What is a product?
M.Jakkaraiah
Asst.professor
PBR VITS
KAVALI
Welcome
What is a product ?
A product is anything that can offered to market for attention,
acquisition ,use, consumption that might satisfy a want or
need.
PRODUCTS
GOODS
SEVICES
Tangible products
Intangible products
Features of product
Features of product
Associated attributes
Intangible attributes
tangibility
Exchange value
Customer satisfaction
Levels of product
Unexpected features
Luxury features
Expected features
Basic features
Basic product
Potential product
Augmented product
Expected product
Generic product
Core benefit
Classifying Products
Durable products
Consumer products,
Business products
Durable products
Durable
Non-durable
Services
Consumer Products
Convenience
Products
Shopping
Products
Specialty
Products
. . To satisfy information needs & buying motives
Unsought
Products
CONVENIENCE GOODS
Staples -
Emergency goods
Impulse purchases
Convenience goods consumers use minimal effort for frequently
purchased low cost items
Shopping Products
Shopping goods - consumers make a considerable effort to
evaluate
Consumers make product comparison(s),
They seek information before purchase,
they are not impulsive
Moderate substitutions are made
Products last a considerable time
Monetary & social costs may be high
TVs As a Shopping Product (2007 ---- 1950s)
Attribute-based Price-based
PICTURE SIZE
WARRANTY
REMOTE CONTROL
LOW PRICE
Plasma LCD screen
observation
Homogeneous products select on price Heterogeneous products
select on benefits
Business products
Materials and parts
Raw materials and parts
Manufactured materials and parts
Capitals items
1.installation
2.equiptment
Suppliers and business services
1.maitainance and repair items
2.operating suppliers
Raw materials
Farm products
Natural products
Manufactured materials and parts
Capitals items
1.installation
2.equiptment
Suppliers and business services
1.mainteinance and repair items
2.operating suppliers
Product Mix & Product Line
Product Item
Product mix
Width
Length
Depth
Consistency
Product Mix
The assortment of products that a company offers to a market
Width how many different product lines?
Length the number of items in the product mix
Depth The no. of variants offered in a product line
Consistency how closely the product lines are related in
usage
LAMPS
Table
Ceiling
Track
Desk
Product Line
Product Line & Product Mix
Product
Line 1
Product
Line 2
Product
Line 3
TABLES
Kitchen
Dining Room
End
Coffee
Outdoor
Conference
Computer
CHAIRS
Dining Room
Living Room
Bedroom
Outdoor
Desk
LAMPS
Table
Ceiling
Track
Desk
Product Mix
CONCEPTUALIZATION OF PRODUCT MIX
Tata Motors
Tata Steel
Tata Tea
BUS
LORRY
PLATES
GEMINI
TEA
Tata DTH
BARS
CARS
WIDTH
D
E
P
T
H
# of lines = 4
# of items = 12
A wide product mix facilitates one stop shopping
Home Depot,
Lowes
PRODUCT MIX EXAMPLE
HAIRCARE
SALTYSNACKS
DENTALCARE
SOFTDRINKS
Shampoo
Conditioner
Hair Spray
Chips
Nuts
Crackers
Tooth Brush
Tooth Paste
Dental Floss
Cola
Ginger Ale
Root Beer
Width (# of product lines)
Depth (# of items)
Factors influencing change in product mix
Changes in market demand
Cost of production
Quantity of production
Changes in company desire
Competitors actions and reactions
Product mix stratagies
Expansion of product mix
Contracting or dropping the product mix
Alteration of existing product s
Trading up/trading down stratagies
Product management
Planning
Forecasting
Marketing
of products of a company is product management
Objectives of product management
To design product stratagies
To spot market opportunities
To develop strategies for each stage of product life cycle
To generate new product ideas
New product planning
New product : New to the company even it is in the world
Types of new products
1.New to the world
2.New to the firm
3.Addition to existing product line
4.Improved and revised
5.Reduction in cost
Importance of new product
To meet consumer needs and wants
To meet competition
To increase profits
To avoid threats from substitutes
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
Process to spot good ideas and drop poor ones
Technically feasibility
Financially viable
Step 2. Idea Screening
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One
Step 4. Marketing Strategy Development
Part Two - Short-Term:
Products Planned Price
Distribution
Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If Yes, Move to
Product Development
If No, Eliminate
Product Concept
Step 7. Test Marketing
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Test Marketing
This CTR relates to the discussion on pp. 282-284.
Test Marketing
Standard Test Markets. Under this approach, the company finds a
small number of representative test cities, conducts a full
marketing campaign in those cities, and then measures and evaluates
performance. This provides a real world picture of how the product
performs. But there are drawbacks. Standard testing is expensive,
long, and tips competitors to company strategy.
Controlled Test Markets. This approach uses a research firm that
has designated store placement space for their clients.
Participating stores receive a fee. Some services like Scantrack
(Nielsen) and BehaviorScan (IRI) offer computerized monitoring of
individual consumer panels whose television viewing is
cross-tabulated with store purchases. Controlled testing is quicker
and less expensive than standard testing. Concerns revolve around
representativeness of the test markets (small size) and tipping off
competitors.
Simulated Test Markets. This approach creates a simulated
shopping environment by the company or research firm. Consumers are
exposed to promotions and then given money to shop with. Purchase
patterns are observed and consumers are interviewed afterward by
researchers. Simulated test marketing is inexpensive and quick.
Representativeness and demand characteristics are concerns and this
approach might be used as a pretest for a go-no go decision on
further testing.
Step-8 commercialization
Introducing the product into the market
Product Life Cycle
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and
Profits ($)
The Product Life-Cycle
This CTR corresponds to Figure 9-2 on p. 288 and relates to the
material on pp. 287-293.
Instructors Note: This CTR can be used to overview the life
cycle concept. Strategies appropriate for each stage are discussed
on the following CTRs.
Product Life Cycle Stages
Product Development. Development begins when the company finds
and develops a new product idea. During development the product has
costs but no sales. Development costs must be strategically weighed
against the projected length of the product's PLC.
Introduction. During the introduction of new products initial
sales growth is slow as the market is just becoming aware of the
product. Profits are usually nonexistent at this stage due to heavy
promotional spending.
Growth. This stage is characterized by rapid market acceptance
of the product and increasing profits.
Maturity. In maturity there is a slowdown in sales growth as the
product has achieved acceptance by most potential customers.
Profits may level off or decline as marketing costs increase to
defend existing market share.
Decline. In this period sales begin to fall off and profits
decline dramatically.
Introduction Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
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
Introduction. In this stage marketers spend heavily on
promotions to inform the target market about the new product's
benefits. Low or negative profits may encourage the company to
price the product high to help offset expenses. companies can
concentrate on skimming strategies to generate high profits now or
on penetration strategies to build market share and dominant the
market for larger profits once the market stabilizes.
Product Life Cycle Strategies
Product Life-Cycle Strategies
This CTR relates to the material on pp. 289 and 293.
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
Product Life-Cycle Strategies
This CTR relates to the material on pp. 289-290 and 293.
Product Life-Cycle Strategies
Growth. In this stage the company experiences both increasing
sales and competition. Promotion costs are spread over larger
volume and strategic decisions focus on growth strategies.
Strategies include adding new features, improving quality,
increasing distribution, and entering new market segments.
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
Diversify brand and models
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
Product Life Cycle Strategies
Maturity. In this stage the company must manage slower growth
over a longer period of time. Strategic decisions made in the
growth stage may limit choices now. Marketing managers must
proactively seek advantage by either market modification to
increase consumption, product modification to attract new users
(quality, feature, and style improvements), or marketing mix
modification in an attempt to improve competitive position.
Product Life-Cycle Strategies
This CTR relates to the material on pp. 290-292 and 293.
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
Product Life-Cycle Strategies
This CTR relates to the material on pp. 292-293.
Product Life Cycle Strategies
Decline. In this stage the costs of managing the product may
eventually exceed profits. Rate of decline is a major factor in
setting strategy. Management may maintain the brand as competitors
drop out, harvest the brand by reducing costs of support for short
term profit increases, or drop the product (divest) altogether.
Introduction Stage-Strategies
PRODUCT
PRICE
SALES PROMOTION
Offer a basic product
Cost +profit
Heavy expenditure to create trails
Distribution
Build selective distribution
Advertising
Build product awareness among early adopters and dealers
Introduction. In this stage marketers spend heavily on
promotions to inform the target market about the new product's
benefits. Low or negative profits may encourage the company to
price the product high to help offset expenses. companies can
concentrate on skimming strategies to generate high profits now or
on penetration strategies to build market share and dominant the
market for larger profits once the market stabilizes.
Product Life Cycle Strategies
Product Life-Cycle Strategies
This CTR relates to the material on pp. 289 and 293.
Growth Stage of the PLC
Product
Price
Offer product extensions, service, warranty
penetrate Price
Distribution
Build intensive distribution
Advertising
Build awareness and interest in the mass market
Sales promotion
Consumer demo
Product Life-Cycle Strategies
This CTR relates to the material on pp. 289-290 and 293.
Product Life-Cycle Strategies
Growth. In this stage the company experiences both increasing
sales and competition. Promotion costs are spread over larger
volume and strategic decisions focus on growth strategies.
Strategies include adding new features, improving quality,
increasing distribution, and entering new market segments.
Maturity Stage of the PLC
Sales promotion
Product
Price
Diversify brand and models
Price to match or beat competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
Encourage to brand switching
Product Life Cycle Strategies
Maturity. In this stage the company must manage slower growth
over a longer period of time. Strategic decisions made in the
growth stage may limit choices now. Marketing managers must
proactively seek advantage by either market modification to
increase consumption, product modification to attract new users
(quality, feature, and style improvements), or marketing mix
modification in an attempt to improve competitive position.
Product Life-Cycle Strategies
This CTR relates to the material on pp. 290-292 and 293.
Decline Stage of the PLC
Product
Price
Phase out weak items
Cut price
Distribution
Go selective: phase out unprofitable outlets
Advertising
Reduce to level needed to retain
hard-core loyal customers
Sales promotion
Reduce to minimal level
Product Life-Cycle Strategies
This CTR relates to the material on pp. 292-293.
Product Life Cycle Strategies
Decline. In this stage the costs of managing the product may
eventually exceed profits. Rate of decline is a major factor in
setting strategy. Management may maintain the brand as competitors
drop out, harvest the brand by reducing costs of support for short
term profit increases, or drop the product (divest) altogether.
Causes of New Product Failures
Overestimation of Market Size
Product Design Problems
Product Incorrectly Positioned, Priced or Advertised
Costs of Product Development
Competitive Actions
Technical problems
Poor planning
Inadequate promotion
Poor packing
Fault pricing
CONSUMER ADOPTION PROCESS
Adopt
Trail
Evaluation
Interest
Awareness
CONSUMER ADOPTION PROCESS
Potential product
Augmented product
Expected Product
Generic product
Core Benefit
Classifying products
Products fall into two general categoriesconsumer products and
business products.
Product line and product mix
A product item is a specific version of a product that can be
designated as a distinct offering among an organizations
products.
A product line is a group of closely related product items that
are considered a unit because of marketing, technical, or end-use
considerations.
Marketers must understand buyers goals if they hope to come up
with the optimal product line.
Specific items in a product line usually reflect the desires of
different target markets or different consumer needs.
A product mix is the composite, or total, group of products that
an organization makes available to customers.
