Chapter 6 – Product Strategy & New Product Development: Creating Offerings
- Understand product mix and product line decisions.
- Understand the people involved in creating and managing offerings.
- Recognize the differences in organizing product marketing for consumer versus B2B companies.
Managing all of a company’s offerings presents a number of challenges. As a company introduces new products, they are confronted with decisions about what a product mix might consist of. A product mix is the complete set of products offered by a company. See Figure 6.6 “Campbell’s Product Mix” for a sample product mix. This product mix is made up for various product lines and each of the product lines will contain a number of product categories. A product line is a group of closely related products with similar function. For example, Nike product lines include footwear, apparel, and sports equipment. The number of product lines is considered the product breath (or width) of the product mix. The number of categories within a product line is considered the product depth. The combination of the product width and the product depths form the overall product mix.‡
Over time, the product mix will become larger and marketing managers are confronted with a number of possible decisions on how to manage the product mix. They include;
Line stretching is a strategy where a company may choose to expand its current product offering beyond the current product range. Line stretching can be done by going down market or up market or both ways. An example of line stretching is when The Gap company decided to launch a new clothing product range which is a more premium product, known as Banana Republic. The Gap also stretched down market by introducing the value brand Old Navy. ‡
Line filling is a strategy of adding more products to an existing product line in order to fill any potential product gaps into which a competitor may decide to introduce a product. An example of line filling is when Proctor & Gamble introduced new variations of liquid laundry detergent (e.g Tide Hygienic Clean, Tide Cold Water, Tide Plus Sport, etc). ‡
Line Modernization, Featuring and Pruning
A number of strategies to improve the product mix. Line modernization is a strategy where you look to improve existing products in the market by adding new features or improving quality issues to prolong the life of the product. Line featuring is a strategy where a product is featured through a particular retailer often at a discounted price (e.g. when Coca-Cola products are featured in a Shoppers Drug Mart online or paper flyer). Lastly, line pruning is a strategy of retiring or eliminating underperforming products. ‡
Depending on the size of the company and the breadth of the company’s offerings, these decisions may involve managers in several different positions.
A brand manager is one such position. A brand manager is the person responsible for all business decisions regarding offerings within one brand. By business decisions, we mean making decisions that affect profit and loss, which include such decisions as which offerings to include in the brand, how to position the brand in the market, pricing options, and so forth. Indeed, a brand manager is often charged with running the brand as if it were its own separate business.
A brand manager is much more likely to be found in consumer marketing companies. Typically, B2B companies do not have multiple brands so the position is not common in the B2B environment. What you often find in a B2B company is a product manager, someone with business responsibility for a particular product or product line. Like the brand manager, the product manager must make many business decisions, such as which offerings to include, advertising selection, and so on. Companies with brand managers include Microsoft, Procter & Gamble, SC Johnson, Kraft, Target, General Mills, and ConAgra Foods. Product managers are found at Xerox, IBM, Konica-Minolta Business Solutions, Rockwell International, and many others.
In some companies, a category manager has responsibility for business decisions within a broad grouping of offerings. For example, a category manager at SC Johnson may have all home cleaning products, which would mean that brands such as Pledge, Vanish, Drano, Fantastik, Windex, Scrubbing Bubbles, and Shout would be that person’s responsibility. Each of those brands may be managed by brand managers who then report directly to the category manager.
At the retail level, a category manager at each store is responsible for more than just one manufacturer’s products. The home cleaning category manager would have responsibility for offerings from SC Johnson, as well as Procter & Gamble, Colgate-Palmolive, and many other producers.
Another option is to create a market manager, who is responsible for business decisions within a market. In this case, a market can be defined as a geographic market or region; a market segment, such as a type of business; or a channel of distribution. For example, SC Johnson could have regional insect control managers. Regional market managers would make sense for insect control because weather has an influence on which bugs are pests at any given time. For example, a southern regional manager would want more inventory of the repellent Off! in March because it is already warm and the mosquitoes are already breeding and biting in the southern parts of Ontario.
In B2B markets, a market manager is more likely to be given responsibility for a particular market segment, such as all hospital health care professionals or doctor’s offices. All customers such as these (retail, wholesale, and so forth) in a particular industry compose what’s called a vertical market, and the managers of these markets are called vertical market managers. B2B companies organize in this way because buying needs and processes are likely to be similar within an industry, channels of communication are likely to be the same within an industry but different across industries.
Because magazines, websites, and trade shows are organized to serve specific industries or even specific positions within industries, B2B marketers find vertical market structures for marketing departments to be more efficient than organizing by geography.
Market managers sometimes report to brand managers or are a part of their firms’ sales organizations and report to sales executives. Market managers are less likely to have as much flexibility in terms of pricing and product decisions and have no control over the communication content of marketing campaigns or marketing strategies. These managers are more likely to be tasked with implementing a product or brand manager’s strategy and be responsible for their markets. Some companies have market managers but no brand managers. Instead, marketing vice presidents or other executives are responsible for the brands.