Industrial ProductIndustrial Product• Industrial Product: A product is all of the value

satisfaction that a customer derives at both organizational and personal level.

Components and levels of product:Core product: The core product which is most fundamental level of the product refers to the core benefit the consumer derives from the product

Ex: Basic computer system for office applications.

Enhanced Products: Generic products are made differentiable by adding enhanced properties. These properties are physical additions or deletions to the generic product & include features, styling, and qualities: Computer system( laptop, screen, memory, network connection, advance software etc)

Augmented Properties: These are those additional benefits connoted in the purchase of a particular product. These are usually intangible benefits & include training, technical assistance, availability of spare parts financing terms, brand, warranty, delivery etc…………

Industrial Product StrategyIndustrial Product Strategy

Industrial ProductIndustrial Product

Features Features

Industrial Product LifeIndustrial Product Life Cycle Cycle

New Product StrategyNew Product Strategy

Product DecisionsProduct Decisions• Market Segmentation Decision: The first product decision to be made

is the market segment decision because all other decisions i.e. Product mix, Product specifications, and Positioning & communication decisions depends on the target market

• Product mix Decision: Product mix decisions pertains to the type of products & product variants to be offered to the target market.

Product specifications: This involves specification of the details of each product item in the product mix. This includes factors like styling, shape, size and other attributed & factors like packaging & labeling.

Positioning & Communication decisions :Its an image projected of the product in the target market. Communication refers to the promotional message designed for the product. Both positioning and communication are very much interrelated. How a product is promoted to the customer is a very important part of the business marketing strategy.

Industrial Product Strategy Industrial Product Strategy

• Industrial marketers must understand that a product Industrial marketers must understand that a product strategy is flexible and dynamic. In industrial marketing strategy is flexible and dynamic. In industrial marketing a product is variable. Industrial firms are required to a product is variable. Industrial firms are required to make changes in the product strategy because of make changes in the product strategy because of changes IN ………changes IN ………

• Customer needsCustomer needs: : Products are made to satisfy certain Products are made to satisfy certain needs & wants of customers. needs & wants of customers.

• TechnologyTechnology : the changes in technology require : the changes in technology require product modification or make existing product obsolete product modification or make existing product obsolete

• Government policiesGovernment policies: : Changes in the government Changes in the government policies and the laws requires change in the product policies and the laws requires change in the product strategy.strategy.

• Product life cycle ( PLC): Product life cycle ( PLC): In order to maintain growth In order to maintain growth in sales and profits industrial firms decide to drop, in sales and profits industrial firms decide to drop, modify, to develop new( substitute) products when the modify, to develop new( substitute) products when the existing products reach “maturity “ or “decline” stages existing products reach “maturity “ or “decline” stages in PLCin PLC

IntermediateIntermediate Hard BargainingHard Bargaining Technical SuperiorityTechnical Superiority Capital IntensiveCapital Intensive Less Chance of FailureLess Chance of Failure

Industrial Product FeaturesIndustrial Product Features

Industrial Product Life CycleIndustrial Product Life Cycle

Concept Similar to Consumer

Products

Generic Inputs – Very Long PLC

Distinct Characteristics

-15-55

1525354555

657585

Introduction Growth Maturity Saturation Decline

Stage

Vo

lum

e

Sales VolumeProfit MarginAdditional new-product profit needed to sustain company growth

Industrial Product Life Industrial Product Life CycleCycle

Stages in Product life cycle• Introduction stage: Some industrial products get accepted rapidly after introduction

and others are accepted slowly. Depends on changes in the user’ habits. For instance: Hand held calculators replaced mechanical calculators in a very short time because use of electronic calculators required neither new skills nor learning for users. While typewriters took two decades after introduction to achieve market acceptance.

Features: Low sales because it takes some time,High cost because of the low sales & high promotional expenditure,Absence or low competition if the product is entirely new,Loss or negligible profits because low sales & high costs.

Strategies: Promotion strategies: Publicity, trade journals, personal selling etc,Exclusive distribution , high distribution margin to justify Promotional

spendingPrice skimming or penetration may be adopted depend on the product & market

Growth Stage: Products begins enter the rapid growth stage, the emphasis on product strategy shifts to improving product design, distribution, service, lowering price, increasing demand. As market demand increases product design and other aspects of the product offering must be changed to meet both low end and premium market segment needs.

Features Fast growth in sales because increasing in consumer acceptance & expansion of market,

Profits growth because of growing sales, Increasing competition, Market segmentation & the introduction of different versions of the

product.

Strategies: TO achieve wider market penetrate the market, Increase in the scale of operation may facilitate price reduction, Increase in competition may also make sales promotion strategies, Distribution tends more intensive & extensive, dealer margin would be

highenough to keep them, Logistics management becomes more important.

• Maturity Stage: As product enters the maturity stage, the number of competitors entering the market increase. The product strategy in maturity or saturation stage should be: 1) Enter New Markets: ex; if product matures in domestic market it may have a good export market.2) Keep the existing customers satisfied, 3) Cut marketing, production and other costs to maintain profit margins.

Features: Sales may grow slowly but @ the later fall in sales,Intense Competition,Falling profits because high promotional expenses,

Concerted efforts on the part of firms for cost cutting& product doep,

Strategies: Distribution strategy may remain almost same as in past stage,There would be efforts to cut cost and prices,Product improvement efforts would be intensified

Decline Stage: In this stage price competition is more severe, and concurrently the sales and profits decline. The strategy adopted by an industrial marketer is to either withdraw the product from the market or develop a substitute product for replacement, or reduce marketing & other expenses substantially to make some profits.

Features: Entry of new products which compete with the product,

Decline in sales,Decline in profits- profits may even become negativeExit of some of the firms,

Strategies:There may be pruning of product line by dropping unprofitable items,Hardly any point increasing or maintaining the market share by

incurring loss,Promotion would be cut to the minimum, marginal distrb would be

phased out

New ProductNew Product

New but Competitive New but Competitive

With Existing Products With Existing Products

Major Modification of an Major Modification of an

Existing and Well Established Existing and Well Established

Product Product

Completely New DevelopmentCompletely New Development

New Product DevelopmentNew Product Development

One of the challenging tasks faced by an industrial firm is the development One of the challenging tasks faced by an industrial firm is the development & marketing new industrial products. Though new product development is & marketing new industrial products. Though new product development is complex and difficult, it is a vital and necessary task for profitable growth of complex and difficult, it is a vital and necessary task for profitable growth of a firm. It tests a firm’s market knowledge, technical competence, financial a firm. It tests a firm’s market knowledge, technical competence, financial strength, and ability compete. Unless products that have entered the decline strength, and ability compete. Unless products that have entered the decline stage( of product life cycle) are replaced by new products a firm can not stage( of product life cycle) are replaced by new products a firm can not expect to maintain its profitability and growthexpect to maintain its profitability and growth. .

New to Seller but Marketed by OthersNew to Seller but Marketed by Others

New to One Group of Customers, but Sold Successfully elsewhere by New to One Group of Customers, but Sold Successfully elsewhere by the Firmthe Firm

• New to both Firm and MarketNew to both Firm and Market• Innovative Product Innovative Product • Dynamically Continuous InnovationDynamically Continuous Innovation• AdaptationsAdaptations• New Use New Use • CopyCopy

New Product New Product DevelopmentDevelopment

Preliminary AppraisalPreliminary Appraisal

Product and Market ResearchProduct and Market Research

Process ResearchProcess Research

Prototype TestingPrototype Testing

CommercializationCommercialization

New Product IdeasNew Product Ideas

R & D DepartmentR & D Department Technical Service StaffTechnical Service Staff Executive PersonnelExecutive Personnel Company’s Sales StaffCompany’s Sales Staff CompetitorsCompetitors Trade LiteratureTrade Literature

New ProductNew Product

ScreeningScreening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

TestingTesting

CommercializationCommercialization

Idea GenerationIdea Generation

Concept TestingConcept Testing

Evaluation and SelectionEvaluation and Selection

Business AnalysisBusiness Analysis

Product DevelopmentProduct Development

Market TestingMarket Testing

CommercializationCommercialization

Steps in New Product Development• Idea Generation: The first step in the product development is the generation

of as many new product ideas as possible. The important sources of new product ideas are company’s market research facility, company sales force, customers, competitors, scientists, and research and educational institutions etc.

• Evaluation and selection: the second step is to evaluate the ideas generated and to select the idea or ideas which is/are worth pursuing further

• .

• Concept Testing: Concept testing involves conceptualizing the product idea into a product and testing its suitability and customer acceptance. For example, if the new product idea is of a new type of emergency lamp, concept testing would involve deciding about its size, weight, shape, and other features like convenience in use, lighting specifications etc

• Business Analysis : Analysis of commercial feasibility of the product involves estimating production and marketing costs, sales potential and profit.

• Product Development: if the business analysis reveals that the product is a profitable proposition, the next stage development of the product in its physical form. This stage comprises the technical aspects of product development.

• Market Testing: its common to conduct a market testing of the product before it is commercialized. The objective is to measure the consumer reaction to the product. Product quality, features, packaging, price etc., ,may be subjected to test. The feedback from the test marketing would enable the firm to improve the product and increases the customer acceptance. Test marketing is normally conducted with a representative sample of potential consumers or in some select markets like some cities/ towns which are regarded representative.

• Commercialization: Market testing would help to management to decide whether the new product should be taken up and if yes whether it should be improved or launched as it is. If the decision is in favor of new product, improvements, if needed, are made and measure are taken for its production. The product is then launched in the market.

• Some Imp Marketing decisions pertaining to commercialization are

• When to launch the product,

• Where, i.e. in which market(s) to launch the product

• Whom to target the product first

• How to market the product…………….

Determinants of Product MixDeterminants of Product Mix

TechnologyTechnology

CompetitionCompetition

Operating CapacityOperating Capacity

Market FactorsMarket Factors

Company AttributesCompany Attributes

Market FactorsMarket Factors

Shift in Customer’s TastesShift in Customer’s Tastes

and Preferences and Preferences

Changes in Availability or CostChanges in Availability or Cost

Changes in ManufacturingChanges in Manufacturing

Process Process

Government Policies / ControlsGovernment Policies / Controls

Company AttributesCompany Attributes

Market PerformanceMarket Performance

Production CapabilitiesProduction Capabilities

R & D StrengthR & D Strength

Financial CapabilitiesFinancial Capabilities

Interest and Abilities of Interest and Abilities of

Executive Teams Executive Teams

Developing Product strategies for Existing Products.

• Developing long term product strategies for existing or established individual products and product lines ( a group of related product items) is an important part of an industrial marketer’s marketing plan.

• Following steps should be taken by industrial marketing firms.

• Evaluate the performance of all the existing products or product lines by using product evaluation matrix.

• By using perceptual mapping technique, examine the relative strengths and weaknesses of the company’s products in comparison to competitors products.

• Based on the above analysis, decide the product strategies for the existing products, that is which products should be continued( or maintained), which products should be modified, which products or products should be dropped and which new product items or product lines are to be added.

• Deciding product strategies: Based on the two techniques- product evaluation matrix & perceptual mapping, the industrial marketer can now decide one of the strategy options mentioned below.

Maintain or continue the product and its marketing strategy. Modify the product and change the marketing strategy Eliminate or drop the product or the product line Add new products or product lines

Business Service Marketing• The essence of systems marketing is that the firm is offering more than a

product than a product and the accompanying services. Systems marketing is the marketing of a service, a service that is personalized and tailored to meet individual customer needs. However one of the major trends has been the remarkable growth of services in both the consumer and the industrial markets. Marketing of industrial or business services has many unique characteristics.

• Professional Service Marketing: Problems and Strategies • The marketing of professional services however presents a unique set of

problems, that require a different marketing approach.

• Services have some unique characteristics that makes them distinct from a product.

• Services are Intangible: They can not be seen, tasted, felt, heard or smelled.

• Services are Inseparable: Can not be separated from their space,

• Services are Heterogeneity: Quality depends not only provider but when & where

• Services are Perishability: They can not be saved and stored.

Services in the Services in the Business-to-Business MarketBusiness-to-Business Market

Two distinct groups:

1. Products supported by services

• The wide range of service elements that accompany the physical product are frequently as important as the technical solutions offered by the product itself.

2. Pure services

• Those that are marketed in their own right without necessarily being associated with a physical product.

Differences Differences BetweenBetween Goods and Services Goods and Services

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity

Implications of Implications of IntangibilityIntangibility• Services cannot be inventoriedServices cannot be inventoried• Services cannot be patentedServices cannot be patented• Services cannot be readily Services cannot be readily

displayed or communicateddisplayed or communicated• Pricing is difficultPricing is difficult

Implications of Implications of HeterogeneityHeterogeneity• Service delivery and customer Service delivery and customer

satisfaction depend on satisfaction depend on employee actionsemployee actions

• Service quality depends on Service quality depends on many uncontrollable factorsmany uncontrollable factors

• There is no sure knowledge There is no sure knowledge that the service delivered that the service delivered matches what was planned matches what was planned and promotedand promoted

Implications of Implications of Simultaneous Production Simultaneous Production and Consumptionand Consumption• Customers participate in and Customers participate in and

affect the transactionaffect the transaction• Customers affect each otherCustomers affect each other• Employees affect the service Employees affect the service

outcomeoutcome• Decentralization may be Decentralization may be

essentialessential• Mass production is difficultMass production is difficult

Implications of Implications of PerishabilityPerishability• It is difficult to synchronize It is difficult to synchronize

supply and demand with supply and demand with servicesservices

• Services cannot be returned or Services cannot be returned or resoldresold

Services are Services are DifferentDifferent

Goods Services Resulting Implications Tangible Intangible Services cannot be inventoried.

Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted.

Production separate from consumption

Simultaneous production and consumption

Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.

Business Product-Service Classification Based on Tangibility

Business services are those market offerings that are intangible-dominant. Few services are totally intangible--they often contain elements with tangible properties.

Unique Service Characteristics

• Customers focus on five dimensions in evaluating service quality.

• Among these dimensions, reliability--delivery on promises--is the most important to customers.

The Dimensions of Service Quality

SUPPORT

PRE-SALES

Technical Assistance

AFTER - SALES

Repair Service

Value added Services

Services

Parts

Standardized Parts

Un-standardized Parts

Consultancy

(Service )

Primarily relevant for Technically complex products / services

Increases Augmented Product ValueCan be used for competitive advantage

CUSTOMER SUPPORT LANDSCAPE

Satisfaction Drivers

Revenue cum Satisfaction

Drivers

Commissioning

Warrantee Service

Post warranty

service

Preventive Advise

Value Added Packages e.g

AMC

ReconditioningServices

Satisfaction -cum- Revenue Drivers

Breakdown Service

Spares Supply

AFTER - SALES

Replace / repair

1. Pre-establish a relationship with a client.

Professional Service FirmsMarketing Programs

2. Advance its reputation as a leader in the field.

3. Strengthen its relationships with existing clients.

Systems Marketing

• Systems marketing means; the supplier not only sells a

system of interrelated products, but a system of operating

procedures, management routines, inventory control, and

other service components to meet buyer’s needs. Ex : IBM

includes maintenance, emergency repairs, and training

services.

• Systems marketing is service marketing. The essence of

systems marketing is that the firm is offering more than a

product and the accompanying services. Systems marketing

is the marketing of a service, that is personalized and

tailored to meet individual customer needs.

Diffusion of innovation

• Diffusion of InnovationsDiffusion of Innovations is a theory that seeks to explain how, why, and at what  is a theory that seeks to explain how, why, and at what

rate new ideas and technology spread through cultures.Three key factors triggered rate new ideas and technology spread through cultures.Three key factors triggered

this dramatic change in market composition.this dramatic change in market composition.

• Microelectronic building blocks have made the production simpleMicroelectronic building blocks have made the production simple

• Computer technology and creative personnel can improve the design for competitive Computer technology and creative personnel can improve the design for competitive

innovator’s product to produce consistently and economicallyinnovator’s product to produce consistently and economically

• Intend to be major players by developing vertically integrated technological Intend to be major players by developing vertically integrated technological

capabilities.capabilities.

Technology Can Help to Alter The TrendsTechnology Can Help to Alter The Trends

Design For Manufacturability And Assembly (DFMA)Design For Manufacturability And Assembly (DFMA)

Necessary Changes In Research Methods And GoalsNecessary Changes In Research Methods And Goals

A Series of Small StepsA Series of Small Steps

Research as a Team EffortResearch as a Team Effort

R&D Linked Corporate Strategy R&D Linked Corporate Strategy