Product

The Four Ps: The Tools Marketing Mix Product Price Promotion Place The Four Cs: The Ends Customer Solution Customer Cost 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 Integration Growth Strategies Market Penetration Market Penetration Product Expansion Product Expansion Diversification Source: H. Igor Ansoff, “Strategic Diversification”, Harvard Business Review, September-October 1957, pp Market Expansion Market Expansion New Markets New Markets Present Markets Present Markets New Products New Products Present Products Present Products Figure 2.4

What is a Product? ProductA 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

Five Product Levels Potential productAugmented product Expected product Basic product Core benefit

Unsought 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 Classifications Consumer Products Specialty Products  Special purchase efforts  High price  Unique characteristics  Brand identification  Few purchase locations Shopping Products  Buy less frequently  Higher price  Fewer purchase locations  Comparison shop i.e Clothing, cars, appliances Convenience Products  Buy frequently & immediately  Low priced  Mass advertising  Many purchase locations i.e Candy, newspapers

Supplies and Services Supplies and Services Materials and Parts Materials and Parts Capital Items Capital Items Product Classifications Industrial Products

Product Quality Product Features Product Style & Design Product Style & Design Ability of a Product to Perform Its Functions; Includes Level & Consistency Help to Differentiate the Product from Those of the Competition 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 Width Width - number of different product lines Length Length - total number of items within the lines Length Length - total number of items within the lines Depth Depth - number of versions of each product Product Mix - all the product lines offered Product Mix - all the product lines offered Consistency

Product Lines and Product 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 During the 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 Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative Create product awareness and trial Create product awareness and trial Offer a basic product Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers

Growth Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market

Maturity Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits Maximize profit while defending market share Maximize profit while defending market share Diversify brand and models Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

Decline Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising 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 PLC Strategy 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 IdeaGenerationConceptDevelopment and Testing MarketingStrategyDevelopment IdeaScreening BusinessAnalysis ProductDevelopment MarketTesting Commercialization

1.Does the offering have a relative advantage? 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 Process Idea 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