Managing products and

differentiation
Characteristics of an effective differential
advantage
Differentiation
Profitable
Distinctive
Preemptive
Affordable
Superior
Important
In which type of industry does operate the
firm?
VOLUME STALEMATED
F
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SPECIALIZED FRAGMENTED
M
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D
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Large Small
Economies of scales
Hax & Majluf, 1983
1. Restaurant
2. Steel
3. Car
4. Electricity
Style
Miscellaneous Repairability
Communication Maintenance and
repair
Reliability
Responsiveness Customer consulting Durability
Design
Events Reliability Customer training Conformance
Atmosphere Performance Credibility Installation Performance
Media Expertise Courtesy Delivery Features
Symbols Coverage Competence Ordering ease Form
Image Channel Personnel Services Product
How can a company differentiate its
market offering?
Product differentiation
Services differentiation
Personnel differentiation
Image differentiation
The Customer value analysis
Customer's ratings of competitors on key
success factors
Note: E = excellent, G = good, F = fair, P = poor.
F F G P F Competitor C
E G E G G Competitor B
G P P E E Competitor A
Selling
Staff
Technical
Assistance
Product
Availability
Product
Quality
Customer
Awareness
Competitor B should not be attacked !
Product life cycle
Product life cycle characteristics
Declinig number
Stable number
beginning to
decline
Growing Number Few Customers
Declining profits High profits Rising profits Negative Profits
Low cost per
customer
Low cost per
customer
Average cost per
customer
High cost per
customer
Costs
Declinig sales Peak sales
Rapidly rising
sales
Low sales Sales
Characteristics
Decline Maturity Growth Introduction
Product life cycle
Marketing objectives and strategies over
the product life cycle
Product life-cycle marketing strategies
Product life-cycle marketing strategies
Product life-cycle marketing strategies
Product life-cycle marketing strategies
Product life cycle
Portfolio planning
Managing brand and product line
portfolios: the BCG share-growth matrix
Stars
Question
marks
Cash cows Dogs
7%
15%
0%
Market
Growth
Rate
Relative market share
10 0 1
Strategic objectives and the Boston Box
! Build sales and/or market
share
! Invest to maintain/increase
leadership position
! Repel competitive
challenges
Stars
Build selectively
Focus on defendable niche
where dominance can be
achieved
Harvest or divest the rest
Question marks
Harvest or
Divest or
Focus on defendable niche
Dogs
Hold sales and/or market
share
Defend position
Use excess cash to support
stars, selected problem
children and new product
development
Cash cows
Strategic objectives and the Boston Box
! Build selectively
! Focus on defendable niche
where dominance can be
achieved
! Harvest or divest the rest
Question marks
Harvest or
Divest or
Focus on defendable niche
Dogs
Build sales and/or market share
Invest to maintain/increase
leadership position
Repel competitive challenges
Stars
Hold sales and/or market
share
Defend position
Use excess cash to support
stars, selected problem
children and new product
development
Cash cows
Strategic objectives and the Boston Box
! Hold sales and/or market
share
! Defend position
! Use excess cash to support
stars, selected problem
children and new product
development
Cash cows
Build selectively
Focus on defendable niche
where dominance can be
achieved
Harvest or divest the rest
Question marks
Harvest or
Divest or
Focus on defendable niche
Dogs
Build sales and/or market share
Invest to maintain/increase
leadership position
Repel competitive challenges
Stars
Strategic objectives and the Boston Box
Build sales and/or market share
Invest to maintain/increase
leadership position
Repel competitive challenges
Stars
Build selectively
Focus on defendable niche
where dominance can be
achieved
Harvest or divest the rest
Question marks
! Harvest or
! Divest or
! Focus on defendable niche
Dogs Hold sales and/or market
share
Defend position
Use excess cash to support
stars, selected problem
children and new product
development
Cash cows
The case of an unbalanced portfolio
High
Low
Low High
M
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Relative market share
Criticisms of the Boston Box
Criticisms of the Boston Box
Product growth strategies: the Ansoff Matrix
Market
penetration or
expansion
Product
development
Diversification
Market
development
Existing
New
Existing New
Products
M
a
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k
e
t
s

Increase sales volume
Entry into new markets
Market development
Product development
Market expansion
Market penetration
Strategic options for increasing sales
volume
Entry into new markets
Market development
Product development
Market expansion
Increase sales volume
Market penetration
Buy competitors
Discourage competitive entry
Win competitors customers
Strategic options for increasing sales
volume
Cadbury Schweppes increased by
87% its promotional expenditure
over a 4-year period
Increase sales volume
Entry into new markets
Market development
Product development
Market expansion
Market penetration
Increase usage rate
Convert non-users
Strategic options for increasing sales
volume
Kel l oggs has targeted l apsed
breakfast cereal users (fathers) and
also tried to increase the usage
(eating) rate of its cornflakes by
promoting eating in the evening.
Entry into new markets
Market development
Market expansion
Increase sales volume
Product development
Market penetration
Product line extension
Innovation
Product replacement
Strategic options for increasing sales
volume
- adding new features to an existing
product
- replacement of old brands/models
with new ones (car market)
- development of the CD
Entry into new markets
Product development
Market expansion
Increase sales volume
Market development
Market penetration
Promote new uses
Enter new segments
Strategic options for increasing sales
volume
- Nylon was first marketed as a
r epl acement f or si l k i n
parachutes but expanded into
shirts, carpets, tyres, etc.
- Sear chi ng f or over seas
opportunities
Market development
Product development
Market expansion
Strategic options for increasing sales
volume
Increase sales volume
Entry into new markets
Market penetration
New products
Honda has moved from motorcycles
t o car s and Sony i nt o 8mm
camcorders