07.

PRODUCT
A Product is anything that can be offered to a market to satisfy a want or need.
Products that are marketed include physical goods, services, experiences, events, persons, places,
properties, organizations, information and ideas. People satisfy their needs and wants with products.
Product Levels
Potential Product

Augmented Product

Expected Product

Basic Product

Core
Product

Five Product Levels

In planning its market offering, the marketer needs to think through five levels of the product. Each level
adds more customer value, and the five constitute a customer value hierarchy. The most fundamental
level is the core benefit: the fundamental service or benefit that the customer is really buying. A hotel
guest is buying ‘rest and sleep’. Marketers must see themselves as benefit providers. At the second level,
the marketer has to turn the core benefit into a basic product. Thus a hotel room includes a bed,
bathroom, towels, dresser and closets. At the third level, the marketer prepares an expected product – a
set of attributes and conditions buyers normally expect when they purchase this product. Hotel guests
expect a clean bed, fresh towels, working lamps and a relatively degree of quiet. At the fourth level the
marketer prepares an augmented product that exceeds customer expectations. A hotel can include a
remote control colour television set, fresh flowers in the room, fine room service etc. Today’s
competition essentially takes place at the product augmentation level and then again today’s augmented
benefits soon become expected benefits. At the fifth level stands the potential product, which
encompasses all the possible augmentations and transformations the product might undergo in the future.
Here is where companies search for new ways to satisfy customers and distinguish their offer. All-suite
hotels where the guest occupies a set of rooms represent an innovative transformation of the traditional
hotel product. Successful companies add benefits to their offering to satisfy and delight their customers.

Product Classifications
Marketers have traditionally classified products on the basis of characteristics: durability, tangibility and
use (consumer/industrial). Each product type has an appropriate marketing mix strategy.
PRODUCT
On the basis of Durability and Tangibility
On the basis of Use

Non Durable Goods Durable Goods Services Industrial Products Consumer Products

Materials and Parts Convenience Goods

Raw Materials Staple Goods
Manufactured Impulse Goods
Materials Emergency Goods
Product Classifications Capital Items Shopping Goods
On the basis of Characteristics such as Installations Homogeneous Shopping Goods
Durability, Tangibility and Use Equipments Heterogeneous Shopping Goods

Supplies and business Services Specialty Goods

Operating Supplies
Maintenance and Repair Items Unsought Goods
Maintenance and Repair
Services Business Advisory
Services
MB208 Marketing Management 7. Product Page - 2 - of 11

Products can be classified into two groups, according to use – industrial and consumer:
Industrial products are products that are purchased to produce other products or facilitate the smooth
running of an organisation. They are purchased to satisfy the organisation’s needs. Functional aspect of
the product is perceived to be more important when compared to the psychological rewards associated
with it.
Industrial products can be classified in terms of how they enter the production process and their
costliness:
Materials and parts: Goods that are completely used up for the production of a manufacture’s product.
They include raw materials such as fruits, iron ore and manufactured materials such as concentrates,
steel.
Capital items: Long lasting goods that facilitate the developing or managing the finished product. They
include installations such as factories, offices, generators and equipments such as hand tools, computers.
Supplies and business services: Short-lasting goods and services that facilitate the developing or
managing the finished product. Supplies include operating supplies like lubricants, fuel, writing paper
and maintenance and repair items such as nails, brooms. Services include maintenance and repair
services like window cleaning, computer repair and business advisory services such as leagal,
management consulting.
Consumer products are products that are used by the consumer for personal, family or household use.
Consumer products can be classified on the basis of shopping habits:
Convenience goods: Purchased frequently, immediately and with a minimum effort.
Convenience goods can be further divided. Staple Goods – purchased on a regular basis, eg. Colgate
toothpaste, Maggie Ketchup. Impulse Goods – purchased without any planning or search effort, eg.
Chloromint, Magazines. Emergency Goods – purchased when a need is urgent, eg. K.C. Paul’s umbrella.
Shopping goods: Purchased after comparing on such bases as suitability, quality, price and style.
Shopping goods can be further divided. Homogeneous shopping goods are similar in quality but different
enough in price to justify shopping comparison, eg. home appliances like television sets. Heterogeneous
shopping goods differ in product features and services that may be more important than price, eg.
cameras.
Specialty goods: Goods with unique characteristics or brand identification for which buyers are willing to
make a special purchasing effort. eg. Bose stereo components, Mercedes car.
Unsought goods: Goods that the consumer normally does not think of buying. eg. Smoke detectors.

AGAIN, According to durability and tangibility, products can be classified as - Nondurable, Durable and
Services:
Nondurable goods: Tangible goods that are normally consumed in one or few uses – eg. cold drinks, and
all FMCG (fast Moving Consumer Goods) like soaps, petrol etc. Since these goods are consumed quickly
and purchased frequently, the appropriate strategy is to make them available in many locations, charge
only a small mark up and advertise heavily to induce trial and build preference.
Durable goods: Tangible goods that normally survive many uses – eg. refrigerators, heavy machines.
Durable products normally require more personal selling and service, command higher margin and
require more seller guarantees.
Services: Intangible, inseparable, variable and perishable products – eg. haircuts, repairs.
Services normally require more quality control, supplier credibility and adaptability.

Examples Of Service Industries

• Health Care– hospital, medical practice, dentistry, eye care
• Professional Services– accounting, legal, architectural
• Financial Services– banking, investment advising, insurance
• Hospitality– restaurant, hotel/motel, bed & breakfast; ski resort, rafting
• Travel– airline, travel agency, theme park
• Others– hair styling, pest control, plumbing, counseling services, health club, interior design
Characteristics of Services
Services are different from goods because they have five distinct characteristics: Intangibility,
Heterogeneity, Inseparability, Perishability, and Lack of Ownership.
Intangibility:
Unlike Products, that can be seen, heard, touched, smelt and/or tasted, Services are to be experienced.
Quality of service is not always strictly measurable. Different people may have different expectations
with regard the same service.
Heterogeneity:
A machine can produce units identical in size, shape and quality. A human being cannot work uniformly
and consistently throughout the day. Since human beings offer a service, there is high probability that the
same level of service is not delivered all the time. Further, the service offered by one employee of an
organisation may vary from the service offered by another employee of the same organisation.
Inseparability:
A service is consumed by the customer as soon as it is delivered to him. Production and consumption
occur simultaneously. Since the delivery and consumption of a service are inseparable, service providers
and service receivers need to be in contact when the service is being rendered.
Perishability:
Unlike products, services cannot be inventoried or stored for future consumption. The service provider
looses on revenue if his service capacity is not fully utilised.
Lack of Ownership:
Due to the intangible nature of services, service delivery, unlike product delivery, does not ensure
transfer of ownership. The challenge here is to make the customers believe that they are being offered a
unique piece of service. Unlike a motor car or a vacuum cleaner, services once delivered cannot be
returned or resold to a third party. They are enjoyed only once by the customer and once consumed
cannot be meaningfully transferred to third parties.
Extended Marketing Mix and Strategies for Services Marketing
In addition to the 4 elements of the Marketing Mix available to all marketers – Product, Price, Physical
Distribution, and Promotion – Marketers of Services are equipped with 3 Additional P-s – Physical
Evidence, Process, and People. The Extended Marketing Mix for Services Marketing consists of 7 P-s.
PRODUCT: Same standardised service – car service stations,
couriers Customised service – doctors, consultants
The service offering needs to be looked at carefully to ensure it meets customer needs as closely as
possible. The range of services offered may require extending/updating in response to new developments
in the market.
PRICING: Fees: Doctors, Lawyers, Accountants
Rent: House, Building, Home
Appliances
Admission Fee: Education, Recreation Parks, Resorts Bases of Pricing
Premium: Insurance Policy Demand, Season, Time of year/day, Age
Interests: Loans of Consumer, Ability to pay
The perishability nature of services makes pricing difficult since fluctuation in demand cannot be met
through inventory. Hence, variation of price depending on time/season/consumption becomes the natural
strategy. Price also represents other factors in addition to simply costs and is often used by prospective
clients as a guide to quality. Therefore, pricing should be regarded as a strategic element of the overall
marketing programme rather than a basic costing exercise.
PROMOTION: Ambience;Employees (Personal Selling); Awards and Certificates displayed; Publicity
Promotional objectives need to be clearly defined before a strategic promotional program can be
designed. Service providers may have more than one promotional objective and will use a variety of
messages and media to communicate with target audiences. Advertising can increase awareness.
Newsletters or house magazines can be a useful tool for communicating with existing customer and other
publics. Sponsorship, PR and publicity can be used to attract attention and inform target audiences. A
higher profile and enhanced corporate identity will make the organisation more attractive to customers.
PHYSICAL DISTRIBUTION: No Intermediaries Required: Legal or Medical consultation
Intermediaries Required: Public Utilities – Electricity, Gas, Ration, Mass Transport etc.; Travel and
Entertainment; Financial Services
Location decisions are important in professional services marketing as many clients use convenience as a
key factor in provider selection. Location may be less important for highly complex or specialist services.
Some services, such as building surveying or accounting audits, have to be carried out at the clients’
premises.
PHYSICAL EVIDENCE: The Remote Encounter- ATM transactions, e-ticketing etc.
The Indirect Personal Encounter- Helplines of banks & credit card
companies
The Direct Personal Encounter- Direct face-to-face encounter with
customers
Customers will base their judgement on the physical evidence available to them. Appearance and
cleanliness of hospitals influence a customer perception of the service.
PROCESS: Standardisation of Processes
The arrangements through which the customer actually receives delivery of the service constitute the
process. In a hospital, the service comprises of getting an appointment at the reception, consulting the
doctor etc. Administration quality, customer care, appointment systems, methods of communication,
office opening hours and operating efficiency in terms of delegation or team working, are all examples of
aspects of the service delivery process which may be improved or revised.
PEOPLE: Competitive advantage through service
personnel Behavioural Training
Since most services are provided by people and service delivery quality depends on the person delivering
the service, hence the selection, training and motivation of employees can make huge difference in
customer satisfaction. Ideally, employees should exhibit competence, a caring attitude, responsiveness,
initiative, problem solving ability and goodwill.

Product Mix
A product mix (also called product assortment) is the set of all product lines and all items that a
particular seller offers for sale. A company’s product mix has a certain width, length, depth &
consistency. These concepts are illustrated in the tables for selected HUL and ITC products.
Product Mix of HUL (Illustrative Only)
Colour Soaps and
Cosmetics Hair Care Skin Care Oral Care Deodorants Detergents Toilet Soaps
Lakme Sunsilk Fair & Lovely Pepsodent Axe Surf Liril
Clinic Ponds Close-up Denim Rin Lifebuoy
Rexona Wheel Lux
Sunlight Pears
Vim Hamam
Savlon

Product Lines of ITC (Illustrative Only)

Exports Financial
Cigarettes Garments Edible Oil (Sea Food) Services Hotels Sports Gear

Width: Total number of product lines a company carries. Our example shows HUL’s and ITC’s product
mix width as 7. They have 7 product lines (Lines of Business).
Length: Total number of items in the mix. In our example, it is 21. The average length of a line is
obtained by dividing the total length by the number of lines. Here, it is 21/7 = 3.
Depth: How many variants are offered of each product in the lines. It is the assortment of sizes, colors
and variations offered for each product. (Lifebuoy Active Red comes in 3 sizes: 125gm, 100gm & 60gm cakes)
Consistency: Refers to the closeness exhibited by the product lines with respect to end use, production
requirements, distribution channels etc. (HUL product lines are consistent as they are consumer goods
distributed by the same channels but ITC product lines are inconsistent as they are widely varied in
nature.)
Product Life Cycle
The product life cycle is an important concept in marketing. It describes the stages a product goes
through from when it was first thought of until it finally is removed from the market. Not all products
reach this final stage. Some continue to grow and others rise and fall.
Just as businesses go through stages, so do products and services. The product or service life cycle is
determined by how long it is marketable. The life cycle of the TV cathode ray tube (CRT) is coming to an
end as more and more flat screens are being purchased. The life cycle of voice-over IP telephone service
is entering its growth phase as more and more people try it out. A branded good can enjoy continuous
growth, such as Microsoft, because the product is being constantly improved and advertised, and
maintains a strong brand loyalty. Knowing where your products or services are in their life cycle will help
you determine refinements or adjustments you may need to make to align them with the vision and
strategy you have already developed.
To say a product has a life cycle is to assert four things:
1. Products have a limited life.
2. Product Sales pass through distinct stages, each posing different challenges & opportunities to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different strategies in each stage of their life cycle.
The PLC concept can be used to analyse product category, product form, a product or a brand:
Product categories have the longest life cycles. Many product categories stay in the mature stage
indefinitely. Typewriters seem to have entered the decline stage of the PLC whereas mobile phones, fax
machines, bottled drinking water are clearly in the growth stage.
Product forms follow the standard PLC more faithfully. Manual typewriters passed through the 4 stages;
their successors – electric typewriters and electronic typewriters – passed through these same stages.
Products follow either the standard PLC or one of several variant shapes.
Brands can have a short or long PLC. Although many new brands die an early death, some brand names –
like Cadbury’s, Colgate, Surf – have a very long PLC and are sometimes used to launch new products.
Most product life cycle curves are portrayed as bell shaped. This curve is typically divided into four
stages: introduction, growth, maturity and decline.
 Introduction – researching, developing and then launching the product
 Growth – when sales are increasing at their fastest rate
 Maturity – sales are near their highest, but the rate of growth is slowing down, e.g. new
competitors in market or saturation
 Decline – final stage of the cycle, when sales begin to fall

Sales &
Profits
Sales
Profit

Intro
duction Growth Maturity Decline

Time
Introduction: A period of slow sales growth as the product is introduced in the market. Profits are low or
non existent in this stage because of the heavy expenses incurred in set-up cost and advertising. Research
and development, production, and marketing costs are high. Prices are set high on the product or service
to recoup some of the development and introduction costs. For example microwave ovens that can now
be purchased for Rs.7,000/- were priced between Rs.12,000 andRs.15,000 when they were first
introduced. In this stage, you’ll want to keep a close watch on the market’s reaction to your products and
services and be ready to make changes. It sometimes helps to experiment with several different product
and service configurations to see what works in these early stages.
Growth: A period of rapid market acceptance and substantial profit improvement. Sales generally
increase with the demand for the product. Cash flow improves and profits are at their peak. When real
estate is being developed, there is an increased demand for construction and the products and services
that support the development. Continue to make refinements to stay ahead of the competition. Build
product & service development capabilities with the cash received from increasing sales.
Maturity: A period of slowdown in sales growth because the product has achieved acceptance by most
potential buyers. Profits stabilise or decline because of increased competition. Sales may continue to
increase or level off. Profits decrease since prices are continually lowered to compete. Still, a great
amount of cash flow is generated through sales. Conduct market research to determine trends. Invest in
research and development. Adapt your product or service to meet the coming trends. If you don’t look for
new opportunities in new markets and new products, the coming decline stage will leave you with
products and services that no longer sell.
Decline: The period when sales show a downward drift and profits erode. Sales drop rapidly even though
prices continue to fall. Profits are extremely low at this stage, but the product or service has generated
sufficient cash flow during its life. When a product or service hits this stage many entrepreneurs
reintroduce it with a new feature or create a new benefit. Simply increasing the size of a candy bar by 33
percent can start its life cycle over again. Consider making changes to your product or service or the way
you market it. You may decide to discontinue your product or service before losses eat into the cash flow
generated by sales.
Marketing Strategies at different stages of PLC
Some key features of each stage in the product life cycle along with their relevant strategies can be
summarised as follows:
Introduction Stage
•New product launched on the market
•Low level of sales
•Low capacity utilisation
•High unit costs - teething problems occur
•Usually negative cash flow
•Distributors may be reluctant to take an unproven product
•Heavy promotion to make consumers aware of the product
Relevant strategies at the introduction stage might include:
 Aim – to encourage customer adoption
 High promotional spending to create awareness and inform people
 Either skimming or penetration pricing
 Limited, focused distribution
 Demand initially from “early adopters”
Growth Stage
•Expanding market but arrival of competitors
•Fast growing sales
•Rise in capacity utilisation
•Product gains market acceptance
•Cash flow may become positive
•Unit costs fall with economies of scale
•The market grows, profits rise but attracts the entry of new
competitors Relevant strategies at the growth stage might include:
 Improve the product - new features, improved styling, more options Improve Product Quality,
Add New Product Features, Improve Styling.
 Add New Models and Flanker Products.
 Enter New Market Segments.
 Increase Distribution Coverage, Enter New Distribution Channels.
 Shift from Product Awareness-Advertising to Product-Preference Advertising
 Lower Prices to attract the next layer of Price-Sensitive Buyers.
Maturity Stage
•Slower sales growth as rivals enter the market = intense competition + fight for market share
•High level of capacity utilisation
•High profits for those with high market share
•Cash flow should be strongly positive
•Weaker competitors start to leave the market
•Prices and profits fall
There is a wide variety of possible options for a product that has reached the maturity stage:
 Market Modification
 Product Modification
 Marketing Mix Modification.
 Rationalisation of capacity
 Competitor based pricing
 Promotion focuses on differentiation
 Persuasive advertising
 Intensive distribution
 Enter new segments
 Attract new users
 Repositioning
 Develop new uses
 Product differentiation & product
improvements Extension Strategies

These extend the life of the product before it goes into decline. Again businesses use marketing
techniques to improve sales. Examples of the techniques are:
 Advertising – try to gain a new audience or remind the current audience
 Price reduction – more attractive to customers
 Adding value – add new features to the current product, e.g. video messaging on mobile phones
 Explore new markets – try selling abroad
 New packaging – brightening up old packaging, or subtle changes such as putting crisps in
foil packets or Seventies music compilations.
Decline Stage
•Falling sales
•Market saturation and/or competition
•Decline in profits & weaker cash flows
•More competitors leave the market
•Decline in capacity utilisation –switch capacity to alternative
products Potential strategies are:
 Harvest by spending little on marketing the product
 Rationalise by weeding out product variations
 Price cutting to maintain competitiveness
 Promotion to retain loyal customers
 Distribution narrowed
 Decrease the Firm’s Investment
 Divesting the Business quickly by disposing off its assets advantageously.
NEW PRODUCT DEVELOPMENT
Every product goes through a life cycle and eventually dies as new products come along that serve
customers better.
Why are new products needed
 Existing products will eventually die, so new products must be developed to maintain or increase
sales.
 Customers want new products
 Competitors will try their best to supply new products
 The future of the company will depend on new products
What is a new product
 Products those are new to the world. Less than 10% of all new products are new to the world.
 New product lines - products that are new to the company but not new to the market. Helps the
company to enter established markets.
 Additions to existing product lines - line extension e.g. New packs, flavours, etc.
 Improvements/modifications of existing products.
 Repositioning: Existing products targeted to new market segments.

To the Market
New Existing
To the Company

Improvement/
New New to the world Modification/
New Product Lines

Existing Repositioning Line Extensions

Steps of New Product Development Process

Idea Generation

Idea Screening

Concept Development & Testing

Marketing Strategy

Development Business Analysis

Product Development

Market Testing

Commercialization
Idea Generation
 Interacting with others: Customers, scientists, competitors, employees, channel members,
consultants, top management, engineering, patent attorneys, universities, commercial
laboratories
 Marketing Research can throw light on new product possibilities
 New product ideas in industrial product area are often suggested by customers who make the
most advanced use of existing products
 Competitors’ products can be researched to find new product ideas
 Company’s salespeople & channel members can be tapped for new product ideas
 Often companies encourage all employees to officially submit suggestions that could lead to
new ideas
 Creativity Labs: Several techniques are used to stimulate creative thinking in individuals and
in groups
 The company should appoint a senior and respected idea manager to institutionalize New
Product Development
 Some companies appoint a cross-functional team to act as an Idea Management Committee. It
consists of people from R&D, engg, purchasing, product, finance, marketing. It meets on a
regular basis to evaluate new product ideas
 Some companies reward & recognize contributors of the best new idea
Idea Screening:
 If the purpose of the idea generation stage is to generate as many new ideas as
possible, the purpose of all subsequent stages is to reduce the number of ideas
 Each new idea is evaluated against a set of criteria. The ones that receive low ratings are
dropped. The ones that survive move on to the next stage
 In evaluating new ideas, the criteria could be as follows:
(i) Will the new idea be truly useful to consumers and to the society?
(ii) Is it a good idea for our Company?
(iii) Does it gel with the company’s objectives?
(iv) Do we have the right people, skills and other resources?
(v) Will it deliver more value to consumers than existing products?
(vi) Can it be easily marketed?
 In screening ideas, the Company needs to avoid 2 types of errors - the Go error
& the Drop error
 A Drop error occurs when the company drops an otherwise good idea due to lack
of imagination, vision & foresight
(i) The idea of copying documents was seen by Xerox but IBM & Eastman Kodak
failed to see it.
(ii) The idea of a home PC was overlooked by IBM but Compaq saw it.
 A Go-error occurs when the Company allows a poor idea to move into
development & commercialization. Product development costs rise substantially through
the successive stages.
Concept Development
An attractive idea has to be developed into a product concept.
A product idea is more generic, a product concept is more specific. It is a possible version of an actual
product stated in meaningful consumer terms.
(1) Yoghurt with exotic flavours - if projected as a nutritional dessert, it will have to
compete with curd, custard etc. If projected as a casual fun–filled snack, it will have to
compete with ice–cream, scoops, even non-alcoholic beverages
(2) Milk Shake: a breakfast drink, casual drink, bedtime drink, health drink
 A product idea can give rise to alternative product concepts
 The product concept will then have to be turned into a brand concept by
choosing a positioning based mainly on functional terms
Concept Testing
It involves presenting alternative product concepts to target consumers for their reactions symbolically or
physically
 The more the concepts being tested resemble the final product, the more reliable concept
testing is
 At the least, concept testing involves presenting target consumers with a detailed written
description of the physical product - its nature, its benefits, its features, its packaging, its shape
and its price
 For some products a written or a pictorial description may be good enough. Some
companies develop physical prototypes by using CAD/CAM
 Some companies even use virtual reality for concept testing
 Having exposed target consumers to the product concept, they are asked to
react to them by answering questions like
(a) Do you understand the concept? (b) Do you believe in its advantages?
(c) What are the major benefits seen in it? (d) What are its advantages over….?
(e) Who will decide to buy it? (f) How will you use it? (g) Who will use it?
(h) What improvements will you suggest? (i) Would you buy it?
(j) What should be a reasonable price for a product like this?
The answers will help the company to decide which concept has the strongest appeal
 However, the most customer-appealing concept may not be the most profitable
concept for the company because of cost considerations

Marketing Strategy Development

The marketing strategy statement has 3 parts:
Part – 1: Describes the target market, the planned product positioning, the sales, market share & profit
goals for the first few years
Part – 2: Outlines the product’s planned price, distribution, ad and sales promotion budget, MR budget
for the first year
Part – 3: Describes planned long–run sales, profit goals & marketing mix strategy

Business Analysis
 At this stage, the company projects sales, costs and profits to see if company goals are met. If
they do, the concept is taken up for development
 Management will now have to forecast sales for, say, the next 5 years
 Costs are estimated by R&D, Production, Marketing, Finance depts.
Sales, Cost & Profit Projections

Year 0 Year 1 Year 2 Year 3

Sales Revenue
COGS
Gross Margin
Development Cost
Marketing Costs
Allocated O/H
Net Margin
Discounted cash inflow
Cum. disc. cash inflow

 From this projection, the max. investment risk (the most negative cumulative
discounted cash inflow) is ascertained. This is an indication of the max. loss that
the company can incur from this product
. The other thing is the payback period, i.e. when does the cum.discounted cash
inflow turns positive from negative. Other simple yardsticks like the BEP is
estimated given the price & cost structures.
Product Development
 Up to now, the product has existed only as a description on a drawing or as a prototype
 This step sees a large jump in investment
 The R&D dept now develops one or more physical versions of the product concept.
 The prototype is tested within the firm to check if it performs under different adverse conditions
(Alpha testing)
 The prototype may be modified subject to alpha testing and then moved to customers for beta
testing Customer testing can take several forms. They can be brought to the lab or they may be
given samples to use at home. In-home and in-store tests are also quite common
 Customer attitudes and purchase intentions are measured using MR techniques like Ranking,
Paired Comparisons, Semantic Differential Scales, etc.
Market Testing
 From alpha & beta testing, if the company is satisfied that the prototype has delivered functional
and perceived benefits, then it is developed into a full–scale product with a packaging and a brand
name and is put in a real life market setting to learn about its potential and how consumers and the
trade react to it.
 In market testing of consumer goods, firms are interested to find out trial, 1st repeat purchase,
adoption & purchase frequency
 Some of the commonly used methods of market testing are -
i. Sales Wave Research
 Some chosen potential customers are offered the product free. They
are expected to report their experience after use.
ii. Simulated Test Marketing
 30-40 target customers are shown ads for the new product ads of competitive brands
 They are then given a small amount of money and invited to a store where they can buy
any product
 The company notes how many people buy the new brand
iii. Controlled Test Marketing
 A panel of stores is selected to carry the new brand for a fee for certain duration. The
shelf–positions, no. of facings, POP displays, etc. are controlled.
iv. Full–Scale Test Marketing
 The company chooses one or a few representative markets where the brand is launched
with full advt. and sales support
Commercialization
 This step involves the largest cost
 The firm has to set up manufacturing facilities or contract manufacturing. If a plant has to be set
up, its location and capacity are crucial issues to be decided. Plant size and capacity will depend
upon both short and long–run demand forecasts.
 Marketing is another major cost. e.g. in introducing a new food product, expenditure typically
represents 55–60% of sales during the first year
 The Co will spend heavily on MR in the first year to buy retail audit reports.
 “Timing” the launch is an important decision which also depends on competitors’ moves. The
timing may be tuned to take advantage of ‘seasons’.
 The “where” question is also important. Most companies develop a phased roll–out over time.
The new product may be launched in a city or a state or a region or nationally
 Company size plays a role in this. Small companies roll out new products in a small market and
move to adjoining markets. Big companies with strong distribution network launches in a region
or in a few states.
 The question of “to whom” needs to be addressed. The company should aim promotion and to
attract the early adopters, opinion leaders and the heavy users in its target group
 “How”? To co-ordinate the various activities involved in launching a new product, the company
can use network–planning techniques such as PERT or CPM.