Transcript Introduction to products and brands

Innovation Management
Kevin O’Brien
Product and Brand Strategy
Learning Objectives
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Appreciate the importance of product
and brand strategy in competitive
markets
Identify alternative product strategies
Examine the concept of product
platforms
Introduce issues of product portfolio
management
Marketing Strategies
Strategy
Product
Price
Distribution Promotion
Undifferentiated Standardised
Low
Intensive
Mass
Differentiated
Different for
each market
segment
What the
market
will bear
Extensive
Targeted by
segment
Concentrated
Customised
Premium
Highly
selective
Direct
Product-Based Competition
Five basic strategies:
 Product proliferation (e.g. Sony, Honda)
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Many new products simultaneously or in close
succession
Market response determines support
Cover all segments & block new entrants
Value (e.g. Toyota/Lexus)
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New quality/cost trade-off curves
Continuous improvement/re-engineering
Re-thinking the business system
(Deschamps & Nayak, 1995)
Product-Based Competition
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Design (e.g. Braun, Harley-Davidson)
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Innovation (e.g. Canon, 3M, Merck)
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Aesthetics, touch, ease of use etc.
Engineering design + aesthetic design
Technological & marketing innovation
Market pioneers/fast-followers
Radical/incremental innovation
Service (e.g. Otis Elevators, SAS)
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Customer relations, physical distribution, aftersales service
(Deschamps & Nayak, 1995)
Product Differentiation
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Form
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size, shape, physical
structure
supplements basic
function
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appropriate to target
market and competitor
performance levels
Conformance quality
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e.g. car CD player, trim
level, child seats
Performance quality
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Durability
Features
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each product identical,
meets the promised
specification &
performance
Reliability
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probability of
malfunction/failure
Repairability
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expected operating life
balanced with
technological
obsolescence
ease of repair, cost,
technical support
Style
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aesthetics – look and feel
distinctive and difficult to
copy
(Garvin, 1987)
Product Planning
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What are the strategic goals for new products?
What product development projects will be
undertaken?
What will be the portfolio of projects?
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New product platforms
Derivatives of existing platforms
Incremental improvements to existing products
Fundamentally new products (discontinous)
What will be the timing and sequence of projects?
What will be the balance of risk?
Considers opportunities from marketing, R&D,
customers, project teams, competitor analysis etc…..
Regularly updated to reflect competitive environment
Differentiation vs Standardisation
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Key questions:
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Product platforms:
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How to deliver distinctive products to market whilst
building on core capabilities and conserving
development, production and marketing
resources?
How to balance the needs of high volume
manufacturing/service delivery with the needs of
individual customers?
Shared components, production processes,
knowledge, people & relationships
Brand platforms:
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Brand extensions, products conform to brand
strategy
(Robertson & Ulrich, 1998)
Product Platforms
External market
Internal organisational activities
Development of
Product platforms
Derivative
product
development
Competitor
product
B1
Competitor
product
B2
Product
positioning
B3
Competitor
product
Platform A
Research &
technology
activities
Platform B
Competitor
product
(Trott, 2005, p358)
Time
Product Platforms
VAG Inter-firm Product Platform Development
High
Audi TT
Audi A3
Product
Price
VW Golf
Seat Leon
Skoda Oktavia
Low
Overall cost leadership
Differentiation
Generic Strategy
Product Platforms
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The benefits of product platforms include:
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Increased product variety and ability to serve
multiple market segments (mass customisation)
Greater speed to market
Improved management of demand and uncertainty
Accommodating differential technology change
Reducing production costs
Supports late-stage differentiation of products
Reduces service infrastructure requirements
Greater speed and efficiency in technological
learning and knowledge creation
(Sanchez, 1999)
Brands and Products
The Lynx brand
Fragrance
Product item
africa
Body spray
Shower gel
Aftershave
Roll-on
deodorant
Deodorant stick
Aftershave gel
mirage
java
tempest
oriental
nevada
Portfolio Management
Strategic portfolio model for one SBU in Exxon Chemical:
Low Market Newness
High Market Newness
Low Product
Newness
Improvements to
existing products
(35%)
Additions to existing
product lines
(20%)
Medium Product
Newness
Cost reductions
(20%)
New product lines
(15%)
Repositioning
(6%)
New-to-the-world
products
(4%)
High Product
Newness
(Adapted from Cooper et al., 1997)
Portfolio Management
Portfolio diagram used by a division of Hewlett-Packard:
Large
Extent of Product Change
Extent of Process Change
Large
Small
Next generation/
platform
L
H
A
G
K
F
B
J
Breakthrough
Small
Size of bubble = size of project
C
E
I
Enhancements
D
(Englund & Graham, 1999)
Product Replacement Strategies
Product
Marketing
No change
No
change
Remix
New/market
segment
Modified
Technology
change
Facelift
Inconspicuous
technological
substitution
Remerchandising
Relaunch
Conspicuous
technological
substitution
Intangible
repositioning
Tangible
repositioning
Neo-innovation
No change
(Saunders & Jobber, 1994)
Product Turnover
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Evidence from innovative industry (laser
printers):
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High levels of competition speed product exit and
delay product entry
Firms with high market share keep products on
the market for longer than those with lower share
Innovative firms bring products to market more
frequently but withdraw products at average rates
Firms with strong brands tend to introduce few
products and withdraw their products slowly
(Figueiredo & Kyle, 2006)
Product Turnover
Firm with strong brand?
Innovative firm?
No
Yes
Entry: Average
Exit: Average
Entry: Low
Exit: Slow
STAGNATOR
MARKETER
Entry: High
Exit: Average
Entry: High
Exit: Slow
INNOVATOR
PRODUCT
PROLIFERATOR
No
Yes
(Figueiredo & Kyle, 2006)
References
Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (1997) Portfolio
management for new products, Hamilton Ontario: McMaster University.
Deschamps, J-P. and Nayak, P.R. (1995) Product Juggernauts, Boston:
Harvard Business School Press.
Englund, R.L. and Graham, R.J. (1999) From experience: linking projects
to strategy, Journal of Product Innovation Management, 16(1), 52-64.
Figueiredo, J.M de and Kyle, M.K. (2006) Surviving the gales of creative
destruction: the determinants of product turnover, Strategic
Management Journal, 27, 241-264.
Garvin, D.A. (1987) Competing on the eight dimensions of quality, Harvard
Business Review, Nov-Dec, 101-109.
Robertson, D. and Ulrich, K. (1998) Planning for product platforms, Sloan
Management Review, Summer, 19-31.
Sanchez, R. (1999) Modular architectures in the marketing process,
Journal of Marketing, 63 (Special Issue), 92-111.
Saunders, J. and Jobber, D. (1994) Product replacement strategies:
occurrence and concurrence, Journal of Product Innovation
Management, 11(5), 433-450.
Trott, P. (2005) Innovation management and new product development,
Harlow: FT Prentice Hall.