Strategic Product Management Flashcards
Corporate strategy
Business and marketing strategy (how, when, where to compete - product market, market segment, marketing mix) needs to fit with the corporate strategy (where we want to go - vision, mission, objectives, allocation of resources, synergies)
Key factors influencing product profitability
Internal factors -development expenses -development speed -production cost -product performance External factors -sales volume -competitive environment Net present value *pricing affects internal (companies look to make good profit) and external (customers influence price)
Typical cash flow for new product
- early development costs
- ramp up costs for production preparation
- marketing and support costs
Layers are connected - lower uncertainty
- project
- firm (strategy: extend portfolio,improve existing products, cost reduction and synergise)
- market (tends/risks in market, competition, different local demands across countries)
- macro environment (opportunities/risk in economic and political climate, natural, demographic, social)
Product strategy
1) INCREMENTAL PRODUCTS: target existing markets/technologies
2) NEW PRODUCTS: target new markets/ technologies
Development activities as determinant of success
- strategic planning plays a strong role for really new products, but lowers the performance for incremental products (uncertainty linked to really new products, while incremental products do not require long-term planning)
- business and market opportunity analysis highly important for the success of incremental products, but not vital for really new products
Uncertainty, risk and exposures
Uncertainty: Unpredictability of environmental or organisational variables that impact corporate performance
-general environmental uncertainties: political, government policy, macroeconomics, social, natural
-industry uncertainties: product market, input market, competitive
-firm uncertainties: operating, liability, r&d, behavioural
Risk: Unpredictability in corporate outcome variables
Exposures: sensitivity of a firm or project’s cash flows to changes in any of a number of interrelated uncertain variables
E.g. Burberry
Product management varies across organisations
Apple: project manager as CEO - Steve Jobs
Microsoft: different divisions fighting for resources
-Functionally focuses organisations: aligned by marketing functions, marketing strategies developed by CEO and Vice President, good when companies have fewer products, no single person is responsible
-Product focuses organisation: centralised structure (product manager mini CEO), different products can use the same distribution channel, narrow focus, employee competition
-Market-focused organisations: segments defined, different marketing strategies required
5 responses to mitigate risks
1) Avoidance (e.g. Divest where there is less uncertainty, delay entry, low uncertainty niches)
2) control (e.g. Lobbying, threats, vertical integration -different channels, sales, supply chain, advertising- low uncertainties)
3) cooperation (e.g. Long-term agreements, franchise/license)
4) flexibility (e.g. Diversification -global reach)
5) imitation (e.g. Follow other firms, learn form competitors - imitate products and processes)
Imitation
Effective strategy to maintain the status quo
- under uncertain environments
- when initial advantage is high
- do dissimilar moved to avoid dethronement
- sometimes should not imitate at all in dynamic environments
Uncertainties can create opportunities
- upward trend
- repeating/regular pattern: could be seasonal , benefit from the ups (e.g. Christmas market)
- if price of materials change over time, can use a cheaper alternative (switch to gain an advantage)
Creating options to capture opportunities
Flexibility options: e.g. Switching materials or production between continents, internally competing products, mutual technologies in the race
Growth options:initial investment may lead to further opportunities e.g. New platform technology,market entry)
Learning options: staged investments e.g. Drug development, research, oil exploration, launch limited number if products before wider roll-out
Exit options: abandon projects, save and employ resources to other initiatives
Uncertainty: real options view
Under uncertainty real options are valuable, they give management the flexibility to acquire, divest, and switch resources when such moves are advantageous
1. Core enhancement launches: improving profit streams and growth of core business, building in familiar business, extending existing brand e.g. Tide packaging size, usage
2. Platform launches: platform for significant growth in future revenue ps and profits e.g. Swifter line of cleaning implements
3. Positioning options: fairly confident long-term demand exists, underlying technology to address demand is unclear
-two key strategic purposes: learns out new capabilities and technologies, create a hedge in the event that the unexpected happened e.g. Boeing 2008 skyhook
4. Scouting options: learn and gather information from consumers, small investments and redirect path after most promising path is identified e.g. Apple stores
5. Stepping-stone options: deliberately staged and sequenced real options, series of small investments (technology is developing, firm needs to develop skills, consumers are learning) e.g. Nanotechnology
Portfolios with gaps…
-want immediate sales so focuses on stepping stone options, scientists have ideas that are focuses on enhancement launches rather than in the customer
New product preannouncement
- Product development and positioning
- use feedback from market to improve design and positioning strategy
- influence customer preference (information about market and why they need the product, how it can be used and influence expectations) - Product diffusion and adoption
- use new product pronouncement to motivate pre launch orders (e.g. Virgin galactica
- network externalities: consumers evaluate new hardware based on complementaries and installed based - New product pre announcement can influence analysts and investors expectations
- people will write positive things about you
- can help investors make better decisions about where to put their money
Elements of a press release
Core information, additional information, dip into emotions
- information must have for communication to be successful
- edition all information that is helpful but not crucial
- would be nice if they had it
1. Press release label (label document press release)
2. Release date statement (for release on -date-/immediate)
3. Contact information
4. Headline
5. Sub heads
6. Body (begins with town, state, date; insert quotes; inverted pyramid)
7. The lead (first sentences need to be attention grabbing)
8. Boilerplate (descriptive paragraph about the organisation)
9. Mark the end of the copy with ### centred at the bottom
New product announcement decisions (whether, when, what)
Have to think about target audience (distributors, consumers -two separate paragraphs)
-customers: forecasting/product testing, make better decisions, cannibalisation of older products if new product comes out
BENEFITS: creating pent up demand, diffusion/adoption, product testing/forecasting
COSTS: risk of potential unavailability, cannibalisation
-distributors: want feedback from sales, want distributors to sell products
BENEFITS: feedback, securing channels
COSTS: losing credibility if unable to supple on time
-shareholders: want to secure funding, loss of market value if announcement lower than expected
BENEFITS: reduce unfit action asymmetries
COSTS: loss of market value
-competitors: careful not to release too much information, too early announcements may lead to problems with the law because they’re trying to influence market power (violating entire use laws - for company credibility and causes customers to avoid purchasing competitor’s products)
BENEFITS: deterring competition, induce rivals to exit, industry reputation as firm that sets standards
COSTS: information spillover, retaliatory action, anti-competitive legislation
Multiple dimensions of value
New technology has to offer a greater overall value
A. Combined value of stand-alone technological utility, installed base, and complimentary goods offered by existing technology
-complementary goods availability: can I use it on other devices
-compatibility with installed base: the more people using the service the better
-technological utility: does it work when I use it
B. New technology competes only on the value of its stand-alone utility
-technological utility
-may have higher technology value but overall technology value is lower
C. New technology that is compatible with existing technology’s installed base and complementary goods
-have complimentary goods available and compatible with installed base, but does not need to be the best software e.g. I can connect on Skype which is the most important
Influencing buyers perceptions
Value components (buyers perspective): proportional
-actual (objective information)
-perceived (subjective information)
-anticipated (expectations of the future)
Producers strategies of disproportional perceptions and anticipations
-advertising increases perceived install base
-announce new products to make buyers wait
-statements about market position increase perceived/anticipated install base
-promotion of vapourware (non existent products) to increase perceived availability if complements
Timing of new product pre announcement
As the following factors increase…
Firm-related factors
-market dominance: later (under observation of the law)
-credibility/reputation: earlier (customers need information that helps them perceive the company as the leader)
Customer-related factors
-customer switching cost/learning requirements: earlier (help prepare for the product)
Industry-related factors
-competition: later (push competitors out of the market)
-growth rate of new market: later (highlight product category interested in)
-network externality: earlier (people can share information and gain buzz)
New-product-related factors
-cannibalisation to existing product: later (avoid so release announcement later)
-ability to stimulate development of complements: earlier (improve existing products/solutions)
-attributes certainty: earlier (clear about product, if unclear later release)
First mover
Advantage
-Brand loyalty (people connect with the he brand first and stick to the brand - shape customers expectations)
-technological leadership (learning curve, protection through patents)
-preemption of scarce assets (location, distribution channels, government permits -charge a higher price)
-exploiting buyers switching costs (initial cost and cost of complements)
Disadvantage
-later entrants enjoy free-rider effects
-immature enabling technologies and complements (high r&d expenses, enabling technologies, provide complements if not available)
-undeveloped supply and distribution channels
-uncertainty of customer requirements (market research for new products difficult, less flexibility to react to changes in the market, customer education costly)
Timing decisions: holidays, government actions, industry traditions (e.g. Sport seasons, trade shows), weather(e.g. Travel), social phenomena (e.g. Single birth peaks, heart attacks peaks)
5 forces
Level of threat in an industry
- threat of entry
- threat of rivalry
- threat of buyers
- threat of substitutes
- threat of suppliers
Behavioural factors
Competitor analysis
-market commonality
-resource similarity
Drivers of competitive behaviour (AMC framework)
-aware of an action: aggressive name calling advertising, widely advertised price cuts, announcement of growth targets and strategies
-motivated to react: direct attack in central markets, direct attacks in markets that have potential for future growth, response would trigger price war
Capable of responding
-access to required skills, technology, resources
-complex coordination of functions within a company
Action-reaction concepts and advantages
Response likelihood: the number of times a firm responded to competitors actions during a given year decided by the number of times the firm had an opportunity to respond
-the less likely the response, the grater the advantage to the actor
Response lag: the average time in days a firm takes to respond o a competitors action
-the longer the response time he greater the advantage to the actor
Response imitation: the degree to which a response imitated an action
-the less likely them imitation the greater the advantage to the actor
Magnitude of action: the extend of resources required to implement and action effectively
-the greater the resources required to undertake an action, the slower the response
Scope of action: the number of competitors directly affected by the action
-the greater the scope of the action, the faster the competitive response
Threat of an action: the number of customers an action could potentially steal from rivals
-the greater the threat of an action, the faster the response
Headlines: new actions to disrupt status quo
- new promotional campaign: launched ad to counter…
- new signalling action: reebok vows to retake lead in the athletics shoe market
- new product action: Merck introduces mevacor
- new pricing action: FedEx offers rate discounts
- new capacity action: Mobil raises lube stock capacity 10%
