Managing Products For Business Markets 9c3r

MANAGING PRODUCTS FOR BUSINESS MARKETS  

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Product Management is linked to market analysis & selection. Core Competencies : The Roots of Industrial Products. “ The diversified corporation is a large tree. The trunk and major Limbs are core products, the smaller branches are business units, the leaves, flowers and fruit are end products. The root system that provides nourishment, sustenance and stability is the core competence.” Identifying Core Competencies: 1. Provides potential access to an array of markets (eg. Honda : design & development of small motors) 2. Makes an important contribution to the perceived customer benefits of the firms and products ( eg. Honda is in motorcycles, automobiles, lawn mowers, Lawn tools) 3. Should be difficult for competitors to initiate. Complex harmonization of individual technologies and production skills.( eg. Motorola – internal pattern of coordination & learning, individualised pager within two hours of receiving an order).

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Sustaining the Lead : – Rareness of competence : Relative to other firms. – How long will it take your competitors to develop the competence? (eg. Maruti in M-800) – Can the source of your advantage be easily understood by competition? (eg. rich, informal process and communication networks that guide strategy at 3M).

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C. K. Prahalad’s view : – Competencies of a firm provide a measure of its capacity to create new business opportunities. – Core product share provides a measure of market influence. “ Intel is not in the personal computer (PC) assembly business (eg. IBM, Q) or purely PC marketing business (e. Dell, Packard Bell). Intel manufactures a key module. However, Intel’s influence in the PC industry is significantly greater than any single PC manufacture.”

Core Competencies and Selected Products at Canon

• Core competencies embodied in superior employee skills-technologies they have mastered, unique ways that employees combine these technologies, and market knowledge that the firm has accumulated. • Canon focuses on basics of what creates value for customer—which includes both technical and organizational skills.

Three Tests to Identify Core Competencies • First, a core competence provides potential access to an array of markets. • Second, a core competence should contribute importantly to customers’ perceived benefits of firm’s end products. • Third, a core competence should be difficult for competitors to imitate.

Sustaining the Lead: Three Questions • How rare or difficult to develop is our competence? • How long would it take our competitors to develop the competence? • Can our competitors easily understand the source of our advantage?

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Core Products to End Products. – Canon’s brand has a small share of Laser printer market but holds 80% manufacturing share in desktop Laser printer “engines”. – Provide core products for a variety of markets. – Shaping new applications and developing new end markets.

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Exploiting selected Core Competencies : – Every activity cannot be dominated, concentrate on those that will be critical in serving customers in future. – 3M : adhesives, abrasives and coating-boating combined with firm’s unique innovation system and entrepreneurial values. Producer of sandpaper in 1920s to Post-it notes, magnetic tape, coated abrasives, photographic film etc.

Quality Movement Stages • Stage one: conformance to standards or success in meeting specifications • Stage two: emphasized that quality was more than a technical specialty and that pursuit of quality should drive the entire business’ core processes • Stage three: examines a firm’s quality performance relative to competitors’ and examines customer perceptions of competing products’ value

What Value Means to Business Customers

Core Benefits Customer Value

Add-on Price

Sacrifices

Acquisition Costs Operations Costs

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,” Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.

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PRODUCT POLICY Through product policy, a firm attempts to satisfy customer needs and build sustainable competitive advantage by capitalizing on its core competencies. Type of Product Lines: 1. Proprietary or catalog products : Items offered only in certain configurations and produced in anticipation of orders. 2. Custom-built products: Items offered as a set of basic units, with numerous accessories and options. Decisions center on offering the proper mix of options. 3. Custom-designed products : items created to meet the needs of one or a small group of customers. Product Line is described in of the company’s capability and the customer buys that capability. 4. Industrial Service : Purchase of capability in an area such as maintenance, technical service or management consulting.

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Defining the Product Market. A product market establishes the distinct arena in which the business marketer competes. Four dimensions are important : – Customer function dimension ; Benefits provided to satisfy the needs of organizational buyers (eg. Mobile messaging). – Technological dimension : Alternative ways a particular function can be performed. (eg. Cell phone, pager, N/B). – Customer segment dimension : customer groups have distinct needs (eg. Physicians, sales reps.) – Value-added system dimension : Sequence of stages along which competitors serving the market can operate.

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Planning for Today & Future : – Planning for today requires clear precise definition of the business. Planning for tomorrow is concerned with how the business should be redefined for the future. – Planning for today focuses on shaping up the business to meet the needs of today’s customers with excellence. Planning for tomorrow can entail reshaping the business to compete more effectively in the future.

Steps in Product Positioning Process 1. Identify relevant competitive products 2. Identify determinant attributes that customers use to differentiate among options and determine their preferred choices 3. From sample of existing and potential customers, collect their ratings of each product on determinant attributes 4. Determine own product’s current position versus competing offerings for each market segment 5. Examine fit between preferences of market segments and current product position 6. Select positioning or repositioning strategy

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PLANNING INDUSTRIAL PRODUCT STRATEGY Product Positioning : Examine the attributes that assume a central role in buying decisions. Determinant Attributes : Important & Differentiating Non-Determinant Attributes : Either one- Differentiating or Important or None. Attribute Determinant

Non- determinant

D1

D2

ND1

ND2

ND3

ND4

Important

X

X

X

 

 

 

Not Important

 

 

 

X

X

X

Non-differentiating ( SB = COMP)

 

 

X

X

 

 

Differentiating (SB > COMP)

X

 

 

 

 x

 

Differentiating (SB

 

X

 

 

 

X

          SB : Sponsor Brand                                 COMP:  Competing Brand D1 : Attribute is important as well as differentiating. SB> COMP

D2 : Attribute is important as well as differentiating. SB< COMP

ND1 : Attribute is important but not differentiating . SB= COMP

ND2 : Attribute is neither important nor differentiating.

ND3 : Attribute is differentiating (SB>COMP) but not important.

ND4 : Attribute is differentiating (SB

• Ex : Heavy vehicle industry Durability :D1, Reliability :D2, Fuel Economy :D3. Safety : ND1. Strategy Matrix : Brand Difference Increase

Decrease

Maintain

Increase 

ND2→D1

 

ND3→D1

Decrease

 

 

D2→ND4

Maintain

ND1→D1  

D2→ND1  

ND4→ND4  D1 →D1 

                      

Importance

Upper left cell ; Increase importance & brand differentiation is a strategy requiring to (i) increase the attribute’s importance to customers and (ii) increase the difference between competition and sponsor brand. D1 is the attribute most preferred by a product manager. D2 : Product manager attempts to convert it into a nondeterminant attribute.

Assessing Global Product-Market Opportunities : Market Needs Product Same Different Configuration Same Universal product Market segmentation Different Product segmentation Specialty segmentation

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Universal or global product assumes the needs of organizational customers are the same across countries eg. IT, Air Liners, Machine tools. –

Search for similarities as well as differences.

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Maximize the size of the common global core of the product while also providing for local tailoring around the core.

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Designed with the global market in mind-not adapted from national products. Canon gave up the ability to precisely meet all needs in the domestic market in order to maximize its position in the global market.

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MANAGING PRODUCTS IN HIGH- TECHNOLOGY MARKET –

Managing a High-Tech Brand “ Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and /or to that firm’s customers.

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Strong Brands Promise & Deliver: A brand is a distinctive identity that represents an enduring and credible promise of value associated with a particular product, service or organization. Emphasis is generally at the corporate level or at the sub-brand level.

Successful brand management involves promising value to customers and then ensuring that the promise is kept through product development, production, sales, services, and promotion.

How High-Tech Brands Build Equity

What Is B2B Branding? • In B2B market corporate branding is predominant. • Corporate brands differ from product brands in that they represent the firm, and their image is potentially constructed by everything a firm is perceived to be doing. • Thus, corporate brand image is synonymous with the company’s corporate image.

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Steps for Building Strong B2B Brand 

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Functional attributes are primary ingredients and supplementary features; product reliability, durability and serviceability; service effectiveness; style and design; and price. Image associations relate to company’s standing in the industry and their overall reputation. 18

Elements Of Brand Trust Probity

Competence

Continuity

Brand Trust

Value Resonance

Caring 19

Elements Of Brand Trust • Competence: technical capability to completely make the product, or effectively deliver the service, they are offering. • Probity: belief that the company will conduct its transactions with a customer in an honest and fair way. 20

Elements Of Brand Trust • Continuity: belief that the company has the resources and commitment necessary to remain in the business area relevant to the customer. • This is particularly important in relation to products which have a long lifetime. • Caring: the company’s employees are sufficiently motivated to care about the quality of service or performance they deliver. 21

ELEMENTS OF BRAND TRUST 

Value Resonance has two levels:  A basic level of corporate good conduct in the sense that the company do not violate the value consensus on ethical and environment issues.  A personalized level of ‘life-style appropriateness’ and is concerned with whether or not the vendor company expresses values, which the individual consumer aspires to incorporate in their personal life style. 22

B2B Brand Equity 

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The creation of significant brand equity involves reaching the top of the brand pyramid, and will occur only if the right building blocks are put into place. Brand salience relates to how often and easily the brand is evoked under various purchase or consumption situations. Brand performance relates to how the product or service meets customer’s functional needs. 23

B2B Brand Equity 

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Brand imagery deals with the manufacturer’s reputation in the market. Brand judgments focus on customer’s own personal opinions and evaluations. Brand feelings are customer’s emotional responses and reactions with respect to the brand (and the company). 24

B2B Brand Equity 

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Brand resonance refers to the nature of relationship that customers have with the brand and the extent to which customers feel that they are “in sync” with the brand. Resonance is characterized in of the intensity or depth of the bond customers have with the brand, as well as the activity engendered by this loyalty.

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Brand Equity Pyramid 4. Relationships = What about you and me

t pu n io at

Jud gm ent s

o

Positive, accessible reactions

Re

1.Identity = Who are you?

P

f r e

a m r

e c n

rce Fo ips les sh Sa tion la Re

3.Response = What about you?

2. Meaning = What are you?

Intense, active loyalty

Partnership Solutions

Salience of the Manufacturer’s Brand

Strong, favorable unique brand associations Deep, broad brand awareness 26

Difficulties In B2B Branding

• Building strong brand equity is a relatively long-term process that revolves around building value for customers first, from which comes positive associations about the product and the company, and building broader associations. • The most powerful associations come from customers’ direct experiences. 27

Difficulties In B2B Branding • Every time customers interact with a supplier, with its products, or interact with customer service person, impressions are formed about the company, the products, and its employees. • Strong B2B brands are, therefore, built one customer at a time. 28

Drivers of Brand Attitude Change • Dramatic and visible new products aggressively ed by advertising • Increases in brand attitude associated with appointment of well-recognized executive officer who introduced new strategy • Brand attitude depends on competitive actions. • Product problems associated with several declines in brand attitude • Legal actions were associated with decreases in brand attitude

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Isolating Technology Adopters: • Once a particular threshold of consumer acceptance was achieved, there was a stampede. • Discontinuous innovations.

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Types of Technology Customers : • Business marketers can benefit by putting innovative products in the hands of technology enthusiasts. • Visionaries have resource control but demands special and unique product modifications.

The Technology Adoption Life Cycle : Classes of Customers •

Technology enthusiasts (innovators) : Interested, Lack control over resource commitments.

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Visionaries (early adopters) ; Exploit the innovation for competitive advantage, demanding.

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Pragmatists (early majority) : makes bulk of Technology purchase, believe in evolution not revolution, seek products from proven market leaders.

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Conservatives (Late majority) : Pessimistic , purchase to avoid being left-behind.

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Skeptics (laggards) : Ever-present critics.

Landscape of Technology Adoption Life Cycle

– Tornado (contd.) HP demonstrated the three critical priorities in its printer business : 1. Just “ship”. 2. Extend distribution channels. 3. Drive to the next lower price point.

– Main Street : Aftermarket development. Frantic waves of mass-market adoption begin to subside. Supply exceeds demand. Develop value based strategies targeted in particular segments of end-s. Operational excellence in production and distribution as well as finely tuned market segmentation strategies. –

End of Life for the Technology Adoption Life Cycle : A discontinuous innovation appears that incorporates breakthrough technology and promises new solutions for customers.

Brand Equity • •

Differential effect that customer knowledge about a brand has on their response to marketing activities and programs for their brand (Keller, 2003) Brand Assets are (a) brand loyalty; (b) Brand Awareness; (c) Perceived quality (d) Broad associations and (e) other proprietary assets (Aakar, 1995)

Customer Equity

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Discounted lifetime values of a firm’s customer base. (Rust, Zeithaml & Lemon, 2000, 2004). Value Equity: Utility of a brand : Quality, Price and convenience. Relationship Equity: Loyalty, recognition, knowledge building. Brand equity tends to put more emphasis on the front end of marketing programs and intangible value. Customer equity tends to put more emphasis on the

Corporate Branding and Brand Architecture

• A Dynamic Model of Brand Architecture

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Corporate Brand provides a visual identity to a ‘trade name’. Corporate Brand as business brand, distinct from a pure consumer brand. Holistic Corporate Brand.

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What Great Industrial Brands do Unlike consumer brands, industrial brands may be household names in some industries and unknown in others such as Hewlett-Packard, FisherRosemount, DuPont, 3M, and Cummins.  LONG TERM PERSPECTIVE: They evoke unique values in s’ minds and remain there for decades. Companies that own great brands constantly work to build and maintain this sense of worth. Remaining relevant over the longterm is based on a commitment to quality. DEFINED CHARACTER : Great brands have a defined character, and the people who manage the brand are very aware of what it is. The process of defining brand character involves understanding what end-s like and dislike, and what values they associate with the core of the brand concept. INVENTION : Great brands invent or reshape categories. Just as DuPont created the man-made fibers category, when it invented Nylon. As Apple reshaped the personal computer category, 3M reshaped the engineered materials category and Cummins reshaped the OEM engine market. EMOTIONAL ATTACHMENT: The common link between great industrial and consumer brands is the ability to tap into consumer emotions. Industrial products sometimes achieve an emotional tie-in too. Philips is one good example of such emotional appeal. DESIGN CONSISTENCY: Great consumer brands have a consistent look and feel. Great industrial brands also maintain design consistency. For example, everything about HP has a consistent design. There is a consistency of