Product, PLC and Diffusion

Part 1

What is a product ?
What Is a Product?

A product is anything that can be

offered to a market to satisfy a
want or need,
including physical goods,
services, experiences, events,
persons, places, properties,
organizations, information, and
ideas.
Figure 11.2 Five Product Levels
Components of Product

Product variety

Quality

Design & Features

Product
Brand name

Sizes & Packaging

Services & Warranties

Part 2

Classification of products.
Product Classification

A product used to manufacture other

Business goods or services, to facilitate an
Product organization’s operations, or to resell to
other consumers.

Consumer Product bought to satisfy an

Product individual’s personal wants
 Types of Products

Consumer
Products

Convenience Shopping Specialty Unsought

Products Products Products Products
Types of Consumer Products

Convenience Shopping
Products Products

Specialty Unsought
Products Products
Types of Consumer Products

Convenience A relatively inexpensive item that

Product merits little shopping effort.

A product that requires comparison

Shopping shopping, because it is usually more
Product expensive and found in fewer stores.

Specialty A particular item that consumers

search extensively for and are
Product reluctant to accept substitutes.

Unsought A product unknown to the potential

buyer or a known product that the
Product buyer does not actively seek.
Types of Consumer Products
Convenience Shopping Specialty Unsought
Products Products Products Products

STAPLES : Habitual, low involvement, low

effort, frequent purchase behaviour. Low
cost widespread distribution, Branding imp.
IMPULSE : Unplanned, spur of the moment
purchase behaviour. Widespread
distribution with POP displays imp.
EMERGENCY : Purchase made under time
pressure, quick decisions, Price sensitivity
is low. Selective distribution but locations to
be highlighted.
Types of Consumer Products
Convenience Shopping Specialty Unsought
Products Products Products Products

HOMOGENEOUS : Little differentiation

among alternatives, lowest price seeking.
Communicate Features / Prices clearly.
HETEROGENEOUS : Extensive problem
solving help in promotion, Personal selling,
demonstration, FAB communication very
important. Consultative selling, Price
sensitivity may be low.
Types of Consumer Products
Convenience Shopping Specialty Unsought
Products Products Products Products

NO SUBSTITUTES PLEASE : Customers

willingness to search for that special product.
Strong preference for a particular technology
or brand. Price sensitivity is low and
distribution may be limited. Specialised
communication channels, User groups /
Mavens are opinion leaders. High
involvement, extended buying cycle.
Types of Consumer Products
Convenience Shopping Specialty Unsought
Products Products Products Products

NEW UNSOUGHT : Unaware of benefits,

adoption process not started, product
offerings to focus on need identification.
Attention getting Promotion very
important. Distribution where category
competition present.
REGULARLY UNSOUGHT: Awareness of
benefit but stuck in adoption process.
Negative attitude to product category.
Strong personal selling, persistence reqd.
 Business
Products

 Are used to manufacture other

products : Derived demand Key is
intended
 May become part of another product : use
no identity to end customer.

 Aid the normal operations of an

organization : process improvement.

 Are acquired for resale without

change in form : Commodity Trading.
Types of Business Products

Major Equipment

Accessory Equipment

Raw Materials

Component Parts

Major Processed Materials

Categories
of Business Supplies
Products Business Services
Part 3

Definition of the terms product item,

product line, and product mix.
 Product Items, Lines, and Mixes

A specific version of a product

that can be designated as a
Product Item distinct offering among an
organization’s products.

A group of closely-related
Product Line product items.

All products that an

Product Mix organization sells.
 Tata Motors Product Mix
Evolution of Products
1977 2003
HCV LCV SUV PCV
Evolution of Products

(1977) (1986) (1991) (1999)

1510 207 Estate Indica

1210 407 Sumo Indigo
1319 709 Sierra
1610 Safari

2003
*HCV – Heavy commercial vehicles (Trucks), LCV – Light commercial vehicles (mini trucks)
SUV - Sports Utility Vehicle, PCV – Passenger Car vehicle
Tata Motors Product Lines and Mix
Product
line

HCV LCV SUV PCV

1510 309 Sumo Indica

1210 407 Sierra Indigo
1319 709 Safari
1610
 Tata Motors Product Lines and Mix

No of Product Lines

HCV LCV SUV PCV

Length of Product

1510 309 Sumo Indica

Line

1210 407 Sierra Indigo

1319 709 Safari
1610

*HCV – Heavy commercial vehicles (Trucks), LCV – Light commercial vehicles (mini trucks)
SUV - Sports Utility Vehicle, PCV – Passenger Car vehicle
 Tata Motors Product Lines and Mix

Width of Product Mix

HCV LCV SUV PCV

Length of Product

1510 309 Sumo Indica

Line

1210 407 Sierra Indigo

1319 709 Safari
1610
DLE
DLS
DLX
Depth of Product Line LSE
LSX
Benefits of Product Lines

Advertising Economies

Package Uniformity

Why Form Standardized

Product Lines? Components

Efficient Sales and

Distribution

Equivalent Quality
Product Mix Width

The number of product

lines an organization offers.

 Diversifies risk
 Capitalizes on established reputations
Product Line Depth

The number of product

items in a product line.

 Attracts buyers with different preferences

 Increases sales/profits by further
market segmentation
 Capitalizes on economies of scale
 Evens out seasonal sales patterns
Adjustments

Adjustments to
Product Items,
Lines, and Mixes

Product Line
Product
Extension or
Modification
Contraction
Product
Repositioning
Product Modifications

Quality
Modification

Types of
Functional
Product Modification
Modifications

Style
Modification
 Repositioning

Why reposition
established brands?

Changing Changes in Social

Demographics Environment

Declining Sales
Line Stretching

 Downmarket stretch : Introduction of a budget

model, low priced line. Often to ward off
attacks from low priced competition.
 Upmarket stretch : Introduction of Premium
range. Seeking higher position on Value
equivalence line
 Two way stretch : Introduced to achieve full
market coverage.
Line Filling

 Rounding off the Product line : Better coverage

of all segments. To be a ‘full line’ company,
plug hole to keep out competition.
 Facilitate incremental pricing : Customers are
more attuned to relative than absolute
difference.
 Just noticeable difference : Customer
confusion and cannibalisation likely.
Product Line Contraction

Symptoms of Product Line

Overextension

 Some products have low sales or cannibalize

sales of other items

 Resources are disproportionately allocated to

slow-moving products

 Items have become obsolete because of new

product entries
Product Line maintenance

 Line modernising : Piecemeal approach or

total redesign – e.g platform strategy in
automobiles

 Line featuring : Selective promotion of high

end or Low end items – e.g Loss leader
strategy of retailers.

 Line pruning : Remove the deadwood or

hibernate some items. May be depended on
state of Demand. Lines lengthened in times of
slow demand
Part 4

Developing new products and

six categories of new products.
New Product

New to the world, the

market, the producer, the
seller, or some combination
of these.
Categories of New Products

New-To-The-World

New Product Lines

Six
Categories Product Line Additions
of
New Improvements/Revisions
Products
Repositioned Products

Lower-Priced Products
Part 5

The steps in the

new-product development process.
New-Product
Development Process

New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
Idea Generation

Customers

Employees

Distributors

Competitors

R&D
Sources of
New-Product Consultants
Ideas
Creative Thinking
Brainstorming

The process of getting a

group to think of unlimited
ways to vary a product or
solve a problem.
Idea Screening

The first filter in the product

development process,
which eliminates ideas that
are inconsistent with the
organization’s new-product
strategy or are
inappropriate for some
other reason.
Concept Test

A test to evaluate a
new-product idea,
usually before any
prototype has
been created.
Business Analysis

Preliminary Demand

Considerations Cost
in
Business
Analysis Stage
Sales

Profitability
Development

 Creation of prototype

 Marketing strategy

 Technical production feasibility

 Final government approvals if needed

Simultaneous
Product Development

A new team-oriented
approach to new-product
development.
Test Marketing

The limited introduction of

a product and a marketing
program to determine the
reactions of potential
customers in a market
situation.
Choosing a Test Market

 Similar to planned distribution

 Relative isolation and free of influences
 Advertising availability; multiple media
 Diversified cross section
 No atypical purchase habits
 Representative population/income
 Not overly used or easily “jammed”
 Year-round sales stability
 Available research/audit and retailers
 Commercialization

Production

Inventory Buildup

Distribution Shipments

Sales Training
Steps in
Marketing a Trade Announcements
New Product
Customer Advertising
Part6

Adoption and PLC

Diffusion

•Defined as a process by which the adoption of an innovation

spreads.

•Innovation may be in the form of a product or a service.

•Not necessarily be something ‘new to the world’ but it certainly

has to be ‘new to the market’.

•A product is said to have been adopted when it has been tried

by a customer and found acceptable for regular usage.

•If a large enough segment of the market does not adopt the
product, it eventually becomes commercially unsustainable and
then eventually dies off.
Stages in Adoption

In Adoption of any Adoption

Product all these
steps have to be
covered. Some
cases need Trial
more time
others
less.
Evaluation

Interest

Awareness
A new way of doing things

Soap Bar
to
Liquid
Categories of Adopters

Innovators Intro

Early Adopters
Categories of
Adopters
in the Early Majority Maturity
Diffusion Process
Late Majority

Laggards
Decline
 Categories of Adopters

Everett Rogers
Adopters
of Adopters
of Adopters

curve
Percentage
Percentage
Percentage of

Early Early Late

Early
Innovators Adopters Early
Majority Late
Majority Laggards
Innovators
2.5% Adopters
13.5% Majority
34% Majority
34% Laggards
16%
2.5% 13.5% 34% 34% 16%
Time
Time
Comparison of Traits with
Categories
Enthusiasts Innovators

Visionaries Early Adopters

Pragmatists Early Majority

Conservatives Late Majority

Skeptics Laggards
Product Life Cycle

A concept that provides a way

to trace the stages of a
product’s acceptance, from its
introduction (birth)
to its decline (death).
 PLC – Typical pattern

Introductory Growth Maturity Decline

Sales & Profits - Rs

Stage Stage Stage Stage Product

Category
Sales

Product
Category
Profits
0

Time
Introductory Stage

 High failure rates Full-Scale Launch

of New Products
 Little competition
 Frequent product modification
 Limited distribution
 High marketing and production costs
 Negative profits
 Promotion focuses on awareness and
information
 Intensive personal selling to channels
Growth Stage
Offered in more sizes,
 Increasing rate of sales flavors, options
 Entrance of competitors
 Market consolidation
 Initial healthy profits
 Promotion emphasizes brand ads
 Goal is wider distribution
 Prices normally fall
 Development costs are recovered
Maturity Stage

 Declining sales growth Many consumer

products are in Maturity
 Saturated markets
 Extending product line
 Stylistic product changes
 Heavy promotions to dealers and
consumers
 Marginal competitors drop out
 Prices and profits fall
 Niche marketers emerge
Decline Stage
Rate of decline depends on
change in tastes or
adoption of substitute products

 Long-run drop in sales

 Large inventories of unsold items
 Elimination of all nonessential marketing
expenses
 PLC – Different patterns

Sales & Profits - Rs

I G M D I G M D
Sales & Profits - Rs

Time Time

Fashion Fad
Diffusion Process and PLC Curve

Introduction Growth Maturity Decline

Product
life cycle
Sales

curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
Time