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PRESENTED BY PROF SURAJIT

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Purchasing agents do not buy drills, theyactually buy its ability to make same size

holes

Theodre Levit

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Product Levels

Customer value hierarchy

Core benefit

Basic product Expected product

Augmented product

Potential product

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What is a Product?

A product is any offering by a company to amarket that serves to satisfy customer needs andwants.

It can be an object, service, idea,etc.

A product is any tangible, intangible offeringthat satisfy the needs or aspirations of aconsumer.

A product has 3 basic levels

Core Product: This answers WHY the buyershould have it. It is also called as GenericRequirement.

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Core Product - explained The generic product concept has two key

issues:

1.Its consumers view of what a given productrepresents.

2.The aspiration of consumer differ from place

to place and time to time.

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Tangible Specifications

Tangibility is added to the core product inthe form of features, style, color, design,

efficiency etc.Eg. The Color of the machine

The Electricity consumption

Detergent ConsumptionCapacity

Quality .

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Augmented Features This fulfill more of psychological or esteem

needs.

Eg. Brand Name

Services provided

Warranty

Credit Terms

etc.

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Classification of Products

The classification of the product depends

upon the TANGIBILITY and DURABILITY found

in an offering.

Typical classification of Product:

Service

Durable

Non Durable

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Consumer goods classification

Convenience goods

Shopping goods

Specialty goods Unsought goods

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Industrial goods classification

Materials and Parts

- raw materials

- manufactured materials and parts Capital items

Supplies and business services

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Umbrella Brand

Products from different categories under onebrand

Dangerous to the brand if the principal brand

fails Sometimes the company name is prefixed to

the brand. In such cases the company name

gives it legitimacy.The product nameindividualises it.

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Packaging

Includes the activities of designing and

producing the container for a product

Packaging is done at three levels

- primary

- secondary

- shipping

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Packaging as a marketing tool

Self service

Consumer affluence

Company and brand image Innovation

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Designing packaging

Packaging concepts

Technical specifications

Engineering tests

Visual tests

Dealer tests

Consumer tests

Packaging innovations

Environmental considerations

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Labels

Identification

Grade classification

Description of product Manufacturer identity

Date of mfg, batch no, expiry date etc.

Instructions for use Promotion

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Labels as a marketing tool

Labels need to change with time

And/or packaging need to change to give it a

contemporary and fresh look

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Non Durable Products Products that are consumed fast and are purchased

on a regular basis. The consumer here spendsminimum time and effort in comparing and buyingthe item.

Consumer Products are further classified according

to its use: Personal, Family and Household asConvenience, Shopping and Specialty.

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FMCG

Fast Moving Consumer Goods are the Non

Durable Goods. Eg. Sot Drinks, Chips, IceCreams etc. The consumer shows minimum

effort in buying these articles.

FMCG is further sub divided into 3 Classes

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Characteristics of FMCGConsumers Point

FMCG has a very low shelf life

1. Frequent Purchases: Salt, Rice, Chocolates2. Low Involvement: The consumer will buy an

alternative if the brand ask for is not available.

Exceptions to the rule: Products like Cigarettes,

Personal Hygiene Products, Brand Loyalty.

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Characteristics of FMCGMarketers Point

High Volumes

The volume of the product required is very high.

Eg. An average family may require 3-4 Soaps a month

Imagine No. of family using it in the whole

country???

If the organization cannot ensure high sales volume,

they will have difficulties in surviving.

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Low Margins

As the product is required in high volume,

there is an intense competition which makes

the marketer sell the product with very less

margin.

They earn through high volume sales to

maximize their turnover.

The Key Becomes High Volumes Low Margins.

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Extensive Distribution Networks

Consumer preference in FMCG productsare not that rigid.

Recall plays a very important role.

Brand Loyalty is not very high.

Consumer allows shopkeeper to decide for

him.Due to all this it becomes very important forthe marketer to make its product available at

maximum place possible.

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High Stock Turnover

It is a characteristic feature of FMCG. It is

because these products are bought frequently

or on a regular basis.

Which in turn allows the marketer to rotate

the capital invested.

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Staples

These are goods purchased on a regular basis.

Eg. Soap, Pulses, Toothpaste etc

Whenever the stock is about to end the

consumer buys these products again.

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Impulse Goods

These are the goods which arepurchased without planning or search

Our external stimuli provokes us to buythese products. Eg. Cold drinks,Chocolates, Chips.

Most of the time the consumers aim isnot buying the product solely but whenspots them, feels, attracted and ends upin buying them.

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Emergency Goods

These goods are purchased when the

need arises. Eg. Umbrellas in rainyseason, Pullovers in winters etc..

The marketers tries for a very gooddistribution chain, as the sales is not thesame throughout and whenever theneed arises, the product should beavailable at maximum places

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Customer Delight

According to the dictionary, satisfaction is defined as, the contentmentone feels when one has fulfilled a desire, need, or expectation. Delight is,

to take great pleasure or joy. Loyalty is having the feelings of

allegiance. These three simple words have a slightly different meaning,

but all have a significant impact on the attitudes and behaviors of

customers. Customer Delight means more than just feeling great about a product or

service. Customer delight means the customer demonstrates high return

and recommend rate behavior. Using Bart Allen Berrys Customer

Satisfaction Behavior Curve (1 to 10 scale) customer delight correlates

with an overall satisfaction rating of approximately 8.75 or higher. Returnand Recommend rate percentages range from 65% to 90%, meaning that

delighted customers will tell six to nine people out of ten about their

satisfaction experience, and it is guaranteed that some of these folks will

also tell others.

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Product Life Cycle

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Product life cycle

Marketing concept that, like people and livingorganisms,goods and services pass through a cradle tograve cycle of progression through their life span.While different products have distinctly

different patterns ofdemand, almost every one ofthem passes throughthe stages ofintroduction, growth, maturity or stagnation,and decline or death. This view dictates the need forcontinuous efforts for new product development.

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Definition

Product Life Cycle (PLC) deals with the life of a product in the

market with respect to business or commercial costs and sales

measures

Four distinct but not wholly-predictable stages every

product goes through from its introduction to withdrawal fromthe market: (1) introduction, (2) growth in sales revenue,

(3) maturity, during which sales revenue stabilizes, and

(4) decline, when sales revenue starts to fall and eventually

vanishes or becomes too little to be viable. As a productmoves through these stages, its pricing,promotion, packaging,

and distribution are re-evaluated and changed ifrequired to

prolong its life. In summary, it is thejourney from "new and

exciting" to "old and dated."

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Every Product has a limited life

Product sales pass through distinct stages,

each posing different challenges,

Opportunities, and Problems to the seller

Profits rise and fall at different stages of the

Product Life Cycle

Products require different Marketing,Financial, Manufacturing, Purchasing and

Human Resource Strategies in each Life Cycle

stage.

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Product Life

Cycle Stages

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1.Introduction

a. Costs are high

b. Slow sales volumes to start

c. Little or no competition - competitivemanufacturers watch for

acceptance/segment growth or lossd. Demand has to be created

e. Customers have to be prompted to try theproduct

f. Makes no money at this stage

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2.Growth

a. Costs reduced due to economies of scale

b. Sales volume increases significantly

c. Profitability begins to rise

d. Public awareness increases

e. Competition begins to increase with a fewnew players in establishing market

f. Increased competition leads to pricedecreases

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3.Maturity

a. Costs are lowered as a result of production volumesincreasing and experience curve effects

b. Sales volume peaks and market saturation is reachedc. Increase in competitors entering the marketd. Prices tend to drop due to the proliferation of

competing productse. Brand differentiation and featurediversification is emphasized to maintain orincrease market sharef. Industrial profits go down

Conti.

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4.Saturation and Decline

a. Costs become counter-optimal

b. Sales volume decline or stabilize

c. Prices, profitability diminish

d. Profit becomes more a challenge of

e. production/distribution efficiency than

f. increased sales

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Strategies for the differing stages of the Product Life Cycle.IntroductionThe need for immediate profit is not a

pressure. The product is promoted to create

awareness. If the product has no or fewcompetitors, a skimming price strategy isemployed. Limited numbers of product are

available in few channels of distribution.

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Growth

Competitors are attracted into the market

with very similar offerings. Products become

more profitable and companies form alliances,

joint ventures and take each other over.Advertising spend is high and focuses upon

building brand. Market share tends to

stabilise.

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Maturity Those products that survive the earlier stages

tend to spend longest in this phase. Sales grow

at a decreasing rate and then stabilise.Producers attempt to differentiate products

and brands are key to this. Price wars and

intense competition occur. At this point the

market reaches saturation. Producers begin to

leave the market due to poor margins.

Promotion becomes more widespread and use

a greater variety of media.

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Decline

At this point there is a downturn in the

market. For example more innovative

products are introduced or consumer tastes

have changed. There is intense price-cuttingand many more products are withdrawn from

the market. Profits can be improved by

reducing marketing spend and cost cutting.

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New Product development process

Idea Generation

Screening

Business Analysis

Prototype Development

Test Marketing

Commercialization

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Product Development Stages

Idea generation

Idea screening

Concept development and testing

Concept testing

Conjoint analysis Market research technique in

which consumers make trade offs between two or

more features and benefits of a product ona scale ranging from 'Most Preferred' to 'Least

Preferred. Conjoint analysis helps in evaluation of

different pricing points.

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B i l i

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Business analysis

The most customer appealing offer is not always the mostprofitable to make

Estimate on costs, sales volumes, pricing and profit levels

are made to find out the optimal price volume mix.

Breakeven and paybacks - Time required to recoveran investment or loan.

Discounted cash flow projections - Value of the

anticipated revenue stream from an investment as at

today or on any given date. Because money can grow byitself (when placed in an interest earning account) a

rupee received today is less valuable than a rupee

received in the future.

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Market testing

Test markets

Test periods

What information to gather?

What action to take?

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Commercialization

When? (Timing)

Where? (Which geographical markets)

To whom? (Target markets)

How? (Introductory Marketing strategy)

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Classification of New Products

Marketing Innovations:The actual product is not changed and the habits of the

consumer also need not to be changed, only a few

alternatives are done. Eg. Packaging, branding, easy

availability etc. Product Improvements:

when a little improvement is done to the existing product.

Like 100 cc scooters, Tubeless tyres, Digi Cams etc.

These are normally targeted to a new segment of buyers Technological Innovations:

personal Computers, Photo copiers

Here early entrants enjoy the major market leadership

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New Product Development

Transfer of Technology

Penetration of New Market

New Product Lines

Product Line Extensions

Cost Reduction

Repositioning or New Product Launch

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Transfer of technology

This is more of an adoption of any product.

New products are often launched on the basis

of new technology.

It can be acquired from the parent company

or with foreign collaboration.

Eg. Personal Computers

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Diversification

Eg. ITC venturing into Paper Products, FMCG

Etc.

Bombay Dyeing Venturing into Real Estate

Business.

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Additions to existing product line

Eg. Godrej extension from Durable like

Refrigerators to Office equipment etc.

Videocon entered into washing machine and

Music Systems etc.

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Improvement in existing product

New product which offers superior

performance than the existing one and

replace it.

Eg. Gramophones and record players have

been replaced by cassette players and now CD

players.

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Cost Reduction

New product which provides similar

performance at lower cost.

Classic Eg. Nirma

d l h

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Product Re-launch

Some times old products are re-launched with

little improvements.

Eg. Tata Tea, Maggie

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Product Mix-Line-Width-Length-Depth-Consistency

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PRODUCT MIX

Example of Proctor & Gamble

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DETERGENTS IVORY SNOW

DREFT

TIDE

CHEER

OXYDOL

DASH

BOLD

GAIN

ERA

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SOAP

IVORY

KIRKS

LAVA

CAMAY ZEST

SAFEGUARD

COAST

OIL OF OLAY

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DIAPERS

PAMPERS

LUVS

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PAPER TISSUE

CHARMIN

PUFFS

BANNER

SUMMIT

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WIDTH

How many different product lines the company

carries

in the case of P&G, we just saw 5 such lines. P&G

produces many more lines, in fact.

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LENGTH

Refers to the total no. of items in the mix. In the P&G

case, there are 25 in all.

Average length = total length/no. of lines. For P&G it is 5 (in this case)

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DEPTH

How many variants are offered of each product in

the line.

In the case of Crest (say): 2 flavors * 3 sizes

= 6 SKUs

So depth = 6

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CONSISTENCY

How closely related the product lines are in end use,

production, distribution etc.

For P&G, consistency is high, since it operates in theFMCG segment.

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Product Line

Line Stretching

Downward Stretch : It takes place when thecompany finds a particular segment (Lower) which

is un-attended by the existing product. And

introduces a product to cater that lower segment.

Upward Stretch : It is when company a companyenters Upper market through Line Extension.

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2 WAY STRETCH

Stretching the line in both directions

*E.g. Marriott

1. economy 2. comfort 3. luxury

Product Line decisions

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Product Line decisions

Product rationalization

Market rationalization

Product line length

too long when profits increase by dropping aproduct in the line

too short when profits increase by adding products

to the product line

Line pruning capacity restrictions to decide

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PRODUCT LINE DECISIONS

Product line analysis

1. Sales & profits (80/20 rule)

2. Market profile (positioning)

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Product Flanking

Basically offering same product in different

price combinations to tap diverse market

opportunities.

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Line Filling : A product line can be extended by adding moreitems to the existing range(e.g. ice creams - more flavors,same price)

Reasons:

Reaching for more profits

Trying to satisfy dealers who complain about lost sales due tomissing items in the line

Trying to utilize excess capacity

Trying to offer a full line of the productionTrying to plug holes in the positioning map.

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Line Modernization : Modernization is

carried out continuously as competitors

are constantly growing and coming out

with new products and ideas.

In this process an Organization should

not be too early, if so, It can harm the

existing product or late so that

competitors already have a hold in the

market.

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Line Featuring

Its about featuring a particular product of the

product line, so as to increase foot falls and

then making the consumer exposed to otherproducts too.

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Advertising and Media Coverage

Sales Promotion

Sales Pomotions offer a direct incentive to buy

more in the short term.

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Brand Extensions

This enables the company to enter new

product categories more easily.

Eg. Lifebuoy: Lifebuoy Plus, Lifebuoy Liquid,

Lifebuoy Gold.

Eg. Amul: Amul Butter, Amul Ghee, Amul

cheese, Amul Milk, Amul Chocolates

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Innovations in Core Product

The life of a FMCG product is short. The

marketer continuously tries to introduce

new products and a consumer is also

open to try new products.

Long Term Outlook

Eg. Kelloggs

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Extending the PLC

Expanding Markets by Usage

a. Increase the Number of Customers

b.Encouraging more consumption.

Wide distribution Network