Product

The Four Ps: The ToolsThe Four Ps: The Tools

MarketingMix

Product

Price Promotion

Place

The Four Cs: The EndsThe Four Cs: The Ends

CustomerSolution

CustomerCost

Communication

Conven-ience

Plea From an Anonymous Customer

• Don’t Sell me Clothes, Sell me a sharp appearance, style and attractiveness.

• Don’t Sell me a House, Sell me comfort, contentment, a good investment and a pride of ownership.

• Don’t Sell me Toys, Sell my children happy moments.• Don’t Sell me Insurance, Sell me peace of mind, and a

great future for my family and me.• Don’t Sell me Books, Sell me pleasant hours and the

profits of knowledge.• Don’t Sell me Computers, Sell me the pleasure and

profits of the miracles of modern technology.

The Moral is…..

• Don’t Sell me THINGS, Sell me Ideas, Feelings, Self-respect, Home, Life and

Happiness.

PLEASE DON’T SELL ME THINGS

5

Vertical IntegrationVertical Integration

Growth Strategies

MarketPenetration

MarketPenetration

Product ExpansionProduct

Expansion

DiversificationDiversification

Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957, pp.113-24

MarketExpansion

MarketExpansion

NewMarkets

NewMarkets

PresentMarketsPresentMarkets

NewProducts

NewProducts

PresentProducts

PresentProducts

Figure 2.4

What is a Product?

• A ProductProduct 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

Five Product Levels

Potential product

Augmented product

Expected product

Basic product

Core benefit

Unsought ProductsUnsought Products

New innovations Products consumers don’t want to think about these products Require much advertising &personal selling i.e Life insurance, blood donation

Product ClassificationsConsumer Products

Specialty ProductsSpecialty Products

Special purchase efforts High price Unique characteristics Brand identification Few purchase locations

Shopping ProductsShopping Products

Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances

Convenience ProductsConvenience Products

Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers

Suppliesand

Services

Suppliesand

Services

Materialsand

Parts

Materialsand

Parts

CapitalItems

CapitalItems

Product ClassificationsIndustrial Products

Product Quality Product Quality

Product FeaturesProduct Features

Product Style & Design

Product Style & Design

Ability of a Product to Perform Its Functions;

Includes Level & Consistency

Ability of a Product to Perform Its Functions;

Includes Level & Consistency

Help to Differentiate the Product from Those of the

Competition

Help to Differentiate the Product from Those of the

Competition

Process of Designing a Product’s Style & Function

Process of Designing a Product’s Style & Function

Developing a Product or Service Involves Defining the Benefits that it Will Offer Such

as:

Product Attributes

Product Classification

• Product Lines and Mixes– Product Line– Product Mix

• Benefits of offering a wide variety and deep assortment of products:– Economies of Scale– Package Uniformity– Standardization– Sales and Distribution Efficiency– Equivalent Quality Beliefs

Product Mix

WidthWidth - number of different

product lines

WidthWidth - number of different

product lines

LengthLength - total number of itemswithin the lines

LengthLength - total number of itemswithin the lines

Depth Depth - number of versions of each product

Depth Depth - number of versions of each product

Product Mix - Product Mix - all the product

lines offered

Product Mix - Product Mix - all the product

lines offered

Co

nsi

sten

cy

Product Lines andProduct Mixes at Gillette

Product Line Decisions

• Product Line managers are concerned with length.

• Too short if profits increase by adding• Too long if profits increase by dropping items.• Product line is influenced by company

objectives.• High market share & market growth, long

Product line• High profitability, short product line

Product-Line Length: a company strengthens its PL in two ways

• Line Stretching: occurs when a company lengthens its product line beyond its current range.

– Downmarket: A Co. positioned in the middle market may want to introduce a lower price due to strong growth in the segment & opportunities in the downmarket. e.g HUL sunlight & wheel.

– Upmarket: Co. may enter high end of the market for more growth, higher margins, or to add prestige.e.g. Toyota introduced, Lexus

– Two-way: means stretching its line in both directions.

• Line Filling: A product line can also be lengthened by adding more items within the present range which is called line filling.

• Motives are:• Incremental profits.• Satisfy dealers who complain about lost sales due to

missing lines.• E.g. Maruti introduced Swift Dizire between Swift and

SX4

Product Life Cycle

• The course of a product’s sales and profits over its lifetime.

• Product development: begins when the company finds and develops a new-product idea. Here, sales are zero and costs mount.

• Introduction: It is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

• Growth: it is a period of rapid market acceptance and increasing profits.

• Maturity is the period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits decline due to increased marketing outlays to defend the product against competition.

• Decline is the period when sales fall off and profits drop.

Stages of the Product Life Cycle

Exhibit 7.2

Marketing Strategy Duringthe Product Life Cycle

• No sales revenue during this stage

• Components of the product concept:– An understanding of desired uses and

benefits– A description of the product

• Customer needs should be discerned before developing marketing strategy

Development Stage

• Begins when development is complete• Ends when customers widely accept the

product• Marketing strategy goals during this stage:

– Attract customers by raising awareness and interest

– Induce customers to try and buy– Engage in customer education activities– Build on availability and visibility– Set pricing objectives

Introduction Stage

• Be ready for sustained sales increases

• Rapid increase in profitability early in the growth stage that decreases at the end of this stage

• Length depends on nature of product and competitive reactions

• Two strategies:– (1) Establish a strong, defensible marketing

position– (2) Achieve financial objectives

Growth Stage (1 of 2)

• Marketing strategy goals in this stage:– Leverage the product’s perceived differential

advantages– Establish a clear product and brand identity– Create unique positioning– Maintain control over product quality– Maximize availability of the product– Find the ideal balance between price and demand– Keep an eye focused on the competition

Growth Stage (2 of 2)

• Few, if any, new firms will enter the market

• Still an opportunity for new product features and variations

• Typically the longest stage in the product life cycle

Maturity Stage (1 of 2)

• Strategies pursued:– (1) Modifying the market– (2) Modifying the product– (3) Modifying the marketing mix

Maturity Stage (2 of 2)

• Two options:– (1) Attempt to postpone the decline– (2) Accept its inevitability

• Harvesting: reducing various costs• Divesting: dropping the product

Decline Stage

Introduction Stage of the PLC

Introduction Stage of the PLC

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

Growth Stage of the PLCGrowth Stage of the PLC

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, warranty

Offer 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

Maturity Stage of the PLCMaturity Stage of the PLC

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 competitors

Price to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefits

Stress brand differences and benefits

Decline Stage of the PLCDecline Stage of the PLC

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 brand

Reduce expenditure and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go 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

Problems Using the PLC

Trouble identifying Which Stage of the PLC the Product Is In

Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLCStrategy is Both a

Cause and a Result of the Product’s Life

Cycle

The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:

New Product Development

• Six strategic product development options:– (1) New-to-the-world products

(discontinuous innovations)

– (2) New product lines– (3) Product line extensions– (4) Improvements or revisions of existing

products– (5) Repositioning– (6) Cost reductions

New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

1. Does the offering have a relativeadvantage?

4. Can the offering be tested on a limited basis prior to actual purchase?

2. Is the offering compatible with buyers’ use or consumption behavior?

3. Is the offering simple enough for buyers to understand and use?

5. Are there immediate benefits from the offering, once it is used or consumed?

New-Product Development ProcessNew-Product Development ProcessIdea Generation & ScreeningIdea Generation & Screening

Why New Products Fail

• “Over Championing”

• Overestimated Demand

• Poor Design

• Poor Marketing Execution

• High Development Costs

• Strong Competitive Reaction

Challenges in NPD

• Idea Shortage

• Fragmented Markets

• Social & Governmental Constraints

• Cost

• Capital Shortage

• Need for Speed

• Shorter Product Life Cycles