SMM 5.1

• Product offering

  The mix of elements assembled by a business marketer, encompassing the physical product, services, features, benefits, and added value, with the goal of creating a solution that provides value to the customer
• Three levels of product

  • Core Benefit
  • Actual Product
  • Augmented Product
• Core Benefit

  • The fundamental value provided by products within the same industry, derived from the functional performance of the product, fulfilling customers' basic needs
• Transactional Exchange

  A one-time or short-term interaction between parties focused primarily on completing a specific transaction or deal, involving a straightforward exchange of goods, services, or money without much ongoing interaction or relationship-building
• Collaborative Exchange

  A deeper and more long-term relationship between parties characterized by cooperation, mutual trust, and shared goals, often involving ongoing communication, coordination, and joint problem-solving to achieve mutual benefits beyond immediate transactions
• Combining service with physical products enhances supplier performance
• Profitability from this integration depends on the existing goods/service mix of the business marketer
• Products with substantial physical components benefit from service elements ensuring proper function, while predominantly service-based offerings benefit from augmenting components supporting customer activities broadly
• This combination of physical and service elements forms a product-service system aimed at fulfilling customer needs
• Supplier Needed Resources and Capabilities for Competitive Offerings

  • Utilization of product usage and process data from the company's physical goods inventory for differentiation
  • Leverage of product development and operational assets to introduce cost-reducing innovations
  • Proficient product sales force and distribution network with in-depth product knowledge for privileged access to customers
  • Field service organization adept at after-sales service and identifying opportunities for complex offerings
• Access to data on the installed asset base is crucial for suppliers to provide value-adding support services, and digital technology enables the evolution of these services over time
• Future advancements in smart technology and data will emphasize the importance of integrated systems, likely increasing the prominence of hybrid offerings and potentially leading to a shift towards predominantly service-based solutions
• Introduction Stage

  • Marketing tasks such as communication activities to make customers aware, initial costs may exceed revenue, generating primary demand may involve trial offers with existing key customers, securing distribution channels is crucial when using indirect channels, marketing activities continue until sales increase, identifying and resolving issues with the offering becomes possible as sales rise
• Growth Stage

  • Increased market acceptance leads to rapid sales and profit growth, higher competition arises leading to price pressure, copycat products become a significant challenge, differentiation strategies can help defend market share and achieve secondary demand, service elements might need to be added to enhance the offering, collaboration with selected customers may be necessary to identify beneficial product adaptations, the objective is to maximize margins and ride the growth wave as long as possible
• Maturity Stage

  • Focus shifts to maintaining profit performance by reducing costs, strategies may include minimizing sales force time spent on pioneering activities, telemarketing can be used more extensively, promotional activities may be directed towards trade rather than end customers, promotional pricing can be employed to retain heavy users, ensure sufficient capacity for maintenance and repair, ensure good availability of spare parts
• Decline Stage

  • Price maintenance and cost reduction measures lose effectiveness without new primary demand sources, falling demand requires further cost reductions, marketing expenses should be minimized, and unprofitable customers and channels should be discontinued, product development should cease, but adaptations may be considered for profitable customers if strategically beneficial
• The life-cycle concept faces criticism for not always aligning with the idealized development pattern depicted, and marketers may struggle to pinpoint an offering's precise life-cycle position and determine appropriate tactics, but the life-cycle concept is most valuable as a strategic management tool rather than for tactical guidance
• Portfolio Analysis Tools

  • Ansoff Matrix
  • GE/McKinsey's Portfolio
  • Innovation Ambition Matrix
  • BCG Matrix
• BCG Matrix

  • Positions offerings on a 2 × 2 matrix based on relative market share and relative market growth, providing intelligence for marketing decisions, relative market share is calculated as a proportion of the market share held by the market leader, often presented on a logarithmic scale, market growth is expressed as an annual percentage rate
• Question Marks

  Low market share in fast-growing markets, posing challenges for marketers, new offerings often start here, requiring time to establish and become profitable, supporting question marks early on is necessary and considered a reasonable investment
• Dogs

  Products with low market share in slow-growing markets, may have been previously successful or started as question marks but failed to achieve their potential, there is little benefit in allocating additional resources to dogs, unless a value-creating strategy can be developed, dogs are candidates for deletion
• Stars

  Offerings with the largest market share in fast-growing markets, positioned on the left-hand side of the matrix, indicating market leadership, stars generate positive cash flows and are successful, require ongoing investment to maintain or enhance their position, often at the growth stage of the life-cycle, strong customer awareness but may need to develop new market segments
• Cash Cows

  These are offerings generating significant profits without requiring further product development, contribute the most to company profits
• Dogs

  • Products with low market share in slow-growing markets
  • These products may have been previously successful or started as question marks but failed to achieve their potential
  • There is little benefit in allocating additional resources to dogs
  • Unless a value-creating strategy can be developed, dogs are candidates for deletion
• Stars

  • Offerings with the largest market share in fast-growing markets
  • Positioned on the left-hand side of the matrix, indicating market leadership
  • Stars generate positive cash flows and are successful
  • Require ongoing investment to maintain or enhance their position
  • Often at the growth stage of the life-cycle
  • Strong customer awareness but may need to develop new market segments
• Cash Cows

  • These are offerings generating significant profits without requiring further product development
  • Contribute the most to company profits
  • Firms with high market share and economies of scale generate substantial positive cash flows
  • Used to sustain the development of new offerings or question marks
• Managing Cash Cows

  1. Vigilance is required as profit margins may decline with slowing growth or market contraction

  2. Losing share in a contracting market diminishes cash generation

  3. Business marketers employ strategies such as price reductions or additional costs

  4. Impact on specific customers in the relationship portfolio is considered

  5. Customization of offerings may reduce price-based competition and customer price sensitivity

  6. Customers recognize the value of customized offerings

  7. Obtaining price premiums may not be feasible, but gaining greater shares of customers' business is possible through customization

  8. Customization enhances the perceived value of the offering
• Innovation Management

  • Importance of Adaptation: Continuous adaptation is necessary to stay ahead of competition, Adaptive innovation becomes vital during global economic recessions for survival
  • Definition of Innovation: Involves idea generation, technology development, manufacturing, and marketing of new or improved products/processes, Products result from having appropriate processes and structures in place, Innovation extends beyond end products to operational processes, marketing, and organizational aspects
  • Managing Innovation: Focuses on organizing the firm to foster innovation, Emphasizes the role of relationships with external partners in aiding the innovation process
• Innovation and External linkages

  • Value in B2B markets comes from relationships with customers and others, Innovation involves collaboration beyond the firm, including the supply network and customer base, External linkages help firms identify opportunities and threats, Leveraging external technology is essential for innovation management, Suppliers and customers can contribute ideas and expertise to drive innovation
• Value Co-Creation in Knowledge-Intensive Business Services

  1. Diagnosing Needs

  2. Designing & Producing Solutions

  3. Implementing the Solution

  4. Organizing the Process & Resources

  5. Managing Value Conflicts
• Supplier Roles

  • Value Process Organizer
  • Value Amplifier
  • Value Experience Supporter
  • Value Option Advisor
• Customer Roles

  • Co-Diagnoser
  • Co-Marketer
  • Co-Developer
  • Co-Designer
  • Co-Producer
  • Co-Implementer
• The new offering development process

  1. Idea Generation

  2. Idea screening

  3. Business case analysis

  4. Concept deployment

  5. Prototype and marketing elaboration

  6. Market trial

  7. Commercial launch

  8. Evaluating the offering development process
• Idea Generation

  Ideas can come from various sources: end-customers, distributors, suppliers, competitors, and staff, Ideas can be solicited or spontaneous, Various methods for idea capture: brainstorming workshops, lead users' input, staff suggestions, Brainstorming workshops involve participants from customer companies and different departments of the firm, Continuous flow of ideas is crucial for new offering development, Involvement from various stakeholders enhances the innovation process, Structured workshops and solicitation methods contribute to effective idea management
• Basic screening criteria

  the organization's capacity to produce the product, alignment with company production capacities or technical proficiencies, congruence with company goals and reputation, the potential for sales and profitability in the market, compatibility with existing offerings and distribution channels

  
• Business case analysis

  Shift to evaluating ideas with high business potential, Financial assessment of market size, growth rate, and potential for each idea, Estimation of development costs for each new offering, Consideration of capital investment, staffing expenses, breakeven point, and payback period, Comparison of prospective projects for decision-making
• Concept deployment

  Development of offering concept during preliminary investigations, Identification of likely targets and their reactions, Outline specifications for concepts with a sound business case, Definition of concept and customer benefits, Estimation of likely price, Use of concept boards or drawings for communication and management support, Conveyance of concept to suppliers for sourcing implications
• Prototype and marketing elaboration

  Development of prototype based on clear concept statement, Prototype serves for evaluation of form, design, performance, and material composition, Series of working prototypes developed for successive fine-tuning, Fine-tuning involves slight performance enhancements or layout changes, Marketing support activities commence concurrently with prototyping, Activities revolve around additional product components, pricing, distribution, and communication plans
• Market trial

  Successive refinements lead to fewer changes in the offering, Offering is deemed ready for customer use at this point, Value in use is established through customer usage, Remaining adjustments and operational costs identified before full-scale launch, Test marketing in a small market area can provide feedback on the entire offering, Feedback includes evaluation of communication activities like promotional materials, sales approach, and pricing
• Commercial launch

  Final adjustments are made to the offering based on successful trial outcomes, Strategy for bringing the offering to market is formulated, Launch can be a big bang event or rolled out sequentially, depending on various factors, Sequential rollout is common for smaller companies due to resource limitations, Customer education may be necessary for novel products regarding functionality, benefits, and usage, Training of support personnel is essential for products with ongoing service needs