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03/18/2014

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PR ODU CT

• Anything that can be offered to the market that might satisfy a need or want. • Products include Physical goods, Services, persons, places & organizations. • Three types of Demand: • 1. Current Demand: Products are available in the market which meets the needs of the customers. • 2. Latent Demand: Products that are currently not available in the market but if offered will be bought by the customers. • 3. Incipient Demand: Considering the trends these products will be accepted by the market at a future date.

PRO DU CT CLASSI FI CATI ONS
• Traditionally Marketers have classified products on the basis of Durability, Tangibility and use. • Consumer Products (Goods &Services)
• Non Durables (FMCG) • Durables (White goods, clothing, etc) • Services (Intangibles – haircuts, education, repairs).

• Industrial (Direct Cost / Indirect cost Items)
• • • • • Raw material: Farm products & natural goods Manufactured Items: assembly’s, components/parts, Capital Items: Machinery, Equipments Tools, Consumables etc. Industrial Services: AMC’s, Business advisory s+ervices

PRODUCT CLASSIFICATIONS
• • • • • • Consumer products (Different Classifications) Convenience goods: consumers buy frequently. Staple: Purchased on a regular basis. Impulse: Purchased without planning. Emergency goods: purchased when needed. Shopping Goods: Purchased on the basis of suitability. Requires comparison. Cars, Apparels Clothes, House hold appliances • Specialty goods: buyers are willing to make special purchasing efforts – art, fashion / sports items, Photographic equipments etc. • Unsought Goods: Consumers are aware but may not consider buying them – Fire extinguishers, LIC

Competition – is at the augmentation level – many a time, not based on what companies make at factories, but beyond that.

POTENTIAL EXPECTED

GENERIC

core

AUGMENTED

Three Levels Of Product (Old)
Installation

Core Product
Packaging

Delivery & Credit

Brand Name

Core benefit or service

Features Warranty

Quality

Styling

Tangible Product

After sales service

Augmented Product

Five Levels Of Product
Expected Product
Product Differentiation Common Attributes Brand Persona Brand Name Basic Features Core Benefit Payment terms / Credit Status

Core Product
Superior value

Potential Product

Latest Style Loyalty Club

A.S.S Warranty

Brand Image

Augmented Product

CRM / Services

Basic Product

FIV E L EVEL S OF PROD UCT • Marketers need to think through five levels of service. Each level adds more customer value. • 1. Core Product: The basic benefit that the customer is buying. Marketers must see themselves as providers of benefit.
• Restaurant: – Food….fulfilling the basic need of hunger.

• 2. Generic Product: the basic version - can be the initial product offering.
• Restaurant: – tasty and good quality food, tables, chairs, and clean environment

• 3. Expected Product: conditions (attributes) that consumers normally expect. Minimum levels of offerings.
• Restaurant: – Variety cuisines, Quality waiters / service personnel, good ambience & décor, hot & delicious food,

FIVE LEVELS OF PRO DU CT
• 4. Augmented product: • One that includes additional services and benefits that differentiates firms offer from competitors.
• Restaurant: Speed of service/delivery, courtesy / service standards, loyalty clubs, specialized offers, children’s play area, entertainment, Brand Image etc. • Today’s competition basically takes place at the product augmentation level. Marketer’s have to look at the customer’s total consumption system.

• 5. Potential Product: • Encompasses all augmentations and the transformations that the product will undergo in the future.

PRO DU CT MI X
• Is the set of all product lines. • P.Mix Width: How many different product lines that the company has. • P. Mix Length: Total no. of items or brands in the p. Line. • P. Mix Depth: refers to how many different variants are offered in each product category. (variants & SKU’s) • The Consistency of the product mix refers to how closely related the P.Lines are in end use, production requirements, distrbn. Channels etc. • The above four factors determine the company’s product Strategy.

PRO DU CT MI X DECI SI ONS • A product line is a group of products that are closely related because they perform a similar function, are sold to the same group of customers, are marketed through the same channels. • Company can expand its business • By adding new lines (mix widening), • By adding new brands (lengthen) and • By adding new variants (deepening of Product Mix).

PRODUCT MIX DECISIONS
• Decision to pursue more product line or less depending on whether it wants to acquire a strong reputation in one field or participate in several fields. • A Product Mix consists of various product lines. It is the assortment of items that a Co. is offering for sale. • • • • • 4 classifications based on profitability Core products Staples Specialty items Convenience items

PRODUCT LINE ANALYSIS
• Core products: Products which are promoted and has high sales volume but Low margins. Low end PC’s , Colour TV’s • Staples: Lower sales volume, but no promotions and hence better margins. High memory/faster CPU’s, • Specialties: Items with lower sales volume but receive high promotion and generally bring in high margins. • Convenience Items: Peripheral items that sell high volume but receive very little promotion. Eg. Printers software, sound/video cards etc. • These items carry higher margins. Consumers tend to buy these items from where they procured original equipment.

Product Line Analysis
• The % of total sales & profits contributed by each line. • And within each line the contribution by each item. • Say 1st item gives 50% of total sales & 30% of profits. • 2nd item may provide 30% of total sales but might provide 30% profits. • High concentration of sales in a few items means line vulnerability. • These items must be carefully monitored and protected (competitor activities). • Decisions on the low performers such as drop / divest.

Product Line Analysis
• Market Profile of Product Line: • Refers to review of how the product line is positioned against competitors lines. • Product map shows how competitors items are competing with competitors products. • What is optimal product line length. • A product line that is too short, the company can increase profits by adding items. If the line is too long the profits can be increased by dropping those items

PR OD UC T L INE DECISI ONS • Companies seeking high market share and market growth will carry longer lines. Less concerned when some items fail to contribute to profit. • If the emphasis is on profits they will carry shorter lines. • Product lines tend to lengthen over time. • Excess mfg. Capacity, sales force and channel partners also look for complete product line. • As items are added costs rise – design & engineering costs, inventory costs, mfg. Change over costs, transportation and promotional expenses. • Role of the marketing controller. • Product portfolio management.

LI NE STRETCH ING DECI SI ONS
• Line Stretching occurs when a Co. lengthens its product line beyond its current range. • Downward Stretch: • Many companies initially locate at the upper end of the market and sub-sequently stretch the line downward. • Oberoi’s & Trident, Sony & Aiwa, Opel Madura Garments, RPG retailing etc. • Reasons:
• • • • • Attacked by competitor at hi end (decides to attack back) Slower growth taking place at hi end. Initially entered higher end to get a quality image and intends to roll downwards. Adds a low end version to plug a gap, that otherwise would attract a new competitor. Care should be taken that low end item doesn’t cannibalize hi end item.

LI NE STRETCH ING (contd. )
• Upward Stretch: • Co.’s in the lower end of the market might contemplate entering the hi end. Toyota – Lexus, Hyundai/Maruti
• Reasons / Risks: • Attracted by the higher growth rate, higher margins or to position as a full line manufacturer. • Upward stretch can be risky. • Well entrenched hi end competition may counter attack . • Doubts among customers whether required hi quality can be maintained. • Sales force and channel partners may lack the skill to deal with the hi end.

PR OD UC T L INE DECISI ONS
• Two-way Stretch • Co.’s serving middle market decides to stretch their line in both the directions. • Toyota started with Corolla – added Camry at higher end & Starlet at the low end. Added Lexus as superior hi end car. • Line Modernization decision: • Product line length is adequate, but line needs to be modernized. Can be done in stages or at once. • Piecemeal overhauling can be advantageous as co. has time to see how the market reacts to the new style. • Rapidly changing Hi Tech products, modernization is a must. • Consumer migration •

PRO DU CT LI NE DECI SIO NS
• Line Featuring Decisions: • Product Mgr. Selects one or more items in the line to feature. • May feature promotional model at the low end to serve as traffic builders. At high end to lend class image (flagships or crown image). • Mercedes announcing an economy model. Bata – Hush Puppies, Adidas. • Disadvantage if the new starts to sell well. • Line Pruning: • When there are too many brands or when there is Production capacity bottlenecks. • Remove deadwood – sales/profit analysis to identify the weak links. • Product Portfolio Management.

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