PRODUCT DECISIONS

Prof. Prashant Kumar Gupta

Jain College Of MBA and MCA

PRODUCT CONCEPT

Potential Product

Augmented Product

Expected ProductBasic ProductCore Benefit

CORE BENEFIT:Service or benefit the consumer is actually buyingEg: Sleep and rest in case of a hotel guest BASIC PRODUCT:Service or benefit is given more tangibilityEg: Hotel room includes bed, towel, desk, etc. EXPECTED PRODUCT:Attributes and conditions buyers usually expectEg: Clean room, fresh towels, etc. AUGMENTED PRODUCT:Product that exceeds expectationsDifferentiation takes place at this level POTENTIAL PRODUCT:All possible augmentation result into potential product

PRODUCT AUGMENTATION

Some points should be noted: Augmentation adds to cost Augmentation soon becomes expectation

PRODUCT CLASSIFICATION

DURABILITY & TANGIBILITY Non-Durable Goods Durable Goods Services

CONSUMER GOODS CLASSIFICATION Convenience Goods Shopping Goods Specialty Goods Unsought Goods

INDUSTRIAL GOODS CLASSIFICATION Material & Parts Capital Items Supplies

PRODUCT DIFFERENTIATION

FORM Shape, size, physical structure

FEATURES Acts as a supplement

PERFORMANCE Low, average, high or superior performance

DURABILITY Measure of products life under normal conditions

RELIABILITY Probability that product will not malfunction

REPAIRABILITY Ease of fixing the product

STYLE Look and feel that the buyer gets

PRODUCT HIERARCHY

It stretches from basic needs to particular items that satisfy them.

There are six levels which can be understood with the example of insurance.

1. Need Family Security2. Product Family Savings & Income3. Product Class: Financial Instrument4. Product Line Life Insurance5. Product Type Term Life insurance6. Item ICICI Prudential

PRODUCT LIFE CYCLE

MARKETING STRATEGIES :INTRODUCTION

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

MARKETING STRATEGIES :GROWTH

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, warrantyOffer 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

MARKETING STRATEGIES :MATURITY

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 competitorsPrice to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefitsStress brand differences and benefits

MARKETING STRATEGIES :DECLINE

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 outletsGo 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

NEW PRODUCT DEVELOPMENT

Idea Generation

Idea Screening

Concept Development &

Testing

Marketing Strategy

Development

Business Analysis

Product Development Test Marketing

Commercialisation

NEW PRODUCT DEVELOPMENT :IDEA GENERATION

It is a systematic search for new product ideas

Sources of idea generation may be internal or external Internal Idea Sources

Find ideas through R&D Ask employees through programs

External Idea Source Ideas from customers directly or indirectly Distributors and retailers

NEW PRODUCT DEVELOPMENT :IDEA SCREENING

Purpose is to reduce number of ideas generated

Identify good ideas and drop bad ones

Review done by a committee

NEW PRODUCT DEVELOPMENT :CONCEPT DEVELOPMENT & TESTING

Idea must be converted to product First make a product and then test it for its

appeal Differentiate between idea, product and

image Idea is a possible product Product is idea tangiblised Image is customers’ perception

NEW PRODUCT DEVELOPMENT :MARKETING STRATEGY AND DEVELOPMENT

Has three partsDefine target marketPlanned positioningSales, market share and profit goals

NEW PRODUCT DEVELOPMENT :BUSINESS ANALYSIS

Review of sales projectionReview of cost and profit

projectionCheck whether company’s

objectives are satisfiedDecide future strategy

NEW PRODUCT DEVELOPMENT :PRODUCT DEVELOPMENT

Converting concept into a real product Requires huge investment First develop and test a few physical

products Check on various parameters

NEW PRODUCT DEVELOPMENT :TEST MARKETING

Testing product in more real market settings

Entire marketing program is tested- branding, positioning, distribution, price, packaging, etc.

Three types:-1. Standard Test2. Controlled Test3. Simulated Market Test

NEW PRODUCT DEVELOPMENT :COMMERCIALISATION

Introducing product to market High costs Build or rent manufacturing facility Timing of commercialisation is

important Where to launch?

PRODUCT DIFFUSION Process by which a new idea or new product is

accepted

Rate of diffusion is the speed that the new idea spreads from one person to the next

Adoption concerns the psychological processes an individual goes through to embrace a new idea

Is a process by which An innovation Is communicated through certain channels Over time Among the members of a social system

DIFFUSION PROCESS

innovation

Any item, thought, or process that is viewed to be new by the consumer

communication

the process of the new idea traveling from one person to another or from one channel to the individual

social system

the group of individuals that together complete a specific goal (adoption)

time

how long it takes for the group to adopt an innovation as well as the rate of adoption for individual

ADOPTION PROCESS

ADOPTION PROCESS

2º 3º 4º 5ºRANKING MUNDIAL DE USUÁRIOS DE INTERNET

1º 6º

Innovators

Early

AdoptersEarly

MajorityLate

MajorityLaggards

Adopt new ideas, risk

takers

Enthusiastic, like taking

risks

Cautious but like to change

Less affluent, less

educated, usually old

Resist change,

conservative, like tradition,

old or low in socio

economic status

ADOPTION PROCESSAwareness Consumer in first

expose to the product innovation.

Lacks in information about the product

May only know the name of product and its basic features.

Interest

Evaluation

Trial

Adoption or Rejection

ADOPTION PROCESSAwareness Consumer is

interested in product and search for additional information.

He wants to know what is it, how it works and what its potentialities are.

Interest

Evaluation

Trial

Adoption or Rejection

ADOPTION PROCESSAwareness Consumer decides

whether or not to believe this product or service.

Will it satisfy his needs and requirements.

Individual makes a mental trial of the idea

Interest

Evaluation

Trial

Adoption or Rejection

ADOPTION PROCESSAwareness Consumer uses the

product on a limited basis.

During this stage the individual determines the usefulness of the innovation and may search for further information about it.

The trial stage is characterized by small-scale experimental use, when it’s possible.

Interest

Evaluation

Trial

Adoption or Rejection

ADOPTION PROCESSAwareness If trail in favorable

consumer decides to use the product

If unfavorable the consumer decides to reject it.

Interest

Evaluation

Trial

Adoption or Rejection

MERCHANDISING PLANNING

Process by which a retailer offers the right quantity of the right

merchandise in the right place at the right time and meets the company’s financial goals.

Sense market trends Analyze sales data Make appropriate adjustments

HOME WORK

Explain the three tests in test marketing. Discuss packaging as a marketing tool,

requirement of good. Why is there a requirement of good

packaging? What is the role of labeling in packaging?