Table Of ContentProduct
Management
McGraw-Hill/Irwin Series in Marketing
Alreck & Settle Hair, Bush & Ortinau Perreault & McCarthy
The Survey Research Handbook Marketing Research Basic Marketing:A Global Managerial
Third Edition Second Edition Approach
Anderson, Beveridge, Lawton, & Scott Hawkins, Best & Coney Fifteenth Edition
Merlin:A Marketing Simulation Consumer Behavior Perreault & McCarthy
First Edition Ninth Edition Essentials of Marketing:A Global
Arens Johansson Managerial Approach
Contemporary Advertising Global Marketing Ninth Edition
Ninth Edition Third Edition Peter & Donnelly
Arnould, Price & Zinkhan Johnston & Marshall A Preface to Marketing Management
Consumers Churchill/Ford/Walker’s Sales Force Ninth Edition
Second Edition Management Peter & Donnelly
Bearden, Ingram, & LaForge Seventh Edition Marketing Management:Knowledge and
Marketing:Principles & Perspectives Johnston & Marshall Skills
Fourth Edition Relationship Selling and Sales Management Seventh Edition
Belch &Belch First Edition Peter & Olson
Advertising & Promotion:An Integrated Kerin, Hartley, & Rudelius Consumer Behavior
Marketing Communications Approach Marketing:The Core Seventh Edition
Sixth Edition First Edition Purvis & Burton
Bingham & Gomes Kerin, Berkowitz, Hartley & Rudelius Which Ad Pulled Best?
Business Marketing Marketing Ninth Edition
Third Edition Seventh Edition Quelch, Rangan, & Lal
Cateora & Graham
Lehmann & Winer Marketing Management Text and Cases
International Marketing
Analysis for Marketing Planning First Edition
Twelfth Edition
Fifth Edition
Rayport & Jaworski
Cole & Mishler
Lehmann & Winer Introduction to e-Commerce
Consumer and Business Credit
Product Management Second Edition
Management
Third Edition
Eleventh Edition Rayport & Jaworski
Cravens &Piercy Levy & Weitz e-Commerce
Strategic Marketing Retailing Management First Edition
Fifth Edition
Seventh Edition Rayport & Jaworski
Cravens, Lamb & Crittenden Mason & Perreault Cases in e-Commerce
Strategic Marketing Management Cases The Marketing Game! First Edition
Third Edition
Seventh Edition Richardson
Crawford &Di Benedetto McDonald Internet Marketing
New Products Management Direct Marketing:An Integrated Approach First Edition
First Edition
Seventh Edition Roberts
Duncan Mohammed, Fisher, Jaworski & Paddison Internet Marketing:Integrating Online and
Principles of Advertising and IMC Internet Marketing:Building Advantage in Offline Strategies
Second Edition a Networked Economy First Edition
Second Edition
Dwyer & Tanner Spiro, Stanton, Rich
Business Marketing Monroe Management of a Sales Force
Second Edition Pricing Eleventh Edition
Third Edition
Eisenmann Stock & Lambert
Internet Business Models:Text and Cases Mullins, Walker, and Boyd Strategic Logistics Management
First Edition Marketing Management:A Strategic Fourth Edition
Decision-Making Approach
Etzel, Walker & Stanton
Fifth Edition Ulrich & Eppinger
Marketing
Product Design and Development
Thirteenth Edition Nentl & Miller
Third Edition
Forrest SimSeries Simulations:
Internet Marketing Intelligence SimSell Walker, Boyd, Mullins & Larreche
First Edition SimSales Management Marketing Strategy:A Decision-Focused
SimMarketing Approach
Futrell SimMarketing Research Fourth Edition
ABC’s of Relationship Selling
SimCRM Weitz, Castleberry & Tanner
Eighth Edition
First Edition Selling:Building Partnerships
Futrell Pelton, Strutton, Lumpkin & Cooper Fifth Edition
Fundamentals of Selling
Marketing Channels:A Relationship Zeithaml & Bitner
Eighth Edition
Management Approach Services Marketing
Gourville, Quelch, & Rangan
Third Edition Third Edition
Cases in Health Care Marketing
First Edition
Product
Management
Fourth Edition
Donald R. Lehmann
Columbia University
Russell S. Winer
New York University
Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
PRODUCT MANAGEMENT
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the
Americas, New York, NY, 10020. Copyright © 2005, 2002, 1997, 1994 by The McGraw-Hill Companies,
Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any
means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill
Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission,
orbroadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 FGR/FGR 0 9 8 7 6 5 4
ISBN 0-07-286598-9
Editorial director: John E. Biernat
Sponsoring editor: Barrett Koger
Editorial coordinator: Scott Becker
Executive marketing manager: Dan Silverburg
Media producer: Craig Atkins
Project manager: Kristin Puscas
Senior production supervisor: Sesha Bolisetty
Coordinator freelance design: Artemio Ortiz Jr.
Lead supplement producer: Cathy L. Tepper
Senior digital content specialist: Brian Nacik
Cover design: Artemio Ortiz Jr.
Typeface: 10/12 TimesNewRoman
Compositor: GTS—New Delhi, India Campus
Printer: Quebecor World Fairfield Inc.
Library of Congress Cataloging-in-Publication Data
Lehmann, Donald R.
Product management / Donald R. Lehmann, Russell S. Winer.—4th ed.
p. cm.—(McGraw-Hill/Irwin series in marketing)
Includes bibliographical references and indexes.
ISBN 0-07-286598-9 (alk. paper)
1. Product management. I. Winer, Russell S. II. Title. III. Series.
HF5415.15.L44 2005
658.5 6—dc22
2004053060
www.mhhe.com
To our families,
colleagues,
and students
Brief Contents
Preface xiii
About the Authors xvi
1 Introduction to Product 10 Pricing Decisions 291
Management 1
11 Advertising Decisions 324
2 Marketing Planning 26
12 Promotions 359
3 Defining the Competitive Set 49
13 Channel Management 388
4 Category Attractiveness Analysis 74
14 Customer Relationship
5 Competitor Analysis 97 Management 414
6 Customer Analysis 139 15 Financial Analysis for Product
Management 441
7 Market Potential and Sales
Forecasting 187 16 Marketing Metrics 464
8 Developing Product Strategy 226
9 New Products 257 INDEX 479
vi
Contents
Preface xiii What Makes a Good Planning System: Some
Empirical Results 32
About the Authors xvi
Is Planning Worthwhile? 32
The Planning Process 33
Chapter 1 Approaches to Planning 33
Introduction to Product Steps in the Planning Process 34
Management 1 Components of the Marketing Plan 35
The Executive Summary 36
Overview 1
Situation Analysis 36
Marketing Organization 3
Marketing Objectives/Strategy 37
Product-Focused Organizations 3 Supporting Marketing Programs 37
Market-Focused Organizations 8 The Rest of the Plan 37
Functionally Focused Organizations 9 Example 39
The Role of the Sales Force 11 Two Case Studies 40
Marketing Organization Implications
Energy Bars (ca. 2002) 41
of Global Marketing 11
Personal Digital Assistants (ca. 1999) 41
Product Management: Summary 45
Fact versus Fiction 12 References 45
Backgrounds 13 Appendix
Critical Skills 13 Marketing Plan Outline 46
The Marketing Plan 14
Variance across Industry/Company Size 15
Chapter 3
Changes Affecting Product Management 15
Changes in Marketing Organizations 17 Defining theCompetitive Set 49
Overview of the Book 21
Overview 49
Marketing Planning 21
Levels of Market Competition 52
Marketing Strategy 22
Definitions 52
Marketing Program Decisions 22
Overlapping Market Segments 57
Summary 23
The Impact of Metamediaries 57
References 23
Product Strategy Implications 57
Appendix
Illustrations 59
Sample Responses from Product Managers 24
Methods for Determining Competitors 61
Managerial Judgment 62
Chapter 2 Customer-Based Measures 63
Summary 68
Marketing Planning 26
Competitor Selection 69
Overview 26 Enterprise Competition 70
Definition and Objectives of Plans 26 Summary 71
Frequent Mistakes in the Planning Process 26 References 72
vii
viii Contents
Chapter 4 Marketing Strategy 115
Category Attractiveness Comparing Value Chains 116
Analysis 74 Marketing Mix 117
How to Assess Competitors’Strategies 118
Overview 74 Technology Strategy 120
Aggregate Market Factors 75 Differential Advantage Analysis 122
Category Size 75 Ability to Conceive and Design 122
Market Growth 76 Ability to Produce 124
Product Life Cycle 76 Ability to Market 124
Sales Cyclicity 77 Ability to Finance 124
Seasonality 78 Ability to Manage 124
Profits 78 What to Do with the Information 124
Category Factors 78 Assessing a Competitor’s Will 126
Threat of New Entrants 79 Predicting Future Strategies 127
Bargaining Power of Buyers 81 Illustrations 129
Bargaining Power of Suppliers 82 Energy Bars 129
Category Rivalry 82 Personal Digital Assistants 135
Pressure from Substitutes 83 Summary 137
Capacity 84 References 137
Environmental Analysis 84
Technological Factors 85
Chapter 6
Political Factors 86
Customer Analysis 139
Economic Factors 87
Regulatory Factors 88 Overview 139
Social Factors 88 What We Need to Know About
Illustrations 92 Customers 140
Energy Bars 92 Who Buys and Uses the Product 140
Personal Digital Assistants 92 What Customers Buy and How They Use It 144
Summary 95 Where Customers Buy 148
References 96 When Customers Buy 148
How Customers Choose 149
Chapter 5 Why They Prefer a Product 153
How They Respond to Marketing Programs 158
Competitor Analysis 97
Will They Buy It (Again)? 158
Overview 97 Segmentation 159
Sources of Information 102 Desirable Criteria for Segments 160
Secondary Sources of Information 102 Methods for Market Segmentation 161
Primary Sources of Information 108 Illustrations 175
Other Sources 110 Energy Bars 175
Ethically Questionable Sources 111 Personal Digital Assistants 177
Creating a Product Features Matrix 112 Motorcycles 179
Assessing Competitors’Current Summary 181
Objectives 113 References 182
Determination of Competitor Objectives 113 Appendix 6A Economic Value to the
Assessing Competitors’Current Customer (EVC) 184
Strategies 115 Appendix 6B Latent Class Methods 186
Contents ix
Chapter 7 Chapter 8
Market Potential and Sales Developing Product Strategy 226
Forecasting 187
Overview 226
Overview 187 Benefits of Strategy 226
Definitions 187 Elements of a Product Strategy 228
Market Potential 188 Setting Objectives 228
Overview 188 Selection of Strategic Alternatives 231
What They Are Used For 189 Increasing Sales/Market Share 231
Information Sources 189 Increasing Profitability 233
New or Growing Product Summary 234
Potential 191 Positioning: Choice of Customer Targets 234
Mature Product Potentials 192 Positioning: Choice of Competitor
Methods of Estimating Market and Targets 236
Sales Potential 192 Positioning: The Core Strategy 236
Analysis-Based Estimates 192 Cost/Price (Value) Strategy 237
Area Potential 195 Nonprice Strategy 238
Sales Potential 195 Managing Brand Equity 241
Sales Forecasting 196 Measuring Brand Value 246
Overview 196 Relation to Customer Strategy 249
Level of Accuracy Needed 198 Product Strategy over the Life Cycle 249
Judgment-Based Methods 199 Introduction Strategies 249
Customer-Based Methods 201 Growth Strategies 251
Sales Extrapolation Methods 202 Maturity Strategies 252
Model-Based Methods 206 Strategies for the Decline Stage 252
What Methods Are Used? 207 Summary 253
Using Regression Models for Illustrations 253
Forecasting 208 Odwalla Energy Bar 253
Developing Regression Models 209 Handspring 254
Recognizing Uncertainty 213 Summary 254
Nonlinear Relations 214 References 255
Share Forecasts 215
Forecasting Really New
Chapter 9
Products 215
New Products 257
Illustrations 217
Forecasting Energy Bar Sales via Overview 257
Regression 217 Product Modification 258
PDA Sales 218 Line Extensions 260
Using Forecasts 219 Adding a Product Variant 262
Combining Forecasts 220 Dropping a Product Variant 263
Gaining Agreement 220 Getting Ideas for New Products 263
Why Not Just Go to the Web? 221 Testing Slightly New Products 264
Summary 221 Concept Testing 264
References 221 Product Testing 266
Appendix Time Series Regression with Market Tests 267
Seasonal Factors 223 Quasi-Market Tests 269
x Contents
Forecasting 269 Pricing for Stability 312
Brand Extensions 273 Skimming 313
Really New Products 275 Competitive Pricing 313
Getting Ideas for Really New Other Factors Affecting Price 313
Products 277 Stage of the Product Life Cycle 313
Evaluating Really New Products 277 Category Conditions 315
Adoption and Expansion 278 Some Specific Pricing Tactics 316
Forecasting Really New Products 279 Product Line Pricing 316
Summary 279 Price Bundling 316
Illustration 281 Complementary Pricing 317
Summary 281 Value Pricing 317
References 282 Everyday Low Pricing 318
Appendix 9A Sample Concept Test Hidden Price Increases 319
Formats 286 Price Discrimination 319
Appendix 9B Assessing Discrimination Second-Market Discounting 320
and Preference 289 Periodic Discounting 320
Auctions 321
Ethical Issues 321
Chapter 10
Summary 322
Pricing Decisions 291
References 322
Overview 291
The Role of Marketing Strategy in Pricing 293 Chapter 11
Measuring Perceived Value and Price 295
Advertising Decisions 324
Perceived Value Price Variable Cost 295
Price Perceived Value Variable Cost 296 Overview 324
Price Variable Cost Perceived Value 297 The Target Audience 328
Measuring Customer Value 298 Setting Advertising Objectives 330
Calculating Value-in-Use 298 Customer-Focused Objectives 330
Pricing Experiments 300 Exposure-Oriented Objectives 332
Using Price Thresholds 302 Objective Specificity 332
Dollarmetric Scale 302 Setting Advertising Budgets 332
Using the Perceived Value Objective and Task 336
Concept 303 Percentage-of-Sales 336
Psychological Aspects of Price 304 Competitive Parity 336
Reference Prices 305 Affordable 341
The Relationship between Price and Experimentation 342
Perceived Quality 306 Decision Calculus 342
The Odd-Ending Effect in Prices 307 Summary 343
Competition and Pricing 307 Evaluating Ad Copy: Laboratory-Based
Competitors’Costs 308 Measures 343
Historical Pricing Behavior 309 Real-World Measures 346
The Role of Own Costs 310 Media Selection 347
Deciding How Much of the Value–Cost Gap Where 347
to Capture: Pricing Objectives 311 Contextual Fit 348
Penetration Pricing 311 When 348
Return on Sales/Investment Pricing 312 Other Considerations 349
