Product Decisions

The Product

“ A product is any thing that can be offered to a market to satisfy a want or need.”

“ Products that are marketed include physical goods, services, events, persons, places, properties, organizations, information and ideas.”

“Everything, both favorable and unfavorable, that

a person receives in an exchange.”

Components of theMarket Offering

Value-based prices

Services mixand quality

Product featuresand quality

Attractiveness ofthe market offering

Five Product Levels

Potential product

Augmented product

Expected product

Basic product

Core benefit

Product Classifications

1. Classification on the basis of Durability and Tangibility

Non durable goods Durable goods Services

Product Classifications

2. Classification on the basis of Usage

BusinessBusinessProductProduct

BusinessBusinessProductProduct

Consumer Consumer ProductProduct

Consumer Consumer ProductProduct

A product used to manufacture other goods or services, to facilitate an

organization’s operations, or to resell to other consumers.

A product used to manufacture other goods or services, to facilitate an

organization’s operations, or to resell to other consumers.

Product bought to satisfy an individual’s personal wants

Product bought to satisfy an individual’s personal wants

Specialty ProductsSpecialty Products Unsought ProductsUnsought Products

Shopping ProductsShopping ProductsBuy less frequently> Gather product information> Fewer purchase locations> Compare for:

• Suitability & Quality • Price & Style

Convenience ProductsConvenience Products

Special purchase efforts> Unique characteristics> Brand identification> Few purchase locations

New innovations> Products consumers don’t want to think about. >Require much advertising & personal selling

Buy frequently & immediately> Low priced> Many purchase locations> Includes:

• Staple goods• Impulse goods• Emergency goods

Consumer-Goods Classification

Industrial Goods

1. Materials and Parts

2. Capital Items

3. Supplies and business services

Industrial Goods

Materials and parts

Raw-materials

Manufactured Materials and parts

Farm Products

Natural Products

ComponentMaterial

ComponentParts

Industrial Goods

Capital Items

Installations

Equipments

Industrial Goods

Supplies

Maintenance & Repair items

Operating supplies

BusinessServices

Maintenance & Repair Services

Business AdvisoryServices

Product Items, Lines, and Mixes

Product ItemProduct Item

Product LineProduct Line

Product MixProduct Mix

A specific version of a product that can be designated as a distinct offering among an organization’s products.

A specific version of a product that can be designated as a distinct offering among an organization’s products.

A group of closely-related product items.

A group of closely-related product items.

All products that an organization sells.

All products that an organization sells.

Product Mix

“ A product mix is the set of all products and items that a particular seller offers for Sale.”

Product Mix

WidthWidth - number of different

product lines

WidthWidth - number of different

product lines

LengthLength - total number of itemswithin the mix

LengthLength - total number of itemswithin the mix

Depth Depth - number of versions of

each product in the line

Depth Depth - number of versions of

each product in the line

Product Mix - Product Mix - all the product

lines offered

Product Mix - Product Mix - all the product

lines offered

Co

nsi

sten

cy

Gillette’s Product Lines and Mix

Blades and Writingrazors Toiletries instruments Lighters

Mach 3 Series Paper Mate CricketSensor Adorn Flair S.T. Dupont Trac II ToniAtra Right GuardSwivel Silkience Double-Edge Soft and Dri Lady Gillette Foamy Super Speed Dry LookTwin Injector Dry Idea Techmatic Brush Plus

Width of the product mixWidth of the product mix

De

pth

of

the

pro

du

ct

line

sD

ep

th o

f th

e p

rod

uc

t lin

es

New Product Development

What is New Product?

1. New-to-the-world 2. New product lines3. Additions to existing product lines4. Improvements and revisions of

existing products5. Repositioning6. Cost reductions

Why New Products Fail?

Inadequate market analysis Product deficiencies Higher Cost Poor timing of introduction of a new

product Competition Insufficient Marketing efforts Inadequate Sales force Weakness in Distribution

New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

Company EmployeesCompany Employees

CustomersCustomers

CompetitorsCompetitors

DistributorsDistributors

SuppliersSuppliers

Idea Generation

Idea Screening

Process to spot good ideas and drop poor ones. Develop system to estimate: market size,

product price, development time and costs, manufacturing costs, and rate of return.

Evaluate these findings against set of company criteria for new products.

Concept Development and Testing

Product Idea: idea for a possible product that the company can see itself offering.

Product Concept: detailed version of the idea stated in meaningful consumer terms.

Product Image: the way consumers perceive an actual or potential product.

Marketing Strategy Development

Part One Describes:The Target Market

Planned Product PositioningSales, Market Share, & Profit Goals

Part One Describes:The Target Market

Planned Product PositioningSales, Market Share, & Profit Goals

Part Two Outlines the First-Year’s:Product’s Planned Price

DistributionMarketing Budget

Part Two Outlines the First-Year’s:Product’s Planned Price

DistributionMarketing Budget

Part Three Describes Long-Run:Sales & Profit Goals

Marketing Mix Strategy

Part Three Describes Long-Run:Sales & Profit Goals

Marketing Mix Strategy

Business Analysis

Involves a review of the sales, costs, Competition, investment and profit projections to assess fit with company objectives.

If yes, move to the product development phase.

Product Development

Develop concept into physical product

Calls for large jump in investment

Prototypes are made Prototype must have

correct physical features and convey psychological characteristics

Test Marketing

Product and program introduced in more realistic market setting.

Not needed for all products. Can be expensive and time consuming, but

better than making major marketing mistake.

Test Marketing

Nokia test-marketed its new cell phone/mobile game player extensively before introducing it worldwide.

Commercialization

Must decide on timing (i.e., when to introduce the product).

Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally).

Must develop a market rollout plan.

Product Line Decisions

“ In offering a product line, companies normally develop basic platform and modules that can be added to meet different customers requirements.

This modular approach enables the company to offer variety of proucts to consumer.

Product Line Decisions

It includes three elements- Product line analysis Product line length decisions Product line Modernization decisions

1. Product Line Analysis

Product – line managers need to know the sales and profits of each item in their line, in order to determine which items to build, maintain, or divest.

In product –line analysis marketer has to analyze-

Sales and profits of product Market profile.

2. Product Line Length Decision

The product line length decision calls for adding new brands to the product line and subsequently eliminating the unprofitable brands from the line.

A company lengthens its product line in two ways

Line stretching Line filling

Line Stretching

Product line stretching occurs when a company lengthens its product line beyond its current range by-

Downward stretch Upward stretch Two way (Combined) Stretch

Two-Way Product-Line Stretch: Hotels

QualityEconomy SuperiorStandard Good

Pri

ceP

rice

High

Aboveaverage

Average

Low Fairfield Inn(Vacationers)

(Salespeople)

(Middlemanagers)

(Topexecutives)

Line Filling

A product line can be lengthened by adding more items with in present range of line.

Some time it may results in cannibalization and creates confusion in the minds of customers.

3. Product line Modernization Decision

In some case product line length is adequate but there is a need of modernizing it.

An important aspect of product line modernization decision is that, it allows competitors see changes and start redesigning their own lines.

Branding

Brand “ A brand is a name, term, sign, symbol or

design or a combination of them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors”

Brand Name Brand name is a part of a brand consisting of a

word, letter, group of word, or letters comprising a name which is intended to identify the goods or services of a seller or a group of sellers and to differentiate them from those of competitors”

Branding

Brand Mark “ A brand mark is the part of the brand which

appears in the form of a symbol, design or distinctive colouring or lettering” ”

Trade mark “Part of a brand that is given legal

protection because it is capable of excusive appropriation”

Branding

“ Branding is the management process by which a product is branded

It covers various activities such as- Giving brand name to a product Deciding a brand mark Establishing and popularizing brand

name and brand mark.

An Overview ofBranding Decisions

BrandingDecision

•Brand

•No brand

Brand-SponsorDecision

•Manu-facturerbrand

•Distribu-tor(private)brand

•Licensedbrand

Brand-Name

Decision•Individualbrandnames•Blanketfamilyname•Separatefamilynames•Company-individualnames

Brand-Repositioning

Decision

•Reposi-tioning

•Noreposi-tioning

Brand-StrategyDecision

•Lineextension

•Brandextension

•Multi-brands

•Newbrands

•Cobrands

Brand Strategies

BrandExtension

New

Bra

nd

Nam

e

Product Category

LineExtension

Existing

Existing

MultibrandsNew NewBrands

Good Brand Names:

SuggestProductBenefits

Distinctive

Lack PoorForeign

LanguageMeanings

SuggestProductQualities

Easy to:PronounceRecognizeRemember

Packaging

Packing is wrapping a commodity or bundling it in a way suitable for transporting, storing and handling.

Packaging includes activities of designing and producing the contains for a product.

Packaging involves promoting and protecting the product.

Importance of Packaging

ImportanceImportanceofof

PackagingPackaging

ImportanceImportanceofof

PackagingPackaging

Protection Protection

PromotePromote

Facilitate Storage, Use, and Convenience

Facilitate Storage, Use, and Convenience

Facilitate RecyclingFacilitate Recycling

Labeling

Label is the part of the product that carries information about the product and the seller.

A label indicates the products brand name, the company logo, ingredients, promotional messages, and instruction for use.

Labeling

PersuasivePersuasive

● Focuses on promotional theme

● Information is secondary

InformationalInformational

● Helps make proper selections

● Lowers cognitive dissonance

● Includes use instruction

Classification of labels

Brand labels Grade labels Descriptive labels

Product Life Cycle

Like a human being, all products have certain length of life during which they pass through certain identifiable stages.

Once the product or service reaches the market, it enters the product life cycle.

The PLC is a theoretical concept which serves as a conceptual base for examining product growth and development.

TimeProduct

Develop-ment

Introduction

Profits

Sales

Growth Maturity Decline

Sales andProfits ($)

Sales and Profits Over the Product’s Lifetime

Product Life Cycle

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

LowLow

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trialCreate product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus formulaUse cost-plus formula

DistributionDistribution Build selective distributionBuild selective distribution

PromotionPromotion Heavy to entice product trialHeavy to entice product trial

Summary of Characteristics, Objectives, & Strategies

Introduction Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Rapidly risingRapidly rising

Average cost per customerAverage cost per customer

RisingRising

Maximize market shareMaximize market share

Offer extension, service, warrantyOffer extension, service, warranty

Penetration strategyPenetration strategy

DistributionDistribution Build intensive distributionBuild intensive distribution

PromotionPromotion Reduce to take advantage of demandReduce to take advantage of demand

Summary of Characteristics, Objectives, & Strategies

Growth Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

PeakPeak

Low cost per customerLow cost per customer

HighHigh

Maximize profits while defending market share

Maximize profits while defending market share

Diversify brand and models Diversify brand and models

Match or best competitorsMatch or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

PromotionPromotion Increase to encourage brand switchingIncrease to encourage brand switching

Summary of Characteristics, Objectives, & Strategies

Maturity Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

DecliningDeclining

Low cost per customerLow cost per customer

DecliningDeclining

Reduce expenditures and milk the brandReduce expenditures and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Selective: phase out unprofitable outletsSelective: phase out unprofitable outlets

PromotionPromotion Reduce to minimum levelReduce to minimum level

Summary of Characteristics, Objectives, & Strategies

Decline Stage of the PLC

Practical Problems of PLC

Hard to identifywhich stage of the

PLC the product is in

Hard to pinpointwhen the product

moves to next stage

Hard to identifyfactors that affect

product’s movementthrough stages

Hard to forecastsales level, length of

each stage, andshape of PLC

Strategy is both acause and result of

the PLC