Product
Jan 21, 2016
Product
The Four Ps: The ToolsThe Four Ps: The Tools
MarketingMix
Product
Price Promotion
Place
The Four Cs: The EndsThe Four Cs: The Ends
CustomerSolution
CustomerCost
Communication
Conven-ience
Plea From an Anonymous Customer
• Don’t Sell me Clothes, Sell me a sharp appearance, style and attractiveness.
• Don’t Sell me a House, Sell me comfort, contentment, a good investment and a pride of ownership.
• Don’t Sell me Toys, Sell my children happy moments.• Don’t Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.• Don’t Sell me Books, Sell me pleasant hours and the
profits of knowledge.• Don’t Sell me Computers, Sell me the pleasure and
profits of the miracles of modern technology.
The Moral is…..
• Don’t Sell me THINGS, Sell me Ideas, Feelings, Self-respect, Home, Life and
Happiness.
PLEASE DON’T SELL ME THINGS
5
Vertical IntegrationVertical Integration
Growth Strategies
MarketPenetration
MarketPenetration
Product ExpansionProduct
Expansion
DiversificationDiversification
Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957, pp.113-24
MarketExpansion
MarketExpansion
NewMarkets
NewMarkets
PresentMarketsPresentMarkets
NewProducts
NewProducts
PresentProducts
PresentProducts
Figure 2.4
What is a Product?
• A ProductProduct is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.
• Includes:– Physical Objects– Services– Events– Persons– Places– Organizations– Ideas– Combinations of the above
Five Product Levels
Potential product
Augmented product
Expected product
Basic product
Core benefit
Unsought ProductsUnsought Products
New innovations Products consumers don’t want to think about these products Require much advertising &personal selling i.e Life insurance, blood donation
Product ClassificationsConsumer Products
Specialty ProductsSpecialty Products
Special purchase efforts High price Unique characteristics Brand identification Few purchase locations
Shopping ProductsShopping Products
Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances
Convenience ProductsConvenience Products
Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers
Suppliesand
Services
Suppliesand
Services
Materialsand
Parts
Materialsand
Parts
CapitalItems
CapitalItems
Product ClassificationsIndustrial Products
Product Quality Product Quality
Product FeaturesProduct Features
Product Style & Design
Product Style & Design
Ability of a Product to Perform Its Functions;
Includes Level & Consistency
Ability of a Product to Perform Its Functions;
Includes Level & Consistency
Help to Differentiate the Product from Those of the
Competition
Help to Differentiate the Product from Those of the
Competition
Process of Designing a Product’s Style & Function
Process of Designing a Product’s Style & Function
Developing a Product or Service Involves Defining the Benefits that it Will Offer Such
as:
Product Attributes
Product Classification
• Product Lines and Mixes– Product Line– Product Mix
• Benefits of offering a wide variety and deep assortment of products:– Economies of Scale– Package Uniformity– Standardization– Sales and Distribution Efficiency– Equivalent Quality Beliefs
Product Mix
WidthWidth - number of different
product lines
WidthWidth - number of different
product lines
LengthLength - total number of itemswithin the lines
LengthLength - total number of itemswithin the lines
Depth Depth - number of versions of each product
Depth Depth - number of versions of each product
Product Mix - Product Mix - all the product
lines offered
Product Mix - Product Mix - all the product
lines offered
Co
nsi
sten
cy
Product Lines andProduct Mixes at Gillette
Product Line Decisions
• Product Line managers are concerned with length.
• Too short if profits increase by adding• Too long if profits increase by dropping items.• Product line is influenced by company
objectives.• High market share & market growth, long
Product line• High profitability, short product line
Product-Line Length: a company strengthens its PL in two ways
• Line Stretching: occurs when a company lengthens its product line beyond its current range.
– Downmarket: A Co. positioned in the middle market may want to introduce a lower price due to strong growth in the segment & opportunities in the downmarket. e.g HUL sunlight & wheel.
– Upmarket: Co. may enter high end of the market for more growth, higher margins, or to add prestige.e.g. Toyota introduced, Lexus
– Two-way: means stretching its line in both directions.
• Line Filling: A product line can also be lengthened by adding more items within the present range which is called line filling.
• Motives are:• Incremental profits.• Satisfy dealers who complain about lost sales due to
missing lines.• E.g. Maruti introduced Swift Dizire between Swift and
SX4
Product Life Cycle
• The course of a product’s sales and profits over its lifetime.
• Product development: begins when the company finds and develops a new-product idea. Here, sales are zero and costs mount.
• Introduction: It 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.
• Growth: it is a period of rapid market acceptance and increasing profits.
• Maturity is the period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits decline due to increased marketing outlays to defend the product against competition.
• Decline is the period when sales fall off and profits drop.
Stages of the Product Life Cycle
Exhibit 7.2
Marketing Strategy Duringthe Product Life Cycle
• No sales revenue during this stage
• Components of the product concept:– An understanding of desired uses and
benefits– A description of the product
• Customer needs should be discerned before developing marketing strategy
Development Stage
• Begins when development is complete• Ends when customers widely accept the
product• Marketing strategy goals during this stage:
– Attract customers by raising awareness and interest
– Induce customers to try and buy– Engage in customer education activities– Build on availability and visibility– Set pricing objectives
Introduction Stage
• Be ready for sustained sales increases
• Rapid increase in profitability early in the growth stage that decreases at the end of this stage
• Length depends on nature of product and competitive reactions
• Two strategies:– (1) Establish a strong, defensible marketing
position– (2) Achieve financial objectives
Growth Stage (1 of 2)
• Marketing strategy goals in this stage:– Leverage the product’s perceived differential
advantages– Establish a clear product and brand identity– Create unique positioning– Maintain control over product quality– Maximize availability of the product– Find the ideal balance between price and demand– Keep an eye focused on the competition
Growth Stage (2 of 2)
• Few, if any, new firms will enter the market
• Still an opportunity for new product features and variations
• Typically the longest stage in the product life cycle
Maturity Stage (1 of 2)
• Strategies pursued:– (1) Modifying the market– (2) Modifying the product– (3) Modifying the marketing mix
Maturity Stage (2 of 2)
• Two options:– (1) Attempt to postpone the decline– (2) Accept its inevitability
• Harvesting: reducing various costs• Divesting: dropping the product
Decline Stage
Introduction Stage of the PLC
Introduction Stage of the PLC
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 distributionBuild 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 salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh 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 competitors
Price to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress 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 brand
Reduce 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
Problems Using the PLC
Trouble identifying Which Stage of the PLC the Product Is In
Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLCStrategy is Both a
Cause and a Result of the Product’s Life
Cycle
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
New Product Development
• Six strategic product development options:– (1) New-to-the-world products
(discontinuous innovations)
– (2) New product lines– (3) Product line extensions– (4) Improvements or revisions of existing
products– (5) Repositioning– (6) Cost reductions
New Product Development Process
IdeaIdeaGenerationGeneration
ConceptConceptDevelopmentDevelopmentand Testingand Testing
MarketingMarketingStrategyStrategy
DevelopmentDevelopment
IdeaIdeaScreeningScreening
BusinessBusinessAnalysisAnalysis
ProductProductDevelopmentDevelopment
MarketMarketTestingTesting
CommercializationCommercialization
1. Does the offering have a relativeadvantage?
4. Can the offering be tested on a limited basis prior to actual purchase?
2. Is the offering compatible with buyers’ use or consumption behavior?
3. Is the offering simple enough for buyers to understand and use?
5. Are there immediate benefits from the offering, once it is used or consumed?
New-Product Development ProcessNew-Product Development ProcessIdea Generation & ScreeningIdea Generation & Screening
Why New Products Fail
• “Over Championing”
• Overestimated Demand
• Poor Design
• Poor Marketing Execution
• High Development Costs
• Strong Competitive Reaction
Challenges in NPD
• Idea Shortage
• Fragmented Markets
• Social & Governmental Constraints
• Cost
• Capital Shortage
• Need for Speed
• Shorter Product Life Cycles