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PRESENTED BY PROF SURAJIT
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Purchasing agents do not buy drills, theyactually buy its ability to make same size
holes
Theodre Levit
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Product Levels
Customer value hierarchy
Core benefit
Basic product Expected product
Augmented product
Potential product
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What is a Product?
A product is any offering by a company to amarket that serves to satisfy customer needs andwants.
It can be an object, service, idea,etc.
A product is any tangible, intangible offeringthat satisfy the needs or aspirations of aconsumer.
A product has 3 basic levels
Core Product: This answers WHY the buyershould have it. It is also called as GenericRequirement.
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Core Product - explained The generic product concept has two key
issues:
1.Its consumers view of what a given productrepresents.
2.The aspiration of consumer differ from place
to place and time to time.
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Tangible Specifications
Tangibility is added to the core product inthe form of features, style, color, design,
efficiency etc.Eg. The Color of the machine
The Electricity consumption
Detergent ConsumptionCapacity
Quality .
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Augmented Features This fulfill more of psychological or esteem
needs.
Eg. Brand Name
Services provided
Warranty
Credit Terms
etc.
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Classification of Products
The classification of the product depends
upon the TANGIBILITY and DURABILITY found
in an offering.
Typical classification of Product:
Service
Durable
Non Durable
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Consumer goods classification
Convenience goods
Shopping goods
Specialty goods Unsought goods
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Industrial goods classification
Materials and Parts
- raw materials
- manufactured materials and parts Capital items
Supplies and business services
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Umbrella Brand
Products from different categories under onebrand
Dangerous to the brand if the principal brand
fails Sometimes the company name is prefixed to
the brand. In such cases the company name
gives it legitimacy.The product nameindividualises it.
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Packaging
Includes the activities of designing and
producing the container for a product
Packaging is done at three levels
- primary
- secondary
- shipping
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Packaging as a marketing tool
Self service
Consumer affluence
Company and brand image Innovation
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Designing packaging
Packaging concepts
Technical specifications
Engineering tests
Visual tests
Dealer tests
Consumer tests
Packaging innovations
Environmental considerations
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Labels
Identification
Grade classification
Description of product Manufacturer identity
Date of mfg, batch no, expiry date etc.
Instructions for use Promotion
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Labels as a marketing tool
Labels need to change with time
And/or packaging need to change to give it a
contemporary and fresh look
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Non Durable Products Products that are consumed fast and are purchased
on a regular basis. The consumer here spendsminimum time and effort in comparing and buyingthe item.
Consumer Products are further classified according
to its use: Personal, Family and Household asConvenience, Shopping and Specialty.
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FMCG
Fast Moving Consumer Goods are the Non
Durable Goods. Eg. Sot Drinks, Chips, IceCreams etc. The consumer shows minimum
effort in buying these articles.
FMCG is further sub divided into 3 Classes
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Characteristics of FMCGConsumers Point
FMCG has a very low shelf life
1. Frequent Purchases: Salt, Rice, Chocolates2. Low Involvement: The consumer will buy an
alternative if the brand ask for is not available.
Exceptions to the rule: Products like Cigarettes,
Personal Hygiene Products, Brand Loyalty.
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Characteristics of FMCGMarketers Point
High Volumes
The volume of the product required is very high.
Eg. An average family may require 3-4 Soaps a month
Imagine No. of family using it in the whole
country???
If the organization cannot ensure high sales volume,
they will have difficulties in surviving.
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Low Margins
As the product is required in high volume,
there is an intense competition which makes
the marketer sell the product with very less
margin.
They earn through high volume sales to
maximize their turnover.
The Key Becomes High Volumes Low Margins.
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Extensive Distribution Networks
Consumer preference in FMCG productsare not that rigid.
Recall plays a very important role.
Brand Loyalty is not very high.
Consumer allows shopkeeper to decide for
him.Due to all this it becomes very important forthe marketer to make its product available at
maximum place possible.
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High Stock Turnover
It is a characteristic feature of FMCG. It is
because these products are bought frequently
or on a regular basis.
Which in turn allows the marketer to rotate
the capital invested.
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Staples
These are goods purchased on a regular basis.
Eg. Soap, Pulses, Toothpaste etc
Whenever the stock is about to end the
consumer buys these products again.
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Impulse Goods
These are the goods which arepurchased without planning or search
Our external stimuli provokes us to buythese products. Eg. Cold drinks,Chocolates, Chips.
Most of the time the consumers aim isnot buying the product solely but whenspots them, feels, attracted and ends upin buying them.
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Emergency Goods
These goods are purchased when the
need arises. Eg. Umbrellas in rainyseason, Pullovers in winters etc..
The marketers tries for a very gooddistribution chain, as the sales is not thesame throughout and whenever theneed arises, the product should beavailable at maximum places
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Customer Delight
According to the dictionary, satisfaction is defined as, the contentmentone feels when one has fulfilled a desire, need, or expectation. Delight is,
to take great pleasure or joy. Loyalty is having the feelings of
allegiance. These three simple words have a slightly different meaning,
but all have a significant impact on the attitudes and behaviors of
customers. Customer Delight means more than just feeling great about a product or
service. Customer delight means the customer demonstrates high return
and recommend rate behavior. Using Bart Allen Berrys Customer
Satisfaction Behavior Curve (1 to 10 scale) customer delight correlates
with an overall satisfaction rating of approximately 8.75 or higher. Returnand Recommend rate percentages range from 65% to 90%, meaning that
delighted customers will tell six to nine people out of ten about their
satisfaction experience, and it is guaranteed that some of these folks will
also tell others.
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Product Life Cycle
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Product life cycle
Marketing concept that, like people and livingorganisms,goods and services pass through a cradle tograve cycle of progression through their life span.While different products have distinctly
different patterns ofdemand, almost every one ofthem passes throughthe stages ofintroduction, growth, maturity or stagnation,and decline or death. This view dictates the need forcontinuous efforts for new product development.
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Definition
Product Life Cycle (PLC) deals with the life of a product in the
market with respect to business or commercial costs and sales
measures
Four distinct but not wholly-predictable stages every
product goes through from its introduction to withdrawal fromthe market: (1) introduction, (2) growth in sales revenue,
(3) maturity, during which sales revenue stabilizes, and
(4) decline, when sales revenue starts to fall and eventually
vanishes or becomes too little to be viable. As a productmoves through these stages, its pricing,promotion, packaging,
and distribution are re-evaluated and changed ifrequired to
prolong its life. In summary, it is thejourney from "new and
exciting" to "old and dated."
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Every Product has a limited life
Product sales pass through distinct stages,
each posing different challenges,
Opportunities, and Problems to the seller
Profits rise and fall at different stages of the
Product Life Cycle
Products require different Marketing,Financial, Manufacturing, Purchasing and
Human Resource Strategies in each Life Cycle
stage.
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Product Life
Cycle Stages
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1.Introduction
a. Costs are high
b. Slow sales volumes to start
c. Little or no competition - competitivemanufacturers watch for
acceptance/segment growth or lossd. Demand has to be created
e. Customers have to be prompted to try theproduct
f. Makes no money at this stage
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2.Growth
a. Costs reduced due to economies of scale
b. Sales volume increases significantly
c. Profitability begins to rise
d. Public awareness increases
e. Competition begins to increase with a fewnew players in establishing market
f. Increased competition leads to pricedecreases
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3.Maturity
a. Costs are lowered as a result of production volumesincreasing and experience curve effects
b. Sales volume peaks and market saturation is reachedc. Increase in competitors entering the marketd. Prices tend to drop due to the proliferation of
competing productse. Brand differentiation and featurediversification is emphasized to maintain orincrease market sharef. Industrial profits go down
Conti.
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4.Saturation and Decline
a. Costs become counter-optimal
b. Sales volume decline or stabilize
c. Prices, profitability diminish
d. Profit becomes more a challenge of
e. production/distribution efficiency than
f. increased sales
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Strategies for the differing stages of the Product Life Cycle.IntroductionThe need for immediate profit is not a
pressure. The product is promoted to create
awareness. If the product has no or fewcompetitors, a skimming price strategy isemployed. Limited numbers of product are
available in few channels of distribution.
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Growth
Competitors are attracted into the market
with very similar offerings. Products become
more profitable and companies form alliances,
joint ventures and take each other over.Advertising spend is high and focuses upon
building brand. Market share tends to
stabilise.
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Maturity Those products that survive the earlier stages
tend to spend longest in this phase. Sales grow
at a decreasing rate and then stabilise.Producers attempt to differentiate products
and brands are key to this. Price wars and
intense competition occur. At this point the
market reaches saturation. Producers begin to
leave the market due to poor margins.
Promotion becomes more widespread and use
a greater variety of media.
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Decline
At this point there is a downturn in the
market. For example more innovative
products are introduced or consumer tastes
have changed. There is intense price-cuttingand many more products are withdrawn from
the market. Profits can be improved by
reducing marketing spend and cost cutting.
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New Product development process
Idea Generation
Screening
Business Analysis
Prototype Development
Test Marketing
Commercialization
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Product Development Stages
Idea generation
Idea screening
Concept development and testing
Concept testing
Conjoint analysis Market research technique in
which consumers make trade offs between two or
more features and benefits of a product ona scale ranging from 'Most Preferred' to 'Least
Preferred. Conjoint analysis helps in evaluation of
different pricing points.
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B i l i
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Business analysis
The most customer appealing offer is not always the mostprofitable to make
Estimate on costs, sales volumes, pricing and profit levels
are made to find out the optimal price volume mix.
Breakeven and paybacks - Time required to recoveran investment or loan.
Discounted cash flow projections - Value of the
anticipated revenue stream from an investment as at
today or on any given date. Because money can grow byitself (when placed in an interest earning account) a
rupee received today is less valuable than a rupee
received in the future.
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Market testing
Test markets
Test periods
What information to gather?
What action to take?
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Commercialization
When? (Timing)
Where? (Which geographical markets)
To whom? (Target markets)
How? (Introductory Marketing strategy)
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Classification of New Products
Marketing Innovations:The actual product is not changed and the habits of the
consumer also need not to be changed, only a few
alternatives are done. Eg. Packaging, branding, easy
availability etc. Product Improvements:
when a little improvement is done to the existing product.
Like 100 cc scooters, Tubeless tyres, Digi Cams etc.
These are normally targeted to a new segment of buyers Technological Innovations:
personal Computers, Photo copiers
Here early entrants enjoy the major market leadership
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New Product Development
Transfer of Technology
Penetration of New Market
New Product Lines
Product Line Extensions
Cost Reduction
Repositioning or New Product Launch
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Transfer of technology
This is more of an adoption of any product.
New products are often launched on the basis
of new technology.
It can be acquired from the parent company
or with foreign collaboration.
Eg. Personal Computers
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Diversification
Eg. ITC venturing into Paper Products, FMCG
Etc.
Bombay Dyeing Venturing into Real Estate
Business.
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Additions to existing product line
Eg. Godrej extension from Durable like
Refrigerators to Office equipment etc.
Videocon entered into washing machine and
Music Systems etc.
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Improvement in existing product
New product which offers superior
performance than the existing one and
replace it.
Eg. Gramophones and record players have
been replaced by cassette players and now CD
players.
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Cost Reduction
New product which provides similar
performance at lower cost.
Classic Eg. Nirma
d l h
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Product Re-launch
Some times old products are re-launched with
little improvements.
Eg. Tata Tea, Maggie
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Product Mix-Line-Width-Length-Depth-Consistency
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PRODUCT MIX
Example of Proctor & Gamble
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DETERGENTS IVORY SNOW
DREFT
TIDE
CHEER
OXYDOL
DASH
BOLD
GAIN
ERA
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SOAP
IVORY
KIRKS
LAVA
CAMAY ZEST
SAFEGUARD
COAST
OIL OF OLAY
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DIAPERS
PAMPERS
LUVS
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PAPER TISSUE
CHARMIN
PUFFS
BANNER
SUMMIT
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WIDTH
How many different product lines the company
carries
in the case of P&G, we just saw 5 such lines. P&G
produces many more lines, in fact.
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LENGTH
Refers to the total no. of items in the mix. In the P&G
case, there are 25 in all.
Average length = total length/no. of lines. For P&G it is 5 (in this case)
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DEPTH
How many variants are offered of each product in
the line.
In the case of Crest (say): 2 flavors * 3 sizes
= 6 SKUs
So depth = 6
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CONSISTENCY
How closely related the product lines are in end use,
production, distribution etc.
For P&G, consistency is high, since it operates in theFMCG segment.
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Product Line
Line Stretching
Downward Stretch : It takes place when thecompany finds a particular segment (Lower) which
is un-attended by the existing product. And
introduces a product to cater that lower segment.
Upward Stretch : It is when company a companyenters Upper market through Line Extension.
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2 WAY STRETCH
Stretching the line in both directions
*E.g. Marriott
1. economy 2. comfort 3. luxury
Product Line decisions
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Product Line decisions
Product rationalization
Market rationalization
Product line length
too long when profits increase by dropping aproduct in the line
too short when profits increase by adding products
to the product line
Line pruning capacity restrictions to decide
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PRODUCT LINE DECISIONS
Product line analysis
1. Sales & profits (80/20 rule)
2. Market profile (positioning)
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Product Flanking
Basically offering same product in different
price combinations to tap diverse market
opportunities.
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Line Filling : A product line can be extended by adding moreitems to the existing range(e.g. ice creams - more flavors,same price)
Reasons:
Reaching for more profits
Trying to satisfy dealers who complain about lost sales due tomissing items in the line
Trying to utilize excess capacity
Trying to offer a full line of the productionTrying to plug holes in the positioning map.
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Line Modernization : Modernization is
carried out continuously as competitors
are constantly growing and coming out
with new products and ideas.
In this process an Organization should
not be too early, if so, It can harm the
existing product or late so that
competitors already have a hold in the
market.
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Line Featuring
Its about featuring a particular product of the
product line, so as to increase foot falls and
then making the consumer exposed to otherproducts too.
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Advertising and Media Coverage
Sales Promotion
Sales Pomotions offer a direct incentive to buy
more in the short term.
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Brand Extensions
This enables the company to enter new
product categories more easily.
Eg. Lifebuoy: Lifebuoy Plus, Lifebuoy Liquid,
Lifebuoy Gold.
Eg. Amul: Amul Butter, Amul Ghee, Amul
cheese, Amul Milk, Amul Chocolates
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Innovations in Core Product
The life of a FMCG product is short. The
marketer continuously tries to introduce
new products and a consumer is also
open to try new products.
Long Term Outlook
Eg. Kelloggs
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Extending the PLC
Expanding Markets by Usage
a. Increase the Number of Customers
b.Encouraging more consumption.
Wide distribution Network