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SECTION IV
IMPLEMENTING
THE MARKET
S T R AT E G Y
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SECTION IV — IMPLEMENTING THE MARKET STRATEGY — COMPRISES 11 CHAPTERS,
Chapter 12 through Chapter 22. The section embraces the second three Marketing Imperatives:
Imperative 4 — Design the Market Offer; Imperative 5 — Secure Support from Other
Functions; and Imperative 6 — Monitor and Control.
The largest group of chapters — Chapters 12 through 20 — address Imperative 4. We organize
the material on designing the market offer into four parts.
Part A, Providing Customer Value, comprises three chapters. Chapter 12, Managing the
Product Line, considers the firm’s products as elements in a product portfolio, each with
specific roles, together with several product-related issues. Chapter 13, Managing Services
and Customer Service, focuses on product/service differences and highlights the importance
of customer service. Chapter 14, Developing New Products, introduces the stage/gate process
for developing new products.
Part B, Communicating Customer Value, also comprises three chapters. Chapter 15,
Integrated Marketing Communications, frames an integrated communications strategy.
Chapter 16, Mass and Digital Communications, focuses on advertising and other non-personal communications approaches. Chapter 17, Directing and Managing the Field Sales
Effort, discusses six core tasks for developing and implementing the sales strategy.
Part C, Delivering Customer Value, comprises a single chapter. Chapter 18, Distribution
Decisions, focuses on how the firm's products reach end-user customers.
Part D, Getting Paid for Customer Value, comprises two chapters: Chapter 19, Critical
Underpinnings of Pricing Decisions, and Chapter 20, Setting Prices.
Imperatives 5 and 6 each merit a single chapter. Chapter 21, Ensuring the Firm Implements the
Market Offer as Planned, addresses Imperative 5 and focuses on building an externally oriented
firm. Chapter 22, Monitoring and Controlling Firm Functioning and Performance, considers
Imperative 6 and shows how to maintain the firm’s planned trajectory.
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Managing Marketing in the 21st Century
SECTION I: MARKETING AND THE FIRM
CHAPTER 1
Introduction to Managing Marketing
CHAPTER 2
The Value of Customers
S E C T I O N I I : F U N D A M E N TA L I N S I G H T S F O R S T R AT E G I C M A R K E T I N G
CHAPTER 3
CHAPTER 4
Market Insight
Customer Insight
CHAPTER 6
Marketing Research
CHAPTER 5
Insight about Competitors, Company, and Complementers
S E C T I O N I I I : S T R AT E G I C M A R K E T I N G
I M P E R AT I V E 1
Determine and Recommend Which Markets to Address
CHAPTER 7
Identifying and Choosing Opportunities
I M P E R AT I V E 2
Identify and Target Market Segments
CHAPTER 8
Market Segmentation and Targeting
I M P E R AT I V E 3
Set Strategic Direction and Positioning
CHAPTER 9
Market Strategy: Integrating the
Firm’s Efforts for Marketing Success
CHAPTER 10
CHAPTER 11
Managing through the Life Cycle
Managing Brands
S E C T I O N I V: I M P L E M E N T I N G T H E M A R K E T S T R AT E G Y
I M P E R AT I V E 4
Design the Market Offer
PART A: PROVIDING
CUSTOMER VALUE
CHAPTER 12
Managing the Product Line
PART B: COMMUNICATING
CUSTOMER VALUE
CHAPTER 15
CHAPTER 13
CHAPTER 16
Mass and Digital
Communication
Developing New Products
CHAPTER 18
Integrated Marketing
Communications
Managing Services and
Customer Service
CHAPTER 14
PART C: DELIVERING
CUSTOMER VALUE
Distribution Decisions
PART D: GETTING PAID FOR
CUSTOMER VALUE
CHAPTER 19
Critical Underpinnings of
Pricing Decisions
CHAPTER 20
Setting Prices
CHAPTER 17
Directing and Managing
the Field Sales Effort
I M P E R AT I V E 5
Secure Support from Other Functions
CHAPTER 21
Ensuring the Firm Implements the Market Offer as Planned
I M P E R AT I V E 6
Monitor and Control
CHAPTER 22
Monitoring and Controlling Firm Functioning and Performance
S E C T I O N V: S P E C I A L M A R K E T I N G T O P I C S
CHAPTER 23
International, Regional, and Global Marketing
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IMPERATIVE 4
Design the Market Offer
PART A – PROVIDING CUSTOMER VALUE
CHAPTER 12
MANAGING THE
PRODUCT LINE
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LEARNING OBJECTIVES
When you have completed this chapter, you will be able to:
• Understand the importance of managing the product line as a portfolio.
• Apply alternative approaches to managing the product portfolio.
• Manage key interrelationships among products.
• Address the pressures for product proliferation and product-line simplification.
• Manage both diverse and complementary product lines.
• Deal with important product issues like bundling, counterfeiting, evolving the product
line, extending product life, product quality, and secondary market products.
• Anticipate concerns about product safety, packaging, and disposal of products and
packaging.
OPENING CASE: SWIFFER
Introduced by P&G in 1999, the Swiffer Sweeper (SS) was not just a new product; it was the first in
a new product class — a line of products for cleaning surfaces. The Swiffer product line now comprises several different cleaning products for a variety of surfaces. The Swiffer design includes both
hardware and disposables. The hardware is a pole and attachment that grips the disposable, typically a dry or wet cloth. The choice of disposable depends on the surface being cleaned; regardless,
the consumer discards the cloth after cleaning. P&G provides refills in various scents: SS dry cloths
— 16-count refills, in unscented, Lavender Vanilla & Comfort, or Sweet Citrus & Zest; wet cloths
— 24-count refills, in Open Window Fresh, Lavender Vanilla & Comfort, or Sweet Citrus & Zest.
Some products are available as starter kits.
Swiffer comprises the following products:
• Swiffer Sweeper. Cleans hard-surface floors. Dry cloths compete with brooms and dustpans;
wet cloths compete with mops and pails of water.
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I M P L E M E N T I N G T H E M A R K E T S T R AT E G Y
• Swiffer SweeperVac. Combines the SS dry cloth with a vacuum cleaner. The dry cloth picks
up fine debris like dirt, dust, and pet hair; the vacuum picks up larger objects.
• Swiffer Dusters. Reaches into nooks and crannies. Has an extendable handle and lockable
pivoting head; a special version cleans automobile interiors.
• Swiffer Sweeper Professional. Similar to the SS but with a larger head; cloths are about
one and a half times the size of two regular SS cloths.
• Swiffer WetJet. Replaces mops for difficult-to-clean floors. Premixed cleaning solutions are
available — Multipurpose Floor Cleaner, Wood Floor Cleaner, and Antibacterial Floor
Cleaner.
• Swiffer Dust & Shine. Wax-free formula cleans and shines wood furniture and other surfaces
like leather and granite.
Most Swiffer products have differently designed hardware and disposables, but P&G has a consistent business model. The hardware has a
low price and generates little profit; P&G makes its money on refills.
The premium-priced Swiffer line is part of P&G’s Household Care
business, roughly 50 percent of total firm revenues.
P&G now has 23 billion-dollar brands. Swiffer is one of 16 brands
with revenue between $500 million and $1 billion with the potential
to become a billion-dollar brand.
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MANAGING THE PRODUCT LINE
n
CHAPTER 12
Chapter 12 is the first of three chapters in Part A of Imperative 4 — Design the Market Offer.
Part A focuses on Providing Customer Value. Chapter 12 addresses Managing the Product Line.
Products and services are central to the firm’s marketing mix. Since decisions about products
and services cross functional lines, they have a broader impact on the firm’s operations than
other marketing-mix variables like promotion, distribution, customer service, and pricing.
Firms also face difficult issues allocating limited resources across product portfolios. Optimal
product-line breadth is a critical issue; product proliferation and product-line simplification
can each have dramatic effects on shareholder value. Introducing new products (Chapter 14),
bundling, counterfeiting, evolving the product line, extending product life, packaging, product
quality, and secondary market products are important related issues. Product safety can embroil
the firm in legal and ethical problems; increased societal expectations regarding health (like fast
food and obesity) and environmental concerns (like pesticides and packaging and product disposal) highlight the importance of product decisions.
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I M P L E M E N T I N G T H E M A R K E T S T R AT E G Y
KEY MESSAGES
Managing the firm’s product line is a major challenge. The firm must make decisions in four areas:
•
Mar ke t ing
Quest ion
What other messages did
you glean from this chapter?
The product portfolio.
• The firm should construct a balanced portfolio where some products generate growth
and market share, some products earn profits, and some deliver cash flow.
• The firm’s key challenge is allocating resources across the portfolio. Financial analysis
methods have advantages and disadvantages. The firm should supplement financial
analysis with portfolio analysis, using the growth-share and/or multifactor matrix.
•
Other product interrelationships. The firm’s products may be interrelated at the
customer — the firm should seek positive complementarity and avoid negative complementarity. Products may also be interrelated at the firm, playing different strategic roles.
•
Product-line breadth: proliferation versus simplification. The firm faces conflicting
pressures for product proliferation and product simplification. Variety in customer needs
drives proliferation, and many firms offer similar versions of the same product. The reader
should not confuse product proliferation with market segmentation. Industry consolidation
often drives simplification, but the firm should make product deletion decisions carefully,
using well-thought-through criteria.
•
Other product-line issues. The firm should address many other product management
issues, including bundling; counterfeiting; evolving the product line; product quality; product
safety; secondary market products; packaging; and disposal of products and packaging.
VIDEOS AND AUDIOS
Luxury Goods
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Ketty Maisonrouge
Columbia Business School
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MANAGING THE PRODUCT LINE
n
CHAPTER 12
QUESTIONS FOR STUDY AND DISCUSSION
Can you answer the questions implied by this chapter’s learning objectives? Check!
1. Table 12.9 shows market research data for PortCo’s (fictional firm). Develop a growth-share
matrix. How do you assess PortCo’s product portfolio? What do you recommend?
TABLE 12.9
PORTCO DATA
FOR QUESTION 1
Product
A
B
C
D
E
F
Long-run
(5-year) Market
Growth Rate (%)
5%
7%
15%
1%
15%
20%
PortCo Market
Share (%)
15%
30%
40%
50%
10%
20%
Market Share of
Leading
Competitor (%)*
30%
12%
15%
10%
40%
20%
PortCo Sales
Revenues
($ millions)
$100
$150
$ 20
$200
$ 30
$ 40
* If the firm has leading market share, this is the competitor with second-highest market share.
2. The World Health Organization estimates 5.4 million people annually die prematurely of tobaccorelated causes like lung cancer, mainly in low- and middle-income countries. Suppose you were
offered product manager jobs, with opportunities for extensive overseas travel, at leading cigarette
manufacturers Altria and R.J. Reynolds. Starting salaries are 20 percent higher than your other
offers. Which, if any, will you accept? Why? What challenges would you face if you did accept?
3. Review cereal product lines at your local supermarket. How do you assess General Mills,
Kellogg’s, and Quaker? What are their strategies? What recommendations can you offer them?
4. The president of Sony Electronics put the problem this way: “If we’re selling a $200 DVD player,
we may want to give away Sony DVD software. But that’s not in the best interest of Sony Pictures.
And Sony Music may want to sell a Springsteen box set for $80 with a coupon that says, ‘Get $20
off your Sony CD Player.’ Why would Sony Electronics want to do that?” How would you advise
the president of Sony Electronics? How would you advise the president of Sony Corporation?73
5. Some service providers bundle services — amusement parks and ski hills provide unlimited use
for a single price. Others unbundle services, like restaurants with a la carte menus. Prepare
guidelines for a service provider making bundling/unbundling decisions.
6. Your electronic components firm contemplates offering a new high-quality device, Super Great,
to its current product, Super. Market research and internal cost data reveals:
• Super. Average price = $25; variable cost = $15; fixed costs = $850,000; expected next year
sales = 250,000.
• Super Great. Fixed costs = $1.6 million; variable cost = $20; Super fixed costs reduce to
$750,000 due to resource sharing. Expected sales at two price points:
• Price = $30: sales = 200,000. Source: 30% from new customers; 30% from competitors;
40% from Super customers.
• Price = $35: sales = 150,000. Source: 20% from Super customers; 80% from elsewhere.
Should you introduce Super Great? If so, at what price?
7. AT&T, Sprint, and Verizon offer many usage plans to address target segment needs. How would you
determine the right number of plans? What are the marketing challenges of offering many plans?
8. Select a product line in which you are interested. How do the various individual products relate
to each other?
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