Product Management PDF
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Product Management McGraw-Hill/Irwin Series in Marketing Alreck & Settle Hair, Bush & Ortinau Perreault & McCarthy The Survey Research Handbook Marketing Research Basic Marketing:A Global Managerial Third Edition Second Edition Approach Anderson, Beveridge, Lawton, & Scott Hawkins, Best & Coney Fifteenth Edition Merlin:A Marketing Simulation Consumer Behavior Perreault & McCarthy First Edition Ninth Edition Essentials of Marketing:A Global Arens Johansson Managerial Approach Contemporary Advertising Global Marketing Ninth Edition Ninth Edition Third Edition Peter & Donnelly Arnould, Price & Zinkhan Johnston & Marshall A Preface to Marketing Management Consumers Churchill/Ford/Walker’s Sales Force Ninth Edition Second Edition Management Peter & Donnelly Bearden, Ingram, & LaForge Seventh Edition Marketing Management:Knowledge and Marketing:Principles & Perspectives Johnston & Marshall Skills Fourth Edition Relationship Selling and Sales Management Seventh Edition Belch &Belch First Edition Peter & Olson Advertising & Promotion:An Integrated Kerin, Hartley, & Rudelius Consumer Behavior Marketing Communications Approach Marketing:The Core Seventh Edition Sixth Edition First Edition Purvis & Burton Bingham & Gomes Kerin, Berkowitz, Hartley & Rudelius Which Ad Pulled Best? Business Marketing Marketing Ninth Edition Third Edition Seventh Edition Quelch, Rangan, & Lal Cateora & Graham Lehmann & Winer Marketing Management Text and Cases International Marketing Analysis for Marketing Planning First Edition Twelfth Edition Fifth Edition Rayport & Jaworski Cole & Mishler Lehmann & Winer Introduction to e-Commerce Consumer and Business Credit Product Management Second Edition Management Third Edition Eleventh Edition Rayport & Jaworski Cravens &Piercy Levy & Weitz e-Commerce Strategic Marketing Retailing Management First Edition Fifth Edition Seventh Edition Rayport & Jaworski Cravens, Lamb & Crittenden Mason & Perreault Cases in e-Commerce Strategic Marketing Management Cases The Marketing Game! First Edition Third Edition Seventh Edition Richardson Crawford &Di Benedetto McDonald Internet Marketing New Products Management Direct Marketing:An Integrated Approach First Edition First Edition Seventh Edition Roberts Duncan Mohammed, Fisher, Jaworski & Paddison Internet Marketing:Integrating Online and Principles of Advertising and IMC Internet Marketing:Building Advantage in Offline Strategies Second Edition a Networked Economy First Edition Second Edition Dwyer & Tanner Spiro, Stanton, Rich Business Marketing Monroe Management of a Sales Force Second Edition Pricing Eleventh Edition Third Edition Eisenmann Stock & Lambert Internet Business Models:Text and Cases Mullins, Walker, and Boyd Strategic Logistics Management First Edition Marketing Management:A Strategic Fourth Edition Decision-Making Approach Etzel, Walker & Stanton Fifth Edition Ulrich & Eppinger Marketing Product Design and Development Thirteenth Edition Nentl & Miller Third Edition Forrest SimSeries Simulations: Internet Marketing Intelligence SimSell Walker, Boyd, Mullins & Larreche First Edition SimSales Management Marketing Strategy:A Decision-Focused SimMarketing Approach Futrell SimMarketing Research Fourth Edition ABC’s of Relationship Selling SimCRM Weitz, Castleberry & Tanner Eighth Edition First Edition Selling:Building Partnerships Futrell Pelton, Strutton, Lumpkin & Cooper Fifth Edition Fundamentals of Selling Marketing Channels:A Relationship Zeithaml & Bitner Eighth Edition Management Approach Services Marketing Gourville, Quelch, & Rangan Third Edition Third Edition Cases in Health Care Marketing First Edition Product Management Fourth Edition Donald R. Lehmann Columbia University Russell S. Winer New York University Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto PRODUCT MANAGEMENT Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2005, 2002, 1997, 1994 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, orbroadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 FGR/FGR 0 9 8 7 6 5 4 ISBN 0-07-286598-9 Editorial director: John E. Biernat Sponsoring editor: Barrett Koger Editorial coordinator: Scott Becker Executive marketing manager: Dan Silverburg Media producer: Craig Atkins Project manager: Kristin Puscas Senior production supervisor: Sesha Bolisetty Coordinator freelance design: Artemio Ortiz Jr. Lead supplement producer: Cathy L. Tepper Senior digital content specialist: Brian Nacik Cover design: Artemio Ortiz Jr. Typeface: 10/12 TimesNewRoman Compositor: GTS—New Delhi, India Campus Printer: Quebecor World Fairfield Inc. Library of Congress Cataloging-in-Publication Data Lehmann, Donald R. Product management / Donald R. Lehmann, Russell S. Winer.—4th ed. p. cm.—(McGraw-Hill/Irwin series in marketing) Includes bibliographical references and indexes. ISBN 0-07-286598-9 (alk. paper) 1. Product management. I. Winer, Russell S. II. Title. III. Series. HF5415.15.L44 2005 658.5 6—dc22 2004053060 www.mhhe.com To our families, colleagues, and students Brief Contents Preface xiii About the Authors xvi 1 Introduction to Product 10 Pricing Decisions 291 Management 1 11 Advertising Decisions 324 2 Marketing Planning 26 12 Promotions 359 3 Defining the Competitive Set 49 13 Channel Management 388 4 Category Attractiveness Analysis 74 14 Customer Relationship 5 Competitor Analysis 97 Management 414 6 Customer Analysis 139 15 Financial Analysis for Product Management 441 7 Market Potential and Sales Forecasting 187 16 Marketing Metrics 464 8 Developing Product Strategy 226 9 New Products 257 INDEX 479 vi Contents Preface xiii What Makes a Good Planning System: Some Empirical Results 32 About the Authors xvi Is Planning Worthwhile? 32 The Planning Process 33 Chapter 1 Approaches to Planning 33 Introduction to Product Steps in the Planning Process 34 Management 1 Components of the Marketing Plan 35 The Executive Summary 36 Overview 1 Situation Analysis 36 Marketing Organization 3 Marketing Objectives/Strategy 37 Product-Focused Organizations 3 Supporting Marketing Programs 37 Market-Focused Organizations 8 The Rest of the Plan 37 Functionally Focused Organizations 9 Example 39 The Role of the Sales Force 11 Two Case Studies 40 Marketing Organization Implications Energy Bars (ca. 2002) 41 of Global Marketing 11 Personal Digital Assistants (ca. 1999) 41 Product Management: Summary 45 Fact versus Fiction 12 References 45 Backgrounds 13 Appendix Critical Skills 13 Marketing Plan Outline 46 The Marketing Plan 14 Variance across Industry/Company Size 15 Chapter 3 Changes Affecting Product Management 15 Changes in Marketing Organizations 17 Defining theCompetitive Set 49 Overview of the Book 21 Overview 49 Marketing Planning 21 Levels of Market Competition 52 Marketing Strategy 22 Definitions 52 Marketing Program Decisions 22 Overlapping Market Segments 57 Summary 23 The Impact of Metamediaries 57 References 23 Product Strategy Implications 57 Appendix Illustrations 59 Sample Responses from Product Managers 24 Methods for Determining Competitors 61 Managerial Judgment 62 Chapter 2 Customer-Based Measures 63 Summary 68 Marketing Planning 26 Competitor Selection 69 Overview 26 Enterprise Competition 70 Definition and Objectives of Plans 26 Summary 71 Frequent Mistakes in the Planning Process 26 References 72 vii viii Contents Chapter 4 Marketing Strategy 115 Category Attractiveness Comparing Value Chains 116 Analysis 74 Marketing Mix 117 How to Assess Competitors’Strategies 118 Overview 74 Technology Strategy 120 Aggregate Market Factors 75 Differential Advantage Analysis 122 Category Size 75 Ability to Conceive and Design 122 Market Growth 76 Ability to Produce 124 Product Life Cycle 76 Ability to Market 124 Sales Cyclicity 77 Ability to Finance 124 Seasonality 78 Ability to Manage 124 Profits 78 What to Do with the Information 124 Category Factors 78 Assessing a Competitor’s Will 126 Threat of New Entrants 79 Predicting Future Strategies 127 Bargaining Power of Buyers 81 Illustrations 129 Bargaining Power of Suppliers 82 Energy Bars 129 Category Rivalry 82 Personal Digital Assistants 135 Pressure from Substitutes 83 Summary 137 Capacity 84 References 137 Environmental Analysis 84 Technological Factors 85 Chapter 6 Political Factors 86 Customer Analysis 139 Economic Factors 87 Regulatory Factors 88 Overview 139 Social Factors 88 What We Need to Know About Illustrations 92 Customers 140 Energy Bars 92 Who Buys and Uses the Product 140 Personal Digital Assistants 92 What Customers Buy and How They Use It 144 Summary 95 Where Customers Buy 148 References 96 When Customers Buy 148 How Customers Choose 149 Chapter 5 Why They Prefer a Product 153 How They Respond to Marketing Programs 158 Competitor Analysis 97 Will They Buy It (Again)? 158 Overview 97 Segmentation 159 Sources of Information 102 Desirable Criteria for Segments 160 Secondary Sources of Information 102 Methods for Market Segmentation 161 Primary Sources of Information 108 Illustrations 175 Other Sources 110 Energy Bars 175 Ethically Questionable Sources 111 Personal Digital Assistants 177 Creating a Product Features Matrix 112 Motorcycles 179 Assessing Competitors’Current Summary 181 Objectives 113 References 182 Determination of Competitor Objectives 113 Appendix 6A Economic Value to the Assessing Competitors’Current Customer (EVC) 184 Strategies 115 Appendix 6B Latent Class Methods 186 Contents ix Chapter 7 Chapter 8 Market Potential and Sales Developing Product Strategy 226 Forecasting 187 Overview 226 Overview 187 Benefits of Strategy 226 Definitions 187 Elements of a Product Strategy 228 Market Potential 188 Setting Objectives 228 Overview 188 Selection of Strategic Alternatives 231 What They Are Used For 189 Increasing Sales/Market Share 231 Information Sources 189 Increasing Profitability 233 New or Growing Product Summary 234 Potential 191 Positioning: Choice of Customer Targets 234 Mature Product Potentials 192 Positioning: Choice of Competitor Methods of Estimating Market and Targets 236 Sales Potential 192 Positioning: The Core Strategy 236 Analysis-Based Estimates 192 Cost/Price (Value) Strategy 237 Area Potential 195 Nonprice Strategy 238 Sales Potential 195 Managing Brand Equity 241 Sales Forecasting 196 Measuring Brand Value 246 Overview 196 Relation to Customer Strategy 249 Level of Accuracy Needed 198 Product Strategy over the Life Cycle 249 Judgment-Based Methods 199 Introduction Strategies 249 Customer-Based Methods 201 Growth Strategies 251 Sales Extrapolation Methods 202 Maturity Strategies 252 Model-Based Methods 206 Strategies for the Decline Stage 252 What Methods Are Used? 207 Summary 253 Using Regression Models for Illustrations 253 Forecasting 208 Odwalla Energy Bar 253 Developing Regression Models 209 Handspring 254 Recognizing Uncertainty 213 Summary 254 Nonlinear Relations 214 References 255 Share Forecasts 215 Forecasting Really New Chapter 9 Products 215 New Products 257 Illustrations 217 Forecasting Energy Bar Sales via Overview 257 Regression 217 Product Modification 258 PDA Sales 218 Line Extensions 260 Using Forecasts 219 Adding a Product Variant 262 Combining Forecasts 220 Dropping a Product Variant 263 Gaining Agreement 220 Getting Ideas for New Products 263 Why Not Just Go to the Web? 221 Testing Slightly New Products 264 Summary 221 Concept Testing 264 References 221 Product Testing 266 Appendix Time Series Regression with Market Tests 267 Seasonal Factors 223 Quasi-Market Tests 269 x Contents Forecasting 269 Pricing for Stability 312 Brand Extensions 273 Skimming 313 Really New Products 275 Competitive Pricing 313 Getting Ideas for Really New Other Factors Affecting Price 313 Products 277 Stage of the Product Life Cycle 313 Evaluating Really New Products 277 Category Conditions 315 Adoption and Expansion 278 Some Specific Pricing Tactics 316 Forecasting Really New Products 279 Product Line Pricing 316 Summary 279 Price Bundling 316 Illustration 281 Complementary Pricing 317 Summary 281 Value Pricing 317 References 282 Everyday Low Pricing 318 Appendix 9A Sample Concept Test Hidden Price Increases 319 Formats 286 Price Discrimination 319 Appendix 9B Assessing Discrimination Second-Market Discounting 320 and Preference 289 Periodic Discounting 320 Auctions 321 Ethical Issues 321 Chapter 10 Summary 322 Pricing Decisions 291 References 322 Overview 291 The Role of Marketing Strategy in Pricing 293 Chapter 11 Measuring Perceived Value and Price 295 Advertising Decisions 324 Perceived Value Price Variable Cost 295 Price Perceived Value Variable Cost 296 Overview 324 Price Variable Cost Perceived Value 297 The Target Audience 328 Measuring Customer Value 298 Setting Advertising Objectives 330 Calculating Value-in-Use 298 Customer-Focused Objectives 330 Pricing Experiments 300 Exposure-Oriented Objectives 332 Using Price Thresholds 302 Objective Specificity 332 Dollarmetric Scale 302 Setting Advertising Budgets 332 Using the Perceived Value Objective and Task 336 Concept 303 Percentage-of-Sales 336 Psychological Aspects of Price 304 Competitive Parity 336 Reference Prices 305 Affordable 341 The Relationship between Price and Experimentation 342 Perceived Quality 306 Decision Calculus 342 The Odd-Ending Effect in Prices 307 Summary 343 Competition and Pricing 307 Evaluating Ad Copy: Laboratory-Based Competitors’Costs 308 Measures 343 Historical Pricing Behavior 309 Real-World Measures 346 The Role of Own Costs 310 Media Selection 347 Deciding How Much of the Value–Cost Gap Where 347 to Capture: Pricing Objectives 311 Contextual Fit 348 Penetration Pricing 311 When 348 Return on Sales/Investment Pricing 312 Other Considerations 349
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