mps- product decisions
Post on 16-Feb-2015
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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
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