of the pooling effect )

(4) Repair parts: separate inventories of model-specific parts may need to be provided
throughout the market life of the product

While adding products to a line may have low apparent marginal cost, in fact, operating
complexity and the corresponding costs increase exponentially as product lines get long.
So, the strategic benefits of product line proliferation must be carefully weighed against
the stark financial realities.

In other words, managers must treat line extensions as major decisions, not marginally
incidental ones, and consider all relevant costs. Further, managers should constantly
monitor product-specific profitability and make on-going adjustments to optimize the
product portfolio.

As a general rule, a company should strive for the shortest line of products that is
strategically viable, and manage its product mix by rigorously screening line extensions,
being constantly vigilante of product-specific profitability, and being willing to manage
losers aggressively.

Product - Support Services

Companies should design its support services to profitably meet the needs of target
customers. How?

• Step 1. Survey customers to determine satisfaction with current services and any
desired new services.

• Step 2. Assess costs of providing desired services.

• Step 3. Develop a package of services to delight customers and yield profits.

4. Industrial Products and Services :

Industrial products are used to manufacture other goods or services, to facilitate an

organization’s operations, or to resell to other customers.

Those purchased for further processing or for use in conducting business.

a. Materials and parts:
• Raw materials, manufactured materials, and parts
b. Capital items:
• Products that aid in buyer’s production or operations
c. Supplies and services:
• Operating supplies, repair, and maintenance items

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Industrial Product - Support Services

Companies should design its support services to profitably meet the needs of target
customers. How?

• Step 1. Survey customers to determine satisfaction with current services and any
desired new services.

• Step 2. Assess costs of providing desired services.

• Step 3. Develop a package of services to delight customers and yield profits.

5. Consumer Products & Services (Durables & FMCG) :

Consumer products are bought to satisfy an individual’s personal wants. Same product
can be classified as business product or consumer product depending on intended use
Products and services bought by final consumers for personal Consumption.

a. Convenience Products: Purchased frequently and immediately, Low priced,

Mass advertising, Many purchase locations
• Examples: candy, soda, newspapers
b. Shopping Products: Bought less frequently, higher price, fewer purchase
locations, Comparison shop
• Examples: furniture, clothing, cars, appliances
c. Specialty Products: Special purchase efforts, High price, Unique
characteristics, Brand identification, Few purchase locations.
• Example: Lamborghini, Rolex Watch
d. Unsought: Little product awareness and knowledge (or if aware, sometimes
negative interest), Pricing varies, Distribution varies, Aggressive advertising
and personal selling by producers and resellers

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 Convenience Products
Buy frequently & immediately Shopping Products
Low priced
Many purchase locations Buy less frequently
Includes: Gather product information
Staple goods Fewer purchase locations
Impulse goods Compare for:
Emergency goods Suitability & Quality
Price & Style

Unsought Products
Specialty Products > New innovations

Special purchase efforts

> Products consumers don’t
Unique characteristics > want to think about
Brand identification
Few purchase locations > Require much advertising &
> personal selling & personal
selling

Consumer Product - Support Services:

Companies should design its support services to profitably meet the needs of target
customers. How?

• Step 1. Survey customers to determine satisfaction with current services and any
desired new services.

• Step 2. Assess costs of providing desired services.

• Step 3. Develop a package of services to delight customers and yield profits.

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Characteristics of Services

ili
Can’t be seen, tasted, felt, heard,

g
n

n
y

a
t

t
i

I
or smelled before purchase.
ili
b

n
y

e
s
Can’t be separated from service
r
t

I
providers.

ri

V
it

b
y

il

a
Quality depends on who provides
them and when, where and how.

ri

P
it

h
y

il

e
Can’t be stored for later sale or use.

6. Marketing and Management of information products and services:

Products purchased, sold and communicated through internet.

It may be a banking transaction, a railway ticket, a hotel, a spa, a tourist destination or
a personal computer.
Payment is made on line

Web Portals:

• Portals: Derived from the Latin word “Porta” Which means an entrance or
gateway to a locality (other websites)
• Portals are the most frequently visited sites on the web.
• The top portals such as ALO, Yahoo, Google and MSN have hundreds of millions
of unique visitors worldwide each month.
• The most important service provided by the portals is that of helping people find
information's they are looking for on the web.
• They are no longer the search engines.
• They are evolved into more complex web sides that provide news, entertainment,
in-depth information's and education on a growing variety of topics.
• Attracting web surfers and directing them to various websites is the main task of
portals.

Internet Service Providers:

• A company that provides access to the Internet. For a monthly fee, the service
provider gives you a software package, username, password and access phone
number. Equipped with a modem, you can then log on to the Internet and browse
the World Wide Web and USENET, and send and receive e-mail.

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