APPROACHES TO ORGANISING PRODUCT MANAGEMENT There are several ways to assign products to 2 company’s available pro, managers. The chloice of approach depends on the nature of the bug; organisation and the number of products and brands, a well as mark objectives, and the preferences of the top management. There are three approaches to organising product m ' 1. Individual Product Manager. The simplest way to assign products jg ,, give one product manager alll the company’s products. ae one oe manager exists in a company. This situation eliminates difficu ties wit intermediate communication. Using only one product manager constitutes the simples expression of the product management operation. It is most useful Organisation where the product mix is consistent. : 2. Several Product Managers. As a company grows, it often adds product lines that are less consistent with the original core business. When more than one product manager exists in a company, two basic forms of organisation are possible. In the first, the product manager reports directly to the marketing chief ang oversees the activities of several people. Hindustan Lever has the system of product managers for individual products. 3. The Product Group Coordinator. The evolution of large-staffed product management groups has led to the creation of a new product management position : the product group coordinator. While the product group manager acts in a managerial capacity to bring about the efficient operation of the entire product group, the product group coordinator is responsible for the internal integration of ‘duct Ness tin bas Ic anagement. the group. PRODUCT CLASSIFICATIONS —~ Marketers have traditionally classified products on the basis of three characteristics : durability, tangibility and use. The following chart shows the product classification: PRODUCT CLASSIFICATION (1) Durability and Tangibility (2) Consumer goods (3) Industrial goods (a) Non-durable goods (a) Convenience goods (a) Material and parts (b) Durable goods (b) Shopping goods (b) Capital items (c) Services (c) Speciality goods (c) Supplies and business (d) Unsought goods servicespurability and Ty (v) Non-durable goods. Non-durable (c) Service 9, Consume @ ) (@) (¥) Durable goods. Durable goods are t Kibility Classification sods are tangible yoods normally consumed in one or a few uses. For example, soaps, salt and biscuits angible yoods that can normally be used for many years, For example, colour TV, refrigerators, washing machines and uum cleaners, Services rate intangible, inseparable, variable and perishable products. For example, airline and banking, services: r Goods Classification Convenience goods. ‘These are goods that the customer usually purchases frequently, immediately and with a minimum of effort. Examples include soaps and newspapers Convenience goods can be further cl ()) Stable lassified into three categories : goods. Consumer purchases on regular basis (1) Impulse goods. Consumer purchases without any planning or search effort, (ut) Emergency goods. Consumer purchases on urgent need, Shopping goods. These are goods that the customer, in the process of selection and purchase, characteri ically compares on such bases as suitability and quality. Examples : Furniture, Electrical Appliances, ete Special goods. These are goods with unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Examples: Cars Unsought goods. These are goods the consumer does not know about or does not normally think of buying. The classic examples of known but unsought goods are life insurance. 3. Industrial Goods Classification (a) () Materials and Parts. These are goods that enter the manufracturer’s product completely. They fall into two classes : raw materials and manufactured materials and parts. Capital items. These are long-lasting goods that facilitate developing or managing the finished product. They include two groups : Installations and equipment. Supplies and Business Services. These are short-listing goods and sevices that facilitate developing or managing the finished product.( PRODUCT MIX DECISIONS Most companies — whether large oF small, generally handle a multitude of products an‘ the companies may expand new lines oF contra .s for the existing P' uct or develop new use n and policy-making with resp whether in manufacturing, oF retailing if product varieties. In course of time ct the old lines, after the existing rod roducts. These activities involve io ,, eevnagerial strategies ect to the company’s line of managerial i products and services. The proliferation of products are made at three different line and product mix. (a) Product item. It is a specific in the seller's list. For example, product item (b) Product line. A group of products that at product policy decisions within the company means th: viz., product item, product levels of product aggregation, ic version of a product that has a separate designation Hindustan Motors’ Ambassador Mark II is a are closely related either because they satisfy a class of‘need, or used together, are sold to the same customer group, are marketed through the same types of outlets, or fall within given price ranges or that are considered a unif because of marketing, technical, or end- use considerations. In other words, a broad group of products, which are meant for essentially similar uses and possess reasonably similar physical characteristics, constitute product line. For example, Kodak Camera, or wearing apparel is a product line; or non-food product line for babies include baby clothes, nursery equipment, vaporizers, and toiletries. (c) Product Mix. Products offered for sale by a firm or a business unit. In other words, product mix is the full list of all products offered for sale by a compan For example, Kodak’s cameras, photographic supplies, chemicals, see and fibres are its product mix; or Tata's hair oil, cosmetics, locomotives textil iron and steel goods, mercedes trucks, etc. are product mix. ' “ Fig. 5.1. An sample of product line.er pocture o jational Goals and Product Mix The efficient fulfillment of the / ie eee eames marketer's goal to supply goods and services to co Leeann ‘on of their needs can be possible if due attention is given to thre " govern the product mix —sales growth, sales stability and profits. Sales growt i : fee a ae either by increasing its share in existing markets or ae ao ee ets. Four ways can be adopted by which product mix can by ee ve goals. These are : (f) Market penetration, under which market sI i ee Y expanding sales of present products in existing uses; (it) Market Cad : : . which markets are expanded by creating new uses of present pros mets (a Ee tet development where market share is increased by developing new e re = Sty existing needs; and (iv) Diversification, whereby market is expanded by Ceveloping new products to satisfy new consumer needs. — sti Stable sales allow for more efficient planning in all phases of production an : istribution. It is also desirable to maintain a proper balance in total sales and product mix so that a product losing marketing may be counteracted by another selling high. Profits are determined by the components of the product mix. Some items are usually more profitable than others. Low profit items may be performing a valuable part in helping to sell company’s more profitable product; and they may also prove as insurance against an unforeseen failure in profitable products. f Product Mix The structure of product mix has dimensions of both ‘width’ and ‘depth’. By ‘width of the product mix’ is meant the number of different product lines found within the company. In other words, breadth is measured by the number of product lines carried. For example, Bajaj Electricals produces bulbs, fluorescent lights, mixies and grinders, toasters, scooters, pressure cookers and a host of other electrical appliances. The ‘depth of the product mix’ refers to the average number of items offered by the company within each product line. In other words, the depth is measured by assortment of sizes, colours, models, prices and quality offered within each product line. The ‘consistency of product mix’ refers to how closely related the various product linés are in terms of consumer behaviour, production requirements, ‘distribution channels’ or in some other way. For example, the products produced by the General Electric Company have an over-all consistency in that most products involve electricity is one way or the other. Kotler observes, “All three dimensions of product mix have a market rationale.” Through increasing the width of the product mix, the company hopes to capitalise on its good reputation and skills in present markets. Through increasing depth ofProduct Li 6) ee —— ee z-a-=s —— Product Line 2 ———>| Product Line 3 >| 3a 3b 3c | Product Line 4 >| 4b (Product Product Mix items Numer of Lines Average Depth = Fig. 5.2. Product Mix. its product mix, the company hopes to entice the patronage of buyers of widely differing, tastes and needs. Through increasing the consistency of its product mix, the company hopes to acquire an unparalleled reputation in a particular area of endeavour. The dimensions of the product mix, and the ways in which they relate to each other are important for marketing management. Changing the product item involves the issues whether to modify, or add or drop product items. Changing the width of the product mix involves altering policy at the product-line level, whether to deepen or shorten an existing product line. Changing the product mix involves the issues what markets the marketer should enter or leave; and how to handle communications for the various product lines or wen‘) Line Decision Strategies Taking of decisions about change in product line depends upon a number of factors, such as the preferences of consumers, the tactics of competitors, the firms cost structures and the spill over of demand from one product to another, etc. 1. Changes in Market Demand Changes in market demand may be due to changes in the component of population served. If there is an increase in the number of births the business would like toincrease new lines of baby aby products, such as baby food, baby shoes, pe s ee y food, baby shoes, perambulators, Increase in the purchas purchasing power of the consumers also leads to the improveme ii e improvement in the quality of the product as also the dropping out of the line certain low-price, low quality goods Change in the consumer behaviour, through changes in his motivation, attitudes, preferences and buying habits may also encourage the marketing executive to expand or contract his product mix. To satisfy the more varying needs, he may add many new lines; such as the departmental stores do by adding to the general merchandise, the light reading material, health and beauty aids, ready-to wear apparels, household requisites, indoor games, sports materials, et. Sometimes changes in product mix are also made to suit the requirements of the middlemen who would like to have varied line of products for reasons of competition, cost and promotion. 2. Competitive Action and Reaction The firm may differentiate its product line to meet price competitions, and save it from unduly low profits. 3. Marketing Influences New product line may be added for two reasons. First, to increase sales by exploiting new market or expanding the present ones; and second, to use the firm's capacity more efficiently by a better use of its resources of salesmen, ware- houses or branch offices. . 4, Product Influences A firm may change its product mix to use its manufacturing capacity more effectively, thereby reducing its net production cost. New line may be added when its production has been discontinued by another firm. To make a better use of the by-products or waste products new lines may be added 5, Financial Influences Product The firm may add or drop out product line as per its financial resources. ‘The product mix may be expanded to increase a firm’s profitable sales volume; or a product line may be dropped to meet depression in the market.) Line Strategies A company has several strategies at its disposal, with respect to the width, depth and consistency of its product mix. Most of these strategies involve a change in the product mix. Major product line strategies are1, Exp nsjon of product mix; mre ping the product mix; Contracting OF Drop| Alteration of existing product; : Developmet of new uses for existing product; Trading-up and trading-down; and Product differentiation and market segmentation. gre ae ansion of Product Mix Expanding the line may be a valid decision if it is in an area in'which consumers traditionally enjoy a wide variety of brands to choose from and are accustomed to switching from one to another; or if the competitors lack a comparable product or if competitors have already expanded into this area themselves. However, the main limitation in expansion is the availability to sufficienty finance, time and equipment. Expansion in the present product mix may be done by increasing the number of lines and/or the depth within a line. Such new lines may be related or unrelated to the present products. For example, the large provision stores may add drugs, cosmetics and housewares (width) while at the same time increasing their assortments of dry fruits, baby foods, detergents (depth), etc. 2. Contracting or Dropping the Product Mix This is rather more difficult, because much money has already been invested; and, therefore, as fast as possible, products are allowed to linger on for long until they become a loss. When contraction is decided upon, various alternatives are available to the marketers. The product may be consolidated with several others in the line so that fewer styles, sizes, or added benefits are offered. Or, the position can be simplified within a line. If even then a product fails, the company may stop it altogether. 3. Alteration of Existing Product Sometimes experience may show that improving an existing product may be more profitable and less risky than developing and launching a new product. Alterations may be made either in the design, size, colour, texture, flavour, packaging, in the use of raw materials in the advertising appeal, or a quality may be changed. This strategy is to be followed regardless of the width and depth of the product mix. 4. Development of New Uses for Existing Product The company may find out new uses for the existing product as and when Sway or Surf may be used not only for washing clothes but also for cleaning the floor, utensils and glass product.It invol () (ii) Ives an expansio: Pi n of the product lines as well as the promotional strategies. Trading-up refers to the addin existing lines with the intentio product. Under trading up 8 of a higher priced prestige product to the . n of increasing sales of the existing low-priced . ie seller continues to d id the older, low iced product for the major porti pe cea P T the major portion of the sales. Ultimately he may shift the promotional emphasis to th to the new products. ‘e new product so that larger share of sales may g° pare ere to the adding of the low priced items to its line of prestige P , with the expectation that the people who cannot buy the original product may buy these new ones because these carry some of the status of the higher priced goods. An instance on the point is that of Allwyn Company, which attempted to broaden its market for Allwyn Refrigerators by introducing five sizes in an attempt to compete at all price levels. Will cigarettes also traded down by bringing out the lower priced Wills-Flake cigarette pack. But this type of trading-up and trading-down is harmful because the consumer may be confused about the new product and_ the sale in the new line is also adversely affected as it is done at the expense of the older product. This situation may be avoided by using differentiating brands, channels of distr ibution, promotional programmes, or product design. 6. Product Differentiation and Market Segmentation These strategies are often employed by the firms who wish to engage in competition in markets characterised by imperfect or monopolistic com| no-price petition. Since these strategies require large financial involvement in promotional efforts they are usually known as both promotional and product planning strateg) () ies. Product Differentiation. Product differentiation involves “developing and promoting an awareness of difference between the advertiser's product and the products of the competitors”. The strategy when used enables a company to remove itself from price competition so that it may compete on the non- price basis, viz. that its product is different from and better than, competitive models. This differentiation is done either in quality, design, brand or g. Where reasonably standardised products are sold, such as soaps, to a broad horizontal market which is fairly this strategy is mostly used. packagin cigarettes, gasoline, etc. homogeneous in its wants, (i) Market Segmentation. Under market segmentation strategy, the seller knows that the total market is made of many smaller homogeneous units, each of its units has different wants, motivations, etc. To meet these different demands, different products are developed, i.e., products are tailor-made to suit these requirements. This strategy attempts to penetrate a limited market in depth,