1 Introduction to Product Management
2 Marketing Planning 24
3 Defining the Competitive Set 49
4
Category Attractiveness Analysis 73S Competitor Analysis 99
6 Customer Analysis 13&
7 Market Potential and Eorecasting 178
8 Developing Product Strategy 211
9 New
Products til10 Pricing Decisions 276
11 Advertising Decisions 309
12 Promotion Decisions 343
13 Channel Management. Customer Contact, and the Product Manager 372
14 Managing Service Quality 397
IS Financial Analysis for Product Management 422
16 Product Management: Back to the Future 445
Name Index I-I
Subject Index 1-5
1 Introduction to Product Management 1
Overview I
Marketing Organization 3
Product-Focused Organizations 4Market-Focused Organizations 7
Functionally Focused Organizations 9
The Role of the Sales Force II
Marketing Organization Implications of Global Marketing II
Product Management: Fact versus Fiction 12
Changes Affecting Product Management 15
Impact of Change on Organizational Structure: Category Management 17
Summaxy 20
Marketing Planning 20
Marketing Strategy 21
Marketing Program Decisions 21
Appendix 1.1 Sample Responses from Product Managers 22
2 Marketing Planning 24
Overview 24
Definition and Objectives of Plans 24
Frequent Mistakes in the Planning Process 27
What Makes a Goad Planning System: Some Empirical Results 30
Is Planning Worthwhile? 31
The Planning Process 31
Approaches to Planning 31
Steps in the Planning Process 32
Cunarpu~eia~
The Executive Suiiazi~aiy 35
Background Assessment
The Marketing
Strategy 36The Rest of the Plan 36
Example
37Two
Case Sitidics 37Ready-to-Drink
Fruit Drinks (Ca. 1995) 37Personal Digital Assistants (ca. 1995)
42Summary 4-4
Appendix Marketing Plan Outline 45
~/3
Defining the Comparative Set 49Overview 49
Leve!s of Market Compeuition 52
Definitions
52Product Strategy
Implications 56Iliustrations 58
Overlapping Market Segments 60
MeThods for Determining Competitors ~0
Managerial Judgment 61
Customer-Based Measures 62
Summary 6~
Competitor SelecUon U)
Enterprise Competition 7!
4 Category Attractiveness Analysis 73
Overview 73
Aggregate Market Factors 74
Category Size
74Market Growth
75Product Life Cycle 75
Sales
Cyclicality 77Seasonality
77Profits 77
Category Factors 78
Threat of New Entrants 78
Bargaining Power of Buyers 80
Bargaining Power of Suppliers 81
Current Category Rivalry 82
Pressure from Substitutes 83
Category Capacity 83
Environmental
Analysis 84Technological Factors 84
rulitic~i
Fat.tors 86Economic Factors 87
Regulatory Factors 88
Sociai Factors 88
Summary 95
Iiiustratioris 96
RTD Fruit Drinks 96
Personal Digital Assistants 97
S Competitor Analysis 99
Overview 99
Sources of Information 103
Secondary Sources of Information 103
Primary Sources of Information 107
Other Sources 110
Some Sources with Ethical Considerations 111
Assessing Competitors’ Current Objectives 113
Determination of Competitor Objectives 113
Assessing Competitors’ Current Strategies I iS
Marketing Strategy 115
How to Assess Competitor’s Strategies 117
Technokwv StrMeov 120
Differential Advantage Analysis 120
‘nijal Lu
Do with the information 123 A aoeo,n~-, ~ UthI I II
Predicting i%rIire
Strategies 125Illustrations
129RTD
Fruit Drinks 129Personal Digital Assistants 131
Summary 137
6 Customer Analysis 138
Overview 138
Who Buys the Product? 139
Product Definition 139
Buyers versus Users 139
Descriptor Variables 140
Analysis for Market Segmentation 145
What Do Customers Buy? 160
Benefits 160
Product Assortment 161
Product Uses 161
How Do Cus~c’mers Choose? 161
The Multiattribute Model 161
.
Customers as Problem SoIvers 166Why They Prefer a
Product: Cuslonicr Value 167Sources of Customer Value 268
Manifestations of Customer Valut’ 169
Assessing the
Value of the Product Category 169Where Customers Buy 170
When Customers Buy 171
lilustrations 171
RDT
Personal Digital Assistants
175Summary 177
7 Market Potential and Forecasting 178
Overview 178
Definitions
Market Potential 179
Overview 179
Estimating Market and Sales Potential: Basics 180
Assessing
Mature Product
Potentials 182Methods of
Estimating Market and Sales Potential 183Analysis-Based Estimates 183
Area Potential 186
Sales
Potential 187rurecasting:
Basics 187Overview
Sales Forecasting Methods 190
What Methods Are Used? 298
Using Regression Models for Forecasting 298
Developing Regression Forecasting Models 200
RTD Fruit Drink Illustration 205
Nonlinear Relations 205
Forecasting Innovations 206
PDA Illustration 207
Presentation of Forecasts 208
Forecasting Methods 208
Combining Forecasts
209Gaining
Agreement 210Summary
210
S
Developing Product Strategy 211Overview
Function of a Strategy 211
Elements of a Product Strategy 213
Se"~g Objectives 214
Selection of Strategic Alternatives 216
Increasing Sales/Market Share 218
Increasing Pmfitability 219
Summary 220
Positioning: Choice of Customer Targets 220
Positioning: Choice of Competitor Targets 221
Positioning: The Core Strategy 221
Cost/Price Strategy 222
Nonprice Strategy 224
Product Strategy over the Life Cycle 228
Strategies for the Introduction Phase 228
Strategies for the Growth Phase 229
Strategies for Maturity 231
Strategies for the Decline Stage 232
Summary 232
Managing Brand Equity 232
Measuring Brand Value 238
Illustrations 239
Rn) Fruit Drinks: Snapple 239
Personal Digital Assistants: The Sharp Viz 243
Summary 242
~11n t~,———- ~ — 3 -./ ‘~ new
rluuua3 243Overview 243
Getting Ideas for Slightly New Products 244
Product Modification 245
Product Variants 247
Adding a
Dropping a Product Variant 249
Formal Testing of Slightly New Products 249
Concept Testing 250
Product Use Tests 251
Discrimination and Preference Testing 252
Market Tests 255
Sales Forecasting 256
Beyond Category Brand Extension 261
Really New Products 263
Getting Ideas for Really New Products 266
Evaluating Really New Products 266
Adoption and Expansion 268
Forecasting Really New Products 269
Summary 269
Summary 2 Concept
Test Funuau ~u10 Pricing Decisions 276
Overview 276
The Role
or Marketing Strategy in Pricing 277Measuring Perceived Value 280
Customer Value 280
Methods 282
Calculating Value-in-Use
Simulating the Buying Experience 285
Estimating Brand Equity 286
Using Price Thresholds
286Doflarmetric Scales
287Using the
Perceived Yalue Concept 288Competition and Pricing 2Q0
Competiror& Costs 290
Historical Pricing Behavior 292
The Role of Costs 292
Deciding How’ Much of the Value-Cost Gap to Capture 294
Penetration Pricing 295
Return on Salesflnvestment Pricing 296
Pricing for Stability 296
Skimming 296
Competi¶ive
Other Factors AtYectinc Price 296
Psychological
Stace ol the Product Life Cycle 299
Category Conditions 30i
Wbo Is
the Decision Maker? 301Some Specific Pricing Tactics
302· Product Line Pricing 302
Value Pricing 303
Everyday Low Pricing 304
Differential Pricing 305
Competing against Private
Ethical Issues 307
Surnmaiy 308
11 Advertising Decisions 309
Overview 309
The Target Audience· 313
Setting Advertising Objectives 315
Customer-Oriented
O*’jectives 315Exposure-Oriented Objectives
(Media Planning) 327Specific Objectives 317
Setting Advertising Budgets 318
Objective and Task 322
Percentage-of-Sales 321
Competitive Parity 323
Affordable 324
Experimentation Method 324
Decision Calculus 325
Summary 325
Evaluating Message Copy 326
Laboratory
Real-World Measures 328
Media Decisions 329
Where 330
· When 332
Overall Considerations 332
Evaluating Advertising Effects 332
Tracking Studies
333Past Sales and Advertising 333
Experimentation 337
Linking
Objectives to Incremental Contribution 337Advertising Agency Compensation Decisions 339
Summary 340
12
Promotion Decisions 343· Overview
343Promotion Objectives 348
Consumer Promotions 348
Trade Promotions 350
· Promotion Budgeting 350
Qverview 350
The Advertising and Promotion Budget 351
Allocating Money between Advenisin2 and Promotion 352
Types ol Customer Promotions 353
Product-Based Promotions 353
Price-Based Promotions 354
Other Customer Promotions 355
Summary 355
Trade Promotions 356
Evaluating Customer Promotions 357
Overview 357
r
Short-Run Evaluation 359
Long-Run Concerns 361
The Competitive Dilemma 362
L
EvaluatingTrade Promotions 362
Assessing
Some Find :gs about Promotion Effects 366
Test
Markek. 368The Retailer’s Perspective 369
Summary 370
13 Channel Management, Customer
Contact, and the ProductManager 372
Overview 372
Channel Selection 315
Direct versus Indirect Channels 375
Indirect Channels
378Channel Members as Value-Added Intermediaries 378
Hybrid Channels 380
Summary 381
Channel Control 381
Contractual/Legal Provisions 382
Self-Interest 382
Human Contact 383
Power in Channel Reintionships 384
Coping with Power Retailers 384
Channel Arrangements
385Monitoring Profi~abihty by ChanW 385
Direct Contact 389
Direct Marketing 389
Customer Acquisition 390
Customer Relationship Management 392
Trade Shows 394
Summary
394
14 Managing Service Quality 397
Overview 397
Example: Fedemi Express 400
The Service Encounter 402
Service Quality 402
Gaps
"Moments
of Truth" 406Differentiating with Service Quality 408
The Augmented Product 408
Service Guarantees 409
Service Recovery 410
Characteristics of a Complete Customer Service Program 412
The Role of Markeling Strategy 412
Top Management’s Role 413
Getting the Right People
414The Role of Product Design 425
Infrastructure 425
Measurement Systems 426
The Return on Service Quality 418
Internal Marketing 428
Summary
420IS Financial Analysis for Product Management 422
Overview 422
Sales Analysis
423 -Overview 423
The Value of Sales Analysis 424
Roadblocks 427
Profitability Analysis 428
Conventional Product Profit Accounting 428
Alternative Accounting Systems 429
Contribution-Oriented Systems 430
Using
the Contribution Margin Rate 433Fixed Costs 435
A Strategic rraniework
for Control 437Price-Quantity Decomposition 438
Penetration-Market Size Decomposition 43’~
Summary 440
Capital Budgeting 440
Overview
440The Basics 441
Summary 443
<16
Product Management: Back to the Future 445Overview 445
· The Role of Information Technology 446
The Amount of Information Processed 447
The Speed of Transmitting information 448
How Information Is Being "Packaged" 448
Corporate Organizational Structures
VThnsaction-Basedlnformation Systems 450
Examples of Transaction-Based Inforrt¶ation Systems 451
Letting Your Customers In 452
New Retail Technology 452
Summazy
Management
and the Internet 454)t$Snet/WWW as
a Distributioji Channel 455- -
on the InternetfwwW 458459
2~