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Product Planning
Meaning
In order to maximise his sales revenue and profits, a business firm must
continuously adjust and adapt its products and services to the changing
requirements of customers. From time-to- time, it may have to design and develop
new products.
Product planning is the process of searching ideas for new products, screening
them systematically, converting them into tangible products and introducing the
new product in the market. It also involves the formation of product policies and
strategies.
Product planning includes improvements in existing products as well as deletion of
unprofitable or marginal products. It also encompasses product design and
engineering which is also called product development. Product planning comprises
all activities starting with the conception of product idea and ending up with full
scale introduction of the product in the market.
It is a complex process requiring effective coordination between different
departments of the firm. It is intimately related with technical operations of the
organisation, particularly with engineering, research and development departments.
Any product has two broad objectives—immediate objectives and ultimate
objectives. Immediate objectives include satisfaction of immediate needs of
consumers, increasing sales, utilising idle plant capacity, etc. Permanent or
ultimate objectives consist of reduction in production costs, creation of brand
loyalty, monopolising the market, etc.
Significance and Objects:
Product planning and development is a vital function due to several reasons. First,
every product has a limited life span and needs improvement or replacement after
some time. Secondly, needs, fashions and preferences of consumers undergo
changes requiring adjustments in products.
Thirdly, new technology creates opportunities for the design and development of
better products. Product planning and development facilitate the profitability and
growth of business. Development of new products enables a business to face
competitive pressures and to diversity risks. Product is the most important
constituent of marketing mix.
Finding and meeting the needs of customers is the key element in a successful
marketing strategy. New product development has become all the more important
in the modern world characterised by technological change and market dynamics.
New product development brings opportunities but also involves heavy
commitment of finance, technology and even emotional attachment. New product
decisions are necessary as well as costly. Many new products fail causing ruin to
business firms.
Product development is a continuous and dynamic function. Continuous
adjustments and improvements in the product arc necessary to minimise costs of
production and to maximise sales. High rate of product obsolescence requires
product innovation frequently. At the same time, cost and time scales have
increased. In some products, the gestation period is very long, sometimes longer
than the life of the product.
As a result the role of R&D expert has become very important. He needs to be in
touch with sales persons and actual end users. Successful technological innovation
involves great resources as well as great risks. Product innovators face spectacular
successes as well as disastrous failures.
Most of the new product ideas do not become actual products. Many new products
achieve limited acceptance in the market. This is so because firms very often are
reluctant to move away from tried and tested products.
6 Important Process of Product Planning
Some of the major process of product planning are as follows: 1. Exploration 2.
Screening 3. Detailed Business Analysis 4. Development 5. Test Marketing 6.
Commercialization.
1. Exploration:
Product planning begins with the generation and formulation, of ideas or concepts
for new products. The product ideas may come from sales persons who are in
constant touch with the needs and desires of consumers.
Middlemen, research and development department, trade and technical journals,
consumers, trade associations, chambers of commerce, government agencies,
research laboratories and executives can be other fruitful sources of product ideas.
New ideas may also emerge from individual innovators, suggestion schemes,
marketing research, cost studies, service organisations, etc. At this stage, the
products of competitors, institutes and allied products should also be considered.
2. Screening:
This stage involves a preliminary comparison and evaluation of product ideas to
select the most promising idea which warrants further consideration. A large
number of ideas may be available. It is necessary to eliminate the ideas which have
no potential. Careful screening helps to avoid wastage of time and resources in
impracticable or uneconomical ideas.
A clear understanding of company objectives and facilities is essential for
successful screening. This will help to reject the ideas which are inconsistent with
the strategy and resources of the enterprise.
In recent years, leading companies have developed specific criteria for screening.
Such criteria consist of:
(a) profitability requirements over a period of time;
(b) annual value of production;
(c) unit profit margin;
(d) new capital required;
(e) use of existing distribution network, etc.
3. Detailed Business Analysis:
Those ideas and concepts which survive the screening stage are put to rigorous
economic evaluation. The technical and economic factors involved in the ideas are
analysed in sufficient detail to judge the commercial viability and technical
feasibility. A statement of expected costs, sales and profits over a period of time is
prepared. Business analysis may also involve some preliminary testing and
analytical studies which is known as concept testing.
Business analysis is made to answer the following questions:
(а) Is the product idea technically feasible?
(b) Is there an adequate market demand?
(c) Is it necessary to obtain patent right?
(d) What is the raw material position?
(e) Will machinery be imported?
(f) Are the production facilities suitable?
(g) How much will it cost to produce and sell?
4. Development:
At this stage, a design or specification of the product is prepared. The product idea
is given a practical shape in the form of a working model or prototype. The idea on
paper is converted into a physical product. The prototype is tested in the laboratory
to ensure that it meets all technical specifications.
5. Test Marketing:
A sample of the product is then tested in a selected market to find but the reactions
or responses of consumers. The working model or prototype is produced in a
limited quantity and it is tested in the market before starting full scale production.
On the basis of the feedback from consumers, necessary improvements
(redesigning) arc made in the product. Test marketing is a vital phase of product
development as it helps to “tie up the loose ends” before launching the product in
the market.
6. Commercialization:
In this final stage, the product is actually introduced in the market on a full scale.
The pricing, channels and promotional methods are finalised. The product is fully
integrated into the company’s normal operations and it no longer remains a new
product.
International product promotion
Meaning
Promotion as those activities marketers engage in to advertise and sell their
product. Essentially, it’s all about getting the word out to your target audience and
presenting them with an offer and a message that resonates.
What’s exciting to us is the opportunity to take advantage of the numerous
channels available to marketers today. We believe that the best
communications/promotions strategy incorporates a combination of some of the
following channels:
Print advertising (magazine, newspaper)
Interactive advertising (Internet)
Social media (social sites such as Facebook, Myspace and LinkedIn, and
company blogs)
Direct mail
Telemarketing
Personal sales (salespeople)
Public relations
Television
Radio
Billboard
Tradeshows
Inserts (magazine or newspaper)
Flyers
The challenge is to develop the best mix of the above channels. Know your target
market. What are they reading? Where are they networking? Where do they
live? Then, try to figure out how they’d like to hear from you.
The better you are at reaching your prospect or customer at the right time, and with
the right message, the more effective your promotion will be.
Top 10 Role of Advertising in Promotion of a Product
The 10 role of advertising in promotion of the product are as follows:
1. Awareness:
One of the important roles of advertising is to create awareness of the product or
services such as brand name and price. The awareness of the product or services
can be created through highlighting the unique features of the brand. Nowadays,
due to intense competition it is not just enough to create awareness, but top of
mind awareness is needed.
2. Information:
Advertising helps to inform the target audience about the product. Providing
information is closely related to creating awareness of the product. Potential
customers must know about a product, such as product features and uses.
Product information is very much required, especially when the product is
introduced in the market, or when product modification is undertaken. Proper
product information can help the consumers in their purchase decision.
3. Persuasion:
When business firms offer similar products, the firm must not only inform the
customers about the product’s availability, but also persuade them to buy it.
Through persuasive messages, the marketers try to provide reasons regarding the
superiority of their products as compared to others available in the market.
Persuasion can be undertaken through creative advertising messages, product
demonstration at trade fairs, offering free gifts, premium offers and organizing
contests.
4. Attitudes:
Promotion is required to build or reinforce attitudes in the minds of target
audience. The marketers expect the target audience to develop a favourable attitude
towards their brands. Positive attitude towards the brand helps to increase its sales.
Through promotional techniques like advertising, the marketer can correct negative
attitude towards the product, if any. Negative attitude can also be corrected through
public relations and advertising.
5. Reminder:
If target customers already have a positive attitude towards a firm’s product or
service, then a reminder objective may be necessary. The reminder objective is
necessary because the satisfied customers can be targets for competitors’ appeals.
Well-established brands need to remind the customers about their presence in the
market. For instance, ‘Raymond – the complete man’ campaign is designed to
remind the customers.
6. Brand Loyalty:
Advertising helps to develop brand loyalty. Brand loyalty results in repeat
purchases and favourable recommendations to others by existing customers. Sales
promotion, effective personal selling, timely and efficient direct marketing, and
other techniques help to develop brand loyalty.
7. Brand Image:
An advertiser helps to develop a good image of the brand in the minds of target
audience. There are several factors that can be of help to audience. There are
several factors, such as the character of the personality that endorses the brand, the
content of the advertising message, the nature and type of packaging and the type
of programmes or events sponsored, that can help to develop brand image in the
minds of target audience.
8. Counter Competitors’ Claims:
The marketer may counter the claims made by the major competitors. For instance,
competitive advertising is undertaken to counter the claims made by competitors
either directly or indirectly. With the help of creative advertising, the marketers
can claim the superiority of their brand. The marketer may also undertake
aggressive sales promotion to counter the competition in the market.
9. Expansion of Markets:
Successful ads results in expansion of the markets. A marketer may intend to
expand markets from the local level to the regional level, from the regional level to
the national level, and from the national level to the international level. For this
purpose, the marketer may undertake various techniques of promotion.
10. Educating the Customers:
Promotion may be undertaken to educate the customers. For instance, some of the
advertising is undertaken to educate the audience regarding the use of the product,
handling operations, and so on. Public awareness campaigns also educate the
public regarding the negative effects of noise, air and dirt pollution, social evils,
and so on.
Three Steps to Effective Product Promotions
1.Target your effort
Promotions can spur purchases by established customers, reel in new customers,
draw customers from competitors, get current customers to buy differently, and
stimulate business during slow periods. But rarely can one promotion accomplish
all of those objectives at once. As a result, you must decide which of the following
is most important so that you can target your effort:
Do you want customers to purchase more frequently, buy in greater volume, or be
attracted to new or different offerings?
Do you want to lure new customers into your business?
Do you want lapsed customers to give your business another try?
Do you want to boost business during slow hours, weekdays or particular seasons?
After carefully and thoughtfully defining the audience and the change you want
your promotion to inspire, ask yourself this question: If you offer a time-limited
incentive, is it likely that the customers you've targeted will respond? If so,
continue to the next step.
2. Plan your incentive
A well-thought-out, properly targeted promotion prompts customers to take action
by offering one of these incentives:
Price savings, including discounts, coupons or added value offers
Samples or trial offers to provide a low-risk way to try new products or services
Events or experiences to generate crowds, enthusiasm, sales, publicity
As you decide on your incentive, keep these facts in mind:
Price offers must be strong enough to compel, but reasonable enough to keep your
business out of red ink. Avoid uninspiring 10 to 20 percent discounts, but also
avoid very deep discounts unless they promote a loss leader to generate other
higher-margin sales, or unless they'll attract valuable new customers into your
business.
Coupons always make a comeback in penny-pincher markets, which means they're
hugely popular these days. Even young consumers and affluent shoppers--groups
that traditionally shun coupons--are using them, boosting the typical 1 to 2 percent
redemption rate by nearly 20 percent. Printed coupons are still the most widely
circulated, but printable coupons, distributed on web sites and via e-mail, provide a
terrific way to test price offers with business friends and fans before incurring costs
to promote the offer more widely via other media.
3. Know what you want to achieve
Promotions work especially well when consumers are in need of a jolt to take
buying action. Just be clear about what you want to achieve. Set the number of
sales you want to ring up, dollars you want to bring in, customer names you want
to collect, buying patterns you want to change, or any other objective you want
your promotion to achieve. Then determine what your desired change will mean
financially to your business.By knowing the potential bottom-line impact of your
promotion, you'll have the information you need to allocate a promotion budget,
dedicate staff time and invest the energy necessary to host a strong promotion that
will deliver business-boosting results over the time period it covers.
Case study
The Hyundai Motor is a South Korean multinational automotive manufacturer
headquartered in Seoul, South Korea. The company was founded in 1967 and,
along with its 32.8% owned subsidiary, Kia Motors, together comprise
the Hyundai Motor Group, which is the world's fifth largest automaker based on
annual vehicle sales in 2012. In 2008, Hyundai Motor (without Kia) was ranked as
the eighth largest automaker. As of 2012, the Company sold over 4.4 million
vehicles worldwide in that year, and together with Kia total sales were 7.12
million.
Hyundai is currently the fourth largest vehicle manufacturer in the world. Hyundai
operates the world's largest integrated automobile manufacturing
facility in Ulsan, South Korea, which has an annual production capacity of
1.6 million units. The company employs about 75,000 people worldwide. Hyundai
vehicles are sold in 193 countries through some 6,000 dealerships and showrooms.
Hyundai Motor, which exported its first independently-made vehicle, the Pony, in
1976, now exports over one million high-quality vehicles ranging from sedans,
SUVs, trucks and buses.
In 2010, Hyundai Motor sold about 3.6 million cars worldwide, up 16.3 percent
from 2009.
Hyundai Motor, South Korea’s largest automaker, sold 659,565 cars in the Korean
domestic market in 2010, reaching a market share of about 45 percent. Outside
Korea, the company sold about 2.9 million cars in 2010 in over 186 countries
Hyundai Motors India
Hyundai Motor India (HMI), a wholly-owned subsidiary of Hyundai Motor, is the
second-largest carmaker in India. Hyundai opened its second plant in India in
February 2008, a decade after it began operations in the country. The US$1 billion
new plant, which was completed in a record 13 months, doubles Hyundai Motor’s
capacity in India to 600,000 units a year. The new plant is located within the same
525 acre plot in Sriperumbudur, in the state of Tamil Nadu, adjacent to the first
plant.
The new plant is dedicated largely to the production of Hyundai Motor’s latest
offerings in India — the i20 and the i10, winner of the most prestigious ‘Car of the
Year’ awards from the leading automotive magazines and TV channels like
Business Standard Motoring, CNBC-TV18, NDTV Car & Bike and Overdrive
magazine.
Building the i10 (A-segment) and i20 (B-segment) cars for world markets, the
Indian subsidiary is Hyundai’s de facto global hub for small car production.
In 2009, Hyundai opened a US$25 million R&D center in HITECH City in
Hyderabad, India. The new facility will enable Hyundai to respond even more
quickly to changing customer needs across the world and will serve as an
important platform for the development of compact cars.
Product Promotion Strategies Used by Hyundai Motors
Contests
Contests are a frequently used promotional strategy. Many contests don't even
require a purchase. The idea is to promote your brand and put your logo and name
in front of the public rather than make money through a hard-sell campaign. People
like to win prizes. Sponsoring contests can bring attention to your product without
company overtness
Social Media
Social media websites such as Facebook and Google+ offer companies a way to
promote products and services in a more relaxed environment. This is direct
marketing at its best. Social networks connect with a world of potential customers
that can view your company from a different perspective. Rather than seeing your
company as "trying to sell" something, the social network can see a company that
is in touch with people on a more personal level. This can help lessen the divide
between the company and the buyer, which in turn presents a more appealing and
familiar image of the company.
Mail Order Marketing
Customers who come into your business are not to be overlooked. These customers
have already decided to purchase your product. What can be helpful is getting
personal information from these customers. Offer a free product or service in
exchange for the information. These are customers who are already familiar with
your company and represent the target audience you want to market your new
products to.
Product Giveaways
Product giveaways and allowing potential customers to sample a product are
methods used often by companies to introduce new food and household products.
Many of these companies sponsor in-store promotions, giving away product
samples to entice the buying public into trying new products.
Customer Referral Incentive Program
The customer referral incentive program is a way to encourage current customers
to refer new customers to your store. Free products, big discounts and cash rewards
are some of the incentives you can use. This is a promotional strategy that
leverages your customer base as a sales force.
Causes and Charity
Promoting your products while supporting a cause can be an effective promotional
strategy. Giving customers a sense of being a part of something larger simply by
using products they might use anyway creates a win/win situation. You get the
customers and the socially conscious image; customers get a product they can use
and the sense of helping a cause. One way to do this is to give a percentage of
product profit to the cause your company has committed to helping.
Branded Promotional Gifts
Giving away functional branded gifts can be a more effective promotional move
than handing out simple business cards. Put your business card on a magnet, ink
pen or key chain. These are gifts you can give your customers that they may use,
which keeps your business in plain sight rather than in the trash or in a drawer with
other business cards the customer may not look at.
Customer Appreciation Events
An in-store customer appreciation event with free refreshments and door prizes
will draw customers into the store. Emphasis on the appreciation part of the event,
with no purchase of anything necessary, is an effective way to draw not only
current customers but also potential customers through the door. Pizza, hot dogs
and soda are inexpensive food items that can be used to make the event more
attractive. Setting up convenient product displays before the launch of the event
will ensure the products you want to promote are highly visible when the
customers arrive.
After-Sale Customer Surveys
Contacting customers by telephone or through the mail after a sale is a promotional
strategy that puts the importance of customer satisfaction first while leaving the
door open for a promotional opportunity. Skilled salespeople make survey calls to
customers to gather information that can later be used for marketing by asking
questions relating to the way the customers feel about the products and services
purchased. This serves the dual purpose of promoting your company as one that
cares what the customer thinks and one that is always striving to provide the best
service and product.