Product and Services Strategy

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What is a Product?
Marketing Offer
A PRODUCT is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Includes:
Physical Objects Services Events Persons Places Organizations Ideas Combinations of the above Information
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Product Surround Concept

Added valueImage, styling etc Basic Features
30% Cost & 70% Impact
Product Surround

Core Product

70% Cost & 30% Impact

The larger the product surround , the greater the probable differentiation of a companys brand offering.
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Product levels
Five Product Levels

Customer value hierarchy Core benefit Basic product Expected product Augmented product

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Service Levels : Customers View

Service Levels Core Product Expected Product Augmented Product

Customers View Customer; generic needs which must be met. Customers minimum set of expectations. Sellers offering over what customer expect or accustomed to.

Potential Product

Everything that potentially can be done.

Service Levels : Marketers View

Service Levels Core Product Marketers View Basic benefit which makes product of interest. Marketers product decision on tangible & intangible components. Marketers other mix elements decisions. including decision about brand name Marketers actions to attract & hold customers regarding changed conditions or new applications.

Expected Product

Augmented Product Potential Product

Classification of products
Consumer-Goods Classification:
Convenience goods
Staples: On regular basis- Jam, Bread Impulse goods: Without Planning- Key ring, magazines (places next to checkout counters) Emergency goods: when need is urgent-umbrella

Shopping goodspurchased on the basis of comparison of quality, price, style

Homogeneous shopping goods: Same quality but different price. Heterogeneous shopping goods : Product features and variety are more important to customers than price

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Consumer Goods Classification

Convenience Goods
Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers Staples: on regular basis (Jam, bread) Impulse Goods: Without planning (key ring, magazines) placed next to check out counters. Emergency goods: When need is urgent (Umbrella)

Shopping Goods
Purchased on the basis of comparision of quality, price and style Homogeneous: Same quality but different price Heterogeneous: Product features and variety are more important then price Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances
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Consumer Goods Classification

Specialty Goods
Special purchase efforts High price Unique characteristics Brand identification Few purchase locations i.e Lamborghini, Rolex

Unsought Goods
Products consumers dont want to think about Require much advertising & personal selling i.e Life insurance, blood donation New innovations

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Consumer Goods: Characteristics

Ajay Pandit

Types Of Product Convenience Characteristics Time, efforts by consumers Time spent planning purchase Confectionary Very little Shopping Furniture Considerable Speciality Designer Suits As much as necessary required to find desired brand Considerable

Very little

Considerable

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Product Classifications: Industrial

Raw materials, manufactured materials, and parts

Materials and Parts

Industrial products that aid in buyers production or operations

Capital Items

Supplies and Services

Operating supplies, repair/ maintenance items

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Classification of Industrial products

Materials and parts
Raw Materials
Farm products Natural products

Manufactured materials and parts Component materials Component parts

Capital items
Installations Equipment
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Classification of Industrial products

Industrial Goods Classification: It is done on the basis of how they
enter production process.

Material & Parts: They enter the manufacturers product completely

Raw materials:
Farm Products- Their commodity character leads to relatively little advertising & publicity, Supply by producers who turn them over to marketing intermediary for assembly, grading, storage & selling e.g. fruits, vegetables. Natural Products- Highly limited in supply, they have great bulk and low unit value e.g. Crude petroleum, Iron etc.

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Classification of Industrial products

Manufactured Material & Parts
Component materials: They are fabricated further pig iron---- Steel, Yarn----- Cloth The standardized nature of these products indicates that supplier reliability is the most important factor. E.g. Iron, yarns Component Parts: They enter finished product completely with no further change in form e.g. Tyre in to Automobile. They sold directly to industrial users, price and service are major considerations e.g. small motors, carburetor, gear box.

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Classification of Industrial products

Capital Items:
long lasting goods that facilitates developing and managing the

finished products. Installations: Consists of building( factories and office), they are major purchases, they are bought directly from producers characterized by long negotiation period, Personal selling is the major promotional tool. Equipments: they comprises, portable factory equipments and tools (Hand tools, Lift trucks) and office equipments ( typewriters etc.) They do not become the parts of finished products, they have shorter life than installations, but longer life than operating supplies.
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Classification of Industrial products

Supplies and business services In industrial setups, supplies are same as convenience goods (straight re buy basis) They are normally marketed through middleman (More geographically distributed)

Maintenance and repair items- paints, Brooms, nails Operating supplies-lubricants, typing paper Maintenance and repair services- They are supplied under contract
e.g. Computer/ LCD repair

Business advisory services- They are normally new task buying

situations e.g. Legal, Management consultancy, Advertising
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Product Classifications: Other Marketable Entities

Activities undertaken to create, maintain, or change the attitudes and behavior toward the following:
Organizations - Profit (businesses) and nonprofit (schools and churches). Persons Politicians, entertainers, sports figures, doctors, and lawyers. Places - Business sites, new residents, and tourism. Ideas (social ideas marketing) Public health campaigns, environmental campaigns, and others such as family planning, or human rights.
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Individual Product Decisions

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Product Attributes
Developing a Product or Service Involves Defining the Benefits that it Will Offer Such as:
Product Quality Ability of a Product to Perform Its Functions; Includes Level & Consistency Differentiates the Product from Competitors Products Process of Designing a Products Style & Usefulness
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Product Features
Product Style & Design

What is a brand?
A brand is a name, term, sign, symbol, design or a combination of the above to identify the goods or service of a seller and differentiate it from the rest of the competitors. When you can not do it then product is a commodity.

Brand to Commodity Slide

Extent of Competition High High

Low
High

Branded Markets & Custom service

Price Differentiati on Commodity Markets

High Low

Gross Margin

Low

Low

Product Image differentiation

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Brand to Commodity Slide

Competition in commodity markets is mainly based on price , by contrast competition in branded services is based on other elements of marketing mix and sub mixes including customer service, advertising, brand name and guarantee etc. Service firms needs to consider how to halt or reverse this transition/ slide to ensure service products remain differentiated, rather than slide in to the commodity category.

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Brand comprises of
Tangible Attributes Product Packaging Labeling Attributes Functional benefits Intangible attributes Quality Emotional benefits Values Culture Image

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Desirable qualities for a brand name

It should suggest something about the products benefits It should suggest the product or service category It should suggest concrete, high imagery qualities It should be easy to spell, pronounce, recognize, and remember It should be distinctive It should not carry poor meanings in other countries and languages

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Brand Identity
It is the marketers promise to give a set of features, benefits and services consistently

Brand Building
Involves all the activities that are necessary to nurture a brand into a healthy cash flow stream after launch

Brand building tools

Public relations and press releases Sponsorships Clubs and consumer communities Factory visits Trade shows Event marketing
Social cause marketing High value for the money Founders or a Celebrity -Richard
Branson

Mobile phone marketing-M-Commerce

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An Overview of Branding Decisions

Branding Decisions: Brand, No Brand Brand Sponsor Decision- Manufacturer Brand, Distributor(Private) Brand, Licensed Brand Brand Names Decisions- Individual names, Blanket family names, Separate family names, Company individual names. Brand strategy Decisions- Line Extensions, Brand Extensions, Multi Brands, New Brands, Co Brands. Brand Repositioning Decisions- Repositioning, No Repositioning
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Branding
Brand decisions
What is brand: A brand is a name, term, sign, symbol or design, or a
combination of them, intended to identify the goods and services of one seller from another. A brand is a complex symbol that can convey up to six level of meanings

Attributes: e.g Mercedes- Expensive, Well built, high prestige Benefits: - Expensive- Exclusive emotional benefits Values: Mercedes stands for high performance, safety, prestige. Culture: Mercedes- German culture-organized, efficient Personality: Mercedes- No- nonsense boss User: 50-55 year old Top Executive

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Branding
Brand Equity Brand equity is an asset, and it is defined as the positive differential effect that knowing the brand name has an customer response to the product or service. The extent to which customers are willing to pay more for the particular brand is a measure of Brand Equity. e.g. Nike
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Competitive advantages of high brand equity

The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can more easily launch extensions because the brand name carries high credibility. The brand offers some defense against price competition.
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Branding
Branding gives the seller several advantages:
Brand name makes it easier for the seller to process orders and track down problems Sellers brand name and trademark provide legal protection of unique product features Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Branding helps the seller segment markets. Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers.
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Branding
Brand-Sponsor Decisions- i.e. How the product is launched
Manufacturer brand also called as National Brand- Sony, IBM Distributor brand- Big Bazar, Vishal Mega Mart Licensed brand name- Hart Schaffner & Marx sells some of its
manufactured clothes under licensed names such as Pierre Cardin

Slotting fee- As the shelf space is scarce, retailer charge slotting fee for
accepting a new brand to cover the cost of listing and stocking it.

Brand laddering -Earlier customer use to view brands arranged in a

category, featuring favorite brand at the top and remaining in the descending order.

Brand parity- Now the ladder is replaced with consumer perception of

Brand Parity, instead of strongly preferred brand , consumers buy from a set of acceptable brands.
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Branding
Brand-Name Decision Four available strategies:
Individual names- P& G : Vicks (Health care), Ariel & Tide (Fabric care) Blanket family names- Umbrella branding e.g TATA Separate family names for all products- Companies often invent different
family names for different quality lines, and are not desirable to use one blanket family name. e.g. Aditya Birla Group: Hindalco for aluminum, Grasim (Suitings)

Corporate name combined with individual product names- Here the

company name legitimizes, and the individual name, individualizes e.g. Kellogg (Kellloggs rice krispies, Kelloggs crn flakes)

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Brand Strategy
Line Extension
Existing brand names extended to new forms, sizes, and flavors of an existing product category. e.g. Pepsi, Pepsi Blue, Pepsi Gold Colgate Total, Colgate herbal, Colgate gel.

Brand Extension (Category extension)

Existing brand names extended to new or modified product categories. E.g. Tata in Automobiles and Tata salt, Timex Watches and Timex Eye gears.

Multibrands
New brand names introduced in the same product category. Here a flanker brand is set up to lock up more distributor space and to protect its major brand e.g. Seiko Lasalle-High end Watch, Seiko Pulsar- Low end Watch

New Brands
New brand names in new product categories.

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Branding
Advantages of Branding
Buyers:
Identification Quality and value

Brand Equity
Higher brand loyalty Name awareness Perceived quality Strong brand associations Patents, trademarks, channel relationships

Sellers
Tells a story Provides legal protection Helps segments markets

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Packaging
Designing and producing the container or wrapper for a product. Steps in developing a good package:
Packaging concept, Develop specific elements of the package, Elements must support products position and marketing strategy.
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Packaging
Packaging Package
Primary Package Secondary Package Shipping Package

Factors which have contributed to the growing use of packaging as a marketing tool
Self-Service Consumer affluence Company and brand image Innovation opportunity
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Labeling
The label might carry only the brand name or a great deal of information, even if the seller prefers a simple label, the law may require additional information. Printed information appearing on or with the package.

Label Performs several functions:

Identifies product or brand Grades the product Describes several things about the product Promotes the product through attractive graphics
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Labeling
Consumerists have lobbied for: Open dating- to describe product freshness. Unit pricing-to state the product cost in standard measurement units. Grade labeling-To rate the quality level. Percentage labeling- to show the percentage of each important ingredient.

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Product Line Decisions

Product Line Length
Number of Items in the Product Line

Stretching
Lengthen beyond current range

Filling
Lengthen within current range

Downward Both Directions Upward

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Product Mix Decisions

Procter & Gamble's Product Mix
Baby Care Beauty Care Fabric & Home Care Food & Beverage Health Care

Width number of different product lines

Length total number of items the company carries within product lines Depth number of versions offered of each product in line

Six Toothpastes in Line

Crest Multicare

Crest Cavity Protection

Crest Tartar Protection

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Product Mix: Invertis Group

Management Computers

Engineering

Width

MBA
Depth

MCA BCA

CS IT EI

BBA B.Sc. CS

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New-Product Development Strategy

Strategies for Obtaining New-Product Ideas
Acquired Companies
Acquired Patents Acquired Licenses

Original Products
Product Improvements Product Modifications New Brands
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Major Stages in New-Product Development

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New Product Development Decision Process

Idea Generation- Is the idea worth considering. Idea Screening- Is the product idea compatible with company objectives, strategies and resources. Concept development and Testing- Can we find a good concept for the product that consumer would try. Marketing Strategy development- Can we find a cost effective and affordable marketing strategy. Business Analysis- Will this product meet firms profit goal. Product Development- Have we developed a technically and commercially sound product. Market Testing- Have product sales met expectations. Commercialization- Are product sales meeting expectations.
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New Product Development Process Step 1. Idea

Generation
Systematic Search for New Product Ideas Obtained From Employees and Also From:

Customers

Competitors

Distributors

Suppliers

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New Product Development Process Step 2.

Idea Screening
Helps spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate:
Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Then, the idea is evaluated against a set of general company criteria.

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New Product Development Process Step 3.

Concept Development
1. Develop New Product Ideas into Alternative Detailed Product Concepts

2. Concept Testing - Test the New-Product Concepts with Groups of Target Customers

Product Image is the Way Consumers Perceive an Actual or Potential Product

3. Choose the One That Has the Strongest Appeal to Target Customers
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New Product Development Process Step 4.

Marketing Strategy
Part One Describes Overall:
Target Market Planned Product Positioning Sales, Market Share, & Profit Goals

Part Two Describes First-Year:

Products Planned Price Distribution Marketing Budget

Part Three Describes Long-Run:

Sales & Profit Goals Marketing Mix Strategy
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Step 5. Business Analysis Step 6. Product Development

Business Analysis

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

If No, Eliminate Product Concept If Yes, Move to Product Development

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New Product Development Process

Step 7. Test Marketing

Product and marketing program are introduced into more realistic market settings. Can be very expensive and time consuming. Test the following:
Positioning strategy, Advertising, Distribution, Pricing, Branding, Packaging, Budget levels.

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New Product Development Process

Step 8. Commercialization
Introducing the New Product into the Market
When is the Right Time to Introduce Product?

Where to Launch a New Product?

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Product Life Cycle (Fig. 9-2)

Sales and Profits ($) Sales

Profits
Time

Product Development
Losses/ Investments ($)

Introduction

Growth

Maturity

Decline

Sales and Profits Over the Products Life From Inception to 8-55 Demise

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Low sales

Costs
Profits Marketing Objectives Product

High cost per customer

Negative or low Create product awareness and trial Offer a basic product

Price
Distribution Advertising

Usually is high
High distribution expenses Spending is high to inform consumers
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Growth Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product

Rapidly rising sales

Average cost per customer Rising profits Maximize market share Offer new product features and models

Price
Distribution Advertising

Remain where they are or fall slightly

Increase number of distribution outlets Educating consumers and meeting competition

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Maturity Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Begin to slow

Costs
Profits Marketing Objectives Product Price Distribution Advertising

Low cost per customer

High profits, then lower profits Maximize profits while defending market share May modify product May decline Build more intensive distribution Stress brand differences and benefits
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Maturity Stage of the PLC

Company tries to increase consumption of the current product

Changing characteristics such as quality, features, or styles to attract new users

Company tries to improve sales by changing one or more marketing mix elements
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Decline Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Declining sales Low cost per customer Declining profits
Reduce expenditure and maintain, harvest, or drop the product

Phase out weak items Cut price

Selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

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