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  • 2. PRODUCT PLANNING AND DEVELOPEMENT MODULE – IV PRODUCT Definition Product Product Product NDP Line Mix Strategy Life cycle Fig. 1.1 PRODUCT FEATURES Tangibility e.g. Car Books, Dress Material Intangible attributes e.g. Attributes Associated Attributes E.g. Brand, Package Warranty, Brand Image Exchange Value Mutually Agreed Price Product with bundles of utilities Consumer Satisfaction. Fig. 1.2 Product Features
  • 3. MODULE – IV PRODUCT CONCEPT Definition: It is a set of tangible physical attributes in an identifiable form. Or “A product is a set of tangible & intangible attributes including packaging, color, prices, manufacturing brand, which may accept as offering want satisfaction” According to Philip Kotler: “A product is anything than can be offered to market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical, services, persons, place, organization and ideas”. According to Alderson “A product is a bundle of utilities consisting of various product features and accompanying services”. According to Stanton “A product is set of tangible and intangible attributes, including packaging, color, price, manufacturer’s prestige, retailer’s prestige and manufacturers and retailers’ service which the buyer may accept as offering satisfaction or wants or needs”. Product Hierarchy or Level The Marketer should understand the need of product levels before the produce is offered in the market, since each level adds more customer value. Level 1 Core Product The core product is the fundamental services or benefits that the customer is really interested in buying. Ex. 1) A hotel guest is buying “rest & sleep”…. 2) A two-wheeler purchaser looking out for “Money & Mileage”…. The marketer must act as benefit provider. Level 2 Basic Products The marketer should turn the core product benefit into basic product by giving or telling him other extra attribute, which he can enjoy by taking the product. Ex: (1) In hotel the basic product includes bed, bathroom, room service, towel, desk, dresser etc. (2) For a bike free servicing for 1 years etc,
  • 4. Level 3 Expected Products The buyers normally expect a se of attributes when he/she purchases a product. Ex.: (1) Hotel guest expects a clean bed, T.V., phone connection, pure water supply etc., (2) For a bike mileage, pick up, disk brakes, etc. In fact almost majority of the hotels meet all these expectations. But the market has to tell the facility being provided is best not reasonable to others. Level – 4 Augmented Products Augmented Product is one where the customers wish beyond the expectation towards a particular product. The marketer prepares an augmented product to meet such expectation (beyond). For ex. A hotel can augment the product by including fresh flowers, rapid check in, express check out, fine dining and good room service. Today’s competitive environment is must concerned about the product augmentation level. In the developed countries, the competition enables the marketer to understand the buyer’s total consumption system. In fact the product augmentation is quite costly affair since, each augmentation costs the company money. For Ex.: Hotel guests may expect today remote control and other amenities in their room. This means that competitors will search for newer attributes and add to further offer. Hence, 2 points are to be considered. (1) Whether customer is ready to pay for the extra benefit. (2) How soon the benefits will turn to profit. Credit facility GUARANTEE & INSTALLATION Design WARANTY SAFETY PACKAGE PRODUCT OR SERVICE UTILITY QUALITY ACCESSORIES DELIVERY BRAND IMAGE AFTER SALES - SERVICES Fig. 1.3 The Product Concept
  • 5. NEW PRODUCT DEVELOPMENT The new product planning process is usually broken in the manageable stages for effective planning and control. There are eight stages where each stage has been labeled differently with respect to the company’s new product proposal. These six stages are explained below. 1) Stage – I (Idea Generation) Idea Generation: The first and foremost aspect of new product planning stage is to generate new ideas. It is the responsibility of the top management to decide upon major company problems pertaining to (a) Expansion of markets. (b) Technological utilization. (c) Earn higher profit margins, etc. Which call for a program of planned idea generation? Fig. 1.4 Stages of new Product Development Screening of Business Prototype commercializati Idea Generation Market test ideas analysis deveop on 1 ment 5 2 3 4 6 It is approved that customers generate the highest percentage of ideas for industrial product. For new ideas, companies mainly rely on internal sources. Especially, they seek ideas from every employee to contribute to the success of the best product and services. Companies identify customer’s needs through survey, projective test, focused group discussion, suggestions, complain letters from customers. For Ex.: The employers of Toyota Submit two million ideas over 85% are implemented. 2) Screening Ideas: At this stage, new product ideas are evaluated to determine which over warrant further study; typically a management team relies on its experience and judgment, rather than on market or competitive data, to screen the pool of ideas.
  • 6. 3) Business Analysis: A surviving idea is expanded in to a concrete business proposal. During the stage of business analysis management: (a) Identifies product features. (b) Estimates market demand, competition and products profitability. (c) Establish a progress to develop the product. (d) Assigns the responsibility for further study of the product’s feasibility. 4) Prototype development: If the results of the business analysis are favorable, then a prototype (or trial model) of the product is developed. In the case of services, the facilities and procedures necessary to produce and deliver the new product are designed and tested Ex.: That is a necessary type in developing a new roller – coaster rider for an amusement park. In case of goods, a small quantity of the trial models in manufactured to designate specification. Technical evaluations are carried out to determine whether it is to product the product. A firm may construct a prototype and subject it to lab test in order to judge whether the proposed product will endure normal – even abnormal usage. Ex.: Apple Computers puts new models through various durability tests that range from pouring soft drink on to computer to subjecting the screen to over 100 pounds of pressure. 5) Market test: Unlike the internal test conducted during prototype development, market test involved actual consumers. A new tangible product may be given to a sample of people for use in their household (in the case of a consumer good) or their organizations (a business good). Following the trial, users are asked to evaluate the product. This stage in new product development often entails test marketing, in which the product is placed on sales in a limited geographical area. Market test finding, including total sales and repeat purchases by the same customers are monitored by the company that developed the product (and perhaps by competitors as well). Some companies seek to interrogate shoppers as they examine a product. 6) Commercialization: In this stage, full-scale production and marketing programs are planned and then implemented up to this point in development Management has virtually complete control over the product. The external competitive environment becomes a major determinant of its destiny.
  • 7. NEW PRODUCT DEVELOPMENT Acquisition Basic Forms Steps in N.P.D. Patent Acquisition: Buys Internal new product 1 Idea generation rights to new product from development by buying its own 2 Idea Screening their patent holders research and development 3 Concept development & product testing License Acquisition for Contact new product 4 Marketing strategy, manufacturing various development development products. -Hiring independent 5 Business analysis researchers or new product 6 Product development developing agencies to develop 7 Test marketing specific product for the firm. 8 Commercialization PRODUCT LIFE CYCLE Introduction Growth Stage Maturity Stage Saturation Stage Decline Stage  Sales are In..  Rising sales at  Rising sales at  Stables sales  Stop increase rate decreasing volume production &  Profit is less rate diversity  Profit increase  Profit margin  Massive Ads  Reduce profit may fall  Stop giving and promotion  Continuous ads and sales activity Ads & Sales  Competition  Maintain promotion promotion through ads & market shares  Weakness sales  Watch word many  Company top  Price is promotion of promptly priority is to primary management removed increase sales  Company’s weapon “Innovate or volume priority is over Die” all market effectiveness  Product becomes obsolete 1) Introduction Stage: It is also referred to as Infant stage; the product is quite new and enters market for the first time. The investment of money is greater during this stage. At this stage, the product is introduced into market and made available to the customers with slow rise in sales. The profit margin is quite low, since there is heavy investment on promotional activities. Such as advertising, sales promotion, etc. in order to stimulate the demand for ex. Colgate herbal tooth paste.
  • 8. 2) Grow Stage: This is a second stage of PLC. In this stage, the consumers/business men accept the product, which in turn gains initial acceptance in the market place. The sales of the product gradually increases, in turn profit also increases the competitors threat is always there during this stage of PLC. Since there will be substitute product in large number. 3) The old buyers may continue with their purchase and new buyers appear. The success of the firm in this stage depends upon the efficient production of quality and network of product. For ex. Kinley Mineral Water from Coke. 3) Maturity stage: At this stage, the competition will spread over the market sales continue to increase for a while, but at a decrease rate. The marketer will incur additional cost for product modifications and improve in marketing mix programme. Eventually the advertising cost comes down, since there is a more awareness about the product over all marketing effectiveness becomes key factor in this stage of PLC. For ex. Johnson and Johnson’s many products are in maturity stage, Compton Greaves fan. 4) Decline/obsolescence period This is the best stage of PLC. The buyer 100 kg for newer and better product, which in turn affect the sales. There are many factors technological changes, consumer lifestyle, competition, etc. During this stage, the product cannot hold its position in the market. Pricing seems to be the competitive weapon. This stage of PLC ceases the need for new product and modification of other products. In case the product becomes outdated with relevance to fashion then the firm will drop the product from the existing line. Product in declining stage a) Product Category: Many products have a largest life cycle since they stay in the maturity stage for a very long period. Ex.: Cigars & Newspapers. b) Product Form: The product like typewriter have passed through four stages of PLC in contrast with their successors. c) Branded products: These have either short or long life in PLC. Several brands die early while others stay for very long period for ex. P&G believes that a strong brand name is essential for survival and success in business.
  • 9. 4) Saturation Stage: Saturation point occurs in the market when the potential customer or buyers are using the product and the company has only replacement sale. Significance: To maintain market share, prices becomes primary weapon, price may fall rapidly and profit margin may become small PRODUCT MIX Definition Width Length Depth Consistency A set of all A product mix A product mix A product mix products and refers to how refers to how refers to how items offers for many different many variants are closely relate in sale by company products line the offered of each various product in to market. company carries. product in the line. line. Ex: TATA Oil, EX:P&G’s cosmetic, products hair care transport, tea, products, health textiles care products etc. Product Line: A broad group of products intended for essentially similar users and possessing similar physical characteristics. Constitutes a “product line”. Ex.: Shirts, jackets, pant.
  • 10. PRODUCT MIX STRATEGY Product Differentiation Expansion P.M. Contraction P.M. Trading Up & and Market Alteration P.M. Down segmentation  Increase the  Eliminating  Design (Qty, Trading up Product number of an entire Quality and adding higher differentiation product line product line Composition price prestige - Promoting  Increase new  Eliminating ) product to lower awareness product in a a product  Usage product between one product line from Increasing sales company to  Operation of lower product of co. product line those of Purpose: Trading Down: competitor Ex.: Raymond’s Ex.: Alwyn, Blazers, Ties, Hero Honda To yield more - Adding a Market Shirts, etc. profit and less lower product segmentation risk then in higher price  Sellers developing a prestige recognize completely new capture every market is product segment of made up of market. many homogenous segment  Attempts to penetrate limited market in depth Product Mix Strategy: 1. Expansion of Product Mix 2. Contraction of Product Mix 3. Alteration of Product Mix 4. Trading up and Trading down 5. Product differentiation & Marketing Segmentation A set of all products and items offers for sale by company in to market.
  • 11. 1. Expansion of Product Mix: A firm may choose to expand its product mix by increasing the number of product line or depth with in the product line such as new line may be related or unrelated to products. Ex.: Raymond’s Blazers, Shirts, Ties, etc. 2. Contraction of Product mix Another product mixes strategy in to thin our product mix either by eliminating entire product line or mi eliminating a product forms the product line. Ex.: Entire product line Alwyn. Hero Honda Street 3) Alteration of Product Mix: Another product mix strategy is that of alternating or improving the design. Usage and operation of established product which yields more profit and less risky than producing or developing new product. 4) Trading Up & Trading Down a) Trading Up - Adding a higher price prestige product to lower price product hoping to increase sales of lower price product. Ex.: Mysore Sandal Gold, Lux, etc. b) Trading Down Adding a lower price product to higher price prestige product line to capture every segment of market. Ex.: Wheel detergent cake & powder. 5) Product Differentiation and Market Segmentation These are two related product strategies. Firms, who win to engage a non-price competition in market, where imperfect, employ these or monopolistic competition exists. PRODUCT DIFFERENTIATION It involved promoting awareness between one-company products to those of competitors. This strategy is used to come out of price competition. If it works the company can compete saying its product is different from or better than competitor’s product. Some company will differentiate the design of product or the only difference may be in the brand or packaging.
  • 12. Company selling reasonably standardized product like soap, cigarettes, toothpaste, etc uses this strategy. Market Segmentation Price D Demand Y Supply Price D Demand Supply 0 Quantity It is a strategy where a seller recognizes that 0his market is made up ofX Quantity many homogeneous segments. Each of these segments has different sets of wants, motivation and other characteristics. The market is seen as a series of demand curve instead of single demand curve. The seller then attempts to develop different products, each one can suit for one or more of these market segments and attempt to penetrate limited market in depth BRANDING Some brand names are so good that they contribute to the success of product, but it takes more than clever brand name to ensure success in market place. Various characteristic determining the desirability of a brand name for their goods or a service it is different to find a brand name that rates well on every attribute. Still, a brand name should have as many of the following. Suggest something about the product line. Particularly its benefit and use: Name-connoting benefits include LIC, Good Knight, etc. It should be easy to pronounce, spell and remember: Simple, short, one-syllable name such a surf tide is helpful. However, some consumers do not easily pronounce even very short names such as odonil. Be distinctive: Brand with names like Taj Hotels, being their brand names with names connoting strength and then add a description of the business for Taj hotel (It connotes the splendor of Mughal empire) Be adaptable to additions to the product line: A family name such as Lipton or ford may serve the purpose better than a highly distinctive name suggesting product benefit.
  • 13. When fast-food restaurants add breakfast to their menus, MC Donald’s name fir better than Burger King or Pizza Hut. Be capable of registration and legal protection. BRANDING’S MAINS TASK 1. Selecting brand name and logo 2. Differentiation through attribute with unique image 3. Positioning through targeting customers 4. Distribution and promotion 5. Keeping brand live and active 6. Brand proliferation through add more brand to a line SELECTION 1. Names communicate with functions or attributes of product. Ex.: Good Knight offers good sleep. 2. Bane communicating the speciality of the product Ex.: Taj Hotels – Reflecting the Moghul Splendor 3. Use of Acronyms. Ex.: BATA, Cadbury, Sony, Etc TYPES 1) Individual Brand Name Each product of the company’s given an independent brand name. Ex.: HLL individual brands − Dove, lux, pears − Surf, rin, wheel − Close up and Pepsodent 2. Family Brand Name Different product of the company is marketed under one brand name. It is also called umbrella brand name. Ex.: Amul – milk power, bread, butter 3. Company’s Name Ex.: Bajaj, BPL, Videocon 4. Middlemen’s / Store / Private Label Manufacturers leave their products for branding by the distributors/retailers Ex.: Food world, stop-shoppers stop
  • 14. BRAND EXTENSION Purpose 1. Helps the new item to acquire instant brand recognition 2. Saves cost, less than launching new brand 3. Helps strengthening of the existing brand by addition of new brands. 4. Helps build the brand in to a super brand in the mind of the customer by creating high profiles. Types 1. Extended to other items in same product line. Ex. Sunrise coffee extended to Sunrise premium and Sunrise Extra Coffee 2. Extended to items in a related product line. Ex. Maggi – Maggi Ketch up, Maggi Soup 3. Extended to items in an unrelated product line. Ex. Kingfisher, TATAs Requirement for success 1. Consistency 2. Brand area of Expertise 3. Benefit transfer to customers. PACKAGING AND LABELING Even after a product is developed and branded strategies must still be devised for other product – related aspects of the marketing mix. One such product feature and a critical one for some product are packaging. PURPOSE AND IMPORTANCE OF PACKAGING Packaging consists of all the activity of designing and producing the container or wrapper for a product.  Protect the product on its way to the customers. A package protects a product during shipment furthermore; it can prevent tampering with products, notably medications and food products, in the warehouse or the retail store. The design and size of a package can also help deter shoplifting that’s why small items, such as compact disc. Come in larger than needed packages
  • 15.  Protect the product after it is purchased Compared with bulk (that is unpacked) items, packaged goods generally are more convenient, cleaner and less susceptible to losses from evaporation, spilling and spoilage. Also “Child Proof” closures thwart children from opening container of medication and harmful products. Help gain acceptance of the product from Middleman: A product must be packaged to meet the needs of wholesaling and retailing middleman. For instance a package size and shape must be suitable for displaying and stacking the product in store. An odd – shaped neither package neither might nor attract shopper’s attention.  Help persuade consumers to buy the product: Packaging can assist in getting a product notices by customer. “The average shopper spends 20 minutes in store viewing 20 products a second”. At the point of purchase – such as super market … - the package can serve as a “Silent Sales Person”. LABELING A label is the part of a product that carries information about the product and the seller. A label may be of a package or it may be a tag attached to the product. TYPES OF LABELS • A brand label is simply the brand alone applied to the product or package. Some oranges stamped, and some clothes carry brand label. • A descriptive label gives objective information about the product’s use, construction, care, performance and other pertinent features. On a descriptive label for a can of corn, there will be statements concerning the type of corn, specification for product size, product code number, etc. • A Grade label: Identifies the product judged quality with a letter, number or word and sometimes also graded A, B…… • Brand Labeling is an acceptable form of labeling but it does not give sufficient information to a buyer.