Product definition:

A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value. Product Planning refers to the systematic decision making related to all aspects of the development and management of a firms products including branding and packaging. Each product includes a bundle of attributes capable of exchange and use.

Differences between Goods and Services

Goods are tangible. You can see them, feel them, touch them etc. Services are intangible. The result of human or mechanical efforts to people or objects.
Major distinguishing characteristics of Services:

Intangibility-major component of a service is intangible Pershibality-many cannot be stored for future sales Airline/Amusement ride Inseparability-customer contact is often the integral part of the service... Variability-in service quality, lack of standardization, because services are labor intensive.

Sales of goods and services are frequently connected, i.e. a product will usually incorporate a tangible component (good) and an intangible component.

Levels of Product:

There are 3 levels of products

Core Product- Marketers must first define what the core BENEFITS the product will provide the customer. Actual Product-Marketer must then build the actual product around the core product. May have as many as five characteristics: o Quality level o Features o Brand name o Packaging All combined to carefully deliver the core benefit(s).

Augmented Product-offer additional consumer benefits and services. o Warranty

Customer training

EXAMPLE SONY CAMCORDER:

Core--the ability to take video pictures conveniently Actual--Sony Handycam (brand name), packaged, convenient design so you can hold it, play back features etc. that provide the desired benefits, high quality etc. Augmented--receive more than just the camcorder. Give buyers a warranty on parts and workmanship, free lessons on how to use the camcorder, quick repair service when needed and toll free telephone number when needed.

Classifying Products
Products can be classified depending on who the final purchaser is. Components of the marketing mix will need to be changed depending on who the final purchaser is.

Consumer products: destined for the final consumer for personal, family and household use. Business to business products: are to satisfy the goals of the organization.

The same product can be purchased by both, for example a computer, for the home or the office.
The following are classifications for consumer products:

Convenience: Packaging is important to sell the product. Consumers will accept a substitute. Marketers focus on intense distribution, time utility. Convenience products can be categorized into staple (milk), impulse (not intended prior to shopping trip). Shopping: Consumers expend considerable effort planning and making purchase decisions. IE appliances, stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary cooperation, high margins, less outlets than convenience goods. Use of sales personnel, communication of competitive advantage, branding, advertising, customer service etc. Attribute based (Non Price Competition), product with the best set of attributes is bought. If product attributes are judged to be similar, then priced based. Specialty: Buyer knows what they want and will not accept a substitute, IE Mercedes. Do not compare alternatives. Brand, store and person loyal. Will pay a premium if necessary. Need reminder advertising. Unsought: Sudden problem to resolve, products to which consumers are unaware, products that people do not necessary think of purchasing. Umbrellas, Encyclopedia, etc.

The following are classifications for Business to Business products:

Production Goods o Raw Materials: o Component parts: becomes part of the physical product o Process materials: not readily identifiable part of the production of other products Support Goods o Major Equipment: o Accessory Equipment: Type writers and tools o Consumable Supplies: IE Paper, pencils or oils o Business to Business services: Financial, legal marketing research etc.

Elements of a Product Mix

If an organization is marketing more than one product it has a product mix.

Product item--a single product Product line--all items of the same type Product mix--total group of products that an organization markets

Depth measures the # of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a range of prices and sustains dealer support. High cost in inventory etc. Width measures the # of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping.

Why so many different products? Different needs of different target markets for the same product. Channels of distribution economies etc.

Product Positioning and Product Repositioning

Definition: This refers to a place a product offering occupies in consumers' minds on important attributes, relative to competing offerings. How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!! New Product--need to communicate benefits Established Products--need to reinforce benefits

Ideal Characteristics
Need to introduce products that possess characteristics that the target market most desires, ideal. Product positioning is crucial. Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS. Whenever a group of consumers has a distinctive "ideal" for a product category they represent a potential target market segment. A firm does well if its attributes (of the product) are perceived by consumers as being close to their ideal. The objective is to be "more ideal" than the competitors. Each product must provide some unique combination of new features desired by the target market. Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions. Marketers can use perception maps.

Existing Products
Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers
^ | | Old Position | New Position | | | Glamour--------------------------------------------------Health | | | | | | |

Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc. Dermatologist reports...skin cancer etc. Lifestyle needs change, move to more health conscious (previously discussed) Need to reposition sun tan lotion as a healthy way to be exposed to the sun.

Target market has shifted from the left quartile to the right quartile as far as needs are concerned. Sun tan marketers need to do same as far as changing consumers perception for the product. How?

Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan for...Be Sun Smart Change Product: Sunscreen and sunless tanning agent.

BMW Banks on Affordability...

^ Very Safe | Lexus/infiniti | Mercedes | BMW | | | Cheap--------------------------------------------------Expensive | | | | | | | Very Unsafe

BMW, to reposition up to the left Due to the exchange rate, Lexus moves to the right Why did they reposition? Safety Affordability

New Product Positioning

When developing a new product, a company should identify all the features that are offered by all its major competitors. Second, identify important features/benefits used in making purchase decisions. Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness".
For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important. However since every spreadsheet has that its an "important fundamental feature", instead of an "important differentiating feature". The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important. The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis.
^

X Math functions

Important to TM (Stockbroker) X | Import Data | | | | | ----------------------------------------------------------Unique | | | | | | | X Binary Data

If the feature is in the upper right hand corner then you have probably got a winning feature. This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features.

Developing and Managing Products

To compete effectively and achieve goals of an organization, the organization must be able to adjust its product mix. Need to understand competition and customer attitudes and preferences. In 1982, Timex turned down the opportunity to market "Swatches". Timex was resting on its laurels, simple low cost watches. Digital revolutionized industry (technological change), Timex stuck with analog. DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY. Now consumer owns 5 watches up from 1.5 watches 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change. Product mix: Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in 1970.

Developing New Products

Need to develop new products. A new product can be:

Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously marketed by the firm, but by others Dynamic Continuous Innovation...minor education needed for consumers to adopt product

Discontinuous Innovation...entirely new consumption patterns

For a new product to succeed it must have:

desirable attributes be unique have its features communicated to the consumer (mkt support necessary)

Developing new products is expensive and risky. Failure not to introduce new products is also risky.

Firms develop new products in two ways:

By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992, bringing in new products to their product mix. Internal development, this is what we are going to focus on.

Why New Products Fail

Lack of differentiating advantage Poor marketing plan Poor timing Target market too small Poor product quality No access to market

Seven phases to new product development:

1. New Product Strategy Development Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment. 2. Idea Generation Continuous systematic search for new product opportunities.
o

Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1800#s, research etc.

o o

Laboratory oriented sources--identify opportunities based on pure research or applied research. Intrafirm devices--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications. Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.

3. Product Screening and Evaluation New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared. --General characteristics, Marketing Characteristics and Production Characteristics. Ideas with the greatest potential are selected for further research. Do they match the organizations goals (DuPont and ICI have many patents that they have not exploited for this very reason.) Look at companies ability to produce and market the product. Need to look at the nature and wants of the buyers and possible environmental changes.

Concept Testing
Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions. This is done before investing considerable sums of money and resources in Research and Development. Can better understand product attributes and the benefits customers feel are most important. Would you buy the product? Would you replace your current brand with the new product? Would this product meet real needs?
4.

Business Analysis : Analyze potential contribution to sales, costs and profits.

Does the product fit into the current product mix? What kind of environmental and competitive changes can be anticipated? How will these changes effect sales etc.? Are the internal resources adequate?

Cost and time line of new facilities etc.? Is financing available? Synergies with distribution channel etc. MIS to determine the market potential sales etc. Patentability should be determined, last 17 years, 14 years for a pharmaceutical product. Find out if it is technically feasible to produce the new product. If you can produce the new product at a low enough cost so as to be able to make a profit.

5. Product Development
Develop a prototype, working model, lab test etc. Attributes that consumers have identified that they want must be communicated through the design of the product.

6. Test Marketing
Can observe actual consumer behavior. Limited introduction in geographical areas chosen to represent intended market. Aim is to determine the reaction of probable buyers. It is the sample launch of the Marketing Mix. Determine to go ahead, modify product, modify marketing plan or drop the product. PROS are:
o o o o o

Lessens the risk of product failure. Reduces the risk of loss of credibility or undercutting a profitable product. Can determine the weaknesses in the MM and make adjustments. Can also vary parts of the MM during the test market. Need to select the appropriate MM and check the validity.

CONS are:
o o o

Test market is expensive. Firm's competitors may interfere. Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.

Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.

7. Commercialization
Corresponds to introduction stage of the Product Life Cycle. Plans for full-scale marketing and manufacturing must be refined and settled. Need to analyze the results of the test market to determine any changes in the marketing mix. Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage. Need to consider:

the speed of acceptance among consumers and channel members; intensity of distribution, production capabilities, promotional capabilities, prices, competition, time period to profitability and commercialization costs.

Buyers' Product Adoption Process

1. 2. 3. 4. 5.

Awareness :Buyers become aware of the product Interest: Buyers seek information and is receptive to learning about product Evaluation: Buyers consider product benefits and determine whether to try. Trial: Buyers examine, test or try the product to determine usefulness relative to needs Adoption: Buyers purchase the product and can be expected to use it when the need for the general type of product arises.

Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts.

Diffusion Process
The manner in which different members of the target market often accept and purchase a product (go through the adoption process)
1. 2. 3. 4.

Innovators: Techno-savvies first customers to buy a product, 2.5 % of consumers Early Adopters: Tend to be opinion leaders. Adopt new products but use discretion, 13.5% Early Majority:34% of consumers, first part of the mass market to buy the product Late Majority: Less cosmopolitan and responsive to change, 34%

5.

Laggards: Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity.

Implications to marketers, company must promote product to create widespread awareness of existence and benefits. Product and physical distribution must be linked to patterns of adoption and repeat purchase.

Product Life Cycle

This cycle is popularized by Theodore Levitt, 1965 PLC can be applied to:

product category (Watch) product style (Digital) a product item/brand (Timex)

Four Stages to the Product Life Cycle:

1. 2. 3. 4.

Introduction Growth Maturity Decline

The following material refers to the PLC as far as the product category is concerned unless otherwise stated.

Introduction
Failure rate for new products can range from 60%-90%, depending on the industry. A product does not have to be an entirely new product, can be a new model (car). Marketing Mix(MM) considerations Need to build channels of distribution/selective distribution Dealers offered promotional assistance to support the product...PUSH strategy. Develop primary demand/pioneering information, communications should stress the benefits of the product to the consumer, as opposed to the brand name of the particular product, since there will be little competition at this stage and you need to educate consumers of the product's benefits. Price skimming...set a high price in order to recover developmental costs as soon as possible. Price penetration...set a low price in order to avoid encouraging competitors to enter the market, also helps increase demand and therefore allows the company to take advantage of economies of scale.

Growth
Need to encourage strong brand loyalty, competitors are entering the market place. Profits begin to decline late in the growth stage. May need to pursue further segmentation.

MM considerations
May need to perform some type of product modification to correct weak or omitted attributes in the product. Need to build brand loyalty (selective demand), communications should stress the brand of the product, since consumers are more aware of the products benefits and there is more competition, must differentiate your offering from your competitors. May begin to move toward intensive distribution-the product is more accepted, therefore intermediaries are more inclined to risk accepting the product. Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy.

Maturity
Sales curve peaks-severe competition, consumers are now experienced specialists. MM Considerations A product may be rejuvenated through a change in the packaging, new models or aesthetic changes. Advertising focuses on differentiating a brand, sales promotion aimed at customer (PULL) and reseller (PUSH). Move to more intense distribution Price dealing/cutting or meeting competition Provides company with a large, loyal group of stable customers. Generally cash cows that can support other products. Strategies during maturity include:

Modification of product...use line extensions Reposition Product

Weaker competition will have left the market place.

Decline
Sales fall off rapidly. Can be caused by new technology or a social trend. Can justify continuing with the product as long as it contributes to profits or enhances the effectiveness of the product mix. Need to decide to eliminate or reposition to extend its life.

MM Considerations Some competition drop out Need to time and execute properly the introduction, alteration and termination of a product. Need to manage product mix through their respective life-cycles. When to decide to introduce new (modified) products that compete with the current product offering. With high-tech products, need to consider introducing new (and competing) products as the existing product is still in the growth stage of its life cycle.

Different types of Life Cycle Curves

Fad Curve Clear products, Crystal Pepsi Fleeting fashions vs. lasting shifts in consumer preference. Cannot differentiate between the two using usual marketing tools like focus groups. Problems: Clear products that didn't fit the positioning. Pay higher prices for products with fewer ingredients.

Seasonal Curve Life cycles that vary by season, clothing etc.

Branding

Part of the actual product. Without brands, shoppers choice becomes arbitrary.

Definition:
A name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from another.

Brand name is that part that can be spoken, including letters, words & Symbols. Brand names simplify shopping, guarantee a certain level of quality and allow for self expression. Brand mark-elements of the brand that cannot not be spoken, IE symbol Trade Character Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. Tradename-The full legal name of the organization.

Benefits of Branding
Provides benefits to buyers and sellers TO BUYER:

Help buyers identify the product that they like/dislike. Identify marketer Helps reduce the time needed for purchase. Helps buyers evaluate quality of products especially if unable to judge a products characteristics. Helps reduce buyers perceived risk of purchase. Buyer may derive a psychological reward from owning the brand, IE Rolex or Mercedes.

TO SELLER:

Differentiate product offering from competitors Helps segment market by creating tailored images, IE Contact lenses Brand identifies the companies products making repeat purchases easier for customers. Reduce price comparisons Brand helps firm introduce a new product that carries the name of one or more of its existing products...half as much as using a new brand, lower co. designs, advertising and promotional costs. Easier cooperation with intermediaries with well known brands Facilitates promotional efforts. Helps foster brand loyalty helping to stabilize market share. Firms may be able to charge a premium for the brand.

Brand equity: Financial value associated with the brand. Can be increased when licensing royalties can be gained.

Four Branding Decisions firms must make

Need to determine Corporate Name A firms name logo and trade characters. Over 1000 ongoing firms change names each year. If nature of business changes, may need to alter Geographic names not as popular as they used to be compared to surnames, descriptive names and coined names.

Types of Brands Manufacturers Brands:

Initiated by the producer. 85% food items, all autos, 75% major appliances, more than 80% gasoline. Requires the producer to be involved in distribution, promotion, and to some extent, pricing. Brand loyalty is encouraged by quality, promotion and guarantees. Producer tries to stimulate demand, encouraging middlemen to make the product available (PULL)

Private Distributor Brands:

Initiated and owned by the resellers. Manufacturers not identified in the product. Helps retailers develop more efficient promotion, generate higher margins and increase store image. Wholesalers brands. Retailers brands Reason for increase in Private Brands:

Increasing prices of MB in 1980s with flat demand Increasing Quality of PB Increasing Promotion of PB PB offer retailers higher margins Offer regional products

Private brands have been growing: 1991 increase 4% 1992 increase 3% 1993 increase .8% Manufacturer brands are beginning to fight back.

Reduce price Promotions focus on quality and directed at PL

New product launches, line extensions. Focus on core products

Generic Brands:
Indicates only product category. Began as low cost alternative in the drug industry. Less than 1% of supermarket revenue even though 85% stock them. Cheaper than branded items. Accounts for less than 1% of retail sales, was 10%.

Selecting a Brand Name

Criteria for choosing a name:

Easy for customers to say, spell and recall (inc. foreigners) Indicate products major benefits Should be distinctive Compatible with all products in product line Used and recognized in all types of media Single and multiple words Bic,IBM PC or a combination Mazda RX7 Availability, already over 400 car "name plates", this makes it difficult to select a new one. Use words of no meaning to avoid negative connotation, Kodak, Exxon Can be created internally by the organization, or by a consultancy Legal restrictions, i.e. Food products must adhere to the Nutrition Labelling

Naming process goes from idea generation to idea evaluation to legal evaluation. Should define objectives--what value to the product should the name provide.

Protecting a Brand Need to design a brand that can be protected through registration. Generic words are not protectable (aluminum foil), surnames and geographic or functional names are difficult to protect. To protect exclusive rights to a brand, must make certain that the brand is not likely to become considered an infringement on any existing registered brand. Guard against a brand name becoming a generic term used to refer to general products category. Generic cannot be protected.

Branding Policy
First question is whether to brand or not to brand. Homogenous products are difficult to brand. Branding policies are:

Individual Branding: Naming each product differently facilitates market segmentation and no overlap. Overall Family Branding: All products are branded with the same name, or part of a name, promotion of one item also promotes other items. Line Family Branding: Within one product line Brand Extension Branding: Use one of its existing brand names as part of a brand for an improved or new product, usually in the same product category. 75% new products are brand extensions.

Product Management
It manages the product development and marketing throughout the product life cycle of the organization. It carefully and continually monitors the four Ps of the marketing mix (Product, Place, Price and Promotion). It maximizes the sales revenue, market share and profit growth. Product Planning and product marketing are two different aspects but some organization perceives it as one and henceforth it is named as Product Management. Product Planning identifies the market needs in producing a product Product marketing is delivering the product to the customers through proper distribution channel, effective sales promotion and advertisement campaign. Product Attributes Attributes refer to an object characteristics or quality. It helps to identify a particular object by its inherent characteristics. Product Attributes refers to the properties/characteristics of the product. It relates to the cost, size, and color, tangible and intangible features of the product. Tangible Product Attributes refer to the physical color, packaging etc. Intangible Product Attributes refer to the style, quality, strength etc. Brand Attributes They are the functional associations assigned to a brand. Brand Attributes have different relevance to different segments. They are the best identification to a brand. Example: Effective advertisement and promotional strategies differentiating form that of its competitors. Differentiation approach to customer in respect of Brand identification

Branding Brand
It is a collection of symbols, associations to a product or service. It is a trademark or a distinctive identity to the product. Brand creates an image in the minds of the customer about the product. Companys profitability can be enhanced if the brand has occupied a lasting position in the minds of the customer. Strong brand image brings in potential and loyal customers to the company.

Brand helps to Deliver the message clearly Maintain loyalty with customers Increases credibility of the company Brings in better and future prospects

Branding:
It creates a differentiated presence about the product in the minds of the consumer by assigning to a product its identity through trademark or logo or name. Branding develops a bond with the customers. They are convinced with the product as branding points out the differentiated feature or benefit about it form that of the competitors. Branding helps in Binding relationship with the customer. Attractive branding retains customers through powerful differentiation and positioning. Strategy to selected group of customers. Eg. Mercedes Benz branded specifically to high class people. It focuses on emotional and visual elements which easily attracts customers. It delivers the brand through powerful distributors and strong communication channels. Brand Equity It is the value added to the brand based on consumer perception and recognition about the product or service. It is created through marketing campaigns and effective promotion. Brand equity is a unique and intangible value added to the product. Example: Coco Cola brand has created an intangible value endowed in the minds of the customers. Brand Equity can be measured in three perspectives: Functional Brand Equity Brand Extensions Customer Based Brand Equity

Functional Brand Equity: Consumers may be willing to pay a premium amount to a branded product when compared with an unbranded one. Therefore consumers value brand as an important perspective. Functional brand equity is measured with respect to promotional and advertising costs. Brand Extensions:

Manufactures of the product goes in for producing related product to a powerful and successful brand. Strength of the parent brand has a greater reflection in the related products of the same brand. Example: Coco Cola manufactures mineral water Kinley Customer based Brand Equity:

It is when customers have strong knowledge about the brand through effective advertising and promotion. Customer based brand equity is positive and negative. Positive brand equity occurs when customers react favorably to the product in the market. Negative brand equity occurs when they are less favorable to the product branded in the market. It leads to customer brand loyalty and good perceived quality about the product. Brand equity helps the marketing researcher to develop good knowledge about the brand in the minds of the consumer, as brand is the most valuable assets of the company.

Branding Strategies
It is the development of new brand elements to the existing or new products or services. Branding helps to make the product stand unique from that of competitors. Strong and effective branding strategy brings in loyal customers. Successful branding enables brand equity. Brand equity is the values added to the product by making the customer pay a premium amount to the branded product. When developing a branding strategy the company should 1 Determine its Competitive Positioning Strategy. Competitive Positioning Strategy is differentiating the product form the market offering. It mainly concentrates on differentiation and positioning. These strategies should be properly adopted in order to differentiate it form its competitors. 2 Features and benefits of the product should be listed and the benefits pertaining to particular segment should be scrutinized. 3 The brand should be designed with attractive color, fonts, logos and promotional message pertaining to segments Proper branding strategies create effective communication about the product to prospect customers.

Types of Brand:
1. Manufacturer Brand: The brand name is that of the manufactures and not a private brand name. Customers may be attracted towards the manufacturer brand name. It is owned by the producer. Eg. Clothes Merchants 2. Own Label Brands Brand may be owned by retailer and not a manufacturer. They produce goods to the retailer on a contract basis under the brand name of the retailer. It is also called as private brands. Example: Nike does not product their goods. They go to different factory outlets to manufactures the products under their brand name.

3. Corporate Branding: Companys name may be used as the brand name. This helps the customer to accept new products introduced by the corporate under the company brand name. It attempts to greater leverage in respect of brand recognition. It maintains lasting potential and loyal customers who are much familiar about the company product. Example: Pepsi 4. Individual Branding: It is the strategy of giving each product a different brand name under the same product family. Uniqueness of the product is identified through individual branding thereby facilitating greater positioning process. Example: Unilever products product goods under different brand names such as Dove, Rin, Surf, Axe, Lux etc.

5. Family Branding: Single brand name is used for all products under the same product family. New product acceptance is easily possible without expecting customer preference as it is produced under the same brand name. It induces the producer to produce goods with higher quality equal to the goods produced earlier. It brings in new customers and they turn out to be potential customers in the long run. Example: Amul milk, butter, milk powder, chocolates and ice creams. 6. Premium Brand: Brand demand a premium price for quality. Cost is more than the normal cost category and it is due to its perceived high quality and price Example: Apple phones and computers. 7. Functional Brand: Brand mainly targets the functional attributes and benefits about the product. Example: Olay Cream targets mainly as an anti aging element. Ariel Washing Powder superior performance in washing 8. Symbolic Brand: Brand targets on the symbolic and emotional aspects of the products. Example: Insurance Companies attract the emotional aspects of the customers through various policies for children.

Product Line and Product Mix Decisions

Product Line: They are the group of product produced which satisfies similar needs. Products are priced at different ranges. It is related but vary in size, color, features and benefits. Example: Car manufacturer producing cars according to various segments Camera manufacturer producing different types of cameras with different price ranges respect to features. Product Line Length It is the number of products produced in the same product line. Companies seeking high market share and growth extend their product line by producing related products. Companies seeking high profitability produce selective products. Product line induces up selling

making customers to move upward in their purchases. Example: Car manufactures produce cars from low range to highest range. It also induces cross selling. Example: Harpic produces toilet cleaner along with the brush. Product in then same product line can be lengthened by Line filling and Line Stretching Line Stretching: It is the introduction of new products in the product line. Line stretching may be Downward Stretching Upward Stretching Two Way Stretching Downward Stretching: Introducing low priced product in the same product line. It is done in order to attract the competitors in the middle market from moving upward. Example: Tata launches Tata Nano in small car segment. Upward Stretching: Introducing high priced products in the same product line. Upward Stretching is adopted by companies in order to have greater market growth and market share. Example: General Motors launching Hummer Luxurious Car Two Way Stretching Introducing high price and low price products in the same product line. Example: Tata Motors are in the two way stretching by launching Nano to lower segments and Tata Safari to higher segments. Line Filling: Products of same price are added in the same product line. It is done in order to make the competitors run away from the market. Excess production capacity and inventory are utilized to produce more and more products. Product Line Strategies Strategy formulated for different products in the same product line. Products in different segment are developed based on a strategic decision such as: Strategy encompasses to have a long term focus in the product. It encourages effective product development Helps to concentrated on critical decisions Products at different segments are clearly and effectively It formulates clear plan for the releasing of products in the same product line based on prioritization Covers the primary market segments Effective and efficient planning of the products encourages company to produce more and more products in the same product category. Product Mix: It is the combination of the products and services offered by the organization. Product mix consists of product line and individual products. Diversification of products is possible through product mix by targeting various segments. Firms deal with multi products in case of

product mix and concentrate on upper, middle and lower level segments. Example: Reliance Industries into Petrol, Mobile, Footwear and Vegetable Shops Product Mix Strategies 1. Positioning the Product: Proper positioning strategies to be adopted considering the competitors, price, quality and the target people. 2. Expanding the Product Mix

Line Extensions: Producing products of related category in the same product line Mix Extensions: Producing related products under the same brand name Example: Ariel producing soap and washing powder Producing different products under different brand name Example: ITC into Vivel Shampoo Producing unrelated products under same brand name Example: Reliance into Reliance Footwear Producing related products under different brand name Example: Procter & Gamble into Pantene Shampoo 3. Alteration of Existing Products:

Companies in order to attract customers they alter the existing products with new design, color and package. 4. Contraction: Eliminate the products form the product line which is unprofitable.

Product Line and Mix Extensions:

Product Line is producing related products in the same category with different price ranges. Product Line decisions is considered by 1. Increasing the number of products in the product line 2. Attract customers by Line Stretching through Upward Stretching (producing high priced products ), Downward Stretching (producing low priced products) and Two Way Stretching (targeting both upper and middle segments by producing low and high priced products.) 3. Producing more products in the same product line at same price so as to utilize the excess capacity and inventory. It is done mainly to run away the competitors. 4. Adding or deleting products based on profitability of the products in the product mix. 5. Deciding upon the allocation of resources with respect to the marketing strategies. Product Mix is combination of related and individual products offered by the organization. It is the responsibility of the top management in taking decisions related to Product Mix.

They include: 1. Positioning and Repositioning: Positioning the product in the minds of the consumers and repositioning the existing product depending upon changing market environment. 2. Addition or deletion of new or existing products 3. Analyzing the effects of addition or deletion of products in the product mix. 4. Focusing on product extension. 5. Forecasting the contingent happening in the effects of the product mix.

Decision with respect of product line and mix relies purely with the product management. It i is based on the strategy formulation. Changes in the product also include changes in the target market, advertising, distribution and promotional campaigns.

Product Development
It is bringing in new product/ service to the organization. Company can develop or add new product. It can be done by acquisition or joint venture or by its own. Company can either Develop new product Add new products to the existing line Improve the existing products Companies adopt new product development mostly by developing the existing products. Environment that we work in require continuous innovation. In order to meet the requirement the companies go in for producing new products or developing existing products. They commercialize new products with the strategic formulation. It is used to increase their market share.

Process in New Product Development

1. Idea Generation 2. Idea Screening 3. Concept Development and Testing 4. Business Analysis 5. Product Development and Marketing Mix 6. Market Testing 7. Commercialization 1. Idea Generation: The first step in the process of new product development is to generate ideas..Opportunity for new product can be had by discovering the needs and wants of the unmet customers. Ideas can also be got through existing customers because their tastes and preferences are not stable.

There are various sources through which ideas can be generated. Ideas can be generated by interacting with customers, competitors and other top members from the management. Customer Survey plays a major role in idea generation. Ideas can also be generated from fact to face interview, discussions etc. 2. Idea Screening The next step is Idea Screening. The generated ideas form various sources are sent to the idea manager. Ideas are received by the idea committee. It drops the ideas that might be vague and picks the ideas that are essential for the product development. There are times at which good ideas are dropped and poor ideas are picked leading to a market failure by the company. It mainly covers the target market, product competition, market size, growth and market share. Idea committee review the ideas against certain criteria as Value of the product Whether the product is feasible to produce Does it meet the customer need? Will the customer be benefitted? Will the product be profitable? 3. Concept Development and Testing The product concept developed should have the detail such as How the customer will be benefitted from the product Consumers reaction to the product Positioning of brand to the customers Cost incurred to product he product Based on the above criteria the concept may be developed. Once the concept is developed the next it is tested. Testing can be done by presenting the ideas to few customers in the target segment and observing their reaction. Concepts are presented to customers using customers. Virtual reality can be used to test the product concepts. They use sensory programs to test the virtual reality. 4. Business Analysis After the product concept is developed the management prepares the sales and cost analyzes to determine whether it satisfies the companys objectives. Sales are estimated based on the number of purchase by the customer. Sales estimation is on first time sales, repeat sales and regular sales. Company estimates the cost and profit by having a thorough analysis with the R&D, manufacturing, finance and sales department. Organization determines whether the product developed fits into the overall mission and vision. Results can be obtained by having internal research, market study, and customer survey and competitor analysis. 5. Product Development and Testing Once the concept and ideas are passed through the business analysis the company directs the research and development team of the organization to develop the product. Product models is first produced and given to the customers. In concept testing the customer are tested only with the product ideas but in product development testing they are tested with real products.

The testing can be Alpha and Beta testing. Alpha testing is the testing done within the organization. Beta testing is testing done by delivering the product to the customers. Testing can be done by giving samples to customers at retail stores or other distribution channels. If the consumers react favorably towards the product it presumes the marketer to develop the product. If the consumer reacts unfavorably then the marketer looks in for adjustments or modifications to be done in the developed product 6. Market Testing After the product is presented to the customer for testing the next step based on the results obtained form product test is dressing up of the product with brand name, design, logo and package. The product is then presented to the market and the retailers. They study the customer perception and liking towards the product.

Market testing helps to gather information about buyers, retailer and dealers.. It may be of Consumer Goods Business Goods Consumer Goods: Consumers are tested in respect of satisfaction and repeat purchase. It is done by: a. Sales Wave Research: Products are offered to the consumers before packaging or labeling at free of cost for three to five times. Product tested depending upon the repeat purchase the consumers make towards the free unlabelled product. b. Controlled Test Marketing: Organization engages few retail stores to display the product for a fee. It takes control of a shelf in the retail stores through displays, promotional campaigns etc. Customer attractiveness towards the products is observed through electronic cameras. c. Test Markets: The product is sent to various places and delivered in the market for test. Effective advertising and promotional campaign is adopted to promote the product in such cities. When the product passes through various stages in the life cycle the marketing mix elements also changes according to the dynamic environment and opportunities. Introduction Stage The product is newly developed and introduced in the market. Introduction cost is high Low sales volume High advertisement and promotion costs No profit At this stage organization adopts skimming strategy by entering into the market with a high price and lowering the price later. Growth Stage Newly introduced product slowly grows in the market. At this stage Sales is high Profit increases Product Awareness is high Cost reduction

At this stage following strategies can be adopted Increase the product quality Identify new distribution channels Entering new market segments Lower price to attract new buyers Expand the promotional campaign Maturity Stage Product creates a lasting image in the minds of the consumer. It denotes the product is at maturity. Sales is high Market Saturation Advertisement expenditure is reduced Competition increases Differentiation and diversification is essential Strategies adopted at this stage are Market Modification: Product can be expanded in the market by converting non users to be customers to the product and entering new market segments. Product Modification: Improve the product through its quality, package, design and other additional features. Once the product reaches its maturity level it slowly declines from its growth Sales volume declines Profit saturates Customer shift to new products Price declines Strategies adopted may be Increase the investment of the firm through diversification Decrease the investment of the firm by dropping unprofitable segment

Pricing Strategy
Pricing is one among the four Ps in the marketing mix. Pricing is the sum fixed in exchange for any goods or service. Firms price their products keeping in mind the market, competition and the market share analysis. Market demand and competition are the two major components involved in the fixation of price. Pricing Objective: Companies choose the pricing objective based on their business and financial goals. The primary objective is. Profit maximization: maximize the profit considering the costs and revenue. They maximize the profit margin of the product. Revenue maximization: Revenue is maximized through sales. Objective of revenue maximization is related to the goals and growing strategy of the market share. Profit Margin Maximization: The profit margin of per unit product is maximized. Quantity Maximization: The number of units sold is maximized in order to decrease the long term costs. Quality Leadership: Objective is to position the product as a leader in quality. Survival: Goal is to select the price that minimizes the cost and retains the product in the market. Status Quo: Maintain the prices in line with the competitors so as to avoid price war. Partial Cost Recovery: Companies provide the product at a superior quality but at low price. This is because the organization has various sources to generate income.

Factors affecting Pricing Decisions

Internal Factors: Markets have to consider the internal factors when setting the price. Internal factors are the factors that can be controlled by the company and can be altered. They are Marketing Objectives: Marketer sets the marketing decisions based on the overall company objective. Price is influenced by the following company objectives: Market Share: Pricing decisions in respect of share is for new and existing products. For new products the company sets low price in the beginning in order to gain market share. In case of existing products they retain the market share. Profit maximization: Marketer set the price for the product in order to maximize the profit. Market Share Leader: They lower the price of the product in order to become a leader in the market share. Marketing Strategy: Marketing mix considers price as one of the main marketing element. It will be effective only when all the elements of the marketing mix work together effectively. Price should be fixed considering the quality, competitors and market share. Cost is the important determinant in setting price. Marketer set price only after considering all the costs associated in manufacturing the product. Consumer normally pays for the product at a price higher than its manufacturing costs. It covers both fixed and variable costs. Fixed Costs: These are the cost that is not affected by changes in the level of production. Variable Costs: They are the cost that is directly related to the changes in the volume of production and distribution of products.

External Factors:
They are the factors which cannot be controlled and altered by the organization. Market Demand and Elasticity: Marketer should determine the effects of the price over the demand in the market. Changes in the price of the product responsive to the changes in the demand are called as Elasticity of Demand. It may be elastic, inelastic and unit elastic. Elastic Demand: Changes in the price of the product have larger proportionate changes in the demand. Increase in price lowers the revenue. Inelastic demand: Changes the price of the product have a smaller proportionate change in the demand. Increase in the price raises total revenue Unitary Demand: Changes in the price of the product have an equal change in the demand. There is no change in the revenue. Distribution Channels and Customer Expectation: The channels through which the marketer delivers the product should be properly selected. The channel members do expect something which they receive from the percentage of the final selling of the product. Customer expectations should be met. They value the products much more than price. Competitors Cost and Price: Marketer should consider the competitors product price while setting the price. Government Regulation: They set price ceilings while setting price. Marketer should also consider other local regulations and tariffs while determining the price.

Pricing Strategy should be evaluated considering 1. Identify the pricing strategy: Marketer should first determine whether the product is priced based on the following pricing methods: Cost Based Pricing: The products are priced based on adding an amount if profit percentage to the manufacturing or production costs. It covers all the costs (including fixed and variable) in producing the product. Cost based pricing determines the desired level of profit by Cost + Profit Percentage = Selling Price Market Based Pricing: Prices are fixed based on the market and customer analysis. It can be Market Skimming: Entering the market by fixing high price at the initial stage and then moving to a low price. Market Penetration: In order to gain customer and huge market share companies penetrate into the market with low price. Psychological Pricing: Setting prices based on the psychological impact of the customer. Discount Pricing: Price reduction offered to customer based on seasons. Competition Based Pricing: Setting prices based on the pricing strategy adopted by the competitors. Companies analyze the competitors products and set price equal to or higher or lower compared to them Demand Based Pricing: Pricing done based on the value the customer perceive about the product and not on costs. 1 The marketer after identifying the pricing strategy evaluates it based on the customer acceptance towards price, as whether it will increase the volume of sales. 2 The fixed price should be communicated to other employees in the organization. Brainstorming session should be conducted to allow them to generate ideas on price fixation. After considering the above steps in pricing strategies the product enters into the market in any one of the following determinants for price fixation. Strategies for pricing are: Price Skimming: They charge high price for the products when they enter the market. Consumers to these types of pricing tend to pay more based on the value of the products and services. It attracts new competitors to the product. Example: Rolex Company with brand new watches at higher price. Premium Pricing: Price charged usually high. They are mainly for luxurious products and it has greater advantage. It creates an impression in the minds of the consumer that high priced product have a greater value and reputation. Penetration Pricing: Marketers enter into the market by charging a low price during their entrants and then increase the price further based on the product demand and movement in the market. Loss Leader Pricing: It is priced based on the psychological impact of the customer.

 Economy Pricing: They are low priced products. Cost is kept at a minimum level. Example: Soaps, Detergents Product Line Pricing: Fixing a single price for all products in the same product line.

Optional Product Pricing: Marketer charge extra for the options provided along with the product. They increase the overall price of the product. Example: Charging extra for windows seat in aeroplanes. Captive Product Pricing: Marketers charge a premium price for the product which complements each other. They are the types of products which cannot be used without the main product. Example: Camera Film Rolls Product Bundle Pricing: Several products are combined in one package and sold to the customer. Example: Books along with the CDs Promotional Pricing: Pricing done mainly to promote the product. Example: Offer based as Buy 3 gets one free. Geographical Pricing: Prices charged based on various geographical areas. Price discrimination: Setting prices according to different target segments and different classes of customers. Example: Airline charging prices based on Economy Class and Business Class. New Product Pricing Strategies: It is much suitable for new entrants. When new products enter into the market company usually charge low price compared to the other products. It helps to capture large market share. Transparent Pricing method is adopted to compare new products with other products in order to understand that they are priced low when compared to large companies. New Product Pricing Strategies are formulated through the following steps: They develop the strategy considering the market analysis The marketing mix 4 Ps in respect of new product is determined Calculate the demand for the product by analyzing the economic factors. Calculate the cost occurred for the product and adopt the pricing methods based on competition or market or cost There are two Pricing Strategies adopted for New Product Pricing Market Penetration: New products enter the market with low price. They adopt this pricing strategy in order to gain market share. Companies use price penetration when competitors produce similar or related products. Market Skimming: Companies charge high price initially and reduce the price later. This pricing strategy is adopted when the quality of the product is high and also when competitors cannot enter the market.

Product Management
It manages the product development and marketing throughout the product life cycle of the organization. It carefully and continually monitors the four Ps of the marketing mix (Product, Place, Price and Promotion). It maximizes the sales revenue, market share and profit growth. Product Planning and product marketing are two different aspects but some organization perceives it as one and henceforth it is named as Product Management. Product Planning identifies the market needs in producing a product Product marketing is delivering the product to the customers through proper distribution channel, effective sales promotion and advertisement campaign.

Product Attributes Attributes refer to an object characteristics or quality. It helps to identify a particular object by its inherent characteristics. Product Attributes refers to the properties/characteristics of the product. It relates to the cost, size, and color, tangible and intangible features of the product. Tangible Product Attributes refer to the physical color, packaging etc. Intangible Product Attributes refer to the style, quality, strength etc. Brand Attributes They are the functional associations assigned to a brand. Brand Attributes have different relevance to different segments. They are the best identification to a brand. Example: Effective advertisement and promotional strategies differentiating form that of its competitors. Differentiation approach to customer in respect of Brand identification

Branding Brand It is a collection of symbols, associations to a product or service. It is a trademark or a distinctive identity to the product. Brand creates an image in the minds of the customer about

the product. Companys profitability can be enhanced if the brand has occupied a lasting position in the minds of the customer. Strong brand image brings in potential and loyal customers to the company. Brand helps to Deliver the message clearly Maintain loyalty with customers Increases credibility of the company Brings in better and future prospects

Branding: It creates a differentiated presence about the product in the minds of the consumer by assigning to a product its identity through trademark or logo or name. Branding develops a bond with the customers. They are convinced with the product as branding points out the differentiated feature or benefit about it form that of the competitors. Branding helps in Binding relationship with the customer. Attractive branding retains customers through powerful differentiation and positioning. Strategy to selected group of customers. Eg. Mercedes Benz branded specifically to high class people. It focuses on emotional and visual elements which easily attracts customers. It delivers the brand through powerful distributors and strong communication channels. Brand Equity It is the value added to the brand based on consumer perception and recognition about the product or service. It is created through marketing campaigns and effective promotion. Brand equity is a unique and intangible value added to the product. Example: Coco Cola brand has created an intangible value endowed in the minds of the customers. Brand Equity can be measured in three perspectives: Functional Brand Equity Brand Extensions Customer Based Brand Equity Functional Brand Equity: Consumers may be willing to pay a premium amount to a branded product when compared with an unbranded one. Therefore consumers value brand as an important perspective. Functional brand equity is measured with respect to promotional and advertising costs. Brand Extensions: Manufactures of the product goes in for producing related product to a powerful and successful brand. Strength of the parent brand has a greater reflection in the related products

of the same brand. Example: Coco Cola manufactures mineral water Kinley Customer based Brand Equity: It is when customers have strong knowledge about the brand through effective advertising and promotion. Customer based brand equity is positive and negative. Positive brand equity occurs when customers react favorably to the product in the market. Negative brand equity occurs when they are less favorable to the product branded in the market. It leads to customer brand loyalty and good perceived quality about the product. Brand equity helps the marketing researcher to develop good knowledge about the brand in the minds of the consumer, as brand is the most valuable assets of the company. Branding Strategies It is the development of new brand elements to the existing or new products or services. Branding helps to make the product stand unique from that of competitors. Strong and effective branding strategy brings in loyal customers. Successful branding enables brand equity. Brand equity is the values added to the product by making the customer pay a premium amount to the branded product. When developing a branding strategy the company should 1 Determine its Competitive Positioning Strategy. Competitive Positioning Strategy is differentiating the product form the market offering. It mainly concentrates on differentiation and positioning. These strategies should be properly adopted in order to differentiate it form its competitors. 2 Features and benefits of the product should be listed and the benefits pertaining to particular segment should be scrutinized. 3 The brand should be designed with attractive color, fonts, logos and promotional message pertaining to segments Proper branding strategies create effective communication about the product to prospect customers. Types of Brand: 1. Manufacturer Brand: The brand name is that of the manufactures and not a private brand name. Customers may be attracted towards the manufacturer brand name. It is owned by the producer. Eg. Clothes Merchants 2. Own Label Brands Brand may be owned by retailer and not a manufacturer. They produce goods to the retailer on a contract basis under the brand name of the retailer. It is also called as private brands. Example: Nike does not product their goods. They go to different factory outlets to manufactures the products under their brand name. 3. Corporate Branding: Companys name may be used as the brand name. This helps the customer to accept new products introduced by the corporate under the company brand name. It attempts to greater leverage in respect of brand recognition. It maintains lasting potential and loyal customers who are much familiar about the company product. Example: Pepsi 4. Individual Branding: It is the strategy of giving each product a different brand name under the same product family. Uniqueness of the product is identified through individual branding thereby facilitating greater positioning process.

Example: Unilever products product goods under different brand names such as Dove, Rin, Surf, Axe, Lux etc. 5. Family Branding: Single brand name is used for all products under the same product family. New product acceptance is easily possible without expecting customer preference as it is produced under the same brand name. It induces the producer to produce goods with higher quality equal to the goods produced earlier. It brings in new customers and they turn out to be potential customers in the long run. Example: Amul milk, butter, milk powder, chocolates and ice creams. 6. Premium Brand: Brand demand a premium price for quality. Cost is more than the normal cost category and it is due to its perceived high quality and price Example: Apple phones and computers. 7. Functional Brand: Brand mainly targets the functional attributes and benefits about the product. Example: Olay Cream targets mainly as an anti aging element. Ariel Washing Powder superior performance in washing 8. Symbolic Brand: Brand targets on the symbolic and emotional aspects of the products. Example: Insurance Companies attract the emotional aspects of the customers through various policies for children. Product Line and Product Mix Decisions Product Line: They are the group of product produced which satisfies similar needs. Products are priced at different ranges. It is related but vary in size, color, features and benefits. Example: Car manufacturer producing cars according to various segments Camera manufacturer producing different types of cameras with different price ranges respect to features. Product Line Length It is the number of products produced in the same product line. Companies seeking high market share and growth extend their product line by producing related products. Companies seeking high profitability produce selective products. Product line induces up selling making customers to move upward in their purchases. Example: Car manufactures produce cars from low range to highest range. It also induces cross selling. Example: Harpic produces toilet cleaner along with the brush. Product in then same product line can be lengthened by Line filling and Line Stretching Line Stretching: It is the introduction of new products in the product line. Line stretching may be Downward Stretching Upward Stretching Two Way Stretching Downward Stretching: Introducing low priced product in the same product line. It is done in order to attract the competitors in the middle market from moving upward. Example: Tata launches Tata Nano in small car segment. Upward Stretching: Introducing high priced products in the same product line. Upward Stretching is adopted by companies in order to have greater market growth and market share. Example: General Motors launching Hummer Luxurious Car

 Two Way Stretching Introducing high price and low price products in the same product line. Example: Tata Motors are in the two way stretching by launching Nano to lower segments and Tata Safari to higher segments. Line Filling: Products of same price are added in the same product line. It is done in order to make the competitors run away from the market. Excess production capacity and inventory are utilized to produce more and more products. Product Line Strategies Strategy formulated for different products in the same product line. Products in different segment are developed based on a strategic decision such as: Strategy encompasses to have a long term focus in the product. It encourages effective product development Helps to concentrated on critical decisions Products at different segments are clearly and effectively focused It formulates clear plan for the releasing of products in the same product line based on prioritization Covers the primary market segments Effective and efficient planning of the products encourages company to produce more and more products in the same product category.

Product Mix:
It is the combination of the products and services offered by the organization. Product mix consists of product line and individual products. Diversification of products is possible through product mix by targeting various segments. Firms deal with multi products in case of product mix and concentrate on upper, middle and lower level segments. Example: Reliance Industries into Petrol, Mobile, Footwear and Vegetable Shops Product Mix Strategies 1. Positioning the Product: Proper positioning strategies to be adopted considering the competitors, price, quality and the target people. 2. Expanding the Product Mix Line Extensions: Producing products of related category in the same product line Mix Extensions: Producing related products under the same brand name Example: Ariel producing soap and washing powder Producing different products under different brand name Example: ITC into Vivel Shampoo Producing unrelated products under same brand name Example: Reliance into Reliance Footwear Producing related products under different brand name Example: Procter & Gamble into Pantene Shampoo 3. Alteration of Existing Products: Companies in order to attract customers they alter the existing products with new design, color and package. 4. Contraction: Eliminate the products form the product line which is unprofitable.

Product Line and Mix Extensions: Product Line is producing related products in the same category with different price ranges. Product Line decisions is considered by 1. Increasing the number of products in the product line

2. Attract customers by Line Stretching through Upward Stretching (producing high priced products ), Downward Stretching (producing low priced products) and Two Way Stretching (targeting both upper and middle segments by producing low and high priced products.) 3. Producing more products in the same product line at same price so as to utilize the excess capacity and inventory. It is done mainly to run away the competitors. 4. Adding or deleting products based on profitability of the products in the product mix.

5. Deciding upon the allocation of resources with respect to the marketing strategies. Product Mix is combination of related and individual products offered by the organization. It is the responsibility of the top management in taking decisions related to Product Mix. They include: 1. Positioning and Repositioning: Positioning the product in the minds of the consumers and repositioning the existing product depending upon changing market environment. 2. Addition or deletion of new or existing products 3. Analyzing the effects of addition or deletion of products in the product mix. 4. Focusing on product extension. 5. Forecasting the contingent happening in the effects of the product mix. Decision with respect of product line and mix relies purely with the product management. It is based on the strategy formulation. Changes in the product also include changes in the target market, advertising, distribution and promotional campaigns.

Process in New Product Development

1. Idea Generation 2. Idea Screening 3. Concept Development and Testing 4. Business Analysis 5. Product Development and Marketing Mix 6. Market Testing 7. Commercialization

1. Idea Generation: The first step in the process of new product development is to generate ideas..Opportunity for new product can be had by discovering the needs and wants of the unmet customers. Ideas can also be got through existing customers because their tastes and preferences are not stable. There are various sources through which ideas can be generated. Ideas can be generated by interacting with customers, competitors and other top members from the management. Customer Survey plays a major role in idea generation. Ideas can also be generated from fact to face interview, discussions etc. 2. Idea Screening The next step is Idea Screening. The generated ideas form various sources are sent to the idea manager. Ideas are received by the idea committee. It drops the ideas that might be vague and picks the ideas that are essential for the product development. There are times at which good ideas are dropped and poor ideas are picked leading to a market failure by the company. It mainly covers the target market, product competition, market size, growth and market share. 3. Concept Development and Testing The product concept developed should have the detail such as How the customer will be benefitted from the product Consumers reaction to the product Positioning of brand to the customers Cost incurred to product he product 4. Business Analysis After the product concept is developed the management prepares the sales and cost analyzes to determine whether it satisfies the companys objectives. Sales are estimated based on the number of purchase by the customer. Sales estimation is on first time sales, repeat sales and regular sales. Company estimates the cost and profit by having a thorough analysis with the R&D, manufacturing, finance and sales department. Organization determines whether the product developed fits into the overall mission and vision. Results can be obtained by having internal research, market study, and customer survey and competitor analysis. 5. Product Development and Testing Once the concept and ideas are passed through the business analysis the company directs the research and development team of the organization to develop the product. Product models is first produced and given to the customers. In concept testing the customer are tested only with the product ideas but in product development testing they are tested with real products. The testing can be Alpha and Beta testing. Alpha testing is the testing done within the organization. Beta testing is testing done by delivering the product to the customers. Testing can be done by giving samples to customers at retail stores or other distribution channels. If the consumers react favorably towards the product it presumes the marketer to develop the product. If the consumer reacts unfavorably then the marketer looks in for adjustments or modifications to be done in the developed product 6. Market Testing After the product is presented to the customer for testing the next step based on the results obtained form product test is dressing up of the product with brand name, design, logo and package. The product is then presented to the market and the retailers. They study the customer perception and liking towards the product. Market testing helps to gather information about buyers, retailer and dealers.. It may be of

 Consumer Goods Business Goods Consumer Goods: Consumers are tested in respect of satisfaction and repeat purchase. It is done by: Sales Wave Research: Products are offered to the consumers before packaging or labeling at free of cost for three to five times. Product tested depending upon the repeat purchase the consumers make towards the free unlabelled product. Controlled Test Marketing: Organization engages few retail stores to display the product for a fee. It takes control of a shelf in the retail stores through displays, promotional campaigns etc. Customer attractiveness towards the products is observed through electronic cameras. Test Markets: The product is sent to various places and delivered in the market for test. Effective advertising and promotional campaign is adopted to promote the product in such cities.

Introduction Stage
The product is newly developed and introduced in the market. Introduction cost is high Low sales volume High advertisement and promotion costs No profit At this stage organization adopts skimming strategy by entering into the market with a high price and lowering the price later.

Growth Stage
Newly introduced product slowly grows in the market. At this stage Sales is high Profit increases Product Awareness is high Cost reduction At this stage following strategies can be adopted Increase the product quality Identify new distribution channels Entering new market segments Lower price to attract new buyers Expand the promotional campaign

Maturity Stage
Product creates a lasting image in the minds of the consumer. It denotes the product is at maturity. Sales is high Market Saturation Advertisement expenditure is reduced Competition increases Differentiation and diversification is essential Strategies adopted at this stage are Market Modification: Product can be expanded in the market by converting non users to be customers to the product and entering new market segments. Product Modification: Improve the product through its quality, package, design and other additional features. Once the product reaches its maturity level it slowly declines from its growth Sales volume declines Profit saturates Customer shift to new products Price declines Strategies adopted may be Increase the investment of the firm through diversification Decrease the investment of the firm by dropping unprofitable segment Marketing Strategies for Service Firms Service is doing any act or performance to another person or third party with non physical goods resulting in non ownership of service.

Service Marketing: It is the marketing of intangible goods. Service marketing includes 3 more Ps form the normal marketing mix elements. They are Product is the intangible service provided on a large scale. Price is the amount customer pays for the service Place is the location from where the goods or service can be produced or consumed Promotion is the communicable message consisting of product features/attributes differentiable form its competitors People include employees who deliver the service. Service employees should be given adequate training to deliver the service to the customer. Service Companys reputation is judged purely on the basis of the employers who deliver the service. Physical Evidence: Tangible evidence for the delivery of the service. Example: Restaurants, Textile Shops. Procedure followed in delivering the service. It ensures service quality, flexible market offering and better service at lower costs.

Advertising
It is form of communication attempting customer to purchase the product. It is a paid form of non personal presentation of the product or service to the customer. They are designed mainly to influence the purchase behavior of the customer. They are an effective promotional tool to attract customers. Advertising may be in the form of television, banner ads, text ads or through Internet. It is mainly focused on Reach: How the message is reached to different customers. Frequency: Number of times the advertising message is delivered to the customer. Impact: Value of exposure of the advertisement. Timing: The time desired to run the advertisement campaign considering the customer leisure and interest. Objectives of Advertising: Trial: It is to encourage customers to purchase the product after a trial purchase. Trial purchase prompts for repeat purchase. Switchback: Old customers may be got back through introduction of additional features and reduction in price. Continuity: Maintaining existing customers by inducing them to continually use the product. Brand Switching: Inducing customers to switch form competitor brand to their own brand. This can be done by comparing their product in respect of price and quality. Types of Advertising: 1. Advertising can be done through media. It includes newspaper, radio, billboards, stickers, pamphlets, television etc. Media advertising is more effective tool compared to other forms. Television is the generally accepted form of advertising. Promotion of the product through such media brings in more customers. Advertisement may be repeatedly telecasted in TV and Radio thereby creating a long lasting image in the minds of the consumers.

 Billboards are sign boards located at important locations of the cities. They should be attractive and catchy. People when they halt at traffic signals get attracted to these billboards and the product displayed. Newspapers: Products are displayed with attractive colors and size. Reading newspapers is habitual inducing attraction towards ads. 2. Celebrity Advertising: Advertising campaigns for the product is done through celebrities. Endorsement of products is done through celebrities fame, name and image. Consumers perceive this product on the perception that the celebrity by whom the product is promoted is a regular user to the product. 3. Persuasive Advertising: It is done after the products have been introduced to the customer. Company charge high price because of the customer perceived quality about the product. 4. Institutional Advertising: Advertising is done to promote the image, name of the company rather than a product. It is done as a public awareness to improve their image among the public. 5. Covert Advertising: Advertising the product or brand in entertainment or a movie Product is used by the Heros and heroines throughout the movie. 6. Informational Advertising: They are used in respect of new products. When new products are introduced in the market advertising may be informational pointing out the usage and benefits of the product. 7. Direct Mail Advertising: Advertisement is sent through direct mail to the customers. They are more selective and speed compared to other forms of advertisement. 8. Product Advertisement: Advertising a specific product during a particular commercial or TV show. 9. Point of Purchase Advertising: The products are displayed at a place near the product. Enable the customer to make the purchase at the point o display. 10. Comparative Advertising: It is done by comparing the product with that of the competitors. Careful measures are to be taken to deliver correct and meaningful messages during comparison.

Sales Promotion:
Sales Promotion is one of the aspects of marketing mix. It consists of techniques and tools in order to stimulate the purchase of the product. They persuade the customer to respond to market activity in the form of sales promotion. Sales promotion is the implied message in the form of contest coupons given along with the advertisement. Sales Promotion tools are

Consumer Sales Promotion Trade Sales Promotion Business Sales Force Promotion

Objective of Sales Promotion:

Sales Promotion creates brand awareness among the product. It helps in capturing customer information about the product at the time of purchase. It mainly targets brand switchers. They are effective tool for customer who looks for low priced products better than the competitors. Sales Promotion is delivering the message to customers about the product though contest, coupons and rebates. It creates customer interest towards the product. Stimulates customer demand through price reduction and discounts. Consumer Sales Promotion Consumer Sales Promotion are designed mainly for customer. They result in purchase. Consumer Sales Promotion techniques is through offering low priced product or additional feature to the product. It creates brand awareness and customer loyalty.

Types of Consumer Sales Promotion: 1 Coupons: It is a purchase price saving or incentive offered to the consumer. Consumers are much aware about the offer and it is accompanied with products, magazines etc. 2 Samples: Offering of product to consumer as a sample. It is delivered at door steps or at retail shops. 3 Free Product: Inviting customers to buy products. Example Buy 3 and get one free. 4 Premiums: It is a type of incentive given to the consumer during purchase. It consists of a fee or prize or reduction in the price of the product. 5 Frequency Programs: Conducting Programs to loyal consumers in order to motivate their intensity in purchasing the product. 6 Rebates: Offered with the intention of lowering the cost of the product. Rebate is offered at the point of purchase. They are given to customers in submission of customer identification. 7 Contests/Sweepstakes: Contest is customers are asked to perform certain activity which is judged by panel of members. Sweepstakes is customer names are drawn at random and prizes are given without asking any activity to perform. 8 Demonstration: Benefits are available to customers by the marketer demonstrating of how to use the product. It may be in person or through video. Trade Sales Promotion: Trade Sales Promotion is aimed at retailers, wholesalers and distributors who distribute the product to the ultimate consumer. It helps to have control over inventory and expansion of retail stores. 1 Point of Purchase: Products are displayed in retail store. They are done in order to promote a particular brand or product. Retail stores develop racks or places to display the product. Based on the number of point of purchases the marketers lower per unit cost of the products to the retailers. 2 Trade Shows: Organizing trade shows at central location of the city. Manufacturers display the products at trade shows and attract large number of potential buyers. 3 Allowances: Offering done on the basis of a agreeable feature to the product. 4 Push money: Retailers receive extra commission during the sale of a particular product or service. Business to Business Sales Promotion: They are the promotional techniques used to move customers to action. The techniques used include price reduction, free products and trade shows.

Public Relation: It is the act of creating relationship with the public through the use of various distribution channels. The image of the product is publicized through public relation. It helps to create a rapport with the employees, investors and customers. Public Relation helps to Build goodwill among customers. Manage threat from various sources. Closely watches and monitors public view about the product.

Public relation Tools: The tools for conveying the messages to the public may be through New Releases Media Releases Seminars Emails Special Events Employee Relation Trade Shows Surveys Advantages of Public Relation Offer more credibility. Consumers have a wider perception about the product when they read it on a newspaper or other media compared to advertising. Result obtained through public relation helps to generate a valuable sales lead. Public Relation helps in building brand image of the product. Cost is much less when compared to other promotional tools. Disadvantages of Public Relation Message conveyance to the public may not be clear. Marketers do not have a direct control over the delivery of the message. It may not be precise as designed by the marketer. Public relation mainly through newspapers is fading due to latest technologies. There is a danger of miscommunication and mismanagement between the Public Relation and the marketing department of the message is not properly delivered.

Personal Selling
Personal Selling is the use of face to face communication between the buyer and the seller. It builds a lasting relationship. Value of the personal selling by the seller is through sale of the product for the buyer it is valued through the internet. It is initiated by: 1. Identify the prospects for the product. It can be done through surveys. 2. Meeting customers by fixing appointment. Surprising them by providing accurate information about them form databases. 3. Listing the features and benefits of the products. 4. Careful handling of objections and queries raised by the customers, 5. Close the sale deal based on the valuable and effective skills of the

salesperson. Advantages of Personal Selling It is a direct communication channel with the customer. Seller delivers the message and receives the feedback immediately. Customer Interaction builds lasting relationship. Wider scope of reach to customers. It is a greater source of information. Customer perception towards the product is observed. Disadvantages of Personal Selling Personal Selling become ineffective due to bad behavior of certain sales person towards customers. Cost is too high. It requires high level of training to sales persons. Direct Marketing: Sending message directly to consumers. It helps to measure positive responses. Direct marketing includes television, magazines, newspapers, mail, email, radios and billboards. Responses from direct marketing can be measured and tracked. Types of Direct Marketing 1 Direct mail: Sending mail to all Postal customers. It is one of low budget medium marketing. It is also called as junk mail. Direct mail may contain advertising message, catalogs or membership card. Mail is formatted and sorted to handle the cost incurred effectively. 2 Face to Face Selling: Marketing of the products through fact to face contact. 3 Internet Marketing: Marketing of the product to internet users. Advertising messages can be sent through E-mail to the internet users. It covers all the segments irrespective of geographical locations. It is more flexible, responsive and potential when compared to other types of marketing. 4 Catalogs: Products offered by the organization are featured in paper form called as catalogs. They are sent to the customers. Order is placed based on the product and their price displayed in the catalog. 5 Telemarketing: Organization appoints trained tele callers to list out the services and products offered by them to the people. They collect the data from various data sources and contacted through phone. It is gaining popularity in recent days. 6 Direct marketing through television: Advertisements are aired on television. Responses can be had through telephone based on the toll free numbers displayed during advertisement. Advantages of Direct Marketing It can be measured through direct responses. Intermediaries are eliminated. Disadvantages of Direct Marketing Segmentation is not relevant by targeting wrong products to wrong segments. Cost incurred in respect of catalogs and pamphlets is high. Marketing Communication Mix Marketing Mix is the combination of advertising, sales promotion, public relation, personal selling and direct marketing to attain the marketing and advertising objectives.

1 Advertising: It the paid form of non personal ideas by the sponsor to the public. It may be through television, radio, banners and billboards. It is designed mainly to influence the purchase behavior of the consumers. 2 Sales Promotion: It is the techniques and tools used to induce customers to purchase a product or service. Incentives are provided to retailers who encourage a particular sale or service of the product. Sales Promotion may be 1) Consumers in the form of Coupons, rebates and to 2) Traders in the form of trade shows and allowances. 3).Public Relation: Relationship with Consumers by publicizing the products. It is done through the use of various distribution channels. It builds good relation with customers. 4. Personal Selling: Face to Face communication between the buyer and the seller. Emotions and perception is observed directly. 5. Direct Marketing: Direct communication with individuals through mail, television, internet and face to face contact. Consumer responsiveness is measured. Marketing communication is effective only when the message is delivered to the consumer as perceived by the marketer. Effective Communication can be developed by: 1 Target Audience to be communicated is identified. Message to be delivered is prepared 2 Communication objective is to be identified. It should be identified on the basis of Awareness Liking Purchase Knowledge 3 Message and object identified should be delivered in the following appeal Rational Appeal: It is based on the self interest of the consumer. Emotional Appeal: Targets the positive and negative feelings. 4 Media through which the message is to be delivered is selected. 5 The final stage in effective communication is the feedback received from the consumer based on the message. Setting the Overall Communication Mix Advertising Marketing communication through advertising has a wider reach without any geographical limitation. Brand is clearly and effectively dramatized and conveyed to the audience. It builds brand and boost sales. Advertising message is considered legitimate by the consumer. Sales Promotion Promotional tools are effective through coupons, rebates, prizes and premiums. Communication through sales promotion boosts up sales and stimulates quick responses. Public Relation Company goodwill and reputation is dramatized. It earns more credibility and wider reach than other forms of communication. Personal Selling Relationship oriented. It builds effective rapport with the clients and makes the buyers more attentive. It encourages feedback. Direct Marketing: Done through various forms such as internet, telephone and face to face contact. It makes the customer interactive, induced and customized and act immediately to the product.

Product Management It manages the product development and marketing throughout the product life cycle of the organization. It carefully and continually monitors the four Ps of the marketing mix (Product, Place, Price and Promotion). It maximizes the sales revenue, market share and profit growth. Product Planning and product marketing are two different aspects but some organization perceives it as one and henceforth it is named as Product Management. Product Planning identifies the market needs in producing a product Product marketing is delivering the product to the customers through proper distribution channel, effective sales promotion and advertisement campaign.

Product Attributes Attributes refer to an object characteristics or quality. It helps to identify a particular object by its inherent characteristics. Product Attributes refers to the properties/characteristics of the product. It relates to the cost, size, and color, tangible and intangible features of the product.

Tangible Product Attributes refer to the physical color, packaging etc. Intangible Product Attributes refer to the style, quality, strength etc.

NEW PRODUCT OPTIONS There are a variety of types of new products and ways to create them. A company can add new products through acquisition or development.

A) The acquisition route can take three forms: 1) The company can buy other companies. 2) It can acquire patents from other companies. 3) It can buy a license or franchise from another company. B) The development route can take two forms: 1) It can develop new products in its own laboratories called organic growth

2) It can contract with independent researchers or new-product development firms to develop new products.

Types of New Products

We can identify six categories of new products: 1) New-to-the-world products 2) New product lines 3) Additions to existing product lines 4) Improvements and revisions of existing products 5) Repositioning 6) Cost Reductions. A) Fewer than 10 to 15 percent of all new products are truly innovative and new to the world. B) These products involve the greatest cost and risk because they are new to both the company and the marketplace. C) Most new-product activity is devoted to improving existing products. D) Many high-tech firms strive for radical innovation CHALLENGES IN NEW PRODUCT DEVELOPMENT New-product introductions have accelerated in recent years. In many industries, the time it takes to bring a product to market has been cut in half. The Innovative Imperative A) New-product introductions have accelerated in recent years B) In an economy of rapid change, continuous innovation is a necessity C) Companies that fail to develop new products put themselves at risk.

New Product Success

A) Most established companies focus on incremental innovation. B) Newer companies create disruptive technologies. C) Established companies can be slow to react or invest in these disruptive technologies because they threaten their investment. D) Incumbent firms must carefully monitor the preferences of both customers and noncustomers over time and uncover evolving, difficult-to-articulate customer needs.

New Product Failure

New-product development can be quite risky. A) New products continue to fail at a disturbing rate: Around 95 percent in the United States Around 90 percent in Europe

Reasons for failure of new products:

Shortage of important ideas in certain areas

Fragmented markets Social and governmental constraints Cost of development Capital shortages Shorter required development time Shorter product life cycles

Business Analysis
After management develops the product concept and marketing strategy, it can evaluate the proposals business attractiveness. Management needs to prepare sales, cost, and profit projections to determine whether they satisfy company objectives. If it does, then the concept can move into the development stage.

Estimating Total Sales

Total estimated sales are the sum of estimated first-time sales, replacement sales, and repeat sales. Sales-estimation methods depend on whether the product is a one-time purchase, an infrequently purchased product, or a frequently purchased product. )A Infrequently purchased products exhibit replacement dictated by physical wearing out or by obsolescence. B) Frequently purchased products have product life cycles sales. cycles

C) In estimating sales, the managers first task is to estimate first-time purchases of the new product in each period. D) To estimate replacement sales, management has to research the products survival-age distribution. E) Because replacement sales are difficult to estimate before the product is in use, some manufacturers base the decision to launch a new product solely on the estimate of firsttime sales. F) For a frequently purchased new-product, the seller has to estimate repeat sales as well as first-time sales.

Estimating Costs and Profits

Costs are estimated by the R&D, manufacturing, marketing, and finance departments.

A) The payback period here is approximately three and a half years. B) Management has to decide whether to risk a maximum investment loss of $4.6 million and a possible payback period of three and a half years.

C) Companies use other financial measures to evaluate the merit of a new-product proposal. D) The simplest is breakeven analysis. E) The more complex method is risk analysis.