SEMESTER - II

MARKETING MANAGEMENT

UNIT - II

What is product?
Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Product: A bundle of attributes The Total Product Tangible attributes: materials, size, weight, design, packaging, performance, comfort Intangibles: brand image, styling, other benefits (installation, delivery, credit, warranty, after-sale service, return policy)

Service and Experience

ServiceAny activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Product Related Global Drivers

Demand Drivers Higher expectations More information Higher switching costs Full-service expectations Supply Drivers Fast-paced innovations Frequent product modifications Manufacturing rationalization Outsourcing coordination Strategic Alliances

Global Product Decisions

Existing Products Product phase - out Product modification Product introduction into new markets Product performance management New Product Product development Product introduction Product performance management

Global Product Development

1. 2. Standardization- developing same product for multiple countries Product Adaptation- modifying product to reflect characteristics of a market

Components of the Market Offering

Value-based prices

Attractiveness of the market offering

Product features and quality

Services mix and quality

International Product Policy

1. 2. 3. 4. 5. 6. 7. What to Sell ? International Product Strategies Standardization versus Customization Managing an International Brand Portfolio Product Packaging and Labeling Managing International Product Lines Timing of Foreign Entry

1. What to Sell ?
The international marketer needs to determine what the market offering should be in a foreign market : Defining the product offering Products versus Services/Rights

Levels of Product

Product Planning and Development

Consumer Goods Classes
Consumer products can be classified by the buying behaviour of the consumers: Convenience goods are bought with little time and effort, such as milk, bread, a chocolate bar. Shopping goods are those where extensive comparison is the norm-- cars, furniture, clothes. Specialty goods are those for which consumers have a strong brand preference. BMW, BENZ Unsought goods are those now unknown to the consumer or, if known, undesired.

Classifying Business Products

Raw materials: unprocessed, become part of other manufactured products Manufactured parts and materials: processed products that become part of other products Installations: major buildings and equipment Accessory equipment: used in operations, include computers, desks, tools Operating supplies: low value, used by most firms, convenience products for businesses

Consumer-Goods Classification
Convenience Products
Buy frequently & immediately > Low priced > Many purchase locations > Includes: Staple goods Impulse goods Emergency goods

Shopping Products
Buy less frequently > Gather product information > Fewer purchase locations > Compare for: Suitability & Quality Price & Style

Specialty Products
Special purchase efforts > Unique characteristics > Brand identification > Few purchase locations

Unsought Products
New innovations > Products consumers dont want to think about. >Require much advertising & personal selling

Consumer-Goods Market Testing

Simulated Test Market

Test in a simulated shopping environment to a sample of Sales- consumers.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

Wave Research
Test offering trail to a sample of consumers in successive periods.

Standard Test Market

Full marketing campaign in a small number of representative cities.

Ansoffs Matrix (Product/Market Matrix) Existing Markets New Markets

Market Penetration

Market Development

New Products

Product Development

Diversification

New Product Development

Development of original products, product improvements, product modifications, and new brands through the firms own R & D efforts.

What is new product?

Original products Product improvements Product modifications New brands that the firm develops through its own research and development efforts

Major stages in new product development

1. 2. 3. 4. 5. 6. 7. 8. Idea generation Idea screening Concept development and testing Marketing strategies Business analysis Product development Test marketing Commercialization

The New Product Development Process

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

Sales and Profits Over A Products Life

Product Life-Cycle Strategies

PLC Stages
1. Product development Introduction Growth Maturity Decline

Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative

Product Life-Cycle Strategies

PLC Stages

Product development 2. Introduction Growth Maturity Marketing Decline Strategies: Introduction Stage

Low sales High cost per customer acquired Negative profits Innovators are targeted Little competition

Product Offer a basic product Price Use cost-plus basis to set Distribution Build selective distribution Advertising Build awareness among early adopters and dealers/resellers Sales Promotion Heavy expenditures to create trial

Four Introductory Marketing Strategies

Promotion
High High Rapidskimming strategy Low Slowskimming strategy

Price
Low
Rapidpenetration strategy Slowpenetration strategy

Product Life-Cycle Strategies

PLC Stages
3. Product development Introduction Growth Maturity Decline
Marketing Strategies: Growth Stage
Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted Growing competition

Product Offer product extensions, service, warranty Price Penetration pricing Distribution Build intensive distribution Advertising Build awareness and interest in the mass market Sales Promotion Reduce expenditures to take advantage of consumer demand

Product Life-Cycle Strategies

PLC Stages
4.

Product development Introduction Growth Maturity Decline

Sales peak Low cost per customer High profits Middle majority are targeted Competition begins to decline

Marketing Strategies: Maturity Stage

Product Diversify brand and models Price Set to match or beat competition Distribution Build more intensive distribution Advertising Stress brand differences and benefits Sales Promotion Increase to encourage brand switching

Product Life-Cycle Strategies

PLC Stages
5. Product development Introduction Growth Maturity Decline
Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition

Marketing Strategies: Decline Stage

Product Phase out weak items Price Cut price Distribution Use selective distribution: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyalists Sales Promotion Reduce to minimal level

2. International Product Strategies

Straight Extension
The firm adopts the same policy used in its home market.

Product Adaptation
The company caters to the needs and wants of its foreign customers.

Product Innovation
The firm designs a product from scratch for foreign customers.

3. Standardization versus Customization

Although the products sold abroad generally are not identical to their domestic counterparts, there is always a core of expertise that the firm can carry abroad. Principle " All Business is local.

Developing New Products for Global Markets

Identifying New Product Ideas 4 Cs: Company Customers Competition Collaborators New Product Development (NPD) Process Screening Concept Testing Conjoint Analysis To Standardize or not to Standardize Test Marketing Timing of Entry: Waterfall versus Sprinkler Strategies Waterfall Strategy: Global phased rollout where new products trickle down in a cascade-like manner Sprinkler Strategy: Simultaneous worldwide entry

Global Product Strategies

Three global strategies to penetrate foreign markets: Extension strategy Adaptation strategy Invention strategy

Five strategic options for the global marketplace: Strategic Option 1: Product and Communication Extension -- Dual Extension Strategic Option 2: Product Extension -- Communications Adaptation Strategic Option 3: Product Adaptation -- Communications Extension Strategic Option 4: Product and Communications Adaptation -- Dual Adaptation Strategic Option 5: Product Invention

New Product Adoption and Diffusion

Adoption process: The decision-making activity of an individual through which the new product is accepted. Diffusion: The process by which an innovation is spread through a social system over time.

Stages in the Adoption Process

1. 2. 3.
4. 5. 6.

Awareness: customer is exposed to the product Interest: interest and information seeking Evaluation: assessment of the advantages and disadvantages of the new product Trial: customer tries the product in low-risk situation; may be a sample or test drive Adoption: customer decides to buy the product Confirmation: customer decides to stay with the product; attempts dissonance reduction

Adopter Categorization of the Basis of Relative Time of Adoption of Innovations

Researchers have identified five categories of individual adopters for new products:

Innovators 3% of the market. Early adopters 13% of the market. Early majority 34% of the market. Late majority 34% of the market. Laggards 16% of the market.
In addition, some individuals non adopters never accept the innovation.

34% Early majority

2 1/2% Innovators

34% Late majority 16% Laggards

13 1/2% Early adopters

Time of adoption innovations

Multinational Diffusion
The Adoption of new products is driven by three types of factors: Other country characteristics used to Individual Differences predict new product penetration patterns Personal Influences include: Product Characteristics
1. Relative advantage 2. Compatibility 3. Complexity 4. Trial ability 5. Observability

Homogeneous population Lead countries Lag countries

Probability of Success
Overall probability of success

Probability of technical completion

Probability of commercialization given technical completion

Probability of economic success given commercialization

4. Managing An International Brand Portfolio

5. Product Packaging and Labeling

Protection
Climate Transport & Handling Buyer's slow usage rate Lack of storage facilites

Promotion
Merchandising ( income level, shopping habits) Minimum breakage / theft Ease of handling Multilingual Labels to Convey an International Image

Legal Constraints
Recycling of Packaging (Duales System, Eco-Emballage) Regulations on consumer info. (Origin, weight, ingredients)

6.Managing International Product Lines

Deciding on the right individual product for world markets is only one aspect of product policy. The next step is to decide what family of products should be offered

International Product Line Planning

The foreign product line is frequently smaller than the domestic line because of financial and market limitations. By introducing a limited product line into foreign markets the firm can test the market before taking a bigger plunge.

Product-line decision
Product mix Product-line analysis Product line length

Product-line analysis
Sales and profit Market profile

Product mix(assortment)
The set of all products and items that a particular seller offers for sale. A companys product mix has a certain width, length, depth, and consistency. Width: how many different product lines. Length: the total number of items. Depth: how many variants are offered of each product in the line. Consistency: how closely related the various product lines are in end use, production requirement, distribution channels, or some other way.

Product Mix
Width - number of different product lines

Length - total number of items within the lines

Product Mix all the product lines offered

Depth - number of versions of each product

The Total Product

Product quality

Sellers services Sellers reputation

Physical characteristics of goods

Price

Colour

Brand

Product warranty Design

Packaging

Product-Line Length
Line Stretching Line Filling Line Modernization Line Featuring & Line Pruning

Line stretching
1. 2. 3. Downmarket stretch Upmarket stretch Two-way stretch

Line filling
Qualityprice analysis

Two-Way Product-Line Stretch: Marriott Hotels

Economy
High

Standard

Quality

Good

Superior
Marriott Marquis (Top executives)

Price

Above average Average

Fairfield Inn Low (Vacationers)

Marriott (Middle managers)

Courtyard (Salespeople)

Brand
Brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and differentiate them from those of competitors.

User

Culture

Personality

Attributes

Benefits

Values

Types of Brands
1. 2. 3. 4. Global brand Tiered branding Co-branding Brand extensions

Brand Positioning
Perceived fit between a particular product offering and the needs of target market Positioning is defined relative to: competitive offerings consumer needs

Positioning Strategy Attribute or Benefit Quality and Price Use or User

1.

Types of Brand Positioning

Physical Positioning How a firms product compares to the competitions on some set of objective physical characteristics
Perceptual Positioning How a firms product compares to the competitions on some set of subjective characteristics

2.

An Overview of Branding Decisions

Branding Decision

BrandSponsor Decision

BrandName Decision Individual brand names Blanket family name Separate family names Companyindividual names

BrandStrategy Decision Line extension Brand extension Multibrands New brands Cobrands

BrandRepositioning Decision

Manufacturer brand
Brand No brand Distributor (private) brand

Repositioning
No repositioning

Licensed brand

Good Brand Names:

Lack Poor Foreign Language Meanings Easy to: Pronounce Recognize Remember

Distinctive

Suggest Product Qualities

Suggest Product Benefits

Brand Strategies
Product Category
Existing New

Brand Name

Existing

Line Extension Multibrands

Brand Extension

New

New Brands

Why Package Crucial as a Marketing Tool

Self-service Consumer affluence Company & brand image Opportunity for innovation

Labels

Promote Describe Identify

Product/Brand Strategic Alternatives

Brand Different Same

Different

Local

Transnational

Product Same

Multinational

Global

The Importance of Launches

A company.must choose a launch strategy that is consistent with its intended positioning. The launch strategy should be the first step in a grand plan for lifecycle marketing. Philip Kotler Marketing Management

Does your product launch plan reflect all of the money and time put into developing the product?

Launch Objectives
Unite company around shared objective: making the launch successful

Provide strategy evidence of the companys intent, and right, to be a market segment leader in product/service category
Build independent third-party validation, and strategy evidence, of positioning strategy

Start the buzz, market pull with a consistent message architecture Support long lead time sales cycles Facilitate fundraising Establish core technology/system as an extensible platform for future products and partnerships Establish broad-based awareness and credibility with xxx customer segment Generate market momentum/Accelerate the sales cycle for Product XXX; delay customer purchase commitments to competitors

New Venture Launch Phases

Company funding announcements: PWC Money Tree, Venture Wire, etc. Company: Stealth mode Identify system lite: business cards, industry event attendance Content-free micro website: contact info, investors, team, etc. (note: may have password-protected real site) Phone listing Company launch: Seeding the market Company: team, market vision Technology platform Product category, general problem addressed Product launch: Going public Positioning strategy: problem solved, market and market entry customer segment, competitive differentiation Product details: architecture, technology and product roadmap Key customers and partners (especially channels) Pricing and product availability information A grown-up website

Pre-Announcing Tips
Do
Describe key elements of technology Explain benefits of technology/potential applications enabled Articulate initial total product assumptions (services, standards, partnerships, etc.)

Dont
Name product, provide specifications Announce pricing Provide precise launch date

Launch Dependencies: Strategy Evidence

Product Concept

Go/No Go
Preliminary Positioning Strategy

Go/No Go
Business Model
Product & Reference Customers

Positioning Strategy Validation

Go/No Go

Be prepared to postpone for key pieces of strategy evidence!

Launch Planning

Strategic Partnerships (channel)

Post Sales Support Plan

Go/No Go

Ongoing Market Reinforcement

18 months

Launch Date

Launch Plan Outline

Positioning Strategy Statement and Message Architecture Objectives and Strategies Competitors/Competitive Response Market leverage/Influencer plan Sales training and lead generation (closed loop) Marketing programs materials Schedule/Timeline Momentum milestones Appendix - positioning toolkit - customer segment profile - buying decision process

Launch Checklist: Some Strategy Evidence Options

Positioning Tool kit Sales, channel strategy Product Release schedule

Programs Ads, site sponsorships CD, Flash demo Customer seminars Data sheets, application notes Direct mail, e-mail, list promotions Newsletters Sales, channel launch; training Trial, swap-up program Trade shows, conferences, events; suite briefings Advance press and analyst tour Speaker program Regional field sales champions User groups, customer councils Webcasts/Webinars with guest experts: customers, analysts, partners Lead management systemsalesforce.com, eloqua, etc.

Materials Brochures Data sheets, application notes Presentations Price lists Product catalogs Product demonstrations Product roadmap Press releases Technical articles Technology, company backgrounders Testimonials White papers Web site update

Launch Manager is Command and Control

Weekly Status and Project Management
Creative, Website, Interactive Marketing Product Development/ Technical Marketing: Data Sheets & Demos Press/Analyst Relations, Materials Production

Sales: Customer Advocates Content

CTO/Guru: White Papers, Simulation Strategies

Launch Program Manager

Shows, Conferences, Events

Strategic Partners, Investor Relations

Summary and Wrap-Up

The Launch Plan is the chance to get the company and product off to a good start in the market!

Pricing Decisions
Quality

Low
Economy Strategy e.g. Air Arabia Airline

High Penetration
e.g. Co-operative Products

Low
Price

Skimming High
e.g. New film or album

Premium
e.g. MBA first class

Cost Determinants of Price

200

150

MC ATC AVC

Dollars

100

50 AFC

5 Quantity

10

Break-Even Analysis
Total Revenue

Break Even Price ($)

Profits Total Costs

Fixed Costs Losses

Quantity (units)

Steps in Setting the Right Price

Establish Pricing Goals Estimate Demand, Costs, and Profits
Choose Strategy

Fine-Tune Base Price Right $$$ $ Price $$$$

Legal and Ethical Issues in Pricing

Unfair Trade Practices

Key Legal and Ethical Issues Related to Price

Price Fixing

Price Discrimination

Predatory Pricing

Discounts, Allowances, and Rebates

Cash Discount Quantity Discount Functional Discount EDLP
(Every Day Low Pricing)

Price Reductions

Seasonal Discounts Promotional Allowances

Trade Loading

Rebates

Geographic Pricing
FOB (Free On Board)Origin

Uniform Delivered

Pricing Tactics Based on Geography

Zone Pricing

Freight-Absorption

Basing-Point

Special Pricing Tactics

Two-Part Pricing

Single Price

Flexible Pricing

Bundle Pricing

Common Special Pricing Tactics

Professional Services

Odd-Even Pricing Bait (and Switch) Pricing Leader Pricing

Price Lining

Pricing strategies
Premium pricing Uses a high price, but gives a good product/service exchange e.g. Concorde, The Ritz Hotel Penetration pricing offers low price to gain market share - then increases price e.g. France Telecom - to attract new corporate clients (or Telewest cable) Economy pricing placed at no frills, low price e.g. Soups, spaghetti, beans - economy brands Price skimming where prices are high - usually during introduction e.g new albums or films on release ultimately prices will reduce to the parity Psychological pricing to get a customer to respond on an emotional, rather than rational basis .e.g 99p not 1.01 price point perspective Product line pricing rationale of a product range e.g. MARS 32p, Four-pack 99p, Bite-size 1.29

Pricing variations off-peak pricing, early booking discounts,etc e.g Grundig offers a cash back incentive for expensive goods Optional product-pricing e.g. optional extras - BMW famously under-equipped Captive product pricing products that complement others e.g Gillette razors (low price) and blades (high price) Product-bundle pricing sellers combine several products at the same price e.g software, books, CDs. Promotional pricing BOGOF e.g. toothpaste, soups, etc Geographical pricing different prices for customers in different parts of the world e.g.Include shipping costs, or place onPLC Value pricing usually during difficult economic conditions e.g. Value menus at McDonalds

Ten ways to increase prices without increasing price - Winkler

Revise the discount structure Change the minimum order size Charge for delivery and special services Invoice for repairs on serviced equipment Charge for engineering, installation Charge for overtime on rushed orders Collect interest on overdue accounts Produce less of the lower margin models in the line Write penalty clauses into contracts Change the physical characteristics of the product