MPS- Product Decisions

By- Prof. Swati Singh

Anything that can be offered to the market.

Product = Goods / Services

Tangible/ Intangible or Tangible + Intangible

It is the basis offering around which other Marketing

strategies revolve. Eg. Pricing, Promotion, Place etc.

Products are almost always combinations of the tangible and intangible. The entire package is sometimes referred to as the augmented product.

The mix of tangibles and intangibles in the augmented product varies from one product or service to another.

Product is a key element in the market offering. Marketing mix planning begins with formulating an offering to meet target customers’ needs and wants.

The customer will judge the offering by three basic elements : product features and quality,

services mix and quality, and price appropriateness

In planning its market offering, the marketer needs to think through five levels of the product.

Each level adds more customer value, and the five constitute a customer value hierarchy.

( Contd…. )

(1) CoreBenefit

(2) Basic Product

(3) ExpectedProduct(4) Augmented

Product

(5) PotentialProduct

(1) Core Product / Core Benefit : The fundamental service or benefit that the customer is really buying.

(2) Basic Product : At the same level, the marketer has to turn the core benefit into a basic product.

(3) Expected Product : A set of attributes and conditions buyers normally expect when they purchase this product.

(4) Augmented Product : The marketer prepares an augmented product that exceeds customer expectations.

Today’s competition essentially takes place at the product-augmentation level. ( In less developed countries, competition takes place mostly at the expected product level ). ( Contd.….. )

( Augmented Product ) According to Levitt : The new

competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.

Some things should be noted about product-augmentation strategy :

First, each augmentation adds cost. The marketer has to ask whether customers will pay enough to cover the extra cost.

Second, augmented benefits soon become expected benefits. For gaining competitive advantage one will have to search for still other features and benefits.

( product-augmentation strategy )Third, as companies raise the price of

their augmented product, some competitors can offer a “ Stripped-down ” version at a much lower price. Thus alongside the growth of fine products we see the emergence of lower-cost products for the clients who simply want the basic product. Ex ; MP3 in Chinese Mobile

(5) Potential Product : encompasses all the possible augmentations and transformations the product might undergo in the future. Companies search for new ways to satisfy customers and distinguish their offer.

( Successful Companies add benefits to their offering that not only satisfy customers but also surprise and delight them. ) “ The best way to hold customers is to constantly figure out how to give them more for less. ”

Gitanjali’s Gold Coin & Jewelry by vending Machine.

A product mix (also called product assortment) is the set of all products and items that a particular seller offers for sale.

A total group of products that an organization markets.

A company’s product mix has a certain width, length, depth and consistency.

A product line is a group of products that are closely related, because they perform a similar function, are sold to the same customer groups, are marketed through the same channels or fall within the given price ranges.

The product mix may be composed of several product lines.

For eg. Soap, Shampoo, Detergents are different Product Lines of HUL

For Eg. Mobile, Home Appliances, TV Audio- video, Camera & Camcorders, PC – Peripherals & Printers.

The width of company’s (say HUL’s) product

mix refers to how many different product

lines the company carries, such as bathing

soap, detergents, shampoos, toothpaste, food

products.

for Samsung it is: 7

The length of a company’s product mix refers to the total number of items in its product mix. Thus in each of the product line HUL has a number of product items. Eg., in the product line of bathing soaps, HUL has several product items like Lux, Liril, Lifebuoy, Pears. For foods it has Knorr, Annapurna, Kisan . Length will be the sum of all items present under different lines.

For Samsung , in case of mobile phones they have different items, eg. Qwerty, Smart Phones, Touch Phone, Dual Sim etc. For Home appliance they have Refrigerator, Microwave oven etc. Product Mix length would actually be the sum of all items available under different Product lines.

The depth of a company’s product mix refers to how

many variants are offered of each product in the line.

Thus if close up toothpaste comes in three

formulations and in three sizes, Close up has a depth

of nine (3x3). The average depth of HUL product mix

can be calculated by averaging the number of

variants within the brand groups.

In case of Samsung : Product line depth would

actually be the sum of all models available under

different categories. For eg. At present Samsung

offers 15 variants under Smartphone category.

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. HUL’s product lines are consistent insofar as they are consumer goods that go through the same distribution channels.

Samsung Product Lines are found consistent as they go through same distribution channel and also use same type of materials to large extent for production.

These four dimensions of the product mix provide the handles for defining the company’s product strategy. The company can expand its business in four ways.

1. The Co. can add new product lines, thus widening its product mix.

2. The Co. can lengthen each product line.3. The Co. can add more product variants

to each product and deepen its product mix.

4. The Co. can pursue more product-line consistency or less, depending upon whether it wants to acquire a strong reputation in a single field or participate in several fields.

Idea Generation and ScreeningConcept Development and TestingMarketing StrategyBusiness AnalysisProduct DevelopmentTest MarketingCommercialization

The Major Product Line Decision involves the

decision related to PRODUCT LINE LENGTH

Product Line Length : Is the no. of items in the

product line.

The Co. has the option of increasing the length by

adding new items, or decrease the length by

dropping items.

When a Co. adds new item to the existing Product

line, it can go for two strategies Line Stretching or

Line Filling.

Line stretching occurs when Co. adds items beyond existing

range. For eg. If a Co. is offering a Product which caters to

Lower income segment it may stretch its line by adding a new

item which may cater Middle or high income group.

A Co. can go for Upward Stretching ie. Entering and

reaching high-end market from lower- end market with

distinct items(Continues to exist in Low-end). For eg. Tata

Motors added TATA-Aria as a luxury car. Samsung did

upward stretching of Mobile Product line by launching Galaxy

range.

Downward Stretching : Launching new items for

low-end market. For Eg. Sampoorna T.V launched

for rural markets by L.G Electronics in India. Tata

Motors launched Tata Nano. Wheel by HUL.

Two- Way Stretching : Launching items for both

high- end as well as low- end market. Eg. Titan

launched Xylus, Nebula, Edge for High-end market.

For economy and low end market it launched

Sonata range of watches.

Line Filling : Adding more items within present range

of line. For eg. HUL launched Lux Shampoos for its existing

middle- end shampoo market for Its hair care product line.

Other brands present in this line were Sunsilk and Clinic

Plus. However later it was positioned as low-end product for

rural India, positioned mainly on price.

The major threat is of self cannibalization. Eg. Nokia

The phenomenon very prominent in Electronic Goods.

To avoid such a situation JND( Just noticeable Difference)

should be highlighted.

Different Brands with Perceivable difference for Different Consumers:

NAKSHATRA is one of India’s most reputed diamond jewellery brands : High End

SANGINI Jewellery is based on the Twist and Turns, signifying the ups and downs encountered in a growing relationship, eventually resulting in a strong special bond : Couples.

GILI : leads the Indian market in casual-wear jewellery today, it shifted the paradigm "from occasional need...to a need for every occasion“…

ASMI : Jewellery has a contemporary delicate and feminine look that is distinctly evocative of strength & grace.In brief Asmi is for the woman of spirit.

New Product Development ProcessStep 1. Idea Generation

New Product Development ProcessStep 1. Idea Generation

Systematic Search for New Product Ideas

Internal sources

Customers

Competitors

Distributors

Suppliers

Process to spot good ideas and drop poor ones

Criteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

New Product Development ProcessStep 2. Idea Screening

New Product Development ProcessStep 2. Idea Screening

New Product Development ProcessStep 3. Concept Development & Testing

New Product Development ProcessStep 3. Concept Development & Testing

1. Develop Product Ideas into Alternative

Product Concepts

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One3. Choose the Best One

New Product Development ProcessStep 4. Marketing Strategy Development

New Product Development ProcessStep 4. Marketing Strategy Development

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

New Product Development ProcessStep 5. Business Analysis

Step 6. Product Development

New Product Development ProcessStep 5. Business Analysis

Step 6. Product Development

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If Yes, Move to Product Development

If Yes, Move to Product Development

If No, Eliminate Product ConceptIf No, Eliminate

Product Concept

New Product Development ProcessStep 7. Test Marketing

New Product Development ProcessStep 7. Test Marketing

StandardTest Market

Full marketing campaignin a small number of representative cities.

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low sales Low sales

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trial

Create product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus Use cost-plus

DistributionDistribution Build selective Distribution Build selective Distribution

AdvertisingAdvertising Build product awareness among early adopters and dealers

Build product awareness among early adopters and dealers

Growth Stage of the PLCGrowth Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Rapidly rising sales Rapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profits

Maximize market shareMaximize market share

Offer product extensions, service, warranty

Offer product extensions, service, warranty

Price to penetrate marketPrice to penetrate market

DistributionDistribution Build intensive distributionBuild intensive distribution

AdvertisingAdvertising Build awareness and interest in the mass market

Build awareness and interest in the mass market

Maturity Stage of the PLCMaturity Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Peak Sales/Leveling salesPeak Sales/Leveling sales

Low cost per customerLow cost per customer

High Profits/Leveling profitsHigh Profits/Leveling profits

Maximize profit while defending market share

Maximize profit while defending market share

Diversify brand and modelsDiversify brand and models

Price to match or best competitorsPrice to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefitsStress brand differences and benefits

Decline Stage of the PLCDecline Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profits

Reduce expenditure and milk the brandReduce expenditure and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers

American Management Association defines brand as follows :

“ A brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors. ”

Must Read : “The 22 Immutable Laws of Branding” – Al Reis & Laura Reis.

Assets for the companies. In case of successful Brands, Brand

value is more than the value of Land and Plant.

They represent Consumer Perception and feeling about the product.

They give opportunity to charge Premium.

The Important Branding Decisions are :

1. Brand Positioning2. Brand Name Selection

3. Brand Sponsorship4. Brand Development

Brand PositioningThe Brand can be positioned on the basis ofa) Attributes : Detergent Powder (Washing

Clothes) : Fena , Ghari Detergent. b) Benefits : Brighter Clothes. : Tidec) Beliefs and Values / Intangibles – Daag

Achhe Hain (Stains Are Good, If they build Relationship – Surf Excel), Ariel : The Chef & the mother ad. Ariel is Positioned as the trust of the mother who knows that she would be able to remove all stains from her son’s apron.

Brand Name Selection : Following Important Things should be kept in mind :

a. Name Should Suggest the benefit the brand is Providing – Barista, Madame.

b. Easy to Pronounce – Parle-G , Surf, Nokia, Idea. v/s Chevrolet, Alpenleibe.

c. Distinctive – Oreo, Neutrogena. d. Extendable –Lux, Cello, Amazon. e. Should Not have Bad Meaning in Different

Languages – Eg. Ford Had a problem in Promotion of Fierra in Spain because Fierra means Ugly and Cruel in Spanish.

Individual Names – Each Product is given Independent Brand Name – HUL – Dove, Sunsilk, Lux and Clinic Plus ( Corporate Branding becomes difficult)

Blanket Family Names – Here different groups of related products of a company are marketed under one Brand Name eg. Knorr (HUL) : Soups, Noodles, Chinese Meal Maker Range ( Manchurian, Schazwan Paneer), Indian Meal Maker (Matar Paneer, Paneer Butter Masal etc.)

Company Trade : name combined with individual product names. – Samsung, Sony, Cadbury, Philips.

Brand Sponsorship – How a Brand is Launched and Managed

A Product could be launched as a Manufacturer’s Brand – eg. Philips, Amul, Bajaj etc

Few Manufacturers sell their Products to Resellers who give it a private brand name also called Store Brand- eg Big Bazar (Tasty –Treat) Pantaloon’s Utsav.

Some Manufacturer’s Market Licensed Brands. Eg- Sellers of Small Kid’s Item use various Licensed names to sell many Items eg- Batman, Benton, Mickey Mouse.

Co- Branding – Sometimes two companies Join together and use co-branding with two established brand names- Maruti- Suzuki, Idea- HDFC Bank.

Brand Development : It may Include Four Strategies

a. Brand Extension: Extending A established and successful Brand Name to new Product Category eg Dove-: Shampoo, Conditioner. Fastrack :Eye Care and Bags. Saffola : Oils, Oats, Salt

b. Line Extension – Introduction of additional Items under same brand name in a given Product Category like new Flavours, Forms, Colors etc . Eg- Maggi Noodles : Thrilllin Curry, Tricky Tomato and Romantic Capasica.

c. Multi Brands – Launching Additional Brands in Same Category – Nestle : Kit-kat, BarOne, Milky Bar, Munch.

d. New Brands – Launching new Brand for New Category – eg Titan – Fast Track – Teenagers., Cadbury : Bourneville- Dark Chocolate Lovers.

Brand Existing

Name New

Existing New

Product Category

Line

Extension

Brand

Extension

Multibrand New Brand

Names

Brand Equity is the Positive Differential Effect that a brand name has on consumer response towards a product / service.

A measure of brand equity is the extent to which the customer is ready to pay more for the brand. Eg As compared to 15000/- for a unknown brand TV, customer would be ready to pay 25000/- for a Sony TV.

With High Brand equity brand extension becomes easy – eg. Coca Cola Launching Diet Coke, Tata in Telecom, Reliance in Retail.

Involves the Activities of Designing and producing the container of the product.

Packaging as Marketing Tool :a. Induces Impulse Purchasesb. Indicates Quality. (Parle-g, Dairy Milk)c. Consumer Affluence – Ready to pay Extra for

Good Packaging. (Indian Festive Season)d. Protection for the Producte. Point Of Differentiation : The Yellow Packaging

of Maggi Noodles, The Unique Packaging of Heinz Ketchup

Helps in Recall.

Packaging As a Silent Salesman It Communicates

Quality / Weight Contents Ingredients Marketer’s Identity Instructions to Use Price (MRP) Usage Pattern , Dosages