Product and Services Strategy

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What is a Product?Marketing Offer A PRODUCT is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Includes: Physical Objects Services Events Persons Places Organizations Ideas Combinations of the above Information8-2

Product Surround ConceptAdded valueImage, styling etc Basic Features30% Cost & 70% ImpactProduct Surround

Core Product

70% Cost & 30% Impact

The larger the product surround , the greater the probable differentiation of a companys brand offering.3

Product levelsFive Product Levels

Customer value hierarchy Core benefit Basic product Expected product Augmented product

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Service Levels : Customers View

Service Levels Core Product Expected Product Augmented Product

Customers View Customer; generic needs which must be met. Customers minimum set of expectations. Sellers offering over what customer expect or accustomed to.

Potential Product

Everything that potentially can be done.

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Service Levels : Marketers ViewService Levels Core Product Marketers View Basic benefit which makes product of interest. Marketers product decision on tangible & intangible components. Marketers other mix elements decisions. including decision about brand name Marketers actions to attract & hold customers regarding changed conditions or new applications.

Expected Product

Augmented Product Potential Product

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Classification of products Consumer-Goods Classification: Convenience goods Staples: On regular basis- Jam, Bread Impulse goods: Without Planning- Key ring, magazines (places next to checkout counters) Emergency goods: when need is urgent-umbrella

Shopping goodspurchased on the basis of comparison of quality, price, style

Homogeneous shopping goods: Same quality but different price. Heterogeneous shopping goods : Product features and variety are more important to customers than price

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Consumer Goods ClassificationConvenience Goods Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers Staples: on regular basis (Jam, bread) Impulse Goods: Without planning (key ring, magazines) placed next to check out counters. Emergency goods: When need is urgent (Umbrella)

Shopping Goods Purchased on the basis of comparision of quality, price and style Homogeneous: Same quality but different price Heterogeneous: Product features and variety are more important then price Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances8-8

Consumer Goods ClassificationSpecialty Goods Special purchase efforts High price Unique characteristics Brand identification Few purchase locations i.e Lamborghini, Rolex

Unsought GoodsProducts consumers dont want to think about Require much advertising & personal selling i.e Life insurance, blood donation New innovations

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Consumer Goods: CharacteristicsAjay Pandit

Types Of Product Convenience Characteristics Time, efforts by consumers Time spent planning purchase Confectionary Very little Shopping Furniture Considerable Speciality Designer Suits As much as necessary required to find desired brand Considerable

Very little

Considerable

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Product Classifications: IndustrialRaw materials, manufactured materials, and parts

Materials and Parts

Industrial products that aid in buyers production or operations

Capital Items

Supplies and Services

Operating supplies, repair/ maintenance items8-12

Classification of Industrial products Materials and partsRaw Materials Farm products Natural products

Manufactured materials and parts Component materials Component parts

Capital items Installations Equipment8-13

Classification of Industrial productsIndustrial Goods Classification: It is done on the basis of how theyenter production process.

Material & Parts: They enter the manufacturers product completelyRaw materials:Farm Products- Their commodity character leads to relatively little advertising & publicity, Supply by producers who turn them over to marketing intermediary for assembly, grading, storage & selling e.g. fruits, vegetables. Natural Products- Highly limited in supply, they have great bulk and low unit value e.g. Crude petroleum, Iron etc.

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Classification of Industrial productsManufactured Material & PartsComponent materials: They are fabricated further pig iron---- Steel, Yarn----- Cloth The standardized nature of these products indicates that supplier reliability is the most important factor. E.g. Iron, yarns Component Parts: They enter finished product completely with no further change in form e.g. Tyre in to Automobile. They sold directly to industrial users, price and service are major considerations e.g. small motors, carburetor, gear box.

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Classification of Industrial productsCapital Items:long lasting goods that facilitates developing and managing the

finished products. Installations: Consists of building( factories and office), they are major purchases, they are bought directly from producers characterized by long negotiation period, Personal selling is the major promotional tool. Equipments: they comprises, portable factory equipments and tools (Hand tools, Lift trucks) and office equipments ( typewriters etc.) They do not become the parts of finished products, they have shorter life than installations, but longer life than operating supplies.8-16

Classification of Industrial products Supplies and business services In industrial setups, supplies are same as convenience goods (straight re buy basis) They are normally marketed through middleman (More geographically distributed)

Maintenance and repair items- paints, Brooms, nails Operating supplies-lubricants, typing paper Maintenance and repair services- They are supplied under contracte.g. Computer/ LCD repair

Business advisory services- They are normally new task buyingsituations e.g. Legal, Management consultancy, Advertising8-17

Product Classifications: Other Marketable Entities Activities undertaken to create, maintain, or change the attitudes and behavior toward the following: Organizations - Profit (businesses) and nonprofit (schools and churches). Persons Politicians, entertainers, sports figures, doctors, and lawyers. Places - Business sites, new residents, and tourism. Ideas (social ideas marketing) Public health campaigns, environmental campaigns, and others such as family planning, or human rights.8-18

Individual Product Decisions

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Product AttributesDeveloping a Product or Service Involves Defining the Benefits that it Will Offer Such as:Product Quality Ability of a Product to Perform Its Functions; Includes Level & Consistency Differentiates the Product from Competitors Products Process of Designing a Products Style & Usefulness8-20

Product FeaturesProduct Style & Design

What is a brand? A brand is a name, term, sign, symbol, design or a combination of the above to identify the goods or service of a seller and differentiate it from the rest of the competitors. When you can not do it then product is a commodity.

Brand to Commodity SlideExtent of Competition High High

LowHigh

Branded Markets & Custom service

Price Differentiati on Commodity MarketsHigh Low

Gross Margin

Low

Low

Product Image differentiation

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Brand to Commodity Slide Competition in commodity markets is mainly based on price , by contrast competition in branded services is based on other elements of marketing mix and sub mixes including customer service, advertising, brand name and guarantee etc. Service firms needs to consider how to halt or reverse this transition/ slide to ensure service products remain differentiated, rather than slide in to the commodity category.

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Brand comprises ofTangible Attributes Product Packaging Labeling Attributes Functional benefits Intangible attributes Quality Emotional benefits Values Culture Image

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Desirable qualities for a brand name It should suggest something about the products benefits It should suggest the product or service category It should suggest concrete, high imagery qualities It should be easy to spell, pronounce, recognize, and remember It should be distinctive It should not carry poor meanings in other countries and languages

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Brand Identity It is the marketers promise to give a set of features, benefits and services consistently

Brand Building Involves all the activities that are necessary to nurture a brand into a healthy cash flow stream after launch

Brand building tools Public relations and press releases Sponsorships Clubs and consumer communities Factory visits Trade shows Event marketing Social cause marketing High value for the money Founders or a Celebrity -RichardBranson

Mobile phone marketing-M-Commerce8-28

An Overview of Branding DecisionsBranding Decisions: Brand, No Brand Brand Sponsor Decision- Manufacturer Brand, Distributor(Private) Brand, Licensed Brand Brand Names Decisions- Individual names, Blanket family names, Separate family names, Company individual names. Brand strategy Decisions- Line Extensions, Brand Extensions, Multi Brands, New Brands, Co Brands. Brand Repositioning Decisions- Repositioning, No Repositioning8-29

Branding Brand decisionsWhat is brand: A brand is a name, term, sign, symbol or design, or acombination of them, intended to identify the goods and services of one seller from another. A brand is a complex symbol that can convey up to six level of meanings

Attributes: e.g Mercedes- Expensive, Well built, high prestige Benefits: - Expensive- Exclusive emotional benefits Values: Mercedes stands for high performance, safety, prestige. Culture: Mercedes- German culture-organized, efficient Personality: Mercedes- No- nonsense boss User: 50-55 year old Top Executive

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Branding Brand Equity Brand equity is an asset, and it is defined as the positive differential effect that knowing the brand name has an customer response to the product or service. The extent to which customers are willing to pay more for the particular brand is a measure of Brand Equity. e.g. Nike8-31

Competitive advantages of high brand equity The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can more easily launch extensions because the brand name carries high credibility. The brand offers some defense against price competition.8-32

Branding Branding gives the seller several advantages: Brand name makes it easier for the seller to process orders and track down problems Sellers brand name and trademark provide legal protection of unique product features Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Branding helps the seller segment markets. Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers.8-33

BrandingBrand-Sponsor Decisions- i.e. How the product is launchedManufacturer brand also called as National Brand- Sony, IBM Distributor brand- Big Bazar, Vishal Mega Mart Licensed brand name- Hart Schaffner & Marx sells some of itsmanufactured clothes under licensed names such as Pierre Cardin

Slotting fee- As the shelf space is scarce, retailer charge slotting fee foraccepting a new brand to cover the cost of listing and stocking it.

Brand laddering -Earlier customer use to view brands arranged in acategory, featuring favorite brand at the top and remaining in the descending order.

Brand parity- Now the ladder is replaced with consumer perception ofBrand Parity, instead of strongly preferred brand , consumers buy from a set of acceptable brands.8-34

BrandingBrand-Name Decision Four available strategies:Individual names- P& G : Vicks (Health care), Ariel & Tide (Fabric care) Blanket family names- Umbrella branding e.g TATA Separate family names for all products- Companies often invent differentfamily names for different quality lines, and are not desirable to use one blanket family name. e.g. Aditya Birla Group: Hindalco for aluminum, Grasim (Suitings)

Corporate name combined with individual product names- Here thecompany name legitimizes, and the individual name, individualizes e.g. Kellogg (Kellloggs rice krispies, Kelloggs crn flakes)

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Brand Strategy Line Extension Existing brand names extended to new forms, sizes, and flavors of an existing product category. e.g. Pepsi, Pepsi Blue, Pepsi Gold Colgate Total, Colgate herbal, Colgate gel.

Brand Extension (Category extension) Existing brand names extended to new or modified product categories. E.g. Tata in Automobiles and Tata salt, Timex Watches and Timex Eye gears.

Multibrands New brand names introduced in the same product category. Here a flanker brand is set up to lock up more distributor space and to protect its major brand e.g. Seiko Lasalle-High end Watch, Seiko Pulsar- Low end Watch

New Brands New brand names in new product categories.

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Branding Advantages of Branding Buyers: Identification Quality and value

Brand Equity Higher brand loyalty Name awareness Perceived quality Strong brand associations Patents, trademarks, channel relationships

Sellers Tells a story Provides legal protection Helps segments markets

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Packaging Designing and producing the container or wrapper for a product. Steps in developing a good package: Packaging concept, Develop specific elements of the package, Elements must support products position and marketing strategy.8-38

Packaging Packaging Package Primary Package Secondary Package Shipping Package

Factors which have contributed to the growing use of packaging as a marketing tool Self-Service Consumer affluence Company and brand image Innovation opportunity8-39

Labeling The label might carry only the brand name or a great deal of information, even if the seller prefers a simple label, the law may require additional information. Printed information appearing on or with the package.

Label Performs several functions: Identifies product or brand Grades the product Describes several things about the product Promotes the product through attractive graphics8-40

Labeling Consumerists have lobbied for: Open dating- to describe product freshness. Unit pricing-to state the product cost in standard measurement units. Grade labeling-To rate the quality level. Percentage labeling- to show the percentage of each important ingredient.

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Product Line DecisionsProduct Line LengthNumber of Items in the Product Line

StretchingLengthen beyond current range

FillingLengthen within current range

Downward Both Directions Upward8-42

Product Mix DecisionsProcter & Gamble's Product MixBaby Care Beauty Care Fabric & Home Care Food & Beverage Health Care

Width number of different product lines Length total number of items the company carries within product lines Depth number of versions offered of each product in line

Six Toothpastes in Line

Crest Multicare

Crest Cavity Protection

Crest Tartar Protection8-43

Product Mix: Invertis GroupManagement Computers

Engineering

Width

MBADepth

MCA BCA

CS IT EI

BBA B.Sc. CS

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New-Product Development StrategyStrategies for Obtaining New-Product IdeasAcquired CompaniesAcquired Patents Acquired Licenses

Original ProductsProduct Improvements Product Modifications New Brands8-45

Major Stages in New-Product Development

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New Product Development Decision ProcessIdea Generation- Is the idea worth considering. Idea Screening- Is the product idea compatible with company objectives, strategies and resources. Concept development and Testing- Can we find a good concept for the product that consumer would try. Marketing Strategy development- Can we find a cost effective and affordable marketing strategy. Business Analysis- Will this product meet firms profit goal. Product Development- Have we developed a technically and commercially sound product. Market Testing- Have product sales met expectations. Commercialization- Are product sales meeting expectations.8-47

New Product Development Process Step 1. Idea

GenerationSystematic Search for New Product Ideas Obtained From Employees and Also From:

Customers

Competitors

Distributors

Suppliers

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New Product Development Process Step 2.

Idea Screening Helps spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Then, the idea is evaluated against a set of general company criteria.8-49

New Product Development Process Step 3.

Concept Development1. Develop New Product Ideas into Alternative Detailed Product Concepts

2. Concept Testing - Test the New-Product Concepts with Groups of Target Customers

Product Image is the Way Consumers Perceive an Actual or Potential Product

3. Choose the One That Has the Strongest Appeal to Target Customers8-50

New Product Development Process Step 4.

Marketing StrategyPart One Describes Overall:Target Market Planned Product Positioning Sales, Market Share, & Profit Goals

Part Two Describes First-Year:Products Planned Price Distribution Marketing Budget

Part Three Describes Long-Run:Sales & Profit Goals Marketing Mix Strategy8-51

Step 5. Business Analysis Step 6. Product DevelopmentBusiness Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Satisfy Company Objectives

If No, Eliminate Product Concept If Yes, Move to Product Development8-52

New Product Development Process

Step 7. Test Marketing Product and marketing program are introduced into more realistic market settings. Can be very expensive and time consuming. Test the following: Positioning strategy, Advertising, Distribution, Pricing, Branding, Packaging, Budget levels.

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New Product Development Process

Step 8. CommercializationIntroducing the New Product into the MarketWhen is the Right Time to Introduce Product?

Where to Launch a New Product?

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Product Life Cycle (Fig. 9-2)Sales and Profits ($) Sales

ProfitsTime

Product DevelopmentLosses/ Investments ($)

Introduction

Growth

Maturity

Decline

Sales and Profits Over the Products Life From Inception to 8-55 Demise

Introduction Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSales Low sales

CostsProfits Marketing Objectives Product

High cost per customerNegative or low Create product awareness and trial Offer a basic product

PriceDistribution Advertising

Usually is highHigh distribution expenses Spending is high to inform consumers8-56

Growth Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSales Costs Profits Marketing Objectives Product

Rapidly rising salesAverage cost per customer Rising profits Maximize market share Offer new product features and models

PriceDistribution Advertising

Remain where they are or fall slightlyIncrease number of distribution outlets Educating consumers and meeting competition

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Maturity Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSales Begin to slow

CostsProfits Marketing Objectives Product Price Distribution Advertising

Low cost per customerHigh profits, then lower profits Maximize profits while defending market share May modify product May decline Build more intensive distribution Stress brand differences and benefits8-58

Maturity Stage of the PLCCompany tries to increase consumption of the current product

Changing characteristics such as quality, features, or styles to attract new users

Company tries to improve sales by changing one or more marketing mix elements8-59

Decline Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSales Costs Profits Marketing Objectives Product Price Distribution Advertising Declining sales Low cost per customer Declining profitsReduce expenditure and maintain, harvest, or drop the product

Phase out weak items Cut priceSelective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

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