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10/11/2012

S5 Market offerings
Gurudas NULKAR

MM| Gurudas Nulkar

Learning objectives
Product
Consumer value hierarchy
Product life cycle
Customers in the PLC
Managing products in the PLC

Classification of products
Product mix decisions
New product planning process

MM| Gurudas Nulkar

What is a product?
Product is anything which is of value & is offered
thro voluntary exchange
Service : Set of activities, benefits or satisfaction
offered for sale
Intangible
May not result in ownership

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

Click to edit Master


title style
Products
will mean

Goods
Services
Events
Experiences
Persons
Places
Properties

Organizations
Information
Ideas

In retailing merchandise
In manufacturing raw materials
In Selling finished goods
In project deliverables
In markets commodities
MM| Gurudas Nulkar

Market
Click to components
edit Master title
of anstyle
offering

Value-based
Valueprices

TOTAL PRODUCT

Attractiveness
of the market
offering
Product
Features and
quality

Services mix
and
quality

MM| Gurudas Nulkar

Customers dont buy the same thing!

Try Segmenting
Gurudas Nulkar
Carpenter
Purchase Manager of Tata Motors
Shopkeeper

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

What do customers buy?


Customers buy products because it solves their
problem
They are willing to pay on the perceived potential of
the product to solve their problem

Gurudas Nulkar
Carpenter
Purchase Manager of Tata Motors
Shopkeeper

MM| Gurudas Nulkar

What do customers buy?


` 35000

` 2500

` 15

Free!

Value price
MM| Gurudas Nulkar

Value hierarchy in products

Basic Product
Core
benefits

Expected
benefits
Augmented
benefits

Differentiated
product

Advantage

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

How do customers decide value?


Quality,
performance

Through experience
By imagination, self assessment

Brand
perception

From observing others


By gauging market Reputation

Value can change with


Time
As per consumers Social position
Usage
Combination
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Differentiation

Brand
recognition

Value comes from Benefits

Psychological

Functional

Economic

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Consumer value

Psychological
Functional
MM| Gurudas Nulkar

Gurudas Nulkar

Economic

10/11/2012

Value to whom? Whos your buyer?

Initiator

magazine
motorcycle
medicine
paint for house
insurance
house

Influencer
Decider
Buyer
User

MM| Gurudas Nulkar

Classification of products
Products

Business

Consumer

Raw materials

Convenience

Parts, components

Shopping

Capital goods

Specialty

Services

Unsought

Consumables
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Convenience category
Bought frequently
Without gathering much information, with minimum
effort
Lower unit prices
Low emotional appeal
Brand preference may not be strong
Short cycle of Wants => Purchase
Staples, impulse & emergency

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

Shopping Category

Compare competing offerings


More brand preferences
Lower purchase frequency
Longer cycle of wants => purchase
More emotional appeal
Fashion apparel, clothes, furniture, appliances..

MM| Gurudas Nulkar

Specialty category
Bought less frequently
More unit prices, more spending
More time and efforts in buying & evaluation process,
Search is stronger
Far longer from Wants => Purchase
Expensive fashion, jewelery, car, house

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Unsought category
Consumers not yet aware
Has not considered buying

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Gurudas Nulkar

10/11/2012

What is changing in the categories?

Monetary value
Frequency of purchase
Involvement in the purchase
Degree of satisfaction

Psychological

Functional

Economic

MM| Gurudas Nulkar

What is changing in the categories?

Monetary
value

Convenience Shopping

Specialty

Unsought

Low

Higher

High

Variable

Higher

Very high

Higher

Highest

Involvement No to Low
of buyer
Degree of
Satisfaction

Not
consciously
felt

One product or service can fall into any of the categories

MM| Gurudas Nulkar

PRODUCT LIFE CYCLE

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

Demand for products


What is the demand for these products in 2012
compared to 1970?

Cordless phones
Cell phones
Umbrellas
Video cassette player
Diabetes Insulin injections

MM| Gurudas Nulkar

Why would demand change?


Changes in macro environment
Technological, political, economic, social, legal, globalization ..

Changes in consumer demographics, psychographics


Age, income, household, behavior..
New products > create new wants
New technology > new satisfaction
Substitutes > does things better

MM| Gurudas Nulkar

PLC
Products have a limited life
The lifecycle can be divided by demand conditions into
distinct stages
Consumer behavior, Competitive dynamics and market
attributes differ
Marketing approach needs to change

This holds true for a PRODUCT CATEGORY and also for a PRODUCT

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

Product Life Cycle

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Introduction Stage
Market characteristics

Slow sales growth


Distribution Channel acceptance is low
Sales and marketing efforts are expensive

Consumer research, trials, R&D


Intensive promotions, communications
Channel strategy
Price uncertainty
Brand awareness

Marketing efforts

MM| Gurudas Nulkar

Growth Stage
Market characteristics

Rapid sales growth


Market pull, thus channel acceptance
Word of mouth
Competition starts building rapidly
Short time period

Product stabilization
Market penetration strategies
Clear positioning & brand building efforts differentiate
Customer retention programs
Harvest profits

Marketing efforts

MM| Gurudas Nulkar

Gurudas Nulkar

10/11/2012

Maturity Stage
Market characteristics

Slow sales growth may plateau out


Market pull, thus channel acceptance
Word of mouth
Competition starts building rapidly
Longest time period in the PLC

Defend market shares - price and mix


Lowest profits
Consolidate segment spending
Brand sustainability is important

Marketing efforts

MM| Gurudas Nulkar

Decline Stage
Market characteristics

Sales start to decline


New products, substitutes, changed behaviors

Serve only the profitable segments moving from segmented approach to


niche
Consolidate channel strategy
Revamping products
Lowest profits, reduce sales expenditure, no communication

Marketing efforts

MM| Gurudas Nulkar

Category PLCs

Small kitchen
appliances,
Many consumer
durables

Advertising
dependant
products
Pharma, drugs,
beverages

Technology based
products mobile
phones

MM| Gurudas Nulkar

Gurudas Nulkar

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10/11/2012

PLC Duration
Varies with every product
Can be controlled by marketing efforts

Changes with technology introductions


Inventions
Disruptive innovations

Theres something very important about the PLC for us

MM| Gurudas Nulkar

Customers in the PLC

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Customers in PLC
Innovators

first on the block pscyhographics


Younger in age
They enjoy taking risks with new products
They are mostly well informed
Very small in numbers
Tolerate failures

MM| Gurudas Nulkar

Gurudas Nulkar

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10/11/2012

Customers in PLC
Early adopters

These wait for initial purchases to happen, product reviews


They enjoy novelty,
Higher income youth, educated, socially forward
Opinion leaders
They help spread the world

MM| Gurudas Nulkar

Customers in PLC
Majority Skeptics, senior in age, mixed
levels of education
Careful buyers & choosers
They build the sales volumes
Dont like to take too much risk
Competitors enter the market
when these come in

MM| Gurudas Nulkar

Customers in PLC
Laggards

They avoid change


Rely on existing products until it outgrows completely
Form the last small section
They dont need to much ad & communication

MM| Gurudas Nulkar

Gurudas Nulkar

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10/11/2012

Characteristics in the PLC


Introduction

Growth

Maturity

Decline

Consumer
Characteristic
s

Innovators
They try out
new things

Early adopters
follow
innovators

Laggards those who


wait to see market
acceptance

Late adopters
buy when they
cannot do without
it

Competition

Low, can start


with one
product then
build of
category

Many
competitors
flowing in

Differentiated
products remain, not
many new
competitors. High
competition

Low competition

Innovation
and
technology

Low, new
products trying
to prove

Product
differentiation
starts

Innovation starts, new New inventions,


technology explored
technology up
gradation

Technology
adoption by
market

Low, only
innovators buy

Starts building

Technology is
accepted by markets

Market outgrows
the technology

MM| Gurudas Nulkar

Characteristics in the PLC


Introduction
Segmenting
strategy

Growth

Chosen market New segments


emerge, new
segments are
segments
addressed
sought

Maturity

Decline

Consolidation
of market
segments

Move to only
profitable
segments

MM| Gurudas Nulkar

PLC Marketing strategies


Maturity

Decline

Marketing
objectives

Create product Gain market share,


awareness &
create strong
trials. Speed to positions
market

Introduction

Growth

Defend market
share, create
profits

Reduce expenses
milk brands

Product
strategy

Offer basic
products

Offer product
extensions, build
service
differentiation

Diversify brands,
items & models

Phase out weak


products

Price

Charge cost
plus

Penetration price
promotions, deals

Match pricing to
strong
competitors

Cut prices

Advertising &
Communicatio
ns

Build stage,
Segment
mass awareness awareness

Advertise
differentiation

Reduce levels to
retain loyalists

MM| Gurudas Nulkar

Gurudas Nulkar

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10/11/2012

Product strategies

MM| Gurudas Nulkar

Bajaj Auto

Market penetration build brand


awareness in India, establish sales
& service network

Invest in advertising &


promotions, legal contracts and
dealerships, production
capacities

Market Development extend to


Bangladesh, Srilanka, Pakistan,
Africa, offices & infrastructure,
sales & service, advertising &
promotion

Invest in infrastructure,
manpower, advertising

Product development
Rickshaw, step-through chassis,
motorcycles, finance

Invest in R&D, technology,


manpower

Diversification electricity
generation, finance to other
markets

Invest in marketing research,


consulting, manpower,
technologies
MM| Gurudas Nulkar

Ansoff Matrix & PLC


Market
development

Institutional accounts,
non-credit card
segments, 24x7
customer support

Product
development

other products, e-books


Market
penetration

Advertising, promotions,
city-by-city approach

New product
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Gurudas Nulkar
development

Gurudas Nulkar

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10/11/2012

A well managed portfolio

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BCG matrix for product portfolio

Cash cows High market share in a


slow-growing industry. Generate
excess cash than needed to Mature
markets
Dogs, low market share in a mature,
slow-growing industry. "break even",
barely enough cash to maintain the
business's market share. Accounting
view is worthless
Question marks growing rapidly
consume huge cash, low market
shares so dont generate much cash.
The result is a large net cash
consumption.
Stars high market share in a fastgrowing industry.

Forecasting
Product cash flows
Marketing efforts

MM| Gurudas Nulkar

BCG matrix for product portfolio

MM| Gurudas Nulkar

Gurudas Nulkar

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10/11/2012

Product decisions
Features

Style
Design

Quality

Product
attributes

Branding

Packaging

Labeling

Support
services

Positioning
Personality
MM| Gurudas Nulkar

Product-line & Product-mix decisions


Product line group of closely related products
Product mix the complete portfolio that the seller
offers

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Product Mix Sony

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Gurudas Nulkar

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10/11/2012

Product Line Sony

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Product Lines why?


SEGMENTATION

Similar functions, similar customers, similar channels


Positioning
Competitive advantage
Market shares
Profitabilities

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Product Lines strategies


Length of product Line?
Line stretch strategy
downward & upward
Line fill
Line pruning - modernization,
low profitability

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Gurudas Nulkar

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10/11/2012

Product Mix

Total product range of the firm


Different stages of the PLC
Different market competencies
Profitability & growth

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Product Strategies
Product Mix (Depth)
Product Lines (Length)
Brands

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Gurudas Nulkar

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