Theodore Levitt

Competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing & all other things that people value.

Developing Product Strategy

Group II

Atulya Jyoti Shilpy Verma Vivek Mitra

Objective of Presentation
To understand: 1. The need to understand products from the industrial customers point of view 2. Product strategies over the industrial product life cycle 3. Managing the industrial product line 4. The difference between marketing products and systems. 5. The special problems and strategic alternatives involved in the marketing of professional services.

Product Decisions
Product The principal component through which the firm aligns its resources with the market environment achieve organizational objectives. Product Decisions: Most important & complex decision facing management. Binds together various interest of different functional departments like R & D, Engineering, Manufacturing, Inventory Control, technical services, and marketing.

Developing Product Strategies

Two primary goals of organizations: To ensure that the product mix is in accord with the overall organizational & marketing objectives. To set guidelines for developing product lines & items. Involves modifying, adjusting the current product or developing a new one. Have a direct influence on the sales performance of other products in the line.

Industrial Product
The concept of a product to the buyer is multidimensional, involving more than its physical properties. From buyers perspective , a product is a combination of basic, enhanced & augmented properties.

Levels of Product

Levels of Product
Basic Properties:
Constitute the generic product and connote the benefits. Ex. Forklift

Enhanced Properties:
Differentiated by adding enhanced properties. Physical additions/ deletions and include features, styling and quality.

Levels of Product
Augmented Properties: Additional benefits connoted in the purchase of a product.
Intangible benefits like technical assistance, warranties, delivery capabilities.

Seldom do industrial buyers purchase only on basic and enhanced product characteristics.

Continual Change
Customer needs change in accord with external environment. Product strategys main goal to satisfy customer needs. Ex: Semiconductor Industry refurbish their plants every 2-3 years to suit rapidly changing technology. No. of circuits in a single chip. Continuous process of evaluation of products needed.

Industrial Product Management

To ensure that the necessary plans, decisions, and commitments made throughout a company effectively meet the changing needs of the marketplace

Industrial Product Management

Product Manager : More experienced & has longer tenure in firm. Responsible for: Forecasting sales, setting product objectives, product and production planning, Determining which market products will enter, reengineering decisions & deciding when product should be deleted /phased out?

INDUSTRIAL PRODUCT LIFE-CYCLE ANALYSIS

Concept for determining appropriate product strategies in the PLC theory

Each stage affected by different competitive conditions. Each Stage requires different marketing strategies if sales and profits are to be efficiently realised.

Applying PLC theory to Industrial Product Strategies

Marketing strategies should be directed not at the stage of the life cycle but at the factors that govern it Lazer & Culley, Marketing
Management

PLC analysis enable:

Marketers to determine where a product is in its life cycle To develop appropriate marketing strategies aimed at those governing factors

Industrial Life Cycle

Source: Survey conducted by Nomura Research Institute, Ltd. Tokyo

Stage 1 - INTRODUCTION
Product Acceptance
Rapidly accepted Hand-held electronic calculators replaced mechanical calculators Slowly accepted Electric typewriters took over two decades to achieve market acceptance

Product acceptance in industrial market is affected by how the product fits into the buyers total use system

Stage 2 GROWTH
Emphasis on product strategy is on:
Improving product design Improving distribution service Lowering price As increased product demand, accompanied by accumulated production experience, begins to lower cost substantially

Must keep product available Should consider the need to lower price as cost decreases

Stage 3 - MATURITY
Marketing Strategy focus:
Keeping current user satisfied Looking for opportunities to find new buyers Enter new market through product modification and changes in other marketing mix variables

Stage 4 - DECLINE
Reason:
Change in customer desires Change in the state of the art (better substitutes)

Phasing the product out Strategy to reduce cost to increase current profit

Developing Product Strategies for Established Products

Issues Which product should be continued Which product should be phased out The number of diversity of products to be offered Product innovation
Decisions w.r.t individual product items Product lines Overall product mix

Product Evaluation Matrix

Maintaining the product and its marketing strategy in the present form Maintaining the present form of the product but changing its marketing strategy Changing the product and altering the marketing strategy Dropping the product or the entire product line Adding one or more new items into a line or adding new product lines

Perceptual mapping in Product Evaluation

Examines the strength and weakness of a product compared to competitors Can also be used to identify new product opportunities It generates information which are useful in developing marketing strategy The position of competitors brands relative to one another The position of brand, or product options, w.r.t their attributes The position of product attributes compared to each other

Profit margin, sales volume, or market share falls below expectations. Revitalize it? Or Eliminate it?

Product Revitalization Decisions

Identifying weak products Searching for alternative actions to restore product performance to acceptable level If the product fails to justify further improvements and investments, then consequences of eliminating the product should be determined

Identify Cause of Poor Product Performance

Avlonitis studied 20 industrial firms Found basis profitability factor Deviation of product from some established performance measures Experts are requested to measure total cost associated, analyse product design, production method and recommend the feasibility of reducing products cost Sales force - Competitive activities and customer requirements

Identifying Alternative Corrective Actions

Cost Reduction Product Modification Price change consideration Promotion change consideration Channel change consideration Product modification through value analysis
Reduce cost by eliminating waste, allowing for greater pricing flexibility Improve product quality, features, or style to meet customer requirements

Product Elimination Decisions

New product potential Customer relationships Impact on profit and sales of other products Corporate image Employee relationships Competitors moves
The importance varies with the type of industry, the number of products manufactured, and the nature of competition

Systems Marketing
Buyers no longer seek to purchase a product for its own value. - Theodore Levitt Preference on buying a bundle of interrelated products
Cuts down cost Saves time Lowers down effort of contracting different vendors

Types
Product systems Capital goods and Supplies Used for operating the equipment Systems contracting Sales of computerized order processing routine Includes low value repetitive Maintenance Repair Operating supplies Service systems Integrated and Balanced delivery methods Information, Consultancy, Customer Relationship Management

Two Faces of Same Coin

Systems Marketing Vs. Services Marketing Vendors become consultants
Determine need Develop a system Meets all pertinent codes, fits operating demand (both on going and planned facilities), represent most reliable system at minimal cost

To Solve Customer Problems

Identifying problems in financial terms What the customer is paying for a problem Developing and Quantifying a profit improvement solution How can the loss of customers be avoided or cut down Accepting the management and responsibility for the systems performance Giving the required maintenance system afterwards

Elements of System Marketing

Developing a general system for broad set of products in the market Analysing the needs of the individual customers Determining the best solution for individual customers Installing and ensuring timely delivery Debugging the system Updating the present system Maintaining the system Guaranteeing the systems performance

Benefits
Increased benefit for both the parties Reduced unit cost for production Savings on Advertising Increased productivity of sales team Brand loyalty towards the vendor

Problems
Intangible Cant be experienced before the actual purchase Inseparable Cant be aloof from the source Heterogeneous Varies from customer to customer as demands are varying Perishable Cant be saved and stored for future use

Intangibility
Services are performance rather than objects Customers evaluate and purchase on Credence or Experience Overcoming Buyer Uncertainty
When they should seek professional services Which attributes to consider in evaluating different providers How to communicate their concerns, desires, or other issues to professionals What they can realistically expect providers to accomplish

Credence or Experience
Product Differentiation
Experience, specialization, credibility and contacts Superiority, better solutions to problems Involvement by high-level professionals Easy access to services On-time completion of work Support Understanding ability Frequency

Inseparability
Services are produced and consumed at the same time Accuracy depends on communication Perception plays a critical part

Heterogeneity
Services are separately catered to different individuals within a firm and firm to firm Performance, Quality and ever-changing demands also contributes in difference in services

Perishability
Services cant be saved for future use It is produced on the time of demand Peak demands causes heavy recruiting and at troughs people experience job cuts

Communication
Advertising used by 14% of vendors only May be perceived negatively Only a narrow audience is targeted Not worth the cost implied If used rationally sales may multiply ten times Personal sales are more effective It all depends on how and who we recruit who collects the data for developing services

Questions

Thank You