Product MGMT-6 Sept

8/8/2019 Product MGMT-6 Sept

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AMITY GLOBALBUSINESS SCHOOL Chandigarh

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Product ManagementModule I

Mr. Amit Chopra


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Product Defined

A Product is anything that can b e offered in the market for attention, acquisition, use or consumption that might satisfy a w ant or a need P hilip Kotler

A Product is a b undle of utilities consisting of v arious

product features and accompanying ser v icesW. Alderson

A product

is

a

set

of

tangi

ble

&intangi

ble

attri

butes

including packaging, colour, price, manufacturers prestige,

retailers prestige, manufacturers & retailers ser v ice.W.J. Stanton


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Ch aracteristics of a Product :Utility.

Saleability.Profitability.Acceptability in law.


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A ugmented product

Expected product

Basic product

C ore Product

Levels of Products :Potential product


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Levels Defined on basis of Utility :C ore Product : Benefit customer receives fromuse of a product

Basic Product:

It includes Packaging &Branding to make product presentable.Expected Product : It includes design,attributes, fatures.A

ugmented Product:

Addition of Warantee/ After sales service.Potential Product : Complete product withadvanced technology future development.


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Product Management : Conceptual Aspects

Classification of ProductsConcept of Product LineProduct Mix DecisionsProduct Life Cycle (PLC)


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C lassification of Products :

Durable/ Tangible GoodsConsumer GoodsIndustrial Goods


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A. Durable/ Tangible Goods

Non Durable Goods : Tangible goods

normally consumed in one or few usese.g. soap, salt etc.Durable Goods : Tangible goods which

can be used for many years e.g. T.V.,washing machines etc.Services : Intangible / Inseperable innature e.g. Airline, banking etc.


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B . C onsumer Goods :C onvenience Goods : frequently purchased withminimal effort, low money involved, non availability leadsto frequent brand switching e.g. grocery items, soap,tooth brush etc.Impulse Goods : Purchased as consumers get attractede.g. Gift items, Toys etc.S h opping Goods : Consumers make rational decisionsto select on basis of suitability, quality e.g. Furniture,Home appliances etc.Speciality Goods : Sophisticated products/ expensivewith special characteristics e.g. TV, laptop etc.Unsoug h t Goods : Unplanned purchases e.g. LifeInsurance


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C . Industrial Goods :Raw Materials : Unfinished Goods consumedduring a manufacturing process e.g. raw cotton,iron,C apital Goods : Material used to produce other products for consumption e.g. machinery, tools,equipments etc.MRO (Maintenance/ Repair & Operatinggoods ): Used to assist in operation of anorganisation & not production of goods e.g.pumps, pipes, safety equipment etc.


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Product Line & Product Mix

Product Item


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Product Line : Closely related products /satisfy a class of need/ marketed by sametype of outlets e.g. baby clothes, nurseryequipments, toiletries etc.Product Mix : Entire range of productsoffered for sale by a company e.g. Bajaj

Electricals produces bulbs, fluorescentlights, mixes & grinders, pressure cookersand many other electrical appliances.


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Product LineProduct Line

LA MPSLA MPSTableTableCeilingCeilingTrackTrackDeskDesk

SelectedSelectedA BC FurnitureA BC FurnitureC o . ProductsC o . Products


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Product Mix

LA MPSLA MPSTableTableCeilingCeilingTrackTrackDeskDesk

TA BLESTA BLESKitchenKitchenDining RoomDining RoomEndEndCoffeeCoffeeOutdoor Outdoor ConferenceConferenceComputer Computer

CH A IRSCH A IRSDining RoomDining RoomLiving RoomLiving RoomBedroomBedroomOutdoor Outdoor DeskDesk

Product Product

Line 1Line 1

Product Product

Line 2 Line 2

Product Product

Line 3 Line 3

SelectedSelectedA BC FurnitureA BC FurnitureC o . ProductsC o . Products


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Length of Product Line :

LA

MPSLA

MPSTableTableC eilingC eilingTrackTrackDeskDesk

TA

BLESTA

BLESKitc h enKitc h enDining RoomDining RoomEndEndC offeeC offee

Outdoor Outdoor C onferenceC onferenceC omputer C omputer

CH AIRS

CH AIRSDining RoomDining Room

Living RoomLiving RoomBedroomBedroomOutdoor Outdoor

DeskDeskSelectedSelectedA BC FurnitureA BC FurnitureC o . ProductsC o . Products

Product Product

Line 1Line 1

Product Product

Line 2 Line 2

Product Product

Line 3 Line 3


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Width of a Product Mix :

LA MPSLA MPSTableTableC eilingC eilingTrackTrackDeskDesk

TA BLESTA BLESKitc h enKitc h enDining RoomDining RoomEndEndC offeeC offeeOutdoor Outdoor C onferenceC onferenceC omputer C omputer

CH A IRSCH A IRSDining RoomDining RoomLiving RoomLiving RoomBedroomBedroomOutdoor Outdoor DeskDesk

Product Product

Line 1Line 1

Product Product

Line 2 Line 2

Product Product

Line 3 Line 3

SelectedSelectedA BC FurnitureA BC FurnitureC

o.

ProductsC

o.

Products


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Lengt h of Product Line : Number of products which constitute broad group of products.Widt h of Product Mix : Total number of Product Lines carried by a firm.Dept h of a Product mix : Averagenumber of items offered by a companywithin each product line.


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Example : Product line Product Mix at Gillette


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Product Line : Related C oncepts

Line ExtentionLine ModernizationLine FeaturingLine Pruning


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PLC (Product Life Cycle)

To say t h at a product h as a life cycle asserts following :

Products have a limited life. Product sales pass through distance stages, each

posing different challenges, opportunities, andproblems to the seller.

Profits rise and fall at different stages of theproduct life cycle.

Products require different marketing, financial,manufacturing, purchasing, and human resource

strategies in each life-cycle stage.


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Stages of PLC


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Marketing Strategy during t h e PL C


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Development StageNo sales revenue during this stageComponents of the product concept : An understanding of desired uses and benefits A description of the product The potential for creating a complete product line

An analysis of the feasibility of the product conceptCustomer needs should be discerned b efore developingmarketing strategy


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Introduction StageBegins when development is completeEnds when customers widely accept the productMarketing strategy goals during this stage : Attract customers by raising awareness and interest Induce customers to try and buy Engage in customer education activities Strengthen or expand channel and supply relationships Build on availability and visibility Set pricing objectives


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Growth Stage 1

Be ready for sustained sales increasesRapid increase in profitability early in the growth stage thatdecreases at the end of this stageLength depends on nature of product and competitivereactionsTwo strategies : (1) Establish a strong, defensible marketing position (2) Achieve financial objectives


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Growth Stage 2Marketing strategy goals in this stage : Leverage the products perceived differential

advantages Establish a clear product and brand identity Create unique positioning Maintain control over product quality

Maximize availability of the product Maintain or enhance the products profitability to

partners Find the ideal balance between price and demand

Keep an eye focused on the competition


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Maturity stage 1

Few, if any, new firms will enter the marketStill an opportunity for new product features and variationsTypically the longest stage in the product life cycle


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Maturity Stage 2Four general goals in this stage : (1) Generate Cash Flow (2) Hold Market Share (3) Steal Market Share (4) Increase Share of Customer Four options to achieve these goals : (1) Develop a new product image (2) Find and attract new users to the product (3) Discover new applications for the product

(4) Apply new technology to the product


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Decline StageTwo options : (1) Attempt to postpone the decline (2) Accept its inevitability

HarvestingDivesting

Factors to be considered during this stage:

Market segment potential The market position of the product The firms price and cost structure

The rate of market deterioration


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Examples of Products atdifferent Stages :

Introduction : 3 rd generation mobile phones, e-ConferencingGrowt h : Portable DVD players, e-mails, smartcardsMaturity : PCs, Faxes, Credit cardsDecline : Typewriters, Dial phones


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Benefits of PLC concept :

To forecast future behavior of salesAs a tool of analysis to assist in the formulationof marketing strategiesTo identify deviations from normsTo assist in a firms product portfolio


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Product Planning :It involves decision making of the company with regardto (a) Introduction of new products, (b) Improvisation of existing products to meet market requirements &expectations (c) eliminating unprofitable products fromcompanys product line (d) produce products which cankeep pace with environment & market changes.It consists of activities which enables to determine whatshould constitute companys line of products.It is aimed at ensuring that a firms product is designedto strengthen companys profit position.Its an ongoing process & should be dealt with utmostcare.


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New Product Development :

It is a process designed to develop, test &consider the viability of products which are newto the market.A New Product includes :- a) a new product for anew market b) existing product modified c)

existing product introduced in a new market d) anew product replacing the existing product


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Why NPD ?To satisfy consumers (demand)To maintain margins (market share)To expand business (growth)To add to product portfolioDefeat competitionTaking advantage of technologyPLC ( declining stage)Enhance relations with distributorsAdding to firms reputation as leading edge company.As diversification Strategy


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NPD Process : 1 . Idea Generation2 . Idea Screening

3. C

oncept Development & Testing

5 . Product Development

4 . Business A nalysis

6 . Test Marketing

7 . C ommercialization


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Idea Generation :

Its a continuous systematic search for new

product opportunities.Generally 1 out of 200 product ideas reach their objectives.Ideas may originate through following sources :-

C ustomers, C ompetitors, C onsultants, DistributionCh annels, Employees, Management, Sales/Marketing personnel, R&D


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Screening of Ideas :

Here unsuitable, poor & otherwise unattractedideas are weeded out from further actions.

Rigorous evaluation is necessaryScreening decisions are based on general

assessment of demand, resources & competitiveposition.


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C oncept Development & Testing :

Product idea is converted to product concept i.e.meaningful consumer terms of product imageCustomer is presented with the proposedproduct to measure the attitudes & intentions atthis early stage of development.It helps in judging the robustness of the newproduct & assessing its commercial appeal.


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Business Analysis :

Checking for business attractiveness of the

proposal.Deciding on whether corporate resources wouldbe committed to development of the newproduct.

Decisions on business analysis are based onfollowing considerations : demand, profitabilityand return on investment.Exploring the viability of the project and whether

it will satisfy companys objectives


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Product Development :

Product idea is given a physical form.Once the management decides to go ahead withthe product idea, following activities areundertaken :- establishing development projectsfor the products , building products with changedspecifications if required & completing laboratoryevaluation.


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Test Marketing :

Itmeans testing the marketing mix of a product onselected samples at different prices so as to check theviability of product launch on a larger scale.Main objectives are 1) evaluating the completemarketing plan including advertising, distribution, sales &pricing. 2) forecast likely sales 3) check for newapplications 4) understand behavior of competition 5 )

Customer acceptability.Its Limitations are a) Its a costly affair b) It might notgive a conclusive result c) being time consuming manyfirms avoid it too be the 1 st in the markete .g . HLL test marketed Lyril soap at Hyderabad &Lucknow.


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C ommercialization(Product Launch) :

Most critical stage which requires careful handling.There should be intensive advertising on large scalewith preferably announcement dates & centers of launch.Launching at selective places & then covering other

areas gradually.Coordination of production & selling programmes .Finalization of marketing plans .

Ch ecking results at regular intervals.


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JAZZ launched by Honda SIELin Delhi on 10th June .


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Product Failure-Why ?

Poor Timing

Market ConditionsPoor PlanningIneffective Branding

Technical/ Design problemsInsufficient DistributionPoor PromotionWrong Positioning


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Product Positioning

Position is, as the word suggests, a perception

in someones mind and, without getting tootechnical about it, positioning is all that you doto create that perception.the process by which marketers try to create animage or identity in the minds of their targetmarket for its product, brand or organization.It indicates how company wishes to compete inthe market place.The concept was introduced by Al Ries & Jack

Trout in early 197

0s.


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Role of positioning :

To strengthen power of messages directedat customers.To target a particular segment.

To ensure that the product is differentiatedin minds of customer.


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Perceptual Mapping

Visual representation of a brand within a specificmarket place showing its positioning relative tocompetitors.Key variables that differentiate products e.g.

price, value, quality, design, durability are used.It involves market research to see how thebrands are perceived.Plotting is done on a two dimensional format.


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Perceptual Map of Supermarkets

Price

Range


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5 0

Examples :

Photo CopyingLuxury CarsFuel efficient CarsFairness CreamsChildcare Products


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Product Portfolio A pproac h :What is Product Portfolio ? It is the variety of products

manufactured or supplied by an organization ideally balanced so that someare matured and some are still in their growth stage.

What is product Portfolio Approach ? Its astrategic tool to examine the goods manufactured or supplied by a companyto assess future marketing strategies. Here the products market growth rateand its relative market share are taken into consideration for determiningthe marketing strategies.


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BC G matrix : An introduction

It is a portfolio management tool developed byBruce Henderson of the Boston Consulting Group in early 1 97 0s.Here the products are classified into 4categories based on combinations of marketgrowt h & market s h are .


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BC G matrix : The 4 Categories

A : Stars products in marketsexperiencing high growth rates with a highor increasing share of the market

- Potential for high revenue growth


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B :C

ash

C

ows : High market share Low growth markets

maturity stage of PLC

Low cost support High cash revenue positive cash flows


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C : Dogs: Products in a low

growth market

Have low or decliningmarket share (declinestage of PLC)

Associated withnegative cash flow

May require largesums of money tosupport

Is your product starting toembarrass your company?


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D : Problem Ch ild(Question Marks)

Products having a lowmarket share in a highgrowth marketNeed money spent todevelop them

May produce negativecash flowPotential for the future?

P roblem child worth spendinggood money on?


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BC G Matrix :Problem Child Stars

Dogs Cash Cows

Low

High

High

Market Share

MarketGrowth

Low


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BCG matrix : ImplicationsDogs:

Are they worth persevering with? How much are they costing?

Could they be revived in some way? How much would it cost to continue

to support such products?

How much would it cost to removefrom the market?

Its best to sell off or diversify to some ot h er marketsso t h at t h e resources could be properly utilized .


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Implications:Problem Ch ild (Question Marks): What are the chances of these products securing a hold

in the market? How much will it cost to promote them to a stronger position? Is it worth it?

Its best to either acquire competitor's units by makingheavy investments or promote these productsextensively so that the firm acquires a significantmarket share.


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Implications:Stars: Huge potential

May have been expensive to develop Worth spending money to promote Consider the extent of their product life cycle in decision making

The organisation effort should be to protect its presentstatus and improve it further by getting new users or by suggesting new applications for these products.


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Implications:C as h C ows: Cheap to promote Generate large amounts of cash

use for further R&D? Costs of developing and promoting

have largely gone Need to monitor their performance

the long term? At the maturity stage of the PLC?

Organisation should try to retain its dominant marketposition by keeping high quality of the product &investing in further R&D for further improvements inthe product.


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Need / Importance of BCG matrix : Helps management to take right decisions onfuture course of actions.

Enables mangers in adopting right marketingstrategies.It ensures that resources are optimally utilized.It helps in making projects more profitable to theorganization.It helps maintaining the competitive position.It communicates priorities & developing focus.Shows the alignment of projects with businessstrategy.


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Drawbacks of BCG Matrix :How to define a market ?

Problems in gathering data on marketshare.A high market share doesnt lead to

profitability all the times.Only 2 dimensional approach.Market growth is not the only indicator for

Documents

Product MGMT-6 Sept