PRODUCT

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					PRODUCT
  Ashok
 Leyland
is known
  for its
products
       What is a Product?
A product is anything that can be offered
  to a market to satisfy a want or need,
   including physical goods, services,
  experiences, events, persons, places,
properties, organizations, information, and
                  ideas.
Figure 12.1 Components of the
        Market Offering
           Value-based prices




              Attractiveness
               of the market
                  offering

     Product                    Services
     features                   mix and
     and quality                quality
Figure 12.2 Five Product Levels
Product Classification Schemes

   Durability

   Tangibility

      Use
Durability and Tangibility


          Nondurable
            goods


Durable
                       Services
 goods
Consumer Goods Classification


   Convenience   Shopping


    Specialty    Unsought
Industrial Goods Classification


          Materials and parts



                          Supplies/
  Capital items
                      business services
   Developing products for rural
            markets
• Products should be designed keeping in mind
  the rural conditions
• Packaging is one of the key drivers of
  success in rural areas
    Issue of transfer and storage: Rugged
    packing
    The issue of affordability: small-unit packs
• Brand elements should be decided keeping in
  mind rural consumers
   Product Line and Product Mix
• Product Item
                                      Whole
  – A specific version of a product    Milk

• Product Line
  – A group of closely related product items
    viewed as a unit because of marketing,
                                                    Whol
    technical, or end-use considerations             e
                                                    Milk
                                             Skim
                                             Milk
                                      2%
                                      Milk
• Product Mix
  – The total group of products that an
    organization makes available to customers

  – Width of product mix
    • The number of product lines a company offers
     Line Stretching

Down-Market Stretch



        Up-Market Stretch
      Product Life Cycles and
       Marketing Strategies
• Product Life Cycle
 –The progression of a product
  through four stages: introduction,
  growth, maturity, and decline.
  MP3s
         DVDs
                CDs
                     Cassettes
                              LP records
The Four Stages of the Product Life Cycle




                                     FIGURE 10.2
  Claims of Product Life Cycles
• Products have a limited life
• Product sales pass through distinct stages
  each with different challenges and
  opportunities
• Profits rise and fall at different stages
• Products require different strategies in
  each life cycle stage
       The Product Life Cycle
• Introduction
  – The initial stage of a product’s life cycle—its
    first appearance in the marketplace—when
    sales start at zero and profits are negative
  – Why new products fail
     • Lack of resources, knowledge, and marketing skills
       to successfully launch the product
     • High pricing to recoup research and development
       costs
                                       Product Life Cycle (Contd.)


• Strategies at various stages of PLC
     Introduction

          Build sales by expanding market for the product

          Heavy expenditure on promotion

          Stimulate trial

          Attract distribution channel partners

          Prices high or low depending on imminent
                 competition
The Product Life Cycle (cont’d)
• Growth
  – The stage of a product’s life cycle when sales
    rise rapidly and profits reach a peak and then
    start to decline
    •   More competitors enter the market
    •   Product pricing is aggressive
    •   Brand loyalty becomes important
    •   Gaps in market coverage are filled
    •   Promotion expenditures moderate
    •   Production efficiencies lower costs
                                      Product Life Cycle (Contd.)

Growth
 Customers aware of the product
 Build sales and market share by building
 brand preference
 Segmentation emerges
 Product redesigned to create differentiation
 Promotion lays stress on the benefits of the
 differentiated product
 Focused competitors emerge
 Distribution will be widened to serve new segments.
 Product made available in different retail formats as
 customers of different segments buy differently
• Maturity
   – The stage of a product’s life cycle when the sales curve peaks
     and starts to decline and profits continue to fall
      • Intense competition
      • Emphasis on improvements and differences in competitors’
         products
      • Weaker competitors lose interest and exit the market
      • Advertising and dealer-oriented promotions predominate
      • Distribution sometimes expands to the global market
   – Strategic objectives for maturity stage
      • Generate cash flow
      • Maintain market share
      • Increase share of customer
                               Product Life Cycle (Contd.)
Maturity
     Market does not grow in this stage
     Sales only at the expense of competition
     Focus on ensuring repeat purchases
     Strong brand helps fight competition
     Maintaining brand loyalty, stimulate repeat
     purchases
     Intense competition, often price wars
     Company should focus on strengthening its
     brand by differentiation
     Lasts for a long time
     Companies should set realistic growth rates
     Low cost manufacturing and marketing
     infrastructure
• Decline
  – The stage of a product’s life cycle when sales
    fall rapidly
    •   Pruning items from the product line
    •   Cutting promotion expenditures
    •   Eliminating marginal distributors
    •   Planning to phase out the product
  – Strategic choices
    • Harvesting the product’s remaining value
    • Divesting the product when losses are
      sustained and a return to profitability
      is unlikely
                                  Product Life Cycle (Contd.)


Decline

     Anticipate the impending decline in sales

     Analyze changing customer requirements


     Exit immediately / gradual withdrawal / Exploit
     brand loyalty
                                  Product Life Cycle (Contd.)
• Uses of PLC

    Emphasizes the need for product planning

    Planning for competition

    Products have limited life cycle

    Plan for the future as growth phase will end

    Adapt marketing strategies as market and
         competitive conditions change
                                 Product Life Cycle (Contd.)

• Limitations of PLC
    Not all products follow the classic S-
 shaped PLC curve
    PLC is the result of marketing activities,
 and is not the cause of variability in sales
     Duration of PLC stages is unpredictable
     Strict adherence to PLC can lead a
 company to      misleading objectives and
 strategy prescriptions
Johnson & Johnson Emphasizes
  New Product Development
Categories of New Products
       New-to-the-world

       New product lines

           Additions

        Improvements

        Repositionings

        Cost reductions
 Moser Baer has moved from
making optical storage media
to selling home entertainment
              The World’s
       Most Innovative Companies
•   Apple              •   IBM
•   Google             •   Sony
•   Toyota             •   Wal-Mart
•   General Electric   •   Honda
•   Microsoft          •   Starbucks
•   Procter & Gamble   •   Target
•   3M                 •   BMW
•   Walt Disney        •   Samsung
 Seven Notions of Innovation
• See the future through the eyes of your
  customer
• Intellectual property and brand power are key
  assets
• Use digital technology to create tools for
  customers
• Build a championship team
• Innovation is a state of mind
• Speed is critical, so push your organization
• Partner up if you’re not the best
The New Product Development Decision Process
Mahindra and Mahindra followed a thorough product

        development process for ‘Scorpio’
 Ways to Find Great New Ideas
• Run informal sessions with customers
• Allow time off for technical people to putter
  on pet projects
• Make customer brainstorming a part of
  plant tours
• Survey your customers
More Ways to Find Great Ideas
• Use iterative rounds with customers
• Set up a keyword search to scan trade
  publications
• Treat trade shows as intelligence missions
• Have employees visit supplier labs
• Set up an idea vault
Drawing Ideas from Customers
• Observe customers using product
• Ask customers about problems with
  products
• Ask customers about their dream products
• Use a customer advisory board or a brand
  community of enthusiasts to discuss
  product
                       Managing The Innovation Process (Contd.)
• Idea generation
    Look outside current markets
    Modify product form
    Question conventional price and performance
    relationships
    Imagine unarticulated customer needs rather
    than simply following them
     Examine competitors’ products at frequent
 intervals
    Retailers as a source of ideas for NPD
    Customers as a source of ideas for NPD
    Utilize MR effectively
• Idea screening
    Evaluate commercial worth of ideas

    Use criteria to evaluate attractiveness of
    market for the proposed market

    Basis such as return on assets, sales
 growth etc.

     Idea for NPD should be in alignment with
 the       company’s objectives and
 competencies

    Should have reasonable chances of
 success
• Concept testing
     Each basic product idea can be expanded
 into     several product concepts
    Each product concept can be compared
 by testing with target customers
     Product concept is a particular
 combination of       features, benefits, and
 price
   Allows views of customers to enter the
 NPD    process at an early stage
    Use research to gather customer opinions
• Business analysis
    Estimates of sales, cost and profits
     Identifies the product target market, its
 size,     and projected product acceptance
 over a number of years
    Study various prices and their implications
 on sales revenues
    Conduct sensitivity analysis
     Estimate revenues and profits to justify
 the      expenses of development and
 marketing
• Product development
    New product concept is developed into a
    physical product
    Multi-disciplinary project teams
    established
    Product testing focuses on the functional
    aspects of the product and consumer
    acceptance
    R&D focuses on functional aspects of
 product and marketing keeps the project
 team aware of psychological factors
Products set up to fail at this stage:
     Developers become their own during this
  stage
     Developers are wary of showing their
     incomplete designs to other people in the
     organization
      Both customer needs and technologies are
  likely    to change during the development
  process itself
     A description of the product can never
  match the physical product in eliciting real
  reactions of   customers
      A company should be willing to do
  ‘anything’     to increase the probability of
  success of a new      product
• Market testing
     Simulated market test
     Launch the new product in a limited way
     Key success indicators such as penetration
 and         repeat purchase can be ascertained
     Launch of new product in one or few
     geographical areas chosen to be
 representative of      its intended market
     Facing competition in retail outlets
     Information provided by test marketing
 facilitates      the go / no go national launch
 decision
• Commercialization and diffusion of
  innovation
    Diffusion is how a new product spreads
    throughout a market over time
    Buyer at different stages of buying
 readiness.
    In initial phase of launch, target customers
 who are more likely to buy the new product
 than others
    Adoption is slower if company targets
 complete market initially
        What is Adoption?
• Adoption is an individual’s decision to become
  a regular user of a product.
Stages in the Adoption Process

          Awareness

            Interest

           Evaluation

             Trial

           Adoption
Adopter Categorization
   Innovators: Most likely to buy the new
   product
   Early adopters: Set of customers who buy the
   product next
   Early and late majorities form the bulk of the
   customers
   Laggards are tradition bound
   Diffusion of innovation categories play crucial
   role in the choice of target markets
    Key is to understand the characteristics of the
    innovator and early adopter categories and
target    them at launch
    Adopter categories can provide basis of
    segmenting the target market
    Diffusion curve linked to the product
    life cycle
    Characteristics of the product being
    launched also affects diffusion rate
    Choice of marketing strategy to establish
a   differential advantage to be made
   Product’s communicability affects
adoption of   new product
    Characteristics of an Innovation

•   Relative advantage
•   Compatibility
•   Complexity
•   Divisibility
•   Communicability

				
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