Presentation on theme: "THE PRODUCT Products are almost always combinations of the tangible and intangible. The entire package is sometimes referred to as the augmented product."— Presentation transcript:
1 THE PRODUCTProducts 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.
2 THE PRODUCTProduct is a key element in the market offering. Marketing mix planning begins with formulating an offering to meet target customers’ needs or wants.The customer will judge the offering by three basic elements : product features and quality, services mix and quality, and price appropriateness.
3 COMPONENTS OF THE MARKET OFFERING Value based pricingAttractiveness of the market offeringProduct features and qualityServices mix and quality
4 PRODUCT LEVELSIn 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…. )
5 FIVE LEVELS OF THE PRODUCT (1) CoreProduct(5) PotentialProduct(2) BasicProduct(3) ExpectedProduct(4) AugmentedProduct
6 FIVE LEVELS OF THE PRODUCT (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.
7 FIVE LEVELS OF THE 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.….. )
8 FIVE LEVELS OF THE PRODUCT ( 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, delivery arrangements, warehousing, and other things that people value.
9 FIVE LEVELS OF THE PRODUCT 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.
10 FIVE LEVELS OF THE PRODUCT ( 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.
11 FIVE LEVELS OF THE PRODUCT (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. ”
12 PRODUCT DIFFERENTIATION The challenge before the product marketers is to create relevant and distinctive product differentiation. The product differentiation may be based on :Physical Differences ( eg., features, performance, conformance, durability, reliability, design, style, packaging )Availability Differences ( eg., available from stores or orderable by phone, mail, fax, internet )
13 PRODUCT DIFFERENTIATION Service Differences ( eg., delivery, installation, training, consulting, maintenance, repair )Price Differences ( eg., very high price, very low price )Image Differences ( eg., symbols, atmosphere, events, media )
14 CHALLENGES FOR PRODUCT INNOVATORS Any successful differentiation will tend to draw imitators. The innovator faces three choices :Lower the price to protect market share and accept lower profits.Maintain a reasonable price and lose some market share and profits.Find a new basis to differentiate the product and maintain current price.
15 PRODUCT CLASSIFICATION ON THE BASIS OF PRODUCT CHARACTERISTICS :DURABILITY, TANGIBILITY AND USE (consumer or industrial ) (1) NON-DURABLE (2) DURABLE (3) SERVICES ( CONTD . )
16 (1) NON-DURABLESThese are tangible goods normally consumed in one or few uses. Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available at many locations, charge only a small mark up and advertise heavily to induce trial and build preference.
17 (2) DURABLESThese are tangible goods that normally survive many uses. Normally require more personal selling and service, command a higher margin, and require more seller guarantees.
18 (3) SERVICESThese are intangible, inseperable, variable and perishable products. Normally require more quality control, superior credibility, and adaptability.
19 PRODUCT CLASSIFICATION ON THE BASIS OF CUSTOMER SHOPPING HABITS : (1) CONVENIENCE GOODS (2) SHOPPING GOODS (3) SPECIALITY GOODS (4) UNSOUGHT GOODS
20 (1) CONVENIENCE GOODSare goods that the customer usually purchases frequently, immediately, and with a minimum of efforts.(A) Staples: Consumers purchase on a regular basis.(B) Impulse Goods: are purchased without any planning or search efforts.(C) Emergency Goods: are purchased when a need is urgent.
21 (2) SHOPPING GOODSare goods that the customer , in the process of selection and purchase, characteristically compares on such basis as suitability, quality, price and style.(A) Homogeneous Shopping Goods: are similar in quality but different enough in price to justify shopping comparisons.(B) Heterogeneous Shopping Goods: differ in product features and services that may be more important than price.
22 (3) SPECIALITY GOODSare goods with unique characteristics or brand identification for which buyer is willing to make a special purchasing effort.
23 (4) UNSOUGHT GOODSare goods the consumer does not know about or does not normally think of buying. These goods require advertising and personal selling support.
24 Calls for coordinated decisions on : (1) Product Mix (2) Product Line PRODUCT STRATEGYCalls for coordinated decisions on :(1) Product Mix(2) Product Line(3) Individual Product(4) Service Product
25 PRODUCT MIXA 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.
26 DIMENSIONS OF PRODUCT MIX The width of company’s (say HLL’s) product mix refers to how many different product lines the company carries, such as bathing soap, detergents, shampoos, toothpaste, food products.
27 DIMENSIONS OF PRODUCT MIX 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 HLL has a number of product items. Eg., in the product line of bathing soaps, HLL has several product items like Lux, Liril, Lifebuoy, Pears.
28 DIMENSIONS OF PRODUCT MIX The depth of a company’s product mix refers to how many variants are offered of each product in the line.
29 DIMENSIONS OF PRODUCT MIX 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. HLL’s product lines are consistent insofar as they are consumer goods that go through the same distribution channels.
30 DIMENSIONS OF PRODUCT MIX 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.
31 PRODUCT LINEA 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.
32 PRODUCT LINE ANALYSISProduct line managers need to know the sales and profits of each item in their line in order to determine which items to build, maintain, harvest,, or divest. They also need to understand each product’s market profile, i.e. how their product line is positioned against competitors’ product lines (The Product Map).
33 PRODUCT PORTFOLIO MANAGEMENT Product Line Length :. Downward Line Stretching. Upward Line Stretching. Two Way StretchingHighNewPresentProductNewPricePresentPresentNewProductNewLowLowHighQuality(Downward)(Upward)(Two Way)
34 PRODUCT PORTFOLIO MANAGEMENT Filling in the Product Line ( adding more items within the present range of line )Product Line ModernizationProduct Line FeaturingProduct Line Pruning
36 DEFINITION OF BRANDAmerican 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. ”
37 BRAND NAME DECISIONS Individual Names Family Names Company Trade name combined with individual product names.
38 BENEFITS OF BRAND AWARENESS First, awareness provides the brand with a sense of familiarity, and people like the familiar.Second, name awareness can be a signal of presence and commitment. The logic is that if a name is recognized, there must be a reason.Third, the salience of a brand will determine if it is recalled at a key time in the purchasing process.
39 BRAND LOYALTYFirst, brand loyalty reduces the marketing costs of doing business, since existing customers are relatively easier to hold.Second, brand loyalty represents a substantial barrier to competitors. Excessive resources are required when entering a market in which existing customers must be enticed away from an established brand that they are loyal to.Third, a relatively large, satisfied customer base provides an image of a brand as an accepted, successful, and enduring product.
40 Branding strategy - Emami The inception of Emami Group took place way back in mid seventies when two childhood friends, Mr. R.S. Agarwal and Mr. R.S. Goenka left their high profile jobs with the Birla Group to set up Kemco Chemicals, an Ayurvedic medicine and cosmetic manufacturing unit in Kolkata in It was an extremely bold step in the early seventies when the Indian FMCG market was still dominated by multinationals
41 Branding strategy - Emami Emami’s FMCG business is currently split into two divisions: personal care and healthcare, and both contribute equally to the total turnover of its FMCG business which is currently about Rs 350 crore. Kolkata-based personal and healthcare major Emami Group is now planning to manufacture and market a range of ayurvedic medicines under their brand name Himani. The move will bring Emami closer to the turf of ayurvedic majors like Dabur India and Himalaya Herbal. Emami’s new foray will include a range of products like digestives, memory booster, cough syrups, blood purifiers and others
42 Navratan oil. The mid-1990s saw actors Govinda and Rambha endorse the brand (the ‘Thanda Thanda, Cool Cool’ campaigns), which enjoyed a high media presence. However, in 2004, Himani executives decided to lend stature and salience to the brand, and roped in the Big B, in the hope that he would break geographical barriers for them and appeal to the masses. Thus followed a commercial which had Bachchan talking into the camera about how the ‘cool’ oil helped him counter stress and headaches in his days of struggle.
43 Navratan oilThat ad did quite well for us,” says Probal Bhattacharya, senior brand manager, Himani Navratna. So, it came as a surprise to watch actor Shah Rukh Khan endorse the brand next in 2006, cast in an ad. “This was done to make the brand even more relevant and full of life to the younger lot,” Bhattacharya remarks. Sadly, the replica communication didn’t work; King Khan failed to appeal to Himani Navratna’s TG: year old males. Having learnt their lesson, the Himani Navratna executives have revived Big B in their communication, as “people still largely associate him with the brand”.
44 DEFINITION OF BRAND EQUITY Brand equity is a set of assets and liabilities linked to a brand’s name and symbol that add to or substract from the value provided by a producer or service to a firm and / or that firm’s customers.Brand equity generates value to the customer that can emerge either as a price premium or enhanced brand loyalty.
45 ( Powerful brands have high brand equity, higher brand loyalty.) AwarenessBrandIdentityBrandEquityPerceivedQualityBrandLoyalty( Powerful brands have high brand equity, higher brand loyalty.)
46 TOOLS FOR BUILDING BRAND AdvertisingSponsorship of games and eventsSocial CausesPublic FacilitiesFounder’s personality
47 BRAND STRATEGY DECISIONS Line ExtensionsBrand ExtensionsMultibrandsNew brandsCo-brands
49 LINE EXTENSIONLine extension occurs when a company introduces additional items in the same product category under the same brand name, usually with new flavours, forms, colours, added ingredients, package sizes and so on.Line extensions generally have a higher chance of survival than new products.On the down side extensions may lead to the brand name losing its specific meanings; Ries and Trout call this “ Line Extension Trap .”
50 BRAND EXTENSIONBrand Extension occurs when a company decides to use an existing brand name to launch a product in the new category.Brand Extension offers a number of advantages.-Instant recognition and earlier acceptance-Saves considerable advertisement costs
51 BRAND EXTENSION Brand Extension also involves risks. - The new product might disappoint buyers and damage their respect for company’s other products.- The brand name may loose its special positioning in the consumer’s mind through over extension - a phenomenon called “ brand dilution .”
52 MULTI BRANDSA company will often introduce additional brands in the same product category.- One of the motives for multibranding is to establish different features and/or appeal to different buying motives.
53 NEW BRANDSWhen a company launches products in a new category, it may find that none of its current brand names are appropriate.When the present brand image is not likely to help the new product, companies are better off creating new brand names.
54 CO-BRANDSCo-branding occurs when two different companies pair their respective brands in a collaborative marketing effort.Each brand sponsor expects that other brand name will strengthen brand preference or purchase intention.
55 New Product Development Process This CTR corresponds to Figure 9-1 on p. 275 and relates to the discussion on ppNew Product Development ProcessIdea Generation and ScreeningConcept Development and TestingMarketing StrategyBusiness AnalysisProduct DevelopmentTest MarketingCommercializationStages in New Product DevelopmentIdea Generation. This stage is the systematic search for new product ideas. Sources for new product ideas include internal sources, customers, competitor's products, distributors & suppliers, and other sources.Screening. This stage focuses on reducing the number of ideas by dropping poor ideas as soon as possible. This helps reduce costs and focus attention more productively.Concept Development and Testing. This stage involves translating ideas into product concepts or detailed versions of the ideas stated in meaningful consumer terms. Concepts are then tested on target consumers.Marketing Strategy. This stage consists of three parts. The first part describes the target market, the second part outlines the product's projected price, distribution, and budget for the first year, the third part describes long-term sales, profit goals, and marketing mix strategy.Business Analysis. This stage reviews the sales, costs, and profit projections for the product to find out if they satisfy overall company objectives.Product Development. This stage involves bringing the product concept into existence as a physical product to ensure that the idea is a workable product.Test Marketing. This is the stage at which the product and marketing program are implemented in one or more realistic market settings.Commercialization. This stage involves actually introducing the new product into the competitive marketplace. In this stage, the company must make decisions involving when to introduce, where, to whom, and how.
56 New Product Development Process Step 1. Idea Generation Systematic Search for New Product IdeasInternal sourcesCustomersCompetitorsDistributorsSuppliers
57 New Product Development Process Step 2. Idea Screening Process to spot good ideas and drop poor onesCriteriaMarket SizeDevelopment Time & CostsManufacturing CostsRate of Return
58 New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas intoAlternativeProduct Concepts2. Concept Testing - Test theProduct Concepts with focus Groups3. Choose the Best One
59 New Product Development Process Step 4. Marketing Strategy Development Marketing Strategy Statement FormulationPart One - Overall:Target MarketPlanned Product PositioningSales & Profit GoalsMarket SharePart Two - Short-Term:Product’s Planned PriceDistributionMarketing BudgetPart Three - Long-Term:Sales & Profit GoalsMarketing Mix Strategy
60 Review of Product Sales, Costs, and Profits Projections to See if Business AnalysisReview of Product Sales, Costs,and Profits Projections to See ifThey Meet Company ObjectivesNew Product Development Process Step 5. Business AnalysisStep 6. Product DevelopmentIf No, EliminateProduct ConceptIf Yes, Move toProduct Development
61 New Product Development Process Step 7. Test Marketing This CTR relates to the discussion on ppControlledTest MarketA few stores that haveagreed to carry newproducts for a fee.StandardTest MarketFull marketing campaignin a small number ofrepresentative cities.Test MarketingStandard Test Markets. Under this approach, the company finds a small number of representative test cities, conducts a full marketing campaign in those cities, and then measures and evaluates performance. This provides a “real world” picture of how the product performs. But there are drawbacks. Standard testing is expensive, long, and tips competitors to company strategy.Controlled Test Markets. This approach uses a research firm that has designated store placement space for their clients. Participating stores receive a fee. Some services like Scantrack (Nielsen) and BehaviorScan (IRI) offer computerized monitoring of individual consumer panels whose television viewing is cross-tabulated with store purchases. Controlled testing is quicker and less expensive than standard testing. Concerns revolve around representativeness of the test markets (small size) and tipping off competitors.Simulated Test Markets. This approach creates a simulated shopping environment by the company or research firm. Consumers are exposed to promotions and then given money to shop with. Purchase patterns are observed and consumers are interviewed afterward by researchers. Simulated test marketing is inexpensive and quick. Representativeness and demand characteristics are concerns and this approach might be used as a pretest for a go-no go decision on further testing.SimulatedTest MarketTest in a simulatedshopping environmentto a sample ofconsumers.
62 Causes of New Product Failures Overestimation of Market SizeProduct Design ProblemsProduct Incorrectly Positioned, Priced or AdvertisedCosts of Product DevelopmentCompetitive ActionsTo create successful new products, the company must:understand it’s customers, markets and competitorsdevelop products that deliver superior value to customers.
63 The Product Life-Cycle Product Life Cycle Stages This CTR corresponds to Figure 9-2 on p. 288 and relates to the material on ppInstructor’s Note: This CTR can be used to overview the life cycle concept. Strategies appropriate for each stage are discussed on the following CTRs.Product Life CycleSales andProfits ($)SalesProduct Life Cycle StagesProduct Development. Development begins when the company finds and develops a new product idea. During development the product has costs but no sales. Development costs must be strategically weighed against the projected length of the product's PLC.Introduction. During the introduction of new products initial sales growth is slow as the market is just becoming aware of the product. Profits are usually nonexistent at this stage due to heavy promotional spending.Growth. This stage is characterized by rapid market acceptance of the product and increasing profits.Maturity. In maturity there is a slowdown in sales growth as the product has achieved acceptance by most potential customers. Profits may level off or decline as marketing costs increase to defend existing market share.Decline. In this period sales begin to fall off and profits decline dramatically.ProfitsTimeProductDevelop-mentIntroductionGrowthMaturityDeclineLosses/Investments ($)
64 What is a Product ?Any tangible or intangible offerings that is perceived as a bundle of benefits by the customers and attempts to satisfy their unsatisfied needs
65 Introduction Stage of the PLC Product Life-Cycle StrategiesThis CTR relates to the material on pp. 289 and 293.Introduction Stage of the PLCSalesLow salesProduct Life Cycle StrategiesCostsHigh cost per customerIntroduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes.ProfitsNegativeMarketing ObjectivesCreate product awarenessand trial
66 Growth Stage of the PLC Rapidly rising sales Average cost per customer Product Life-Cycle StrategiesThis CTR relates to the material on pp and 293.Growth Stage of the PLCSalesRapidly rising salesProduct Life-Cycle StrategiesGrowth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments.CostsAverage cost per customerProfitsRising profitsMarketing ObjectivesMaximize market share
67 Maturity Stage of the PLC Product Life-Cycle StrategiesThis CTR relates to the material on pp and 293.SalesPeak salesCostsLow cost per customerProduct Life Cycle StrategiesMaturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position.ProfitsHigh profitsMarketing ObjectivesMaximize profit while defendingmarket share
68 Decline Stage of the PLC Product Life-Cycle StrategiesThis CTR relates to the material on ppSalesDeclining salesCostsLow cost per customerProduct Life Cycle StrategiesDecline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether.ProfitsDeclining profitsMarketing ObjectivesReduce expenditure and milk the brand
75 Pricing Approaches Cost based pricing Competitor based pricing Mark up or full cost pricingCompetitor based pricingGoing rate pricingSealed bid pricingPricing below the competitionPricing above the competitionSkimming pricingPenetration pricingBundle pricing
76 PackagingThe packaging of the product is the outer layer that assist an organization to protect the product and make it more attractive for the customers
77 Types of PackagingPrimary Packaging: It is the first material that envelops the product. This is the initial packaging of the Product and the smallest unit of Packaging which is in direct contact with the product.Secondary Packaging: It is outside the primary packaging, which helps in protecting the primary-packed product.
78 Tertiary Packaging: It is the last Packaging used for bulk handling, warehouse storage and transport shipping. Palletized Unit Load is the most common of the Tertiary Packaging which is used to pack the Secondary-packed products tightly into the containers.
79 E Branding What is a brand? Brand – A brand is a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers, create value and to differentiate them from those of competitors.Brand image refers to the perception of the brand in the public's mind.
80 E BrandingE Branding is the promotional and branding activities planned by an organization in the internet mediaIt should be noted that Indian markets are growing in terms of usage of internet. Hence, the organizations spreads awareness through e banners, pop ups, pop unders, viral marketing efforts etc