an iso 9001:2008 certified organization ms 63 product management

An ISO 9001:2008 Certified Organization

MS 63

PRODUCT MANAGEMENT


BLOCK 1

INTRODUCTION

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Objectives for product management

• Identify the various characteristics of products.

• Learn how companies build and manage product lines and mixes.

• Understand how companies make better brand decisions.

• Comprehend how packaging and labeling can be used as marketing tools.


What is a Product?

• Goods

• Services

• Experiences

• Events

• Persons

• Places

• Properties

• Organizations

• Information

• Ideas


The Product and Product Mix

• Potential customers judge product offerings according to three elements:– Product features and quality– Services mix and quality– Value-based prices



• The customer value hierarchy:– Core benefit– Basic product– Expected product– Augmented product– Potential product



ProductClassifications

• Durability and tangibility• Consumer goods• Industrial goods

• Nondurable– Tangible – Rapidly consumed– Example: Milk

• Durable– Tangible – Lasts a long time– Example: Oven

• Services– Intangible– Example: Tax preparation


Consumer Products …Consumer Products … end users. end users.

Durable & Non Durable Consumer Durable & Non Durable Consumer ProductsProducts

Durable Durable goodsgoods

ServicesServices

Non durable Non durable goodsgoods


Consumer Product Goods ClassificationConsumer Product Goods Classification

ConvenienceProducts Shopping

Products

SpecialtyProducts

Is based on Level of Effort expended


CONVENIENCE GOODSCONVENIENCE GOODS

Convenience goods – consumers use minimal effort for frequently purchased low cost items

StaplesStaples - goods purchased on a regular basis (ex. milk, - goods purchased on a regular basis (ex. milk, eggs)eggs)

Emergency goodsEmergency goods - purchased when the need is urgent - purchased when the need is urgent (ex. umbrella, boots)(ex. umbrella, boots)

ImpulseImpulse purchases – no conscious pre planning purchases – no conscious pre planning

MILK


Shopping ProductsShopping Products

Shopping goodsShopping goods - consumers make - consumers make a considerable effort to evaluate …a considerable effort to evaluate …

Consumers make product comparison(s), They seek information before purchase, they are not impulsive

Moderate substitutions are made Product’s last a considerable time

Monetary & social costs may be high


Specialty ProductsSpecialty Products

Specialty goodsSpecialty goods - consumers make a significant - consumers make a significant effort to acquire the desired brand.effort to acquire the desired brand.

• infrequently (seldom) purchasedinfrequently (seldom) purchased

• relatively expensiverelatively expensive

• little or no substitutionlittle or no substitution

• High involvement, well informed consumersHigh involvement, well informed consumers

• High “visibility” to “others”High “visibility” to “others”

•


Consumer Behavior Product Classification Consumer Behavior Product Classification Market Strategy Market Strategy

• Market Coverage Product Category

• Intensive DistributionIntensive Distribution (convenience)(convenience)

• Selective DistributionSelective Distribution (shopping) (shopping)

• Exclusive Distribution Exclusive Distribution (specialty) (specialty)


PRODUCT MANAGEMENT DECISIONS

• Product Mix Decisions

• Product Innovation/Modernisation Decision

• Product Line Pruning/Product Elimination/Product Phasing Decisions

• New Product Decision/Diversification Decisions Branding and Packaging Decision

• Branding and Packaging Decision

• Product Mix Decisions


PRODUCT MANAGER'S MANAGEMENT

SYSTEM SCOPE • Management Tasks • Marketing Decisions • Budget and Marketing Plans


Changing role of Product Manager

• Changes in the number and type of elements

• Changes in the number of product manager

• When changes occur in the resources or support services required for the marketing elements


BLOCK 2

MANAGING PRODUCTS


The Product Mix

• A company’s assortment of product lines and individual offerings– Product Width--the number of product lines

offered.

– Product Length--the number of different products a firm sells.

– Product Depth--variations in each product that a firm markets in its mix.


• Product Mix - the total group of products offered Product Mix - the total group of products offered consistencyconsistency: relatedness of items : relatedness of items

Product mixProduct mix


Product lineProduct line

LAMPSLAMPS•TableTable•CeilingCeiling•TrackTrack•DeskDesk

Product Line - a group of closely related productsa group of closely related products

Product Line Decision


Product Line Decision

Bases for product line extension

• Customer Segmentation

• Consumer Desires

• Pricing Breadth

• Excess capacity

• Short term gain

• Competitive intensity

• Trade pressure


Disadvantages of Line Extension

• Weaker Line Logic • Lower Brand Loyalty • Underexploited Idea • Stagnant Category Demand • Poorer Trade Relations • More Competitor Opportunities • Increased Costs


FACTORS INFLUENCING PRODUCT LINE

DECISIONS • Category Size • Market Growth • Product Life Cycle • Sales Cyclicity • Seasonality • Profits


• Product Mix DecisionsProduct Mix Decisions – A firm may lengthen or widen its product mix– A Company may decide to add variations that

will attract new users– A product may be pruned or altered, and new

product may extend the product life cycle– Line extension: introduction of a new

product that is closely related to other products in the firm’s existing line


The Product Life Cycle

• Product life cycleProduct life cycle: progression of products through introduction, growth, maturity, and decline stages


Introduction Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low sales Low sales

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trial

Create product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus Use cost-plus

DistributionDistribution Build selective distributionBuild selective distribution

AdvertisingAdvertising Build product awareness among early adopters and dealers

Build product awareness among early adopters and dealers


Growth Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Rapidly rising sales Rapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profits

Maximize market shareMaximize market share

Offer product extensions, service, warranty

Offer product extensions, service, warranty

Price to penetrate marketPrice to penetrate market

DistributionDistribution Build intensive distributionBuild intensive distribution

AdvertisingAdvertising Build awareness and interest in the mass market

Build awareness and interest in the mass market


Maturity Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Peak salesPeak sales

Low cost per customerLow cost per customer

High profitsHigh profits

Maximize profit while defending market share

Maximize profit while defending market share

Diversify brand and modelsDiversify brand and models

Price to match or best competitors

Price to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefits

Stress brand differences and benefits


Decline Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profits

Reduce expenditure and milk the brand

Reduce expenditure and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers


Extending the Product Life Cycle

• Marketers usually try to expand each stage of the life cycle for their products as long as possible

• Product life cycles can stretch indefinitely as a result of decisions designed to:– Increase the frequency of use by current

customers– Increase the number of users for the product– Find new uses– Change package sizes, labels, or product quality


Product Deletion Decisions

• Product lines must sometimes be pruned and marginal products eliminated

• This decision is typically faced during the late maturity and early declined stages of the product life cycle

• An unprofitable item may be continued in order to provide a complete line for customers


Product Portfolio

A business portfolio is the collection of Strategic Business Units that make up a corporation. The optimal business portfolio is one that fits perfectly to the company's strengths and helps to exploit the most attractive industries or markets.

A Strategic Business Unit (SBU) can either be an entire mid-size company or a division of a large corporation, that formulates its own business level strategy and has separate objectives from the parent company.


The aim of a portfolio analysis is: 1) Analyze its current business portfolio and decide

which SBU's should receive more or less investment, and

2) Develop growth strategies for adding new products and businesses to the portfolio

3) Decide which businesses or products should no longer be retained.


BCG Matrix


General Electric (or McKinsey) matrix uses market attractiveness as not merely the growth rate of sales of the product, but a a compound variable dependent on different factors influencing the future profitability of the business sector.

These different factors are either subjectively judged or objectively computed on the basis of certain weights, to arrive at the Market Attractiveness Index. The Index is thus based on a thorough environmental assessment influencing the sectoral profitabilities.


PRODUCT PRICING

• FACTORS INFLUENCING THE PRICING DECISIONS

• Objective • Other Components of Marketing Mix • Product Life-Cycle • Skimming Pricing • Penetration Pricing • Costs• Fixed costs • Variable costs


• Economies of Scale

TYPES OF PRICING

• Cost-Plus Pricing

• Target Profit Pricing

• Perceived Value Pricing

• Going Rate Pricing

• Bid Pricing


DISCRIMINATORY PRICING

• Customer-Based

• Product-Based

• Place-Based

• Time-Based


STRATEGIC SIGNIFICANCE OF PRICING

• Competitive Edge

• Optimizing Profits

• Increasing Captive Consumption


BLOCK 3

BRANDING & PACKAGING DECISION


Branding Decisions

Branding is

• a process

• a tool

• a strategy

• an orientation • a brand could be a word, term-sign or symbol

that identifies and distinguishes one product from another


Strategic Relevance of Branding

• Brand as a tool to segment the market • Brand starts-with an idea • Brand has an enduring value • Brand helps protect innovation • Brand sustains though product may die

• Brand a living memory


Branding Policy Decisions

• Manufacturer Brand Policy • Family Branding • Independent Branding • Distributors Brand Policy • Mixed Brand Policy


Brand Name Selection Process

• Step I- Preparing checkpoints for the different values to be contained in the name

• Step II-A faking a search for names

• Step III-Assigning differential ratings to the names formulated

• Step IV - Quadrivalent analysis for separating undesirable names from desirable ones and measuring the marketing potency of the different names

• Step V-The final choice


How to Build a Brand?

• Inputs – Identification of key customer groups or segments. – Understanding customer expectations needs and

aspirations. – Assessing competitive offering including substitutes. – Building customer confidence by

• customizing the product. • establishing key image of the brand. • dealer support-easy availability and push. • innovative communication and promotion schemes, and elegant

packaging – Total brand management-both hardware and software

aspects.


• Outcome – Market share – New customers attracted – Customer loyalty index – Increased profitability – Brand knowledge


• Assessment – Continuous feedback from customers as well as trade

channels – Scientific inquiry into customer satisfaction

determining • who is the customer and profile of the target segment, • what constitutes customer satisfaction, designing the scale to

measure customer satisfaction, • measuring current levels of customer satisfaction, and • trend analysis and pointers for management of customer

satisfaction.

• Brand Strength


Dimensions of Brand Image

• Appeal to reason

• Appeal to senses

• Appeal to emotion


Consideration in Branding of a Commodity

• Offering sufficient value to the customer to induce change from a commodity to a branded option.

• Role and degree of consumer involvement in buying decision

• Segmenting the market, selecting a target segment and positioning of the product to match with the target segment characteristics.

• Communicating price-quality position offering sufficient turnover and long term growth.

• Setting and controlling distribution. • Selecting suitable packaging. • Channelising marketing investment


Product Positioning

• The term product (brand) positioning refers to the place a product occupies in a given market

• Positioning Strategies

• Market Segmentation Considerations

• Market Segmentation Considerations

• Positioning for specific usage occasions

• Positioning for user category

• Positioning against another product


• Product class dissociation

• Hybrid bases

• Tools for Positioning Decision Making • Attribute Rating Method

• Overall Similarity-based Method


Positioning: Product Differentiation: Market Segmentation

• Positioning Creates Product Differentiation

• Product Differentiation Helps Positioning • When you talk to a group- it becomes a segment • Intensity increases with narrow targets- segmentation

and fragmentation • Same product can be positioned differently for

different segments • Rematching Product to position • You Need a New Position-when you invade into

another product category to expand your market.


Brand Equity

• a brand as a name, term, sign, symbol, or design, or a combination of these, used to identify the product and services of a company.

• David Aaker specifies five levels of attitudes towards a brand.

1) No brand loyalty; due to price differential customer will switch brands

2) No reasons to switch the brand; consumers are overall satisfied

3) Customers are satisfied with the brand, and would incur cost by switching the brand

4) Customers relate themselves with the brand 5) Customers are devoted to the brand


• brand equity as a set of assets (liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by product or service to a firm and/or that firm's customers.

• assets of a brand are brand name awareness, brand loyalty, perceived quality, and brand associations


Brand Equity measurements

• Price premium• Customer satisfaction• Perceived quality• Popularity and leadership position• Brand value• Brand personality• Organisational association• Brand awareness• Market share• Market price and distribution coverage


How Brand Equity is created

• Strength of brand association

• Favourable brand association

• Unique brand associations


Building brand equity

1. Choice of brand elements that makeup the brand.

2. Developing and implementing marketing support programs.

3. Leveraging secondary associations by linking the brand to other entities


Packaging Decision


Functions of Packaging

• Protection• Differentiation• Packaging for promotion• Packaging for pricing• Packaging for convenience


Packaging Strategies

• Changing the package

• Packaging the product line

• Reuse Packaging

• Mutiple Packaging


BLOCK 4

NEW PRODUCT DEVELOPMENT


Organising for Product development

• New Product Development at the Corporate Level


• New Product Development at the Divisional Level


New Product Development at the Operating Level

1) New Product Development in Functional Department


2) New Product Development Responsibility of Product

Manager


Structural units for New product development

• New product department• New product committee• Ad hoc committee• Task force• Venture team


Causes of New Product Failures• Overestimation of Market Size• Product Design Problems• Pro-Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or Advertised• Costs of Product Development• Competitive Actions To create successful new products, the company must:

– understand it’s customers, markets and competitors – develop products that deliver superior value to customers.– duct Incorrectly Positioned, Priced or Advertised

• Costs of Product Development• Competitive Actions To create successful new products, the company must:

– understand it’s customers, markets and competitors – develop products that deliver superior value to customers.


New Product Development Process

• Idea Generation and Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development• Test Marketing• Commercialization


New Product Development ProcessStep 1. Idea Generation

Internal sources• Top management

executives • Sales personnel• Production

department• Employee suggestion

system

External sources• Competitive products• Customers• Consultants• Advertising agencies• Distribution channel


Methods of generating new product ideas

• Individual techniques• Attribute listing• Heuristic ideation

technique• Forced relationship• Transfer analysis

• Group techniques• Brainstorming• Focus group• Interviews• Synectics


New Product Development ProcessStep 2. Idea Screening

• Process to spot good ideas and drop poor ones• It is an elimination technique• Reducing the large number of ideas into

profitable one• Criteria

• Market Size• Product Price• Development Time & Costs• Manufacturing Costs• Rate of Return


New Product Development ProcessStep 3. Concept Development & Testing

1. Develop Product Ideas into Alternative

Product Concepts

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One3. Choose the Best One


New Product Development ProcessStep 4. Marketing Strategy Development• Marketing Strategy Statement Formulation

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share


New Product Development ProcessStep 5. Business Analysis

Step 6. Product Development

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If Yes, Move to Product Development

If Yes, Move to Product Development

If No, Eliminate Product Concept

If No, Eliminate Product Concept


New Product Development ProcessStep 7. Test Marketing

StandardTest Market

Full marketing campaignin a small number of representative cities.

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled Test Market

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

Controlled Test Market

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


BLOCK 5

IMPLEMENTING NEW PRODUCT DECISION


Concept Development And Testing Concept generation mechanism• Problem based ideation

This approach emphasis on the needs and problems of stakeholders by systematically analyzing the internal documents of the company, interviews of the stakeholders , from group discussion and market research

• Attribute Based Ideation• This method employs forced change of all the

possible attributes of a product and attempts to discover innovative product


Concept Testing

• It considers consumer acceptance

• Positive response leads to product development

• Negative response lead to either drop the product or reconsider with some modifications


Test Designs Two types of tests are used for concept testing• Monadic test• Competitive test

Data Collection

Four kinds of data can be collected from the respondents

• Purchase intention measure• Product attribute diagnose• Product diagnostic information• Respondents profile information


Physical Development of the product

• Product Architecture is the arrangement of the functional elements of a product into physical blocks

• It consists of sketches,function diagrams and proof of concept prototypes

• The purpose is to define the basic physical building blocks of the product

• A product can be thought of in functional as well as physical terms

• Physical elements are the parts, components and subassemblies


Implications of Architecture

• Product change

-Upgradation

-Ad-ons

-Adaptation

-Wear and Tear

-Consumption

-Flexibility

-Reuse


• Product variety

• Component Standardisation

• Product performance

• Manufacturability

• Management of product architecture development


Industrial Designing in product development

• Industrial design is professional service of creating and developing concepts and specifications

• Goals to achieve wile developing new product• Utility• Appearance• Ease of maintenance• Low costs• communication


Importance of Industrial design• Ergonomic needs

-ease of use

-ease of maintenance

-user of interactions

-novelty of user interaction needs

-safety in usage• Aesthetic Needs

-product differentiation

-pride of ownership,image and fashion

-motivation to industrial designers


Process of industrial design development

• Generating information about customer needs

• Conceptualization

• Product concept refinement

• Concept screening and selection

• Developing control drawings

• Integrating different functions like engineering, manufacturing and vendors


Product Prototyping

• Prototype is an approximation of the product along one or more dimensions of interest

Types of prototype

• Physical prototype

• Analytical prototype


Uses of prototype

• Learning

• Communication

• Integration

• Milestones

• A prototype may reduce the risk of costly iterations

• It may restructure task dependencies


Concurrent Engineering• The method to minimise time loss,

minimise unnecessary expenses and increase interdepartmental cooperation

• It is the systematic approach to the integrated, concurrent design of products and related processes including manufacturing and support


Pre test marketing and Test marketing

• It is an expensive and time consuming process

• The attempt is to stimulate the key factors of an actual market condition of a new product introduction to act upon the potential consumer, in a controlled condition

• It reflects the current market competition situation


Various models are used for the test marketing

• Assessor model

• Preference model

• Trial repeat model


Test Marketing

• Generally it is used for the frequently purchased FMCG

Objectives are• To obtain the best estimates of sales volume

and market share • Marketing mix elements• Only opportunity to evaluate the entire marketing

strategy• It is like a dress rehearsal, time to streamline

manufacturing, selling and delivering the products to consumers


Issues in Test marketing

• Designing Test market

• Duration of Test Marketing

• Design of experiments

• Data collection from test markets

• Store audits

• consumer survey

• Diary panel

• Analyzing test marketing data


Product Launch

• It is the last step in new product development

Types of new product• New for the mankind• New for the country• New for the industry• New product in a product category• New product in product class• New product for the company


The Marketing Plan

• Setting objectives for new products

• Situation analysis

• The market analysis it includes

• Market overview

• Segment overview

• Consumer overview

• Competition overview


• Internal analysis is the assessment of the company’s resources with reference to the new product one should analyse

• The sales force

• Promotional set up

• Distribution system


Selecting Target Market

• On the basis of

• Segment attractiveness

• Ease of access

• Degree of fit

• Competitive situation

• Relative advantage

• Profitability


Pricing the new product

• Pricing strategies are

• Skimming pricing

• Penetration pricing

Factors affecting price

• Demand for the new product

• Costs


Significance of Promotion

• Awareness

• Interest

• Evaluation

• Trial

• Adoption


Promotion mix

• Advertising

• Publicity

• Sales promotion

• Personal selling

Budgeting for promotion

• Budgeting for Advertising

• Budgeting for sales promotion

an iso 9001:2008 certified organization ms 63 product management

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