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 Define an Industrial Product

 Understand Changes in the product strategy

 Know Product Life cycle (PLC) Theory and its application

 Develop Product strategies for existing products

 Understand new product development

 Know impact of technology and high-tech marketing

 Learn Marketing of industrial services

What is an Industrial product?

Basic
• Generic properties
properties

Enhanced • Generic products are made differentiable by adding enhanced

properties properties

• Include intangible benefits such as training, technical

Augmented
assistance, availability of spare parts, maintenance and repair
properties services.

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DEFINATION AND MEANING OF AN INDUSTRIAL PRODUCT

 Definition : Its is a physical thing as well as a Complex set of

economic, technical, legal and personal relationship between a
buyer and a seller.

 Meaning of a Total Product Package : It includes basic properties

(with fundamental benefits), enhanced properties (with tangible
benefits), and augmented properties (with intangible benefits).

 In a competitive market, business marketers must understand

target customers’ perceptions of a total product package and offer
the same better than competitors.

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CHANGES IN PRODUCT STRATEGY

Business marketers must understand that a

product strategy is dynamic and flexible.
It changes due to changes in
(i) Customer needs
(ii) Technology
(iii) Government Policies / Laws
(iv) Product Life – Cycle

A General Model of Product Life – Cycle (PLC)

Industry
Sales

Rupees

Industry
Profits

Introduction Growth Maturity Decline

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Rapid Growth Decline

(high learning
Sales product)

Market development Competitive Saturation

(low learning products) turbulence (maturity)

Low learning products

Time

Minimize learning
requirements, Maintain / Defend position
Strategy Establish strong Milk the offer of
develop Strengthen against
Objective market position all possibilities
widespread brand market niche competition
awareness
Price /
Early entrance distribution Competition Similar
Outlook for Not likely in early
of aggressive squeeze stable, no new competition and
competition unprofitable stage
emulators shaking out competition dropping out
competition
Limited models – Design to Alert for cost
Product Intensified Prune line of
focus on facilitate new improvement,
design product items not
minimizing segment and penetration
objective improvement returning profits
learning new systems pricing

Rapid Growth Decline

(high learning
product)
Sales

Market development Competitive Saturation

(low learning products) turbulence (maturity)

Low learning products

Time

Aggressive Broaden
Price High trade Defensive Maintenance
promotional promotional
Objective discounts pricing strategy pricing strategy
pricing strategy pricing strategy

Strengthen
Promotional Create awareness Strengthen Maintain trade
brand Phase out
Objective gain trial dealer ties loyalty
preference

Intensive / Intensive /
Intensive / Extensive, keep extensive, keep
Exclusive /
Distribution extensive, rapid dealers well dealers
selective, high Phase out
objective resupply of supplied at supplied at
distributor margins
distributors minimum inventory
inventory costs minimum cost

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PRODUCT STRATEGIES FOR EXISTING PRODUCTS

Business marketers should take the following steps :

 Evaluate the performance of existing products by using
“product evaluation matrix”
 Examine the relative strengths and weaknesses of the
company’s products by using “ perceptual mapping”
technique
 Decide the product strategies, based on above analysis

INDUSTRIAL MARKETING: Chapter 7 11

PERFORMANCE EVALUATION OF EXISTING PRODUCTS

Example : A material handling Co.

(i) Product = P
Last 3 year’s average performance figures are
• Industry sales growth = 25%, Company sales growth =
30%
• Market Share = 30% (Dominant) , Profitability = As per
Target

(ii) Product = S
• Industry Sales growth = 16% (Stable) ; Company Sales
Growth = 15% (Stable)
• Market Share = 12% (Average) ; Profitability = Below
Target
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Product Evaluation Matrix

Company Sales Decline Stable Growth

Profitability Below
Industry Target Above Below Target Above Below Target Above
Market
Sales Target Target Target Target Target Target
Share

Dominant P

Growth Average

Marginal

Dominant

Stable Average

Marginal S

Dominant

Decline Average
Q
Marginal

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PERCEPTUAL MAPPING TECHNIQUE

High Price

High Low
Quality Quality

A*
1 *A
C

Low Price

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Firm A’s product quality is perceived to be “average” by

customers, compared to its competitors B & C. Firm A should try
to move to a new position of superior quality at a reasonable
(average) price to improve its profitability.

DECIDE PRODUCT STRATEGIES

(i) Maintain / Continue the product and/or its marketing
strategy
(ii) Modify the product and/or change marketing strategy
(iii) Drop / eliminate the product
(iv) Add new product

INDUSTRIAL MARKETING: Chapter 7 15

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CLASSIFICATION OF NEW PRODUCTS (Booz, Allen & Hamilton)

(i) New-to-the-world products Products that are new to the world &
innovative
(ii) New Product lines
(iii) Addition to the existing product lines
(iv) Improvements in existing products
(v) Repositioning existing products to new market segments
(vi) Cost reductions – New products that offer similar performance at a lower
cost.

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Types of new products

New Product lines New to the world
20 % products
10 %

Revisions / Additions to existing

Newness to improvements to lines
the company existing products 26 %
26 %

Cost reductions Repositionings

11 % 7%

Newness to the market

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CATERPILLAR

• Caterpillar India Private Limited (CIPL) is a

100% subsidiary of Caterpillar, Inc. USA.

• CIPL manufactures Off-Highway dump

trucks, front end loaders, hydraulic
excavators and backhoe loaders.

• Their products are used in open cast

mining, quarrying, irrigation, steel
plants, cement plants, power plants in
the field of construction and material
handling.

• CAT 770G – Addition to the existing

product lines

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PRODUCT DESCRIPTION

• One Worldwide Platform – One WW Design & one WW

Process
• Lower O&O cost by providing best in class serviceability.
• Improved Shift Quality
• Improved Economy Mode
• Tire Protection
• Improved TCS & Lines Routing
• Improved Operator comfort
• Weight & Cost Reduction

COMPETITIVE BENCHMARKING

CAT 770G (40T) vs AMW Motors

Ltd.

- 21% higher productivity

o 12% higher payload
o 5% faster haul time
- 3% lower fuel consumption
- 24% metric ton/litre advantage

CAT 772G (50T) vs John Deere

- 12% higher productivity
o 12% higher payload
o 6% faster haul time
- 20% lower fuel consumption
- 40% metric ton/litre advantage

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Who dreams up new products ?

• Within the company : Manufacturing, sales, engineering,
management
• Outside the company : Customers, distributors,
competitors, government agencies.

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Organizing for effective product

development
• An atmosphere that encourages risk-taking and innovation
• Every product should have a champion
• Centralized Vs Decentralized R&D
• New Product committee
• Task force
• New product development department
• The venture team : Just like task force, however they do
not do original duties and devote full time to new product
development

NEW PRODUCT DEVELOPMENT PROCESS

It consists of 7 Stages :
(i) Idea generation,
(ii) Idea Screening,
(iii) Idea evaluation (Marketing / Engineering agreement. – customer
satisfaction vs technical feasibility )
(iv) Preliminary Business analysis (Business potential, tentative pricing,
investment level)
(v) Product development (R&D to convert the product idea into a reality)
(vi) Test Marketing (Evaluation of the product by potential users.)
(vii) Formal business planning & commercialization

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IMPACT OF TECHNOLOGY

Technological innovations create new products / services that are new to

the world. Examples of these innovations, called break through
technology are :
(i) Technological inventions of 1940s of vacuum tube and amplifier
circuit created new products / services like radio, wireless telegraphy,
and telephone service

(ii) Technological inventions of 1950s & 70s of transistor, integrated

circuit (IC), microprocessors have applications in new products like TV
sets, movie Cameras, Computers, Calculators, Mobile phones, Printers
etc.

(iii) Digital revolution of information technology and the internet have

improved company and consumer capabilities

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MODIFIED TECHNOLOGY ADOPTION LIFE CYCLE

This is suited to high–tech marketing

Deep Gap
34%
Innovators 13½%
34%

Early Late
Early 16%
Adopters Majority Majority
2½% Laggards

Time of Adoption of Innovations

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HIGH – TECH MARKETING STRATEGY

 Target a niche market

 Plan whole product properties
 Develop partnerships
 Unique positioning strategy
 Effective Communication Strategy
 Multi – Channel distribution strategy
 Skimming pricing strategy

INDUSTRIAL MARKETING: Chapter 7 33

Marketing of Industrial Services

Classifications of Industrial Services

Materials Personal Hotels

Components for Good
Computers Legal
(Steel, Ball Bearings) Conferences Transportation

Pure Pure
Tangible intangible
Product service
Major Equal Major
Product, Product Service,
Minor & Minor
Service Service Product

INDUSTRIAL MARKETING: Chapter 7 34

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Unique Characteristics of services and

marketing Implications.
Characteristics Marketing Implications Examples

1. Intangibility ! Buyers see evidence of service quality ! Management

(cannot be seen /
felt, before buying) ! Sellers tangibilise the intangible Consultancy & EDPs.

2. Inseparability ! Effective interaction depend on service ! Repairs to machines

(Production &
consumption at the providers. & Courier service.
same time) ! Requires effective recruiting and training
of service providers.

3. Variability ! Uniform quality is difficult ! Management

(Service quality ! Focus on quality & automation education & marketing
varies) research.
4. Perishability ! Demand fluctuates. ! Airlines seats &
(Cannot be stored)
! Use methods to match demand & Warehouse space.
capacity.

5. Non-ownership ! Advantages of non-ownership : ! Hotel and car rental

(Buyer uses a
service, but cannot reduction in costs & flexibility services.
own it)

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Summary

PRODUCT STRATEGYS & NEW PRODUCTS DEVELOPMENT

 Industrial Product is a physical thing and also a complex set of
economic, technical, legal and personal relationship between a buyer
and a Seller

 Product Strategies are changed due to changes in customers needs,

technology, government policies or laws, and product life – cycle

 Product life cycle (PLC) concept is used to develop marketing strategies

at different stages of PLC

 Product strategies for existing products are developed by (i) evaluating

the performance of existing products, using “product evaluation matrix ,”
(ii) Studying the strengths and weaknesses of existing products, using
“perceptual mapping” technique.

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Product and
Brand Strategy
Chapter
7

Chapter Questions
• What is the definition of an Industrial product and its
relevance to core competencies?
• What factors influence changes in product strategy?
• How marketing strategies differ at various stages of
product life-cycle (PLC)?
• How product strategies are developed for existing
products?
• What is the purpose of branding, the branding process
& how to build strong brands ?

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Definition of an Industrial
Product
• It is a physical thing and also a complex set of
economic, technical, legal, and personal relationship
between a buyer and a seller

• Total product characteristics include:

– Basic properties (i.e. fundamental benefits)
– Enhanced properties (i.e. tangible benefits)
– Augmented properties (i.e. intangible benefits) as
competition increases

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Core Competencies
• Relevance
– Organisations that develop core competencies bring out
Successful products
– Prahlad & Hamel have defined a core competence as a
complex harmonization of individual technologies and
production skills
• Characteristics
– It should benefit customers
– It should have many applications
– It should be difficult for competitors to imitate
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Changes in Product Strategy

• Product strategy is dynamic

• Firms change product strategy

because of changes in :
– Customer needs
– Technology
– Government policies / laws
– Product life-cycle

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PLC Stages and Marketing

Strategies (for innovative products – new to
the market)

• In the Introduction stage

– Focus on market development to educate buyers
– Product should have at least basic properties
– Spend on promotion to create awareness & preference
– Establish effective distribution channels
– Pricing should be related to positioning strategy
• In the Growth Stage
– Differentiate the product from competitors
– Do Promotion to remind and reinforce
– Increase distribution to cover more segments
– Reduce price to penetrate the market
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PLC Stages and Marketing

Strategies (for innovative products – new to
the market)

• In the Maturity Stage

– Focus on product differentiation (e.g. superior quality of product
and service )
– Promotion should focus on superior value
– Intensify distribution by entering new markets
– Reduce costs to keep prices competitive
• In the Decline Stage
– Harvest, divest / withdraw the product, or develop a substitute
product
– Minimize promotion and distribution to reduce costs
– Satisfy existing customers better than competitors
– As price competition is severe, cut price 43

Developing Product Strategies

for Existing Products
• For this, following steps are involved:
– Evaluate existing products’ performance
– Use perceptual mapping for poor performance products
– Decide product strategies from the following
alternatives
• Continue the product and marketing strategy
• Modify the product and / or change marketing strategy
• Drop the product
• Add new product or product lines

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Branding in Business Markets

• What is a Brand?
– It is a name, symbol, design, or combination, intended
to identify the goods, services, or organization of one
seller and differentiate them from those of competitors
– In short, a brand identifies the seller
• What is a brand equity?
– It is the value (or worth) of a brand
• Purpose of branding
– To identify and differentiate a product / service /
business organization from its competitors
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Branding Process in Business

Marketing

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Branding Process in Business

Marketing
• To Brand or Not to Brand
– Major factors considered:
• High pressure to reduce prices due to intense competition (strong
brands get higher prices)
• Solution oriented marketing make selling complex (Branding
reduces complexity)
• Large number of similar products / services offerings (buyers can
differentiate strong brands)

– Key Brand functions in B2B Markets:

• Risk reduction
• Easy information
• Image creation
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Branding Process in Business

Marketing
• Brand Planning and Analysis
– Marketers should develop brand plans
– Key factors in brand planning:
• Involvement of all
• Brand continuity
– Brand creation starts with brand analysis
– Brand analysis is done through marketing research
– Marketing research gets information about:
• Target customers / segments
• Competitors
• External environment
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Branding Process in Business

Marketing
• Brand Strategy
– After brand analysis, brand strategies are made:
• Brand Hierarchy: Corporate, product, or both
• Choosing Brand names:
– Person’s name
– Nature of business
– Use of Acronyms
– Artificial / Metaphorical names
• Brand Positioning
– To establish a unique or distinctive place in the minds of target
audience in relation to competition
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Branding Process in Business

Marketing
• Brand Strategy
– Brand Extensions by using existing, well-established brand names

– Multibrand Strategy by setting up other brands

– Co-branding / Dual branding combines two/more well-known

brands

– Ingredient branding is one type of co-branding

– Global Brand Strategy should achieve standardisation &

consistency of a company’s market offerings across different
countries
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Branding Process in Business

Marketing
• Building Strong Brands and Associations
– Focus on those value propositions (V.Ps.) that are
important to target customers
– Strong brands have superior functional and
performance quality
– Document, demonstrate, and effectively communicate
V.Ps
– Use appropriate brand-building tools for
communication
– Customers’ positive usage experiences build strong
associations
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Branding Process in Business

Marketing
• Brand Auditing
– Purpose: To find the brand’s strengths and
weaknesses
– Should be done once in six or twelve months
– The Process of brand auditing includes:
• Decide audit objectives
• Do internal analysis
• Do external analysis through marketing research
• Analyse and interpret the data
• Prepare report, including “brand score card”, which
includes brand performance vs. target customers’
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Product and
Brand Strategy
Chapter
7

Chapter Questions
• How new products are classified?
• What are the success and failure factors of new products?
• What is the process of new product development?
• What are product development management (PDM) and product
lifecycle management (PLM) concepts?
• What is the relationship between innovation, competitiveness,
and technology? How to manage innovation?
• What is high-tech marketing and its strategy?
• What is the importance of product and service quality?
• How business services are classified? What are their
characteristics and marketing implications?
• What are the marketing strategies for business service firms? 54

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Classification of New Products

• A product that is new to the market and to the

company is a new product
• They are classified as:
– Innovative and new to the market / world
– New to the company, not new to the market
– Major revisions or improvements to existing products
– Additions to existing product lines
– Repositioning existing product to new market segment
– Substantial cost reductions without affecting performance

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New Products – Success and

Failure
• Success Factors of New Products
– Product superiority or uniqueness
– Market knowledge or marketing effectiveness
– Technical and production capabilities
– Cross – functional team work
• Factors Responsible for Failure of New Products
– Not satisfying the needs of many potential customers
– Similar to exiting products
– Not delivering expected performance
– Have a weak process of new product development
– High prices –higher than customers’ expectations 56

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New Product Development (NPD)

Process

Idea generation

Idea screening
Concept Development and Testing

Business Analysis

Product Development

Market Testing

Commercialization
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New Product Development (NPD)

Process
• Idea Generation - Major sources of new product ideas
(NPIs) are:
– Customers : by solving their problems
– Employees: by brainstorming and attribute listing
– Suppliers and intermediaries: by getting feedback
• Idea Screening
– Purpose: select ‘likely to succeed’ ideas
– Done in two stages:
• If the NPI gets positive answers to certain questions, then it goes to
second stage
• Where the firm’s capabilities are rated for NPI w.r.t. marketing,
production, R & D, supplies, finance, company objectives 58

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New Product Development (NPD)

Process
• Concept Development and Testing (CDT)
– NPI is converted into new product concepts (NPCs)
– NPCs are presented to prospects, using physical or
simulated products, or plastic models.
– NPC with strongest appeal from prospects is selected
• Business Analysis - Projections for 5-7 years done for
the NPI regarding:
– Investments in plant, equipment, etc.
– Sales, customers, competitors
– Costs of product development, manufacturing, marketing
– Price levels, profitability, ROI
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New Product Development (NPD)

Process
• Product Development (PD)
– R & D develops prototype of the NPI
– It should conform to prospects’ requirements about
performance and costs based on CDT
– Speed up PD, using concurrent engineering

• Market Testing- Methods used:

– Alfa and Beta testing
– Trade shows
– Intermediaries’ premises
– Test marketing
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New Product Development (NPD)

Process
• Commercialisation or launching of a NP
includes:
– A marketing plan and action plan
– Action plan has various activities to be completed
by the product launch time
– PERT and CPM technique used for timely
completion of all activities

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Product Development
Management (PDM)
• Product Development
Management should have:
– Ability to create digital
products
– Cross functional
collaboration
– Managing product
information and NPDs
– Updating digital data

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Product Lifecycle Management

(PLM)
• Product Lifecycle Management (PLM)
– Change from PDM to PLM has begun
– PLM is a software solution aimed at delivering fast and
quantifiable results

• Benefits of PLM software solution

– Reduction in product development (PD) time
– Minimisation of process errors
– Reduction of PD travel expenses
– Minimisation of time to market / launch

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Innovation, Competitiveness,
Technology
• Innovation is any product, method, service, or idea that
is perceived as new by someone
• Through continuous innovation some companies
differentiate themselves from competitors and gain
competitive advantage
• Technological innovations create new products and
services – new to the market

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Managing Innovation
• Major steps for managing & encouraging
innovation are:
– Adopt a decentralised structure
– Develop collaborative teams
– Get right people who are creative and team players

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High –Tech Marketing

• High – Tech includes telecommunications, computers,
software, biotech, consumer electronics
• Major characteristics differentiating high-tech
marketing:
– High technological uncertainties
– High market uncertainties
• Diffusion of innovation or adoption of innovation model
is slightly modified to understand acceptance of new
high tech products – called Modified Technology
Adoption Life Cycle
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Technology Adoption Life – Cycle

• Innovators: Technology enthusiasts; Early adopters: Visionaries –

outgoing & ambitious
• Early majority: Pragmatists; Late majority: Conservatives; Laggards:
Suspicious & tradition - bound
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High – Tech Marketing Strategy

(For innovative & new to the world product)

• Target a niche market

• Plan whole product properties
• Develop partnerships
• Evolve a unique positioning strategy
• Develop an effective integrated marketing
communication (IMC) strategy
• Determine multi-channel distribution strategy
• Select skimming pricing strategy
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Product and Service Quality

• Product and Service Quality

– Strategic importance to quality
– PIMS findings on quality
– Meaning / definition of quality
• Measuring service quality
– Reliability
– Responsiveness
– Assurance
– Empathy
– Tangibles
Role of marketers is in delivering high quality products and
services to target customers 69

Marketing of Business Services

• Product – Service Classification
• Three groups:
– Pure tangible products
– Products combined with services
– Pure service
• Examples:
Personal Hotels for Airlines Legal
Steel
Computers Conferences travel

Pure tangible Major goods Equal parts of Major service Pure

goods accompanying goods and accompanying service
minor services minor
services Goods&
70
services

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Unique Characteristics of Services

and Marketing Implications

• Intangibility (e.g. Management consultancy)

– Can not be seen / felt before purchasing
– ‘Tangibilise’ the intangible by giving evidence of service
quality

• Inseparability (e.g. Courier service)

– Production and usage simultaneously
– Effective buyer-seller interactions needed

71

Unique Characteristics of Services

and Marketing Implications
• Variability (e.g. Management education)
– Variable quality of service
– Develop systems and standards for uniform quality
• Perishability (e.g. Airlines – empty seats)
– Services can not be stored
– Use pricing and reservation methods to match supply and demand
• Non-ownership (e.g. Hotel services)
– Buyer uses service, but does not own it.
– Communicate advantages of non-ownership – e.g. flexibility and
less cost

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Marketing in Business Service

Firms
• Three Types of Marketing
– Internal marketing: Train and motivate employees to ensure
superior service to customers
– External marketing :Use marketing mix to achieve objectives
– Interactive marketing: Use employees’ skills in serving customers
– i.e. technical and functional quality
Company

Internal External
Marketing Marketing

Employees Customers
73
Interactive Marketing

Marketing Strategies for

Business Services
Segmenting and targeting
Differentiating the service
Developing service package/offer
Pricing
Promotion
Distribution 74

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