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PRODUCT MANAGEMENT Core product - Principal benefit offered Tangible product - Packaging, features, style, brand name, quality Augmented product - Delivery,

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Presentation on theme: "PRODUCT MANAGEMENT Core product - Principal benefit offered Tangible product - Packaging, features, style, brand name, quality Augmented product - Delivery,"— Presentation transcript:

1 PRODUCT MANAGEMENT Core product - Principal benefit offered Tangible product - Packaging, features, style, brand name, quality Augmented product - Delivery, credit, warranty, service, installation

2 Types of Consumer Goods Convenience - frequently purchased, minimum effort, low priced Staples - bread, gasoline, milk Impulse - chewing gum, snacks, soft drinks Emergency - medicines, toothpaste Shopping - Purchased after comparison shopping Clothing, furniture, appliances, shoes Speciality - Unique characteristics, buyer makes special effort Porsche cars, Carter watches Unsought goods - Insurance, cemetery plots

3 Types of Industrial Goods Supplies - Maintenance - brooms, bulbs Repair - nuts, nails, screws Operating - oil, electricity, gas Raw Materials - Steel, chemicals corn (Kelloggs) Components - Crankshafts, wheels Accessory Equipment - Typewriters, computers, handtools

4 Types of products Durable goods Nondurables Services

5 PRODUCT LIFE CYCLE (PLC) Theory applies to products, not brands. 4 Stages: Introduction, growth, maturity, & decline Introduction: e.g., Caller ID service - slow sales growth - near zero profits - heavy expenses in educating the customer Price High: If volumes are small, production costs high, R&D costs high, high tech. Price Low: Low tech product, no patent protection, high volumes.

6 Growth: e.g., mobile phones - Rapid growth in acceptance New product features - expand market - Increase in sales and profits Increase distribution Improve quality

7 Maturity: - Sales growth slows down Differentiate your product - Increase in competition/decrease in profits Modify market, product, mix - Exit of weak companies Decline: e.g., oatmeal, video arcade games - Sales falling off quickly and profits decline Sell off business - Exit from market Reduce product line. Drop markets, segments, channels. Reposition. Some studies show PLC applies to brands, fashions, and fads. Similar to BCG analysis in some aspects.

8 PRODUCT QUALITY What is quality? - Consists of attributes and superiority on these attributes. AND - Also the ability to perform as specified (i.e., it depends on perception of the customer).

9 How to communicate quality: - signs and product cues (fine coats - lining) - price - packaging, distribution, advertising, promotion. - association with manufacturer (IBM), with countries (Japanese automobiles, Italian clothing). Does higher quality lead to higher profitability? Strategic Planning Institute found a significant positive relationship.

10 Product features: Can be standard or “extras” Cars Cameras What features to add? Balance customer value to cost.

11 Product Design: Much neglected. Differentiate using design (e.g., Olivetti). Style: Appearance of product Design: Functionality, aesthetics, human factors, ease of service, costs.

12 Product line length, width, and depth WIDTH Detergent Toothpaste Soaps Diapers L Bold Gleem Ivory Pampers E Cheer Crest Zest Luvs N Tide Coast G Oxydol Camay T H

13 Branding: Know what is meant by: brand brand name brand mark trademark copyright

14 To brand or not? Generics: 30-50% cheaper - threat to established brands - sell better where perceived quality difference is less. How did companies react? - increase quality, segment markets (e.g., Ralston Purina) - introduce cheaper line (e.g., P&G “Banner” line of paper products) - cut prices - open special shops (Ralph Lauren, Benneton) - demonstrate superiority (Kraft taste tests)

15 Advantages of branding: - Easy to process orders and track problems - Legal protection - Attract loyal and profitable set of cusotmers - Helps in segmentation - Distribution leverage - Signal of quality - Leads to innovation through generating competition - Premium price

16 Types of brands: Manufacturer’s brands: –Campbell, Heinz, Kellogg, Goodyear Private brands: –Sears, J.C. Penney Licensed Brands: –Christian Dior, Pierre Cardin, Coca Cola clothing Battle of the Brands: between manufacturer and middleman

17 Categories of branding: Individual brand names (e.g., Tide, Cheer, Camay, Folgers ) Adv: Does not tie company’s reputation to one brand. Disadv: Dilute your company’s resources such as advertising. No brand may be dominate. Blanket family name: (e.g., Heinz, Campbell ) Adv: Costs less to introduce new products, no “name” research required. Separate family brand names for each product. e.g., Diehard, Craftsman, Kenmore Combination of 1 and 2. e.g., Kelloggs Raisin Bran

18 Brand Strategy decisions Line extensions Brand extensions Multibrands New brands Co-brands

19 Desirable qualities for brand name: - could convey product benefits: Coldspot, Coppertone, Craftsman - could convey product qualities such as action or color Sunkist, Firebird - easy to pronounce, recognize and remember 7-Up, Puffs - distinctive Kodak, Exxon - translate easily Enco - Standard Oil - pronunciation problems - EZ

20 Tests done before deciding on a name Association tests: what images come to mind? Learning tests: how easily is the name pronounced? Memory tests: how well remembered? Preference tests: which one preferred?

21 Name lab and interbrand: top consulting firms (Acura, Compaq) Good brand becomes associated with the product category eg: Problem: can be made common names eg:

22 BRAND EQUITY: It is the “added value” that a brand endows a product (“that something extra”). How do you measure that “value”? It depends upon which perspective one is considering. 1.Firm perspective - Brand equity is the incremental cash flow from the association of the brand with the product. Sources: Increased market share Premium pricing Reduced promotional expenses

23 *Brand equity also imparts a differential advantage over competitors from a loyal customer base. Sources: Platform for new products and extensions Momentum to carry through difficult periods Resistance from competitive attack 2. Trade perspective - *Brand equity gives brand leverage over other products in a category. Sources: Easier acceptance and wider distribution Ability to negotiate better terms Protection against private labels

24 3.Customer perspective - *Brand equity is the increase in attitude strength a customer has for a product using the brand. How do you get brand equity? Build: begin with a quality product develop accessible attitudes maintain a consistent image Borrow: line extensions (different favor, form, application) category extension (same core benefit, usage situation, customer base)

25 Brand Extensions: Adv: Instant recognition Low ad costs e.g., Honda lawn mower Disadv: can fail and hurt original name e.g., BiC pantyhose, Life Savers gum may be inappropriate and may dilute image Buy: License Acquire

26 BRAND LOYALTY: Attitude + repeat purchase Three levels of loyalty: - Brand recognition - Brand preference - Brand insistence Why multibrand: - Combined sales higher - Get greater shelf space - Helps brand switchers - Motivates organization - Can target different segments Problems: small shares for each, none may be profitable

27 Packaging: –primary –secondary Earlier function- to contain and protect product. Other functions - - as a sales tool (attract, inform, persuade) - instant recognition - convenience

28 Labelling: Functions - identify, grade, describe, promote Fair Packaging and Labeling Act 1966 Unit pricing Open dating Nutrition labeling Other social issues: Excessive cost Scarce resources Pollution

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