Module 5: Product Related strategies Babasabpatilfreepptmba.com Page 1 Module 5: Product Related strategies Product as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Ex: cars, computers, or cell phones Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible. Ex:- banking, hotel services, airline travel, retail, homerepair services and wireless communication. Levels of Product and Services Product and services are shown in three levels. The most basic level is the core customer value (Core Benefit), which addresses the core requirement of user or problem-solving benefits or services that consumers seek. Ex: tooth Paste, Magazines etc. The Customer frequently buy these products with less involvement. At the second level, product turns the core benefit into an actual product. They need to develop product and service features, design, a quality level, a brand name, and packaging. For example, the TV is an actual product. Its name, parts, styling, features, packaging, and other attributes have all been carefully combined to deliver the core customer value. The third level is an augmented product around the core benefit and actual product by offering additional consumer services and benefits. The BlackBerry is more than just a communications device. It provides consumers with a complete solution to mobile connectivity problems. Thus, when consumers buy a BlackBerry, the company and its dealers also might give buyers a warranty, instructions on how to use the device, quick repair services when needed, and a toll-free telephone number and Web site to use if they have problems or questions. When developing products, marketers first must identify the core customer value that consumers seek from the product. They must then design the actual product and find ways to augment it to create this customer value and the most satisfying customer experience. Product and Service Classifications 1. Consumer products are products and services bought by final consumers for personal consumption. Consumer products include convenience products, shopping products, specialty products, and unsought products. These products differ in the ways consumers buy them. a) Convenience products are consumer products and services that customers usually buy frequently, immediately, and with minimal comparison and buying effort. Ex: detergent, candy, magazines, and fast food. Convenience products are usually low priced, and marketers place them in many locations to make them readily available when customers need or want them. b) Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. When buying shopping products and services, consumers spend much time and effort in gathering information and making comparisons. Ex : furniture, clothing, used cars, major appliances, and hotel and airline services. Shopping products marketers usually distribute their products through fewer outlets. c) Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
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Module 5: Product Related strategies
Babasabpatilfreepptmba.com Page 1
Module 5: Product Related strategies
Product as anything that can be offered to a market for attention, acquisition, use, or consumption
that might satisfy a want or need. Ex: cars, computers, or cell phones
Services are a form of product that consists of activities, benefits, or satisfactions offered for sale
that are essentially intangible. Ex:- banking, hotel services, airline travel, retail, homerepair services
and wireless communication.
Levels of Product and Services
Product and services are shown in three levels. The most basic level is
the core customer value (Core Benefit), which addresses the core
requirement of user or problem-solving benefits or services that
consumers seek.
Ex: tooth Paste, Magazines etc. The Customer frequently buy these
products with less involvement.
At the second level, product turns the core benefit into an actual
product. They need to develop product and service features,
design, a quality level, a brand name, and packaging. For example,
the TV is an actual product. Its name, parts, styling, features, packaging, and other attributes have all
been carefully combined to deliver the core customer value.
The third level is an augmented product around the core benefit and actual product by offering
additional consumer services and benefits. The BlackBerry is more than just a communications
device. It provides consumers with a complete solution to mobile connectivity problems. Thus, when
consumers buy a BlackBerry, the company and its dealers also might give buyers a warranty,
instructions on how to use the device, quick repair services when needed, and a toll-free telephone
number and Web site to use if they have problems or questions.
When developing products, marketers first must identify the core customer value that consumers
seek from the product. They must then design the actual product and find ways to augment it to
create this customer value and the most satisfying customer experience.
Product and Service Classifications
1. Consumer products are products and services bought by final consumers for personal
consumption. Consumer products include convenience products, shopping products, specialty
products, and unsought products. These products differ in the ways consumers buy them.
a) Convenience products are consumer products and services that customers usually buy frequently,
immediately, and with minimal comparison and buying effort. Ex: detergent, candy, magazines, and
fast food. Convenience products are usually low priced, and marketers place them in many locations
to make them readily available when customers need or want them.
b) Shopping products are less frequently purchased consumer products and services that customers
compare carefully on suitability, quality, price, and style. When buying shopping products and
services, consumers spend much time and effort in gathering information and making comparisons.
Ex : furniture, clothing, used cars, major appliances, and hotel and airline services. Shopping
products marketers usually distribute their products through fewer outlets.
c) Specialty products are consumer products and services with unique characteristics or brand
identification for which a significant group of buyers is willing to make a special purchase effort.
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Ex: specific brands of cars, high-priced photographic equipment, etc.
d) Unsought products are consumer products that the consumer either does not know about or
knows about but does not normally consider buying. Most major new innovations are unsought until
the consumer becomes aware of them through advertising. Ex: life insurance. By their very nature,
unsought products require a lot of advertising, personal selling, and other marketing efforts.
2) Industrial Products are those purchased for further processing or for use in conducting a
business. Ex: If a consumer buys a car use for his purpose then, the car is a consumer product. If the
same consumer buys the same car for making business, the car is an industrial product.
Product and Service Decisions
Marketers make product and service decisions at three levels: individual product decisions,
product line decisions, and product mix decisions.
A. Individual Product and Service Decisions
Figure shows the important decisions in the development & marketing of individual products &
services.
1) Product and Service Attributes: Product attributes are quality, features, and style and design.
a) Product Quality. Product quality is one of the marketer’s major positioning tools. Quality has a
direct impact on product or service performance; thus, it is closely linked to customer value and
satisfaction. Quality defines as the characteristics of a product or service that bear on its ability to
satisfy stated or implied customer needs. Similarly, (Siemens defines quality as: “Quality is when our
customers come back and our products don’t.)
b) Product Features. A product can be offered with varying features. The company can create
higher-level models by adding more features. Features are a competitive tool for differentiating the
company’s product from competitors’ products.
c) Product Style and Design. Another way to add customer value is through distinctive product
style and design. Design is a larger concept than style. Style simply describes the appearance of a
product. Styles can be eye catching or yawn producing. A sensational style may grab attention and
produce pleasing aesthetics, but it does not necessarily make the product perform better. Unlike
style, design is more than skin deep—it goes to the very heart of a product. Good design contributes
to a product’s usefulness as well as to its looks. Design begins with observing customers and
developing a deep understanding of their needs.
2) Branding
A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker
or seller of a product or service. Consumers view a brand as an important part of a product, and
branding can add value to a product.
Branding has become so strong that today hardly anything goes unbranded. Salt is packaged in
branded containers, Even fruits, vegetables, dairy products, and poultry are branded. Brand names
help consumers identify products that might benefit them. Brands also say something about product
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quality and consistency. Building and managing brands are perhaps the marketer’s most important
tasks.
3) Packaging
Packaging involves designing and producing the container or wrapper for a product. The primary
function of the package was to hold and protect the product. Numerous factors have made packaging
an important marketing tool as well. In increased competition the packaging must perform many
sales tasks—from attracting attention, to describing the product, to making the sale and to create
immediate recognition of a brand. In this highly competitive environment, the package may be the
seller’s last and best chance to influence buyers. Thus, for many companies, the package itself has
become an important promotional medium. Poorly designed packages can cause sales for the
company. Innovative packaging can give a company an advantage over competitors and boost sales.
In recent years, product safety has also become a major packaging concern. We have all learned to
deal with hard-to-open “childproof” packaging. Most drug producers and food makers now put their
products in tamper-resistant packages. In making packaging decisions, the company also must heed
growing environmental concerns. Fortunately, many companies have gone “green” by reducing their
packaging and using environmentally responsible packaging materials.
4) Labeling
Labels range from simple tags attached to products to complex graphics that are part of the
packaging. The label identifies the product or brand. The label might also describe several things
about the product—who made it, where it was made, when it was made, its contents, how it is to be
used, and how to use it safely. Finally, the label might help to promote the brand, support its
positioning, and connect with customers. Labels and brand logos can support the brand’s positioning
and add personality to the brand.
5) Product Support Services
Customer service is another element of product strategy. Support services are an important part of
the customer’s overall brand experience. Keeping customers happy after the sale is the key to
building lasting relationships. “Take care of customers, no matter what it takes,” before, during, and
after the sale.
Product Line Decisions
A product line is a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall
within given price ranges. For example, Nike produces several lines of athletic shoes and apparel.
Product line length—the number of items in the product line. One objective is to create a product
line to allow for upselling. Thus, Maruti would like to move customers up from Maruti 800 to Maruti
Zen. Another objective might be to allow cross-selling: HP sells printers as well as cartridges. A
company can expand its product line in two ways: by line filling or line stretching.
Product line filling involves adding more items within the present range of the line. There are
several reasons for product line filling: reaching for extra profits, satisfying dealers, using excess
capacity, being the leading full-line company, and plugging holes to keep out competitors. The
company should ensure that new items are noticeably different from existing ones.
Product line stretching occurs when a company lengthens its product line beyond its current range.
The company can stretch its line downward, upward, or both ways.
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Companies which are initially taken its position in the high price slot, stretches the line downwards
by offering products in the same line for the lower end markets. This is called Stretching down. Ex:
Kodak introduced Kodak fun time film to counter lower priced brands.
Companies which are initially positioned its product for lower end markets, decides to make higher
offers for the top slots. This is called stretching up. Sometimes, companies stretch upward to add
prestige to their current products. Ex: Japanese auto companies introduced an upmarket automobile:
Honda launched Acura
Companies in the middle range of the market may decide to stretch their lines in both directions.
This is called as Two Way Stretch. Ex: Marriott hotel group, along with regular Marriott hotels, it
added eight new branded hotel lines to serve both the upper and lower ends of the market.
Product Mix Decisions
Product mix (or product portfolio) consists of all the product lines and items that a particular seller
offers for sale. Colgate’s product mix consists of four major product lines: oral care, personal care,
home care, and pet nutrition. Each product line consists of several sublines. For example, the home
care line consists of dishwashing, fabric conditioning, and household cleaning products. Each line
and subline has many individual items. Altogether, Colgate’s product mix includes hundreds of
items.
A company’s product mix has four important dimensions: width, length, depth, and consistency.
Product mix width refers to the number of different product lines the company carries. For
example, the “Colgate World of Care” includes a fairly contained product mix, consisting of personal
and home care products. By contrast, GE manufactures as many as 250,000 items across a broad
range of categories, from light bulbs to jet engines and diesel locomotives.
Product mix length refers to the total number of items a company carries within its product lines.
Colgate typically carries many brands within each line. Ex:its personal care line includes Softsoap
liquid soaps & body washes, Irish Spring bar soaps, Speed Stick deodorant, & Afta aftershaves.
Product mix depth refers to the number of versions offered for each product in the line. Colgate
toothpastes come in 16 varieties, ranging from Colgate Total, Colgate Max Fresh, Colgate Sensitive,
Colgate Cavity Protection, and Colgate Tartar Protection to Ultrabrite, Colgate Sparkling White,
Colgate Luminous, and Colgate Kids Toothpastes. Each variety comes in its own special forms and
formulations. For example, you can buy Colgate Total in regular, mint stripe gel, or whitening liquid.
The consistency of the product mix refers to how closely related the various product lines are in end
use, production requirements, distribution channels, or some other way. Colgate product lines are
consistent insofar as they are consumer products and go through the same distribution channels.
These product mix dimensions provide the handles for defining the company’s product strategy. The
company can increase its business in four ways.
(1) It can add new product lines, widening its product mix. In this way, its new lines build on the
company’s reputation in its other lines.
(2) The company can lengthen its existing product lines to become a more full-line company.
(3) It can add more versions of each product and thus deepen its product mix.
(4) The company can pursue more product line consistency or less depending on whether it wants to
have a strong reputation in a single field or in several fields.
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Services Marketing
Services have grown dramatically in recent years. By 2014, it is estimated that nearly four out of five
jobs in the US will be in service industries. Services are growing even faster in the world economy,
making up 64 percent of the gross world product. Service industries vary greatly.
Governments offer services through courts, employment services, hospitals, military services, police
and fire departments, the postal service, and schools.
Private not-for-profit organizations offer services through museums, charities, churches, colleges,
foundations, and hospitals.
Alarge number of business organizations offer services airlines, banks, hotels, insurance companies,
consulting firms, medical and legal practices, entertainment and telecommunications companies,
real-estate firms, retailers, and others.
The Nature and Characteristics of a Service
1) Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before
they are bought. For example, people undergoing cosmetic surgery cannot see the result before the
purchase. Physical goods are produced, then stored, later sold, and still later consumed. In contrast,
services are first sold and then produced and consumed at the same time.
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2) Service inseparability means that services cannot be separated from their providers, whether the
providers are people or machines. As both service provider and service seeker are present during the
service is rendered, the interaction between these two is a special feature of services marketing.
3) Service variability means that the quality of services depends on who provides them as well as
when, where, and how they are provided. For example, some hotels say, Marriott have reputations
for providing better service than others. But one employee may be cheerful and efficient, whereas
another is unpleasant and slow.
4) Service perishability means that services cannot be stored for later sale or use.
Branding Strategy:
Brand Equity is the positive differential effect that knowing the brand name has on customer
response to the product and its marketing. High brand equity provides a company with many
competitive advantages. A powerful brand enjoys a high level of consumer brand awareness and
loyalty.
Brand valuation is the process of estimating the total financial value of a brand. Measuring such
value is difficult. EX: the brand value of Google is a $100 billion, with Microsoft at $76 billion and
Coca-Cola at $67 billion.
Co-branding. Co-branding occurs when two established brand names of different companies are
used on the same product. Co-branding offers many advantages.
Brand Extensions. A brand extension extends a current brand name to new or modified products in
a new category. For example, Kellogg’s has extended its Special K cereal brand into a full line of
cereals plus lines of crackers, fruit crisps, snack and nutrition bars, breakfast shakes, protein waters,
and other health and nutrition products.
Multibrands. Companies often market many different brands in a given product category. For
example, in the United States, P&G sells six brands of laundry detergent (Tide, Cheer, Gain, Era,
Dreft, and Ivory), five brands of shampoo (Pantene, Head & Shoulders, Aussie, Herbal Essences, and
Infusium); and four brands of dishwashing detergent (Dawn, Ivory, Joy, and Cascade).
Multibranding offers a way to establish different features that appeal to different customer segments.
New-Product Development Strategy
New products are the lifeblood of a company. As old products mature and fade away, companies
must develop new ones to take their place. For example, 51 percent of Apple’s revenues come from
iPods, iPhones, and iTunes.
New-product development
The New Product development is the development of original products, product improvements,
product modifications, and new brands through the firm’s own product development efforts.
The New-Product Development Process
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Figure: New Product Development Process
To create successful new products, a company must understand its consumers, markets, and
competitors and develop products that deliver superior value to customers.
1) Idea Generation
New-product development starts with idea generation the systematic search for newproduct ideas. A
company typically generates hundreds & thousands of ideas from the sources like internal sources
and external sources such as customers, competitors, distributors and suppliers, and others.
Internal Idea Sources
Using internal sources, the company can find new ideas through formal R&D. However, in one
survey, 750 global CEOs reported that only 14 percent of their innovation ideas came from
traditional R&D. Instead, 41 percent came from employees, and 36 percent came from customers.5
Thus, beyond its internal R&D process, companies can pick the brains of its employees from
executives to scientists, engineers, and manufacturing staff to salespeople. Many companies have
developed successful “intrapreneurial” programs that encourage employees to envision and develop
new-product ideas. For example, the Internet networking company Cisco has set up an Idea Zone,
through which any Cisco employee can propose an idea for a new product or comment on or modify
someone else’s proposed idea.
External Idea Sources
Companies can also obtain good new-product ideas from any of a number of external sources. For
example, distributors and suppliers can contribute ideas. Distributors are close to the market and can
pass along information about consumer problems and new-product possibilities. Suppliers can tell
the company about new concepts, techniques, and materials that can be used to develop new
products. Competitors are another important source. Companies watch competitors’ ads to get clues
about their new products. They buy competing new products, take them apart to see how they work,
analyze their sales, and decide whether they should bring out a new product of their own. Other idea
sources include trade magazines, shows, and seminars; government agencies; advertising agencies;
marketing research firms; university and commercial laboratories; and inventors. Another most
important source of new-product ideas are customers. The company can analyze customer questions
and complaints to find new products that better solve consumer problems. Or it can invite customers
to share suggestions and ideas.
Crowdsourcing :Many companies are now developing crowdsourcing or open-innovation
newproduct idea programs. Crowdsourcing throws the innovation doors wide open, inviting broad
communities of people customers, employees, independent scientists and researchers, and even the
public at large into the new-product innovation process.
2) Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding
stages is to reduce that number. The first idea-reducing stage is idea screening, which helps spot
good ideas and drop poor ones as soon as possible. Product development costs rise greatly in later
stages, so the company wants to go ahead only with those product ideas that will turn into profitable
products. It makes some rough estimates of market size, product price, development time and costs,
manufacturing costs, and rate of return.
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3) Concept Development and Testing
An attractive idea must be developed into a product concept. It is important to distinguish between
a product idea, a product concept, and a product image. A product idea is an idea for a possible
product that the company can see itself offering to the market. A product concept is a detailed
version of the idea stated in meaningful consumer terms. A product image is the way consumers
perceive an actual or potential product.
Concept Development
In concept development different concepts about products will be developed, depending upon
different criterias. Ex: for developing of electric car, the different concepts are An affordably priced
midsize car as family car, A mid-priced sporty compact car for young singles and couples. A “green”
car appealing to environmentally consciousness i.e. low-polluting transportation. A high-end
midsize utility vehicle.
Concept Testing : Concept testing calls for testing new-product concepts with groups of target
consumers. The concepts may be presented to consumers symbolically or physically. Many firms
routinely test new-product concepts with consumers before attempting to turn them into actual new
products.
4) Marketing Strategy Development
It is designing an initial marketing strategy for introducing the product into the market. The
marketing strategy statement consists of three parts. The first part describes the target market; the
planned value proposition; and the sales, market share, and profit goals for the first few years. For
example for above car concepts the marketing strategies are:
* The target market is younger, well-educated, moderate- to high-income individuals, couples, or
small families seeking practical, environmentally responsible transportation.
* The car will be positioned as more fun to drive and less polluting than today’s internal combustion
engine or hybrid cars.
* The company will aim to sell 50,000 cars in the first year, at a loss of not more than $15 million. In
* The second part of the marketing strategy statement outlines the product’s planned price,
distribution, and marketing budget for the first year:
5) Business Analysis
Business analysis involves a review of the sales, costs, and profit projections for a new product to
find out whether they satisfy the company’s objectives. If they do, the product can move to the
product development stage.
To estimate sales, the company might look at the sales history of similar products and conduct
market surveys. It can then estimate minimum and maximum sales to assess the range of risk. After
preparing the sales forecast, management can estimate the expected costs and profits for the product,
including marketing, R&D, operations, accounting, and finance costs. The company then uses the
sales and costs figures to analyze the new product’s financial attractiveness.
6) Product Development
Here, R&D or engineering develops the product concept into a physical product. This step, require
huge investment. It will show whether the product idea can be turned into a workable product. The
R&D department a prototype which may take days, weeks, months, or even years depending on the
product and prototype methods. Often, products undergo rigorous tests to make sure that they
perform safely and effectively. Marketers often involve actual customers in product testing.
7) Test Marketing : Test marketing is the stage at which the product and its proposed marketing
program are introduced into realistic market settings. It is actually launched and marketed in few
selected cities, towns and territories. Test marketing gives the marketer experience with marketing a
product before going to the great expense of full introduction. It lets the company test the product
and its entire marketing program, targeting and positioning strategy, advertising, distribution,
pricing, branding and packaging, and budget levels. Test marketing is time consuming and costs
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high. However, when introducing a new product requires a big investment, when the risks are high,
or when management is not sure of the product or its marketing program, a company may do a lot of
test marketing. Ex: KFC conducted more than three years of product and market testing before
rolling out its major new Kentucky Grilled Chicken product.
As an alternative to extensive and costly standard test markets, companies can use controlled test
markets or simulated test markets. In controlled test markets, such newproducts and tactics are tested
among controlled groups of customers and stores. In each Behavior Scan market, maintains a panel
of shoppers who report all of their purchases by showing an identification card at checkout in
participating stores. By combining information on each consumer’s purchases with consumer
demographic and TV viewing information, BehaviorScan can provide store-by-store, week-by-week
reports on the sales of tested products. Such controlled test markets usually cost much less than
standard test markets and can provide accurate forecasts in as little as 12 to 24 weeks.
8) Commercialization
Test marketing gives management the information needed to make a final decision about whether to
launch the new product. If the company goes ahead with commercialization i.e. introducing the new
product into the market. The company mayspend hundreds of millions of dollars for advertising,
sales promotion, and other marketing efforts in the first year.
The company launching a new product must first decide on introduction timing. If the economy is
down, the company may wait until. Next, the company must decide where to launch the new product,
in a single location, a region, the national market, or the international market.
Product Life-Cycle
Figure shows a typical product life cycle (PLC), the course
that a product’s sales and profits take over its lifetime. The
PLC has five distinct stages:
1. Product development begins when the company finds and
develops a new-product idea. During product development,
sales are zero, and the company’s investment costs mount.
2. Introduction is a period of slow sales growth as the
product is introduced in the market. Profits are nonexistent in this stage because of the heavy
expenses of product introduction. The introduction stage starts when a new product is first launched.
Introduction takes time, and sales growth is apt to be slow. In this stage, as compared to other stages,
profits are negative or low because of the low sales and high distribution and promotion expenses.
Much money is needed to attract distributors and build their inventories. Promotion spending is
relatively high to inform consumers of the new product and get them to try it. These firms focus their
selling on those buyers who are the most ready to buy.
3. Growth is a period of rapid market acceptance and increasing profits. If the new product satisfies
the market, it will enter a growth stage, in which sales will start climbing quickly. Companies have
opportunities to make profit but, new competitors will enter the market. The increase in competitors
leads to profit slow down. So companies keep their promotion spending at the same or a slightly
higher level. Educating the market remains a goal, but now the company must also meet the
competition. Profits increase during the growth stage as promotion costs are spread over a large
volume and as unit manufacturing costs decrease.
4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by
most potential buyers. Profits level off or decline because of increased marketing outlays to defend
the product against competition. The slowdown in sales results in many producers with many
products to sell, greater competition. Competitors begin marking down prices, increasing their
advertising & sales promotions, & upping their product development budgets to find better versions
of the product. Some of the weaker competitors start dropping out, & only well-established