Transcript Product life cycle strategies File

PRODUCT AND BRANDING
WHAT IS A PRODUCT
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A product is anything that can be offered to a market for
attention, acquisition, use, or consumption that might
satisfy a want or need.
Products include more than just tangible objects such as
cars, computers, cell phones etc. They include services,
events, persons, places, organisations, ideas, or mixes of
these entities.
Services are a form of product that consists of activities,
benefits, or satisfactions offered for sale that are
essentially intangible and do not result in ownership of
anything. Examples include banking, hotel etc.
LEVELS OF A PRODUCT
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1)
2)
There are three levels of a product and each level adds
more customer value:
Core product—The problem-solving service or core
benefits that consumers are really buying when they
obtain a product.
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It addresses the question “what is the buyer really
buying?” For example, a woman buying lipstick or eye
shadow buys more than eye or lip colour.
Actual product—A product’s parts, quality level,
features, design, brand name, packaging and other
attributes that combine to deliver core product benefits.
LEVELS OF A PRODUCT
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3)
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For example, Black Berry is an actual product whose
name, parts, styling, features, packaging and other
attributes have been combined carefully to deliver core
customer value of staying connected.
Augmented product—These are additional consumer
services and benefits built around the core benefit and
actual product.
For example, the Black Berry solution offers more than
just a communication device—provides a consumer with
a complete solution to mobile connectivity problems.
The company and its dealers may give buyers warranty,
instructions on how to use it etc.
THREE LEVELS OF PRODUCT
Augmented
Product
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Actual Product
Warranty
Quality
level
Features
Core benefit
Design
Brand
name
Installation
Packaging
Delivery and Credit
After Sale
Service
PRODUCT CLASSIFICATION
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Products fall into two broad classes based on the types
of consumers that use them:
Consumer products
 Industrial products
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Consumer products are those bought by final consumers
for personal consumption. They are classified based on
how consumers go about buying them and include:
Convenience products
 Shopping products
 Specialty products
 Unsought products
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CONSUMER PRODUCTS
CLASSFICATION
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Convenience products are consumer products that the
customer usually buys frequently, immediately and with a
minimum of comparison and buying effort. E.g. Soap;
Newspapers, Magazines etc
They are usually low priced and placed in many locations
to make them readily available when customers need
them.
Shopping products are less frequently purchased consumer
products that customers compare carefully on suitability,
quality, price, and style or design.
CONSUMER PRODUCTS
CLASSFICATION
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When buying shopping products, consumers spend much
time and effort in gathering information and making
comparisons.
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Examples include furniture, clothing, cars, major appliances,
hotel and airline services, restaurant meals.
The products have fewer outlets but deeper sales support
to help customers in their comparison effort.
Specialty products are consumer products with unique
characteristics or brand identification for which a
significant group of buyers is willing to make special
purchase effort.
CONSUMER PRODUCTS
CLASSFICATION
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Examples include specific brands of cars, designer clothes,
services of legal or medical specialists.
Unsought products are consumer products that the consumer
either does not know about or knows about but does not
normally think of buying them.
Most major new innovations are unsought until consumers
become aware of them through advertising.
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Examples of known but unsought products include life insurance,
funeral plans, blood donation to Red Cross.
Unsought products require a lot of advertising and other
marketing efforts.
INDUSTRIAL PRODUCT
CLASSIFICATION
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Industrial products are those products purchased for
further processing or for use in conducting a
business.
 They differ from consumer products based on the
purpose for which the product is bought.
 The three groups of industrial products include:
 Material and parts
 Capital items
 Supplies and services
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INDUSTRIAL PRODUCT
CLASSIFICATION
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Materials and parts include raw
manufactured materials and parts.
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materials
and
Raw materials consist of farm products (such as wheat, cotton,
livestock, fruits and vegetables) and natural products (such as
crude petroleum, fish, iron ore).
Manufactured materials and parts consist of component
materials (such as cement, wires) and component parts (such as
tyres, small motors, castings).
Most manufactured products are sold directly to industrial
users.
Price and service are the major marketing factors;
branding and advertising tend to be less important.
INDUSTRIAL PRODUCT
CLASSIFICATION
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Capital items are industrial products that aid in the buyer’s
production or operations, including installations and
accessory equipment.
Installations consist of major purchases such as buildings
(factories, offices) and fixed equipment (generators,
elevators).
Accessory equipment includes portable factory equipment
and tools (hand tools) and office equipment (such as
computers, fax machine, desks). They have a shorter life
than installations and simply aid in the production process.
INDUSTRIAL PRODUCT
CLASSIFICATION
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Supplies and services. Supplies include operating supplies
(lubricants, paper, pencils) and repair and maintenance
items (paint, nails, brooms).
Supplies are the convenience products of the industrial
field because they are usually purchased with a minimum
effort or comparison.
Business services include maintenance and repair services
(window cleaning, computer repair) and business
advisory services (legal, consulting, advertising).
PRODUCT DECISIONS
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In the development and marketing of products, marketing
managers make product decisions at three levels:
 Individual
product decisions
 Product line decisions
 Product mix decisions
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a)
Individual product decisions comprise the following:
Product and service attributes—Product quality
(characteristics of a product or service that bear on its
ability to satisfy stated or implied customer needs);
Product features (to differentiate from competitors) and
Product style and design (appearance, performance).
INDIVIDUAL PRODUCT DECISIONS
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Branding. A brand is a name, term, sign, symbol or design
or a combination of these, that identifies the products or
services of one seller or group of sellers and differentiate
them from those of competitors.
b)
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Brand names help consumers identify products that might
benefit them. Brands also tell the buyer something about
product quality, features and benefits.
The brand name is the basis on which the whole story can
be built about a product’s special qualities.
The seller’s brand name and trademark provide legal
protection for unique product features that otherwise
might be copied by competitors.
It also helps the seller in market segmentation.
INDIVIDUAL PRODUCT DECISIONS
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Packaging—It involves designing and producing the
container or wrapper for a product.
The package includes:
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Product’s primary container e.g. tube holding Colgate
toothpaste
Secondary product package that is thrown away when product
is about to be used e.g. cardboard box containing tooth paste
Transportation package necessary to store, identify and
transport the product
Labelling—printed material appearing on or with the package
The functions of packaging include holding and protecting
the product; attracting attention; describing the product
and making sale.
INDIVIDUAL PRODUCT DECISIONS
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d)
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e)
Labelling—Labels range from simple tags attached to
products to complex graphics that are part of the
package.
The label identifies the product or brand; describes the
product(—who made it, where it was made, when it was
made, its content, how it is to be used) and promotes the
product with attractive graphics.
Product support services—These are services that
augment actual product and both delight customers and
yield profits to the company. E.g. 24-hour telephone
help lines etc.
PRODUCT LINE DECISIONS
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A product line is a group of products that are closely
related because they function in a similar manner, are sold
to the same customer groups, are marketed through the
same types of outlets, or fall within given price ranges.
 For
example, Nokia or Samsung produces several lines of
telecommunication products.
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The major product line decision involves product line
length—the number of items in the product line.
The line is too short if the manager can increase profits by
adding items and too long if the manager can increase
profits by dropping items.
PRODUCT LINE DECISIONS
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i.
Product lines tend to lengthen over time, and most companies
eventually prune unnecessary or un profitable items or
services from their lines to increase overall profitability.
A company lengthens its product line by:
Product line stretching—occurs when a company lengthens
its product line beyond its current range.
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The company can stretch its line downwards (to avoid attracting
new competitor or to respond to competitor attack); upwards (in
order to add prestige to current products); or both.
Product line filling—adding more items within the present
range of the line to reach for extra profits, using excess
capacity, plugging holes to keep out competitors etc
PRODUCT MIX DECISIONS
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The organisation with several product lines has a product
mix.
A product mix (product portfolio or product assortment) is
a set of all product lines that a particular seller offers for
sell.
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company can offer a set of two or more product lines and
each product line may also have sub lines.
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a.
b.
A company’s product mix has four important dimensions:
Width—Product mix width refers to the number of
different product lines the company carries.
Length—Product mix length refers to the total number
of items the company carries within its product lines.
PRODUCT MIX DECISIONS
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c.
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Depth—Product line depth refers to the number of
versions offered of each product in the line. For
example tooth paste has cavity protection, sensitivity,
multicare, whitening etc
Consistency—Consistency of the product mix refers to
how closely related the various product lines are in end
use, production requirements, distribution channels, or in
some other way.
These product mix dimensions provide the handles for
defining the company’s product strategy. The company can
add new product line; add more versions of each product;
or pursue more product line consistency.
NEW PRODUCT DEVELOPMENT
PROCESS
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Idea screening—Screening new product ideas to identify
good ideas and drop poor ones as soon as possible.
The criteria for screening new product ideas include:
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Usefulness of the product to the consumers and society
Importance of the product to the company
Company’s resources, objectives and strategies
Ability to deliver more value to customers than competing
products
Easiness to advertise and distribute
The company wants to go ahead only with product ideas
that will turn into profitable products.
NEW PRODUCT DEVELOPMENT
PROCESS
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Concept development and Testing—A product concept
is a detailed version of the new product idea stated in
meaningful consumer terms.
3)
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E.g. “An affordably priced midsize car designed to be used
around town visiting friends”; “ A ‘green’ car appealing to
environmentally conscious people who want practical, lowpolluting transportation”
Concept testing calls for testing new product concepts
with groups of target consumers, symbolically or
physically, to find out if the concepts have strong
consumer appeal.
NEW PRODUCT DEVELOPMENT
PROCESS
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4)
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ii.
iii.
Marketing Strategy Development—This involves designing
an initial marketing strategy for a new product based on the
product concept.
It’s the initial marketing strategy for introducing the new
product to the market.
The marketing strategy statement consists of three parts:
Description of the target market, planned product
positioning, sales, market share and profit goals for the few
years.
An outline of the product’s planned price, distribution and
marketing budget for the first year.
Description of the planned long-run sales, profit goals and
marketing mix strategy.
NEW PRODUCT DEVELOPMENT
PROCESS
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5)
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Business Analysis—It involves a review of the sales,
costs and profit projections for a new product to find out
whether they satisfy the company’s objectives.
The company can look at the sales history of similar
products and conduct market surveys. It can then
estimate minimum and maximum sales to assess the
range of risks.
The company can also estimate expected costs and
profits for the product including marketing, R&D,
operations, accounting and finance costs.
The sales and costs figures are used to analyse the new
product’s financial attractiveness.
NEW PRODUCT DEVELOPMENT
PROCESS
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6)
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Product development—Developing the product concept
into physical product in order to ensure that the product
idea can be turned into a workable market offering.
This calls for a large jump in investment. The R&D will
develop and test one or more physical versions of the
product concept.
The new product must have the required functional
features and also convey the intended psychological
characteristics.
NEW PRODUCT DEVELOPMENT
PROCESS
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7)
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Test marketing—The stage of new product development
in which the product and marketing program are
introduced or tested in more realistic marketing settings.
It gives the marketing manager experience with
marketing the product before going to the great expense
of full production.
It lets the company test the product and its entire
marketing program—targeting and positioning strategy,
advertising, distribution, pricing, branding, packaging
and budget levels.
The amount of test marketing needed varies with each
new product.
NEW PRODUCT DEVELOPMENT
PROCESS
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8)
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Commercialization—It involves introducing the new
product into the market. The company will face high costs
because it may need to build or rent a manufacturing
facility, pay heavily for advertising, sales promotion, and
other marketing efforts.
The company decides on the launching timing, where
(location) to launch the new product and market rollout.
PRODUCT LIFE CYCLE
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a.
b.
Each product has a lifecycle. A product life cycle is the
course that a product’s sales and profits take over its
lifetime.
The product lifecycle has 5 stages:
Product development—begins when the company finds
and develops a new product idea. During product
development, sales are zero the company’s investment
costs mount.
Introduction—period of slow sales growth as the product
is being introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of
product introduction.
PRODUCT LIFE CYCLE
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Growth—period of rapid market acceptance and
increasing profits.
Maturity—period of slowdown in sales growth
because the product has achieved acceptance by
most potential buyers.
c.
d.
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e.
Profits level off or decline because of increased
marketing outlays to defend the product against
competition.
Decline—the period when sales fall off and profits
drop.
PRODUCT LIFE CYCLE
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
Not all products follow the S-shaped product life
cycle:
 Some products are introduced and die quickly.
 Others stay in mature stage for long, long time
 Some enter the decline stage and are the cycled
back into growth stage through strong promotion
or repositioning.
Product adoption curve
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PRODUCT LIFE CYCLE STRATEGIES
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Introduction Stage—The product life cycle stage when the
new product is first distributed and made available for
purchase.
It takes time, and sales growth is apt to be slow.
Profits are negative or low because of the low sales and
high distribution and promotion expenses—to attract
distributors, build their inventories and inform consumers of
the new product and get them to try it.
The company and its few competitors produce basic
versions of the product because the market is not generally
ready for product refinements at this stage.
PRODUCT LIFE CYCLE STRATEGIES
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The firms focus their selling on buyers who are most ready
to buy.
A company must choose a launch strategy that is consistent
with the intended product positioning.
If it chooses its launch strategy to make a ‘killing’, it may
be sacrificing long run revenue for the sake of shorn run
gain.
As the company moves through later stages of the life
cycle, it must continuously formulate new pricing,
promotion, and other marketing strategies.
PRODUCT LIFE CYCLE STRATEGIES
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Growth Stage—The product life cycle stage in which a
product’s sales start climbing quickly.
Early adopters will continue to buy, and later buyers will
start following their lead, especially if they hear of
favourable word of mouth.
Competitors will be attracted and enter the market. They
will introduce new product features and the market will
expand.
The increase in competition leads to an increase in the
number of distribution outlets, and sales jump just to build
reseller inventories.
Prices remain where they are or fall only shortly.
PRODUCT LIFE CYCLE STRATEGIES
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ii.
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iv.
Companies keep their promotion spending at the same or a
slightly higher level.
Profits increase during growth stage, as promotion costs are
spread over a large volume and as unit marketing costs fall.
The firm uses several strategies to sustain rapid market growth:
It improves product quality and add new product features
and models.
It enters new market segments and new distribution channels.
It shifts some advertising from building product awareness to
building product conviction and purchase
It lowers prices at the right time to attract more buyers
PRODUCT LIFE CYCLE STRATEGIES
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Maturity Stage—The product life cycle stage in which
sales growth slows or levels off.
This stage normally lasts longer than introduction and
growth stages, and most products are in this stage of life
cycle.
The slowdown in sales growth results in many producers
with many products to sell leading to greater competition.
Competitors begin marking down prices, increasing their
advertising and sales promotions, and increasing their R&D
budgets to find better versions of the product.
Because of competition, profit drops and weaker
competitors start dropping out.
PRODUCT LIFE CYCLE STRATEGIES
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Successful products actually evolve to meet changing
consumer needs.
Companies can consider the following strategies:
Modifying the market—The company tries to increase
the consumption of the current product by looking for
new users and new market segments.
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It may also look for ways to increase usage among present
customers.
Modifying the product—Changing characteristics such as
quality, features, style, or packaging to attract new users
and inspire more usage.
PRODUCT LIFE CYCLE STRATEGIES
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The company can improve product’s styling and attractiveness;
product’s quality and performance in terms of durability,
reliability, speed and taste.
Modifying the marketing mix—Improving sales by changing
one or more of the marketing mix elements.
The company can offer new or improved services to buyers.
It can cut prices to attract new users and competitor’s
customers
It can launch a better advertising campaign or use
aggressive sales promotion.
The company can also move into new marketing channels to
help serve new users
PRODUCT LIFE CYCLE STRATEGIES
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Decline Stage—The product life cycle stage in which
a product’s sales decline.
Sales may decline due to technological advances,
shifts in consumer tastes and increased competition.
Some firms withdraw from the market. Those
remaining prune their product offerings by dropping
smaller market segments, cutting promotion budget
etc.
PRODUCT LIFE CYCLE STRATEGIES
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Weak products are costly to the firm in terms of:
 Profits
 Need for management’s time
 Frequent price and inventory adjustments
 Advertising and sales force attention that would be
better used to make healthy products profitably
 Reputation for organisation and other products for
the organisation
 Product delays to search for replacements
PRODUCT LIFE CYCLE STRATEGIES
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•
Management can therefore decide or consider:
 Maintaining the brand without change in the hope
that competition will leave the industry.
 Harvesting the product—reducing various costs
(plant & equipment, maintenance, R&D, advertising)
and hoping that sales hold up.
 Dropping the product from the line by selling to
another firm or liquidating it at salvage value.
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End of lecture, next topic price…..