PRESENTED BY PROF SURAJIT

Purchasing agents do not buy drills, they actually buy its ability to make same size holes” Theodre Levit

Product Levels
• • • • • Customer value hierarchy Core benefit Basic product Expected product Augmented product Potential product

What is a Product?
 A product is any offering by a company to a market that serves to satisfy customer needs and wants.  It can be an object, service, idea,etc.  A product is any tangible, intangible offering that satisfy the needs or aspirations of a consumer.  A product has 3 basic levels  Core Product: This answers WHY the buyer should have it. It is also called as Generic Requirement.

Its consumers view of what a given product represents.Core Product . 2. .explained • The generic product concept has two key issues: 1.The aspiration of consumer differ from place to place and time to time.

The Color of the machine The Electricity consumption Detergent Consumption Capacity Quality …. efficiency etc. design.Tangible Specifications • Tangibility is added to the core product in the form of features. Eg. style. color. .

.Augmented Features • This fulfill more of psychological or esteem needs. Brand Name Services provided Warranty Credit Terms etc…. Eg.

• Typical classification of Product:  Service  Durable  Non Durable .Classification of Products • The classification of the product depends upon the TANGIBILITY and DURABILITY found in an offering.

Consumer goods classification • • • • Convenience goods Shopping goods Specialty goods Unsought goods .

raw materials .manufactured materials and parts • Capital items • Supplies and business services .Industrial goods classification • Materials and Parts .

The product name individualises it. In such cases the company name gives it legitimacy.Umbrella Brand • Products from different categories under one brand • Dangerous to the brand if the principal brand fails • Sometimes the company name is prefixed to the brand. .

primary .secondary .shipping .Packaging • Includes the activities of designing and producing the container for a product • Packaging is done at three levels .

Packaging as a marketing tool • • • • Self service Consumer affluence Company and brand image Innovation .

Designing packaging • • • • • • • • Packaging concepts Technical specifications Engineering tests Visual tests Dealer tests Consumer tests Packaging innovations Environmental considerations .

expiry date etc…. batch no. Instructions for use Promotion .Labels • • • • • • • Identification Grade classification Description of product Manufacturer identity Date of mfg.

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 .

Non Durable Products • Products that are consumed fast and are purchased on a regular basis. Shopping and Specialty. • Consumer Products are further classified according to its use: Personal. . Family and Household as Convenience. The consumer here spends minimum time and effort in comparing and buying the item.

• FMCG is further sub divided into 3 Classes… . Ice Creams etc….FMCG • Fast Moving Consumer Goods are the Non Durable Goods. Chips. The consumer shows minimum effort in buying these articles. Eg. Sot Drinks.

Exceptions to the rule: Products like Cigarettes. Frequent Purchases: Salt. Brand Loyalty. Chocolates 2. Rice. Low Involvement: The consumer will buy an alternative if the brand ask for is not available…. Personal Hygiene Products. .Characteristics of FMCG Consumers Point • FMCG has a very low shelf life 1.

.Characteristics of FMCG Marketers Point • High Volumes The volume of the product required is very high. they will have difficulties in surviving. of family using it in the whole country??? If the organization cannot ensure high sales volume. An average family may require 3-4 Soaps a month… Imagine No. Eg.

They earn through high volume sales to maximize their turnover. there is an intense competition which makes the marketer sell the product with very less margin. The Key Becomes High Volumes Low Margins. .• Low Margins As the product is required in high volume.

.  Consumer allows shopkeeper to decide for him.• Extensive Distribution Networks  Consumer preference in FMCG products are not that rigid. Due to all this it becomes very important for the marketer to make its product available at maximum place possible.  Recall plays a very important role.  Brand Loyalty is not very high.

Which in turn allows the marketer to rotate the capital invested. .• High Stock Turnover It is a characteristic feature of FMCG. It is because these products are bought frequently or on a regular basis.

. Soap. Eg. Pulses. Toothpaste etc… Whenever the stock is about to end the consumer buys these products again.• Staples These are goods purchased on a regular basis.

Eg. feels. Most of the time the consumers aim is not buying the product solely but when spots them. Cold drinks.• Impulse Goods These are the goods which are purchased without planning or search… Our external stimuli provokes us to buy these products. . attracted and ends up in buying them. Chips…. Chocolates.

Pullovers in winters etc. the product should be available at maximum places… .• Emergency Goods These goods are purchased when the need arises.. The marketers tries for a very good distribution chain. Umbrellas in rainy season. Eg. as the sales is not the same throughout and whenever the need arises.

Return and Recommend rate percentages range from 65% to 90%. satisfaction is defined as. • Customer Delight means more than just feeling great about a product or service. . These three simple words have a slightly different meaning. the contentment one feels when one has fulfilled a desire. Delight is. Loyalty is having the feelings of allegiance. need.Customer Delight • According to the dictionary. and it is guaranteed that some of these folks will also tell others. meaning that delighted customers will tell six to nine people out of ten about their satisfaction experience. Using Bart Allen Berry’s Customer Satisfaction Behavior Curve (1 to 10 scale) customer delight correlates with an overall satisfaction rating of approximately 8. to take great pleasure or joy.75 or higher. Customer delight means the customer demonstrates high return and recommend rate behavior. but all have a significant impact on the attitudes and behaviors of customers. or expectation.

Product Life Cycle .

and decline or death. While different products have distinctly different patterns of demand. . This view dictates the need for continuous efforts for new product development. like people and living organisms.goods and services pass through a cradle to grave cycle of progression through their life span. maturity or stagnation. almost every one of them passes through the stages of introduction.Product life cycle …… Marketing concept that. growth.

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 from the market: (1) introduction. (2) growth in sales revenue. when sales revenue starts to fall and eventually vanishes or becomes too little to be viable. packaging. during which sales revenue stabilizes.promotion. As a product moves through these stages. its pricing. (3) maturity. and distribution are re-evaluated and changed if required to prolong its life. In summary." . it is the journey from "new and exciting" to "old and dated. and (4) decline.

Opportunities. each posing different challenges. and Problems to the seller • Profits rise and fall at different stages of the Product Life Cycle • Products require different Marketing.• Every Product has a limited life • Product sales pass through distinct stages. . Manufacturing. Purchasing and Human Resource Strategies in each Life Cycle stage. Financial.

Product Life Cycle Stages .

Customers have to be prompted to try the product f. Demand has to be created e.Introduction a. Little or no competition . Makes no money at this stage . Costs are high b. Slow sales volumes to start c.1.competitive manufacturers watch for acceptance/segment growth or loss d.

Increased competition leads to price decreases . Sales volume increases significantly c.2. Competition begins to increase with a few new players in establishing market f. Public awareness increases e. Costs reduced due to economies of scale b. Profitability begins to rise d.Growth a.

Prices tend to drop due to the proliferation of competing products e. . Sales volume peaks and market saturation is reached c. Costs are lowered as a result of production volumes increasing and experience curve effects b.Maturity a. Increase in competitors entering the market d. Brand differentiation and feature diversification is emphasized to maintain or increase market share f.3. Industrial profits go down Conti….

d. e. f. b.4.Saturation and Decline a. c. profitability diminish Profit becomes more a challenge of production/distribution efficiency than increased sales . Costs become counter-optimal Sales volume decline or stabilize Prices.

a skimming price strategy is employed. The product is promoted to create awareness.Introduction differing stages of the Product Life Cycle. Limited numbers of product are available in few channels of distribution. . If the product has no or few competitors. Strategies for the  The need for immediate profit is not a pressure.

Advertising spend is high and focuses upon building brand. joint ventures and take each other over. Products become more profitable and companies form alliances. Market share tends to stabilise. .Growth • Competitors are attracted into the market with very similar offerings.

Price wars and intense competition occur.Maturity • Those products that survive the earlier stages tend to spend longest in this phase. Producers begin to leave the market due to poor margins. At this point the market reaches saturation. Producers attempt to differentiate products and brands are key to this. Sales grow at a decreasing rate and then stabilise. Promotion becomes more widespread and use a greater variety of media. .

Decline • At this point there is a downturn in the market. Profits can be improved by reducing marketing spend and cost cutting. There is intense price-cutting and many more products are withdrawn from the market. For example more innovative products are introduced or consumer tastes have changed. .

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New Product development process • • • • • • Idea Generation Screening Business Analysis Prototype Development Test Marketing Commercialization .

.‘ Conjoint analysis helps in evaluation of different pricing points.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 on a scale ranging from 'Most Preferred' to 'Least Preferred.

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 Breakeven and paybacks .  Discounted cash flow projections . .Business analysis  The most customer appealing offer is not always the most profitable to make  Estimate on costs. Because money can grow by itself (when placed in an interest earning account) a rupee received today is less valuable than a rupee received in the future. sales volumes.Time required to recover an investment or loan. pricing and profit levels are made to find out the optimal price – volume mix.Value of the anticipated revenue stream from an investment as at today or on any given date.

Market testing • • • • Test markets Test periods What information to gather? What action to take? .

Commercialization • • • • When? (Timing) Where? (Which geographical markets) To whom? (Target markets) How? (Introductory Marketing strategy) .

Packaging. Photo copiers Here early entrants enjoy the major market leadership .Classification of New Products • Marketing Innovations: The actual product is not changed and the habits of the consumer also need not to be changed. • Product Improvements: when a little improvement is done to the existing product. Like 100 cc scooters. branding. These are normally targeted to a new segment of buyers • Technological Innovations: personal Computers. only a few alternatives are done. Digi Cams etc. Eg. easy availability etc. Tubeless tyres.

New Product Development • • • • • • Transfer of Technology Penetration of New Market New Product Lines Product Line Extensions Cost Reduction Repositioning or New Product Launch .

It can be acquired from the parent company or with foreign collaboration. Eg.Transfer of technology • This is more of an adoption of any product. New products are often launched on the basis of new technology. Personal Computers .

Bombay Dyeing Venturing into Real Estate Business. ITC venturing into Paper Products. FMCG Etc.Diversification • Eg. .

Godrej extension from Durable like Refrigerators to Office equipment etc. • Videocon entered into washing machine and Music Systems etc. .Additions to existing product line • Eg.

Gramophones and record players have been replaced by cassette players and now CD players. . • Eg.Improvement in existing product • New product which offers superior performance than the existing one and replace it.

Nirma .Cost Reduction • New product which provides similar performance at lower cost. Classic Eg.

• Eg. Tata Tea. Maggie .Product Re-launch • Some times old products are re-launched with little improvements.

Product Mix-Line-WidthLength-Depth-Consistency .

PRODUCT MIX Example of Proctor & Gamble .

DETERGENTS • • • • • • • • • IVORY SNOW DREFT TIDE CHEER OXYDOL DASH BOLD GAIN ERA .

TOOTHPASTE • GLEEM • CREST .

SOAP • • • • • • • • IVORY KIRK’S LAVA CAMAY ZEST SAFEGUARD COAST OIL OF OLAY .

DIAPERS • PAMPERS • LUVS .

PAPER TISSUE • • • • CHARMIN PUFFS BANNER SUMMIT .

in fact.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.

of lines. • For P&G it is 5 (in this case) . of items in the mix. • Average length = total length/no.LENGTH • Refers to the total no. there are 25 in all. In the P&G case.

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 .

consistency is high. • For P&G. .CONSISTENCY • How closely related the product lines are in end use. distribution etc. since it operates in the FMCG segment. production.

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And introduces a product to cater that lower segment.Product Line • Line Stretching  Downward Stretch : It takes place when the company finds a particular segment (Lower) which is un-attended by the existing product.  Upward Stretch : It is when company a company enters Upper market through Line Extension. .

luxury . economy 2.g.2 WAY STRETCH • Stretching the line in both directions *E. comfort 3. Marriott 1.

Product Line decisions
• Product rationalization • Market rationalization • Product line length too long – when profits increase by dropping a product in the line too short – when profits increase by adding products to the product line • Line pruning – capacity restrictions to decide

PRODUCT LINE DECISIONS
• Product line analysis 1. Sales & profits (80/20 rule)
2. Market profile (positioning)

• Product Flanking Basically offering same product in different price combinations to tap diverse market opportunities.

 Line Filling : A product line can be extended by adding more items 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 to missing items in the line Trying to utilize excess capacity Trying to offer a full line of the production Trying to plug holes in the positioning map.

if so. It can harm the existing product or late so that competitors already have a hold in the market.• 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.

so as to increase foot falls and then making the consumer exposed to other products too. .• Line Featuring Its about featuring a particular product of the product line.

• Advertising and Media Coverage • Sales Promotion Sales Pomotions offer a direct incentive to buy more in the short term. .

Eg. Lifebuoy Gold. Amul Ghee. Eg. Lifebuoy Liquid. Amul Milk. Amul Chocolates . Lifebuoy: Lifebuoy Plus. Amul: Amul Butter.• Brand Extensions This enables the company to enter new product categories more easily. Amul cheese.

• Innovations in Core Product The life of a FMCG product is short. Kelloggs . • Long Term Outlook Eg. The marketer continuously tries to introduce new products and a consumer is also open to try new products.

• Extending the PLC • Expanding Markets by Usage a. • Wide distribution Network .Increase the Number of Customers b.Encouraging more consumption.

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