Transcript 2 product _st - WordPress.com

PRODUCT OR OFFERING
Samir K Mahajan
PRODUCT OR OFFERING
People satisfy their needs and wants with products. A product is any offering that can satisfy a need or want.
Products that are marketed includes one of the 10 basic offerings of goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas. The customer will judge the offering by three
basic elements: product features and quality, services mix and quality, and price appropriateness.
Samir K Mahajan
PRODUCT LEVELS: CUSTOMER
VALUE HIERARCHY
Marketers plan their market offering at
five levels. Each level adds more
customer value, and together the five
levels constitute a customer value
hierarchy.
 Core benefit : The most fundamental
level is the core benefit. Core benefit
is the inner need ( or fundamental
service or benefit) that urges the
consumers to buy a product or a
service or any other offering. The
main aim of consumers is to satisfy
this inner urge. e.g. A hotel guest is
buying “rest and sleep.”
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PRODUCT LEVELS contd.
 Basic product /Generic Product : At the second level, the marketer has to turn the core benefit into a basic product.
The basic product must satisfy the inner needs of the consumer. In this stage, the product contains those values
that are totally necessary for it to function. Thus a hotel room includes a bed, bathroom, towels, desk, dresser.
 Expected Product: At the third level, the marketer prepares an expected product – a set of attributes and
conditions buyers normally expect when they purchase a product. Hotel guests expect a clean bed, fresh towels,
working lamps, and a relative degree of quiet and privacy. Because most hotels can meet this minimum
expectation, the traveller normally will settle for whichever hotel is most convenient or least expensive.
 Augmented Product: At the fourth level, the marketer prepares an augmented product that exceeds customer
expectations. Augmented product include those attributes that can differentiate it from the competitors’ products
and might provide a slight advantage over them for the consumers. These may include the brand name, the design,
the packaging, the overall quality, the additional functions (apart from the basic features), the installation, the
after-sale service, the warranty, the home delivery and the possibility to accept credit from the consumers. A hotel
can include a remote-control television set, fresh flowers, rapid check-in, express checkout and fine dining and
room service.
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PRODUCT LEVELS contd.
 Potential Product : At the fifth levels stands the potential product, which includes all the possible augmentations and
transformations that the company finally includes in the product to differentiate it from the competitors’ products.
Here is where 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. Delighting is a
matter of exceeding expectations. Thus the hotel guest finds candy on the pillow or a bowl of fruit or a video recorder
with optional videotapes. Ritz-Carlton hotels, for example, remember individual guests’ preferences and prepare
rooms with these preferences in mind.
Samir K Mahajan
Example of a Service: A Hotel Room
Core benefit: the inner urge of customers to
sleep and rest, and have some privacy and
silence.
Basic product: a hotel room with bathroom,
towels, desk, dresser
Expected product: a hotel room with a bed that
is neat and clean, clean bed, fresh towels,
working lamps, and a relative degree of quiet
Augmented product: a hotel with air
conditioned bed room, remote-controlled
television set, fresh, rapid check-in, express
checkout, fine dining and room service a
minibar,
Potential product: a hotel room with a LCD
television, a big bathroom with a hydromassage shower cabin, tub, hair dresser etc.
PRODUCT LEVELS contd.
Example of a Product: Car
Core benefit: the need to get from one place to another.
Basic product: a car on its own; on this level this basically
means that the car has 4 wheels .
Expected product: a car that is in working condition, so
the owner can use it for transportation, it has decent
mileage, etc.
Augmented product: a car (say Ford or any other brand for
that matter) that is in fully working condition, has an
attractive design, passed all safety tests, has 4-wheel
steering, built-in alarm and air condition, etc. The car is
also accompanied by other benefits provided by the
motor company like warranty, instalments, etc.
Potential product: the car is much safer than the
competitors’ products; it tends to break down less
frequently than other cars, has the best mileage, etc.
Samir K Mahajan
THE PRODUCT HIERARCHY
Product hierarchies is used to group products of a company according to different criteria. A product hierarchy can be
multilevel and used for control or informative purposes. The product hierarchy stretches from basic needs to particular
items that satisfy those needs. We can identify six levels of the product hierarchy:
1. Need family : The core need that underlies the existence of a product family. Example: personal care
2. Product family : All the product classes that can satisfy a core need with reasonable effectiveness. E.g.
skin and beauty care ( such as cosmetics, skin creams), bathing agents (such as soap), hair cleaning agents (shampoos),
hair conditioning agents etc
3. Product class (category) : A group of products within the product family recognized as having a certain functional
coherence. E.g. hair cleaning agents or skin and beauty care, or bathing agents
4. Product line : A product line is a number of products grouped together based on similar characteristics such as product
price, product quality, target group, and product specification/features. Firms may decide to split their product mix into
groups known as product lines. E.g. shampoos,( or soaps, or cosmetics or conditioner or skin creams).
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THE PRODUCT HIERARCHY contd.
5. Product type : A group of items within a product line that share one of several possible forms of the product. E.g. antidandruff shampoos or shampoo for normal hair or shampoo for dry-hair, anti-hair fall shampoo or shampoos for oily
hair, or hair-fall control shampoo
6. product variant or Item or stock-keeping unit : A distinct unit within a brand or product line distinguishable by size,
price, appearance, or some other attribute. Example: a sachet of anti-dandruff shampoo or bottled anti-dandruff
shampoo.
Samir K Mahajan
PRODUCT SYSTEM
Product System: A product system is a group of diverse but related items that function in a compatible manner. For
example, smartphone product lines come with attachable products including headsets, cameras, keyboards,
presentation projectors, e-books, MP3 players, and voice recorders.
Product mix: A product mix (also called a product assortment ) is the set of all products and items a particular seller
offers for sale. A product mix consists of various product lines. The Godrej Agrovet division has a wide range of
products in animal feeds, agricultural inputs, horticulture, and tissue culture .
Samir K Mahajan
PRODUCT MIX (PRODUCT
PORTFOLIO OR PRODUCT
ASSORTMENT)
A product mix (also called a
product assortment) is the set of
all products and items a particular
seller offers for sale. A product mix
consists of various product lines.
A company’s product mix has four
dimensions such as width, length,
depth and consistency.
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PRODUCT MIX contd.
 Product Mix Width: The product mix width is the number of product lines the company carries or sells. In our example
whirlpool has seven product lines, its product mix width is seven. A wide product mix increases the type of customers a
firm can target. However it may involve a lot of work as each product line will require a strategy and management. A
narrow product mix may be easier to manage and allow the firm to specialise in particular product lines and product
types. However a small product mix reduces the type of customers a firm can target as they can't cater for everyone's
product "needs and wants".
 Product Line Length :The product line length shows the number of product types in a particular product line. A product
line may be long or short. If there are too many product types in a product line, they will begin to compete with each
other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer
choice and send customers to competitors with a greater selection of products. The product manager's job is to work
out how many products to include in the product line. In the product line washing machine of Whirlpool , there are
three items such as semi-automatic, automatic and white magic.
 Product Mix Depth :Product Mix Depth is number of product variant offered for each product type in a product line
with respect sizes, formulations or any other distinguishing characteristic. Whirlpool’s automatic washing machine are
available in front load and top load each of which has different sizes and other features.
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PRODUCT MIX contd.
 Consistency of Product Mix :Product mix consistency pertains to how closely related product lines are to one
another--in terms of use, production and distribution or some other way. A company's product mix may be
consistent in distribution but vastly different in use. For example, a small company may sell its health bars and health
magazine in retail stores. However, one product is edible and the other is not. The production consistency of these
products would vary as well.
These four product-mix dimensions permit the company to expand its business by (1) adding new product lines, thus
widening its product mix; (2) lengthening each product line; (3) deepening the product mix by adding more variants;
and (4) pursuing more product-line consistency.
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PRODUCT MIX contd.
PRODUCT LINE STRETCHING
Product line stretching occurs when a business adds new product to the product line and the new product types are
added to the existing products in the product line. If the new product types are cheaper or of a lower quality it is
known as a downward stretch. If the new product types are more expensive or of a higher quality it is known as an
upward stretch. Supermarkets often stretch product lines by offering value, standard and premium versions of their own
brand products. Product stretching enables firms to fill any gaps they have identified in the market.
Product selection is an important decision as the product is the item the firm is selling. Firms need to strike a balance
between giving customers choice and trying to cater for everybody by stocking too many products. Dividing products
into product lines and the product line into further groups, helps firms to develop product strategies. It will also help
them identify which product ranges sell well and which do not as each product line will be monitored.
Samir K Mahajan
NEW PRODUCT DEVELOPMENT
New product development is the process of
bringing a new product to the market, from
initial conception of new ideas, research into its
likelihood to succeed, to producing, testing,
launching and evaluating the initial the product.
Introducing a new product is a difficult task,
there is no guarantee that the new product
developed is accepted in the market; hence, the
risk is high. At the same tine, a company’s
success depends on its ability to continually
improve and update its product and fulfil
customers needs and wants. It thus is better to
adopt a scientific
approach for the
development of new products. The following
are the different stages of a new product
development:
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NEW PRODUCT DEVELOPMENT contd.
 Idea Generation: New product development starts with an idea. Idea generation is a continuous, systematic search
for new product opportunities. It involves delineating sources of new ideas and methods for generating them. The
idea may come from any source e.g: competitors, newspapers, government, research & development, department,
distributors and suppliers, customers, employees etc.
 Idea Screening : Once new product ideas have been generated, they need to be assessed to eliminate those ideas
that are unfeasible and are unlikely to be successful and selecting those which are feasible and workable to
develop. Here the company evaluates all ideas. The intention is to avoid unnecessary expenses resulting from
pursuing unwanted ideas which do not suit the company’s requirements. An idea is evaluated with reference to
various factors such as consumer needs, investments, profitability, technology, etc.
 Concept Development and Testing: At this stage a feasible idea can be developed further and presented to the
potential customers. This may involve presenting statements or ideas about the product to the audience rather
than the actual product itself. This will allow the company to assess if the product is likely to be successful and
establish if there are any issues that they have overlooked.
 Marketing Strategy: In this stage it is to be decided how the product/service idea will be launched and sustained
within the market. A proposed marketing strategy will be written laying out the marketing mix strategy of the
product, the segmentation, targeting and positioning strategy sales and profits that are expected.
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NEW PRODUCT DEVELOPMENT contd.
 Business Analysis: In terms of finance, the product has to be assessed to see if it is financially feasible in the long term.
The financial analysis needs to look at the costs and profit the product will generate and how long the expected life of
the product is. The production aspect of the product needs to be analysed, for example issues surrounding materials,
storage, labour, machinery and costs etc.
 Product Development: In this stage, product on paper is converted into a physical product. This is done by the
engineering department or by the research & development department. Proper care must be taken while developing
the product, so that the new product does not become a waste. For this purpose, research reports, company’s budget,
product features, etc have to be studied carefully. Once the product has been produced, it can then be demonstrated
and trialled with the target audience. Undue haste in developing a new product results in the premature death. On the
other hand, if the time taken is to long, the company may lose the opportunity to the competitors.
 Test Marketing: After developing the product, the next stage is to test its commercial viability. Test marketing is defined
as developing a temporary marketing mix & introducing the new product to a sample market in order to verify &
analyze the market reaction for the new product. While, test marketing, the company changes the marketing mix
namely, product, price, promotion & physical distribution depending upon the test marketing results. If it is accepted, it
chooses the best marketing mix for the product, otherwise the project is rejected.
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NEW PRODUCT DEVELOPMENT contd
 Commercialization: When the market accepts the new product, i.e. test marketing is successful, it is launched in
other markets on a large scale. The launch of a product needs to be carefully thought-out : whether it will be
released immediately to the national markets or be launched regionally to begin are key questions. It is from this
stage that a new product is really born from the customer’s point of view.
New product development is essential to any business that must keep up with market trends and changes. The eight
stages of product development may seem like a long process but they are designed to save wasted time and resources.
New product development ideas and prototypes are tested to ensure that the new product will meet target market’s
needs and wants. There is a test launch during the test marketing stage as a full market launch is expensive. Finally the
commercialisation stage involves careful planning to maximise product success, a poor launch will affect product sales
and could even affect the reputation and image of the new product.
Samir K Mahajan
PRODUCT LIFE CYCLE (PLC)
The stages through which individual products
develop over time is called commonly known
as the "Product Life Cycle". PLC is the typical
stages a product goes through during its
lifetime.
The product life cycle is broken down into
four different stages introduction, growth,
maturity and decline stages of the product.
After a period of development, the product is
introduced or launched into the market. It
gains more and more customers as it grows
and, eventually, the market stabilizes and the
product becomes mature. Then after a period
of time, the product is overtaken by
development and the introduction of superior
competitors, goes into decline, and is
eventually withdrawn.
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PRODUCT LIFE CYCLE contd
 Introduction: As the product is launched/ hits the market, it enters the introduction stage of the product life cycle. Cost
of production is very high. Because it is a new product that customers are not yet aware of the product, sales during the
introduction stage are generally low which means the size of the market for the product is small. Profits are negative or
low. Informative advertisement is used to promote the product. Public awareness is very important for the success of
a product. If people don't know about the product they won't go out and buy it. Marketing expenses are thus generally
high because it requires a lot of effort to bring awareness to the product.
o Objective: The primary objective at introduction stage is to create a market for the product. The company also attempts
to build brand awareness and show how the product differs from those offered by competitors in the same category.
o Strategies for Introduction: The marketing mix at this stage entails strategies to establish a market and create a
demand for the product. The marketing strategy at this stage are as follows:
 Product branding and quality level is established and intellectual property protection, such as patents and trademarks
are obtained.
 Pricing strategy can be either a skimming strategy or a penetration strategy . If a skimming strategy may be used to
cover the cost of development. With skimming strategy, prices are set very high initially and then gradually lowered
over time. This is a good strategy to use if there are few competitors for the product. There is also a great deal of risk.
If people don't want to pay high prices the company may lose out. Penetration strategy is used to build market share .
In this case the firm set its prices very low at the beginning and then gradually increase them. This is a good strategy to
use if there are a lot of competitors who control a large portion of the market. Profits are not a concern under this
strategy. The most important thing is to get the product known and worry about making money at a later time.
 Distribution channel is selective until consumers show acceptance of the product.
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 Promotion is aimed at informing and educating the potential consumers about the product.
PRODUCT LIFE CYCLE contd
 Growth: If the firm is fortunate enough to get its product out of the introduction stage, it then enter growth stage. At
this stage, the customers become aware of the product and sales grow rapidly. Cost are reduced due to economies of
scale and the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses
to invest more money in the promotional activity through persuasive advertising. Competitors are attracted into the
market with very similar offerings.
o Objective: In the growth stage, the firm seeks to build brand preference and increase market share of its product by
reaching out as many potential end users as possible.
o Strategies for Growth : Marketing tactics during growth stage requires branding that differentiates the product from
other products in the market and informing customers how the product benefits them over the products. The
marketing strategies at stage are :
 Product quality is maintained and additional features and support services may be added.
 Pricing typically remains stable so long as the firm enjoys increasing demand with little competition. If competition
emerges to deter the product's growth , the company may be forced to lower the price.
 Distribution channels are added as demand increases and customers accept the product.
 Promotion is aimed at a broader audience.
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PRODUCT LIFE CYCLE contd
 Maturity: As the product gains over its competition, the product enters the maturity stage of the product life
cycle. During the maturity stage, the product is established and the aim for the firms is now to maintain the market
share they have built up. Sales now increase slowly. The product faces intense competition from rival products in the
market. Advertising expenditure will be at its highest to sustain growth. Profit may so start to fall as the product enters
the saturation stage. The firm may use competitive or promotional pricing. The firm needs to consider any product
modifications or improvements to the production process which might give them a competitive advantage.
o Objectives: The primary objective at maturity point is to defend/ maintain market share while maximizing profit
instead of increasing market share.
o Strategies for Maturity: The marketing mix during this stage involves efforts to build customer loyalty, typically
accomplished with special promotions and incentives to customers who switch from a competitor or a brand. The
strategies at this stage are:




Product features may be enhanced to differentiate the product from that of competitors.
Pricing may be lower because of the new competition.
Distribution becomes more intensive, and incentives may be offered to encourage preference over competing products.
Promotional efforts are geared toward building brand loyalty with existing users, and attracting customers from
competitors.
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PRODUCT LIFE CYCLE contd.
 Decline: Once a product market is over saturated ( ie. all the potential customers have bought the product already) ,
the product enters into the decline stage of the life cycle. Eventually, the sales starts falling and the market for a
product will start to shrink . The shrinkage may be due to introduction of more innovative products or change in
consumer tastes. The product thus losses its appeal and the consumers are switching to a different type of product.
There will be stiff competition in the market with intense price cutting, and many more products are withdrawn from
the market. Advertising is reduced and then stopped. The company may attempt to revive the product by creating new
uses or lowering prices in an effort to reap profit. If the product has become obsolete or the company has developed a
replacement product, it may discontinue manufacturing it altogether and liquidate existing inventory, and finally
withdraw the product from market.
o Objective: At decline stage, the objective is to prolong the life of the product and reap profits for as long as possible.
o Strategies for Decline: At decline stage, the marketing mix and marketing efforts decline. Profits can be improved by
reducing marketing spending and cost cutting. As sales decline, the firm has several options:
 Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
 Harvest the product–reduce costs and continue to offer it, possibly to a loyal niche segment.
 Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the
product.
 Companies can try to rescue their products struggling in the declining phase by repositioning them in the minds of
the consumers, and get them back to the growth phase. And in some cases, they might be able take their new products
forward straight into the growth phase.
Samir K Mahajan
. PRODUCT LIFE CYCLE contd.
Characteristics of Different Stages of PLC at a glance
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PRODUCT LIFE CYCLE contd.
OBJECTIVES OF THE PRODUCT LIFE CYCLE at a Glance
Marketing
Objectives
Introduction
Growth
Maturity
Decline
Create
Product
Awareness
and trial
Maximise
market trial
Maximise
profit while
defending
market share
Reduce
expenditure
and milk the
brand
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PRODUCT LIFE CYCLE contd.
MARKETING STRATEGIES FOR THE DIFFERENT STAGES OF THE PRODUCT LIFE CYCLE at a glance
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Reference : Philip Kotler and Internet