; 13 Introduction to Produet and Branding (Unit 1) UNIT 1 Introduction to Product and Branding PRODUCT 1.1.1. Meaning and Definition of a Product A product is the item that is developed and refined for sale in the market. It aims to mect the customers” needs and wants. The concept of product can be categorised into two, i.c., narrow concept and wide concept. In its narrow concept, a product is a combination of physical or chemical characteristics which has some utilities. It is not just a non-living object or a physical substance, A product also has other functions than its utility like satisfying customer needs and wants, e.g,, fan, table, pen, cooler, chair, etc. In its wider concept, a product having a variety of colours, designs, packaging and brand is said to be a different product. For example, if a shampoo is made available in three different variants and smells, then these are three products, as they are fulfilling needs of customers with varied choices. Hence, product is defined as a complete package of benefits received by a consumer. According to George Fisk, “Product is a cluster of psychological satisfactions”, Accor services”. ig W. Alderson, “A product is a bundle of utilities consisting of various features and accompanying According to Philip Kotler, “A product is a bundle of physical services and symbolic particulars expected to yield satisfactions or benefits to the buyer”. It is the sole responsibility of product managers to manage the products. The product management activities comprise of planning, forecasting and marketing of products dr services at all stages of the product lifecycle Broadly, it is a wide range of activities carried-out to deliver a particular product in the market. 1.1.2. Characteristics of Product The key characteristics of a product are as follows: 1) ‘Tangibility: A product can be perceived by sense of touch. It also has features like to be seen, felt, etc. ef car, computers, t-shirt, etc. form of services, e.g. repairing services, insurance services, etc. Intangibility can also be an associated feature of tangible products. For example, if a person provides free servicing for a refrigerator, refrigerator | 2) Intangible Attributes: Intangible products lack physical substance. They cannot be touched. It is in the | is a tangible product, whereas after sales services is an intangible attribute. This means that the product offered is both tangible as well as intangible in nature. 3) Associated Attributes: The associated features of a product consist of packaging, warranty, brand, etc, For example, Hindustan Lever’s “vanaspathi ghee” is best known by the customers with its brand name DALDA and its packaging. Moreover, it has created such an image that all types of vanaspathi ghee are commonly known as DALDA ghee. 4) Exchange Value: A product either tangible or intangible in nature be exchangeable between the seller and buyer at a commonly accept 5) Consumer Satisfaction: A product should be capi experienced by the customer can be real or p: branded cosmetics, one also purchases beauty. must have an exchange value. It should able price, able of satisfying the customers. The type of satisfaction sychological. For example, when a consumer purchases Scanned with CamScanneriz MBA Second Semester (Marketing Managemen) sppy 1.1.3. _ Goods-Services Continuum 7 7 , In general, organisational products are a composition of goods and services. According t0 the goods-servin continuum in figure given below, some products may have either tangible (ey salt) or intangible (68 teaching) characteristics. However, there are some products which provide both goods and services at the same time, like travelling via airplane. The position of product on the continuum enables the marketer to spot potential opportunities, Teaching High Séale of a) Tanya 7 \dvertisin; rey dveising ene CS 2 icusvel intangible elements Balanced Entity, ———> Tue enna oo? 2? ao Low — as Low oO a? Tangible clements TE patancea tty (ost ge) (ay Fests shop (Oy Talore suit Ttootile S Desres or ttangiity Hse i oe Sa degre of Tanai igh CO) Resi Si Figure 11: Goods-Services Continuum At the tangible (pure goods) end of the continuum, only those goods are positioned which are not related to services. At the intangible (pure services) end of the continuum, only those services are positioned which have no association with physical products. The middle portion of both the ends consists of the products which have combined characteristics of both goods and services, €.8., goods like air-conditioners also require services like installation and delivery, besides being a product in itself. . All the three positions involved in goods-services continuum, are described below:”' “: 1) Goods Dominated Products: These types of products are tangible in nature and are complemented with supporting services. For example, one month warranty or toll-free services are mainly offered by the company to increase the value of the product. The strategy of associating the supporting services with the main product is called ‘embodying’. The term embodying is used by IT industry, where companies use this strategy to enter into international ‘market which is flooded with low-cost products having inappropriate user-guidance, 2) Equipment-Based or Facility-Based Services: In this category, both goods and services combine to form complete product. For example, restaurants and hotels are placed in middle of the continuum, as they use goods (e.g., expensive crockery) and services (e.g. skilled manpower). Other facility-driven services such as museums, multiplexes, 200s, amusement parks, etc., involve following three factors: i) Operational Factors: Effective utilisation of different technologies should be practised so that customers feel delighted while using services. A proper set of instructions and indications must be provided to guide customers about using the service, This may help the company to reduce their waiting time. ii) Locational Factors: These services are commonly purchased services, e.g., ATM ot dry clean services. Here, location plays an important role as these services are provided at particular locations. iif) Environmental Factors: These are storefront services where customers visit the place for services. Therefore, environment of that particular place should be attractive enough to appeal customers. For example, banks must provide an elegant and sophisticated appearance, advanced technology, quick services, etc., to their customers, 3) People-Based Services: These products mainly include services and are placed towards the intangible (service) side of the continuum. People-based services are becoming popular because people are finding it difficult to take out time for several tasks, it fessionals for their legal and t: ‘lated work. i i sxample, people recruit prof ir log ax related work. Personal fitiiess trainers have Foren business in mostly all ities. Even people hire professional dog walkers fer their pets, eee eine i = Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 15 3.1.4. Product Hierarchy There is a hierarchical relation between different products offered to consumers. Starting from category of the need served it goes upto particular product item which actually satisfies that need, The overall product hierarchy is described below: - 1)_ Need Family: This is the top most level in the product hierarchy. It describes the type of basic need which is to be satisfied by the firm. For example, personal care is one ‘need family’ for any firm. 2) Product Family: The next level in this hierarchy is ‘product family’, It includes different product classes which can be used to satisfy the targeted basic need, For example, need for personal care can be fulfilled by different product classes like skin care, hair care, tooth care, etc. These are the product classes which combine to form the ‘product family’ for the ‘need family’, i.e., beauty. 3) Product Class: The third level of product hierarchy is the ‘product class’. It denotes the group of products having a specific functional consistency within the product family. For example, skin care is a product class for a particular firm. 4) Product Line: The next level in product hierarchy is ‘product line’. In each product class there are few Product lines. Each product line is made-up of number of closely related products. These may be closely related because of similar mode of function, similar price ranges, similar buyer types or similar distribution channels. For example, creams, soaps and deodorants are the product lines which come under the product class of skin care, 5) Product Type: The next level in product hierarchy is ‘product type’. It denotes the total number of variants available in a particular product line. For example, non-alcoholic, alcoholic, strong or mild deodorants and deodorants for males and females are the product type. 6) Brand: Brand is the sixth level of product hierarchy and is referred to the name with which one or more products can be identified or recognised. For example, Axe is a brand of male deodorants. 7) Item: This is the seventh level of product hierarchy and is referred to a particular unit within a product line or brand which can be differentiated on the basis of its appearance, specific feature, shape, size, weight or Price. This unit can also be termed as product variant, sub-variant or stock-keeping unit. For example, Axe black is an item used as deodorant. 3.1.5. The Role of Product as a Market Offering In marketing, it is very important to have proper information about the product because no marketing function can be performed without the existence of product. The role of a product can be understood by the following points: 1) Product is Focal Point of all Marketing Functions: Product is the central point around which all the functions of marketing are performed, e.g., advertisement, purchasing, distribution, sales promotion, selling, “etc. Product is the fundamental tool on which the profitability of a business organisation depends, Without product, nothing can be done in any organisation as it is considered as the soul of the organisation. Product policy determines various other related marketing policies such as policies related to distribution, sales Promotion, pricing, and customer satisfaction. 2) Product is Origin of Planning: Every product differs in quality, nature, demand in the market, ete. No marketing activity can be formulated which is applicable to each and every product because for each product we require specific policies related to pricing, sales promotion, distribution, publicity, advertising, etc. Product policies are the genesis of all the other ‘ypes of policies. Various types of studies such as study of sales, market size, profitability, sales figures, and their growth and decline, which are used in marketing ‘management, are also conducted, keeping a specific product in mind. 3) Product is Essential: It is inevitable to have a product to perform any kind of marketing function such as distribution, advertising, sales promotion, etc. In most of the cases, product policy of any business organisation decides the success of marketing practices. Therefore, product is essential for any kind of marketing activity. ‘ 4) Product is a Destination: Customer satisfaction is the ultimate goal of all the marketing activities, Many Policy decisions take help of product in order to furnish high level of utilities, satisfaction, and benefits to the Customer. Thus, product can be considered as the destination for customer satisfaction. In order to fulfil the Scanned with CamScanner~ 16 MBA Second Semester (Marketing Management) Sppy needs of the customers, the producers must focus on the distinctive features of the product such as size, quality, durability, application, etc. The products, which are not able to provide quality to the customers, cannot sustain in the market for a long duration because they are not able to satisfy the needs of the customers, 5) Product is a Tool to Satisfy Customers’ Needs and Wants: With the help of intangible features of Product such as services, quality, attributes, etc., the needs and wants of customers can be satisfied, The main purpose behind all the marketing activities is to achieve customer satisfaction. The producers must have a clear idea about the product and its qualities along with the needs and wants of the customers, 3.1.6. Product Line and Length A product line denotes the group of closely linked products which the organisation offers. These products are linked together as they operate in an identical manner, used by same group of customers, have similar price Tange, or sold via same type of retailers. For example, ITC is a major brand producing several product lines including personal care, lifestyle retailing, education and stationary, etc. Product line is very different from product bundling, where few items combine to form a single product. The fundamental basis of all the products in a product line is same. Therefore, a good marketing plan is sufficient to improve the sales of all the products in & product line. Generally, different products with different prices are offered in a product line. In this way, the organisation makes sure that all its products under the product line are picked up by every type of customer. The act of introducing a new product in the present product line is called as ‘product line extension’. Primarily, the idea of product extension is used to avert competition, The motive behind launching products similar to that of competitors, is keeping the customers attached to the brand they are loyal with. Usually, people tend to buy products from known brands. Thus, in case of buying any new product, people prefer to purchase it from known brands rather than from any unfamiliar/unknown source. A special plan of action is required for marketing different products in a product line. A marketer should always know about the competitors and their products so as to offer suggestions to the organisations regarding inclusion of new products in the current product line. Along with this, the marketing firm should also be able to identify popular and unpopular products in the market. Statistical data collected from the market can be very helpful to the marketers to find out which products should continue to be part of the product line and which should be discontinued. Pricing is helpful in creating a difference between various’ products. Organisations try to justify expensive products on the basis of particular constituents which are part of those products. 3.1.6.1. Forms of Product Line and Length Decisions Marketers encounter several difficult decisions on product line featuring and product line length while establishing product line strategies. These product line decisions are discussed below: 1) Product Line Length Decisions: By including more items in the product line, if the profit increases, the product line is said to be too short. On the other hand, by eliminating few items from the product line, if the profit still increases, the product line is said to be too long. The length of any product line of an organisation is determined by its objectives. One objective may be to enhance the sales. For example, the famous brand BMW tries to encourage its customers to shift from the current BMW 3 series to the next level of BMW 5 or BMW 7 series. Another objective may be to promote the cross-selling. For example, computers as well as printers are provided by Hewlett-Packard. Protection against economic uncertainties may also be the objective of an organisation. For example, the popular brand GAP has several outlets under its flagship like Old Navy, GAP, Banana Republic, etc., which offer products of various price ranges to absorb the economic changes taking place globally. : ‘A product line can be expanded by two methods namely; line stretching and line filling: i) Product Line Stretching Decisions: The product line offered by all companies includes specific variety of items out of the complete range of products furnished by the entire industry. For example, Maruti deals with automobiles of the most economical or moderate price range in the automotive industry. If a business entity expands its product line over and above the present array, it is termed as “ine stretching’. Line stretching can be exercised in the following three ways: a) Downward Stretch: Several organisations start with offering most expensive products in the market and gradually try to extend at lower levels. For example, TATA Motors deals into midsize and high end utility car segment. It has extended its product line downwards by venturing into the ‘small vehicle segment through launching TATA Nano. Scanned with CamScannerIntroduction to Product and Br ing (Unit 1) ” ‘The key reasons for downward stretch are as follows: * The organisation involved in serving high end market faces tough competition and decides to cater low end market to deal with competitors. + Presence of poor growth rate in the high end market, * The organisation includes a low end division to avoid the entry of new competitors. The decision to stretch downward is not free from risks and uncertainties. The newly introduced low end product may result in the cannibalisation of high end product of the same organisation. Consequently, the low end competitors may enter the high end market to respond to this step. Moreover the present suppliers/dealers of the organisation may not be interested in handling low end products due to low profit margin and risk of losing market reputation. For example, General Motors opposed the making of small cars and this gap was immediately filled in by the Japanese companies, which recognised it as a huge opportunity. It is a fascinating fact that automobile market pioneers like ~ Honda and Toyota are venturing into the smaller car segment after appreciation of Suzuki's success in that segment. >) Upward Stretch: Organisations serving low end market may intend to move into the high end market. High level profit margins, elevated growth rate or an opportunity to feature as a full-line Producer may be few reasons which may tempt organisations to enter the high end market. For example, initially Maruti was known to produce low end cars, but it moved into the high end market with the launch of Maruti Esteem and Maruti 1000. The decision of upward stretch is also risky. The well-established high end competitors may respond by plunging into the lower end market, It is not easy for sales executives as well as for suppliers/vendors to effectively perform in the high end market without proper skills and training. ©) Two-way Stretch: The organisations belonging to the mid-level of the market can extend their product line in any one way out of the two options available, i.., either upwards or downwards. ii) Product Line Filling Decisions: Product line extension is also possible by including new products in the current product line. To achieve gradual increase in profit levels, to persuade the agents with regards to the criticism faced due to decrease in sales because of the products not being present in the current product line, to make use of the surplus capacity available, to become market leader in the full- line segment, to block the loopholes to control the competitors, are the few reasons behind product Tine filling. Excessive product line filling may confuse the consumers and consequently reduce the sales of other products. Each item needs to have a distinct place in the consumer's mind, The distinctness of each product should be thoroughly significant. The new product recommended should have an advantage in terms of increased market acceptance and should not be included to reassure the internal requirements of the company. 2) Product Line Modernisation Decisions: Here the product, a part of the product line, is revised and re- launched to meet the contemporary styling requirements and preferences. Product lines should be updated as per the latest trends in the market. This process of modernisation can be, in terms of the technology used for the production of the product or the appearance or style of the product. Many companies have adopted the modemisation process. For example, new look of 800cc car developed by Maruti, variety of PC chips developed by Intel, launch of Splendor plus in place of the older Splendor model by Hero Honda, etc., are the significant examples of the modemisation decisions. It is a strategy where the company introduces new items in place of old ones Gropped out. Product line modernisation is a constant process in today's fast transforming product market. The consumers are inspired to shift their preferences towards expensive and high-end products due to constant improvements formulated by the companies. 3) Product Line Featuring Decisions: This is all about deciding which product(s) to feature in the organisation’ s product line. The manager deciding the product line strategies picks up one or more products from the product line to represent as a flagship product or a prominent item of the line to increase the demand. This kind of decision is taken in case of presence of several non-profitable items in the product line. Thus, line featuring is helpful in elevating the sales volume of the organisation, For example, Dream Service is the current focus of marketing campaigns of Honda. Scanned with CamScanner18 MBA Second Sen ster (Marketing Management) SPPy 4) Product Line Pruning Decisions: This strategy finds out the products which are poor performers tems of profit eaming potential inthe product line and removes them from the line to increase the earning potential ofthe company. This process decreases the length of the product line. This process is adapted by the company when i is unable to eam the expected profit levels or when a specific patter is not well received by the customers or not being beneficial for the growth of the organisation. Pruning decisions can be taken to make physical or human Tesources available for other capable models which are being utilised by the unproductive model. 3.1.6.2. Product Line Analysis . - To order to offer a product line, businesses usually create a basic platform and modules to satisfy growing customer needs. For example, there is a basic platform around which cars manufacturers manufacture their cars. Similarly, ‘model home is shown to the buyers by the homebuilders. Additional features can be added by the customers in the model products. The companies are able to reduce their production cost and offer variety of products with the help Of this modular approach. Itis important for product line managers to know the sales and profit of every item in the Product line. This will help to:take decisions regarding manufacturing, maintaining, harvesting or divesting. The ‘manager is also required to understand the market profile of each product in the product line. 1) Sales and Profits: There are products with different margins in the portfolio of every company, For example, high margins are made by the supermarkets on freshly baked goods, flowers and ethnic food, fair margins on frozen and canned foods, and almost negligible margins on bread and milk. Similarly, there are different margins made by a local telephone company on its core service, caller ID, voice mail, and call waiting. Depending on the promotion and sales volume, there are four types into which a company can classify its products that yield different gross margins. In order to explain this, take an example of laptop computers. 1) Core Products: Since the basic laptops can be seen as undifferentiated products, these laptop computers produce high sales volume and are largely promoted by the company but with low margins, ii) Staples: CPU's or bigger memories are the items with no promotions and lower sales volume. There is higher margin required by these products. iii) Specialties: Specialties are the items that might be highly promoted but have lower sales volume. This includes the items like digital movie equipment; or personal delivery, installation, or on-sight training that might generate income for services. iv) Convenience Items: Items like carrying cases and accessories, upscale video or sound cards, and software are the peripheral items that generate high sales volume but are less promoted by the company. It is more convenient for the costumers to purchase these products from where they buy oti products. Higher margins are contained by these items. Jt is important that the companies identify the differences in these items, This will help them in deciding which item needs more advertising or increase in price so as to generate more profit margins andlor sales. 2) Market Profile: The manager of product-line must evaluate how hi product-line of his competitors. Take an example of a paper compan paperboard. Consider two features of a paperboard, weight and finish paperboard is offered at high, medium and low levels and the paper is 120, 150 and 180 weights. The location of different items of product- competitors say A, B, C and D can be shown in figure 1, inal Product line is set against the 'y say X with a product-line of quality. The finish quality of a offered at standard levels of 90, line of Company X and its four Finish quality Low (90) Medium (120) High Euan ‘Paper weight (150) Extra high (180), Figure 1.2: Product Map for a Paper-Product Line a ceemenenensnsinaianaiiiimiiiiiin ee Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 19 The two product items were sold by the competitor A in the extra high weight class ranging from medium © low finish quality. There are four items having different weight and finish quality is sold by the competitor B. Whereas, there are three items sold by the competitor C with greater finish quality and greater weight, There are three items sold by the competitor D in which all are light weighted but have different finish quality. Company X sells the items which are different in both weight and finish quality. The competitors of Company X’s items can be shown by the product map. For example, there is no direct competitor for the high-weight, medium quality papers of Company X whereas, its low-weight, medium quality papers compete with both competitors B and D, The possible locations for new items are also revealed by the map. There is no company that manufactures high-weight, low-quality paper. If a potential unexploited market demand is identified by Company X and it can manufacture as well as price the paper at Jow cost, Company X could add this item to its product line, The identification of market segments is the other significance of product mapping. The different forms of Paper in terms of quality and weight, preferred by the normal printing industry, the office supply industry, and the point-of- purchase display industry is shown in figure 1.2. As shown in the map, Company X is less effective in fulfilling the needs of point-of-purchase display industry and the office supply industry but can effectively serve the needs of remaining one industry. The analysis of product line gives the information for both product-line length and product-mix pricing which are the two key decision areas. 1.1.7. Product Systems and Mixes A product system can be considered as a group of products which are different in appearance but have great ‘compatibility. For example, a smart phone has many ancillary products like data cables, cameras, head phones, mp3 player, voice recorders, etc. The product mix is the total number of product lines that is supplied by a supplier to a customer. It is often referred to as product assortment. A. product mix has several different product lines under it, not necessarily all items in the product mix are related to each other. Thus, it is also known as “a compilation of the various products produced or marketed by a company” as product mix contains aggregate of all the products offered by a company. For example, a company’s product mix could comprise shaving products, soaps, detergents and beauty products. A group of all product lines and commodities supplied by a seller to its customers is called ‘product mix’. It can also be termed as ‘product assortment’. A product mix is offered by a company which has many product lines under its tag: Generally, it is not necessary to have correlated items in a product mix. Thus, product mix is a mixture or combination of all the products made available by a firm to its customers. It can also be termed as “a compilation of the various products produced or marketed by a company”. For example, a company’s product mix consists of shampoos, detergents, soaps, etc., produced by it. According to American Marketing Association, “Product Mix is the composite of products offered for sale by a firm or a business unit”. For example, if an enterprise manufactures or deals with different varieties of Soap, oil, toothpaste, toothbrush, etc., the group of all these products is called ‘Product Mix’, ‘The possibility of fulfilling the diverse needs of customers increases with an increase in the number of products Offered by the manufacturer. Several enterprises come up exclusively with a single product. Such organisations may fulfil all the requirements and needs of their customer groups by having command and proficiency in this single product. The original brand may come up with more products and expand its line if the company Possesses necessary potential and expertise and if the needs of the consumers are justified. ‘The product mix of a company can be strengthened to satisfy the fresh requirements of customers of group of ‘customers so as to help the organisation develop and progress. Expansion and inclusion of products leads to an ‘exhaustive marketing budget for the company. This addition may cause competition by the similar brand in the ‘market and overlapping of marketing strategics. For example, the Dodge Challenger and the Ford Mustang are strong rivals in the car industry but each one attempts to satisfy consumer requirements, Scanned with CamScanner20 MBA Second Semester (Marketing Management) Sppy Product Mix Decisions i The product mix of an enterprise has particular length, width, depth and consistency. All these factors ary explained below with the help of an example about product mix of Hindustan Unilever ds Produet Mix Wiath |_» a eeaent | [ Clean Shampoos] | 28h | |rootmpase| | "Soyer reaniné | | reaCoffee y t 1 ¥ y q a cea flax ysodent | | Active wheel |} Vim Lipton green label SHS YS casoa {femur || Su Danes | fetta Sig |[Pove, | fntemasona Surtexest |} Comox | |B Be |S | ebuoy Rin Sopeme |} Sutgh | fs Mata a Peas a E ioc Paar ae Roses Breen rook bona Rexona ama Jase Figure 1.3: HUL Product Mix 1) Product Mix Length: The total number of products comprising the product mix is termed as the product mix Tength. Several brands are part of cach product line offered by Hindustan Unilever Limited. For example, product mix consists of ten soaps, four shampoos, two toothpastes, six laundry detergents, etc. 2) Product Mix Width: The number of product lines offered by a company denotes the span or width of the Product mix. HUL offers a considerably extensive product mix which consists of several product lines dealing in cosmetics, food, household cleaning products, paper, medicines and personal care products. The Product mix width of HUL is represented by five product lines in the figure 1.3. There are several other product lines which are part of the product mix of HUL. 3) Product Mix Depth: Different forms of products available in the product line define the depth of the product mix. It is understood that the various types of products available in the product line form the product mix depth. For example, the famous toothpaste ‘Close up’ is available in three types namely: blue, green and red and in 5 sizes, it can be concluded that the depth of Close up is 15. In case of HUL, the average of various kinds of product groups offered under the brand name need to be calculated for computing the average product mix depth, 4) Product Mix Consistency: The close association of the product line in terms of the final consumption, product distribution networks, manufacturing requirements or any other possible ways, decides the consistency of the product mix. As HUL majorly deals in consumer goods, all product lines have maintained required consistency level because of similar distribution networks, 3.1.7.2. Product Mix Strategies The major product mix strategies required to be managed are explained below: 1) Product Line Expansion/Contraction: A collection of many product lines is termed as concentration of product mix. An extended and lengthy product line is cut back to remove the products which are not cost effective. Extending the current product line is termed as diversification. Widening the depth and width of the product mix can help the organisation in availing the prevalent opportunities in the market, For example, companies dealing in audio equipment manufacturing can expand its activities by manufacturing television sets. There may be additions or deletions or even both in the current product lines by at organisation. Application of latest and ultra-modern technology helps a company to have an upward stretch or it may settle for a downward stretch by using lucid technology. 2) Produet Modification: This product mix strategy talks about modifying or alteririg the basic features of & product namely; shape, size, style, cost, colour, etc. A company usually considers modification method when it is striving to-revive or strengthen the demand of a particular product. At times, simply an external alteration is necessary in a product or in'the current product line. The modification being tangible of Scanned with CamScanner{Introduction to Product and Branding (Unit. 1) a intangible can be accomplished by re-creating, re-developing, altering size and including or eliminating some characteristics related to the product, For example, popular pan masala brand, Pan Parag, launched small packets offering different quantities and at variable costs to gain access to different market segments and to increase its market area. Also, diverse growth was observed in the market share of the protect when the company planned to include tobacco, i. zarda, in the pan masala, Several factors like organisational objectives in the long-run, competitive growth observed in specific product market and consumer needs and priorities majorly influence the product modifications. 3) Product Elimination: It is always not possible to refine or change products to complement the market requirements. On such cases, removing these products from the market can prove to be a beneficial option. The activity of removing the product is known as ‘product elimination’ in technical terms. This activity of elimination or deletion can be for the whole product line or for a specific item of the product line. 7 Products with non-profitable scale of production and poor cost-inventory analysis (due to low demand) are generally eliminated from the market. The profit levels may not justify the unreasonable management time consumed by such product. Since, these products are obsolete they may lower the company’s reputation. Therefore, elimination decision is very crucial in such cases. 2. CLASSIFICATION OF PRODUCT: ‘There are diverse factors and methods to distinguish products, which are as follows: [Foes | Based on the Nature Based on Consumers Intentions Based on Social Benefit }- Goods een Consumer Product Industrial Product/ Goods } Experiences Pleasing products L Events Deficient products E persons Convenience products Raw Material Salutary products } Places ‘Shopping products Copital Equipment Desirable products [Properties Specialty product ‘Accessory Equipment L Organisations ‘Unsought products Component Parts & Process L Information Materials Supplies |- Industrial Services 1.2.1. Based on the Nature There are ten types of products which can be classified on the basis of their nature: 1) Goods: Goods are physical and tangible materials which can be possessed and owned, e.g., wheat, bicycles, etc. 2) Services: Services are intangible in nature and their production and consumption process occurs at the same time. It cannot be owned but can be possessed after being paid, eg., banking and insurance services, ete. 3) Ideas: For developing a product, every marketer has an idea on the basis of which production process is carried-out. Like, Charles Revson of Revlon stated that although in their factory they produce cosmetics, but in their stores they are selling hope, e.g., advertisement agency, consultancy firm. 4) Experiences: A company can create a market experience for their customers by organising various goods ty, Water World, ete:, and services at one place, e.g., Science Scanned with CamScanner2 MBA Second Semester (Marketing Management) Sppy 5) Events: Event also acts as a product for marketers. Events are strongly connected ie ns of People attending it. The companies realise the power of events and seek to associate their products with the event, Thus, event sponsorship is a big business as many companies try to leverage their products in the event, These events are time-based which are held in a gap of one or more years like Award functions, Olympics, ete. ©) Persons: Many marketers work as a publicity and endorsement agent for film stars and sportspersons. Here, «film star or a sportsperson is a product for the marketer, This type of marketing is commonly known ag celebrity marketing, 7). Places: Different places can be marketed to promote tourism business. For example, tourism in Kerala was Promoted by campaigning it as God's Own Country. 8) Propertis "operties are personal assets which are intangible in nature. It can be in form of real estate property (e-8., Amby Valley project) or financial property i.c., shares and bonds (e.g., Maruti or TCS IPO ‘Campaign ) 9) Organisations: In order to create a positive and dynamic company image, the organisations work actively. For example, Philips uses a tagline “Let's Make things Better", 10) Information: Information also acts as a product, when produced and marketed. Useful information can be Provided as a product in different forms like dictionaries, encyclopedias, ete. 3.2.2. Based on Social Benefits Based on the social characteristics, products can be classified on the basis of long-term benefits and short-term, benefits, such as: 1) Pleasing Products: These Products offer immediate satisfaction to the cor in the long-run, e.g., consumption of alcohol, cigarettes, pan masala, ete. 2) Deficient Products: Deficient products neither provide an} benefits to the firm. These are non-profitable products; producing them, e.g., pager or typewriter. 3) Salutary Products: These products have long-term benefits but do not provide immediate satisfaction to consumers. Thus, companies are by and large impassive towards these is i products. However, by applying eiferent marketing strategies, such products can be made atracive for the consumers in the long-run, eg., soyabean chips (diet chips), sumer but are injurious to them 'y immediate satisfaction nor give long-term therefore companies are least interested in 4) Desirable Products: Desirable products offer both long-term as well as short-term benefits to the i te satisfaction and consumer welfare, eg. healthy, tasty. and Teady-made food Brodcts. Ethical organisation try to make ita pont to manufacture desirable prodiets vg es they can eam their profits as well as carry out their responsibilities towards society. 3.2.3. Based on Consumer’s Intentions On the basis of consumer's intentions product can be classified into two categories: 1 Consumer Products: The goods and services which are’ purchased: by custom consumption are known as ‘consumer product’. These products are classived st pate: oer buying habits/tastes/purchasing power, etc. Consumer products consist of Unsought products, specialit products, shopping products and convenience products. These products net ay ts spectaiy person and how the products are purchased and marketed, Person to | 2) Industrial Goods: A product purchased for use primarily in the production of other Joods i ‘industrial goods’. These produets can be intended for resale, for commencing a business 9° for preda | other products producing American Marketing Association has defined the industal goods as “Goods wn a ; sold primarily for use in producing other goods or rendering services ag contrasted with oa sorted to be be sold primarily to the ultimate consumers”. Goods destined to Scanned with CamScannerIntroduction to Product and Branding (Unit 1) Difference between Consumer Products and Industrial Products In general, products can be classified into consumer products and i between them are: industrial products. The important differences Basis of Difference Consumer Products Industrial Products 1) Nature of (Consumer products are consumed by the finallIndustries and manufacturing units are the| Customers consumers. main consumers of industrial products. 2) Number of [Large number of customers’ use consumer|There is limited number of customers for Customers products. industrial products. 3) Nature of Consumer products are directly demanded.|The demand for industrial products is} Demand Thus, it is known as autonomous demand. indirect. Thus, it is known as derived demand. /4) Product Most consumers are unaware of the all the|The consumers of industrial products are well Analysis. ‘consumer products in the market. Therefore, | aware of the products and their pros and cons, ‘they are unable to analysis the pros and cons of|They extensively analyse the product before| [a product, before purchasing it. purchasing it 5) Buying |The factors to be considered while purchasing] The factors to be considered while purchasing] Considerations consumer products are packing, design, colour, industrial products are availability, suitability, durability, utility, price, etc. utility and price only. Usually, in industrial products, the factors like design, size, colour, eic., are not taken into account. [Consumer products are bought in smalllIndustrial products are bought in large! 6) Quantity of Purchase |quantities, quantities. 1) Market ‘The consumer products’ market is extremely|The industrial products’ market is small Extension large and widespread. {compared to consumer products. 8) Marketing [fm consumer products, advertising and sales|In industrial products, _buyer-seller Strategy promotion methods are most significant relationship plays a crucial role. 1.2.4. Classification of Consumer Products Consumer goods can be classified into following categories: Classification of Consumer Products ‘Convenience Goods ‘Shopping Goods Specialty Goods iii ‘Unsought Goods 1.2.4.1, Convenience Products Convenience products are those consumer products which a customer purchases very often, wants them to be elivered quickly, and does not want to make much efforts for acquiring them. These types of products mainly include household products having low unit value such as, match box, medicines, groceries, cosmetics, etc, ‘These products are non-durable and customer consumes these products quite fast. Such products generally are of single use, hence are also known as ‘one shot items". These products have following two sub-categori . 1) Staple Convenience Goods: The products, which a customer has already decided to purchase before centering a shop, are called staple convenience goods, e.g., Soap, sugar, tea leaves, etc. 2) Impulse Convenience Goods: The products, which a customer purchases without having any plan, are called impulse convenience goods, e.g., cold drinks, chocolates, cakes, etc. Customers do not search for convenience goods very thoroughly; this is because the producers, with the help of Wholesalers, try to increase the reach of the products in the market as broadly as possible. In order to increase the availability of these products, vending machines are used in schools, offices, public places, and other appropriate locations. These products are also displayed in attractive way near the checkout counters of stores and in other high footfall zones. Scanned with CamScanner24 MBA Second Semester (Marketing Management spp, 1.2.4.2. Shopping Products i é a thorough compay Shopping produets are those produets which are purchased by customers afer doing a thorough oy eg with competing products on the basis of its features, quality, price, etc. gist gine] be considered as an element of ‘buying motive’ of a customer. These types of Sete Tie cai than convenience products because a lot of differentiation can be observed in these products. cts have high unit value, are purchased less frequently, and are durable in nature. Buying decision for these types of goods is influenced by various factors such as, price functionality. fe ra size and shape, colour, quality, etc, Air-conditioners, laptops, mobile phones, furniture, etc., the examples of shopping products, In case of shopping goods, majority of the customers go to stores for purchasing them, rete) = een are established and organised very strategically, i.e., they are generally located nearby ot he ate Competitor stores and they are established mainly in famous shopping areas of the cities, The strategies Prevalent for marketing of these types of products include intense advertising campaigns in local newspapers, radio channels, and television channels. Advertising for such type of products is mostly done in cooperation with their producers or manufacturers. 12.4.3. Specialty Products Specialty products are those consumer products which consumer chooses very consciously and purchases them from specialised retailers, e.g., jewellery, expensive clothing, medicines, etc. According to American Marketing Association, specialty goods are “goods having unique characteristics and/or brand identification for which a significant group of buyers are habitually willing to make a special purchasing effort”. The customers perceive specialty products as exclusive and rare. They have exact knowledge about what they are looking for and they are ready to put lots of efforts in order (o acquire these products. It is not compulsory but most of the times specialty products are costly and these products may or may not be durable in nature, Unlike shopping goods, price is not the decisive factor for buying these products, Personal preferences (e.g., a certain cuisine) and brand preferences (e.g,, a certain brand of bike) are the two main factors which make these products unique. Suits, diamonds, and antiques are some other examples of specialty products. Selected retail outlets are favoured for the distribution of these products by producers and distributors. These retail outlets are selected due to their capability and zeal to invest in high advertising and personal selling activities of these products. Another factor which is considered before selecting an outlet is the level of match in the image of store and the product, 1.2.4.4. Unsought Products Unsought products are those consumer products about which a prospective customer is not aware or he does not have any interest in buying these products. Either some kind of danger or the probability of danger is the main reason behind the demand ofthese products. Unsought products can be classified into two categories: 1) Regularly Unsoaght Products: Those products which a customer is not willing to buy right now but he may need them in near future are known as regularly unsought products, e,g., dentist visit, life insurance, health check-up, income tax saving, etc. 2) New Unsought Products: New unsought products ae those products which are recently launched inthe market and customers are not aware of them. The main function of the marketer is to inform the targe ‘customers about the existence of the product. ‘The purchase of unsought products may not be prompt and it ean be postponed, The i . . Therefore, the ma must extensively focus on personal sling asta, high advcrtsng, end intense mane ange falas" aad | on which marketer eatgorses unsougt pra se tngbliy, se (ndutal rcoreamen este Unsought products are those products for which the customers neither th, urge > purchase them. The customers may finally be itching ty, nor do they have af’ circumstances and almost as a compulsion instead of waiting for the latest meng go, ABY, unavoi unsought product can be marketed effectively-by using large number of sales sovatve variant of it MB ‘Working inthe direction of generating ned ofthat product among the customeau® fF and mass. advert TT TTT TT Te Ls Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 25 1.2.5. Classification of Industrial Products Industrial or business products can . ‘i : Ong aches be categorised on the basis of theit uses in business organisation, in the ‘Clasiicaton of ndustriat Products Raw Materials & Parts T—[_cariatEaviomeay ems Supplies LT indus Services ‘Accessory Equipment f--| ah ‘Component Parts and Process Matias 1.2.5.1. Raw Materials & Parts The term ‘raw material’ refers to those products which eventually become one of the ingredients of a final product. Firms use parts and raw materials for manufacturing its final product. Natural products (land, water, wood, minerals, etc.) and agriculture products (fruits, grains, vegetables, livestock, etc.) are two types of raw materials which are used in production process by the business organisations. ‘These products are bought by the business organisations in their raw state in order to use them in the manufacturing process of any consumer goods or industrial goods, e.g., timber, wheat, rice, leather, milk, ores, crude oil, etc. Some raw materials can be processed directly to make other consumer products such as, milk can be processed into curd, wheat can be processed into cereal, etc. Whereas, some raw materials are transformed into semi-finished goods which can further be used by the business organisations in production processes such as, iron ore can be used to extract iron which is further sold to industrial buyers for the manufacturing of machines and tools. Most of the raw materials are classified into various categories depending upon their quality so that consistency ‘can be confirmed within a category. But still sometimes nominal variations in terms of quality of raw material persist within the categories. Therefore, credit terms, price, and delivery become the main concerns for sales negotiations. Personal selling is the fundamental marketing approach to sell the raw materials because these raw materials are sold in huge quantities and lots of sales negotiations take place. 1.2.5.2. Capital Items/Equipment Capital items or capital equipment or installations are those huge machines and tools which an organisation uses during its production or operations activities. The cost of capital equipment is very high and they are proposed to be used for a longer duration, Cranes, machineries, generators are some of the examples of | capital equipment. Such capital items are put into direct use in the process of manufacturing of goods. Some of | the special equipment like robotic equipment, conveyor belts, etc. are created and manufactured for some | Specific operations. On the other hand, there are some other capital equipment like, large commercial ovens, printing machines, Computerised Axial Tomography (CAT) scan machines, etc., which have a standard design but can be altered as per the requirement of the production or operation processes. ‘The buyers of these capital items have to do a lot of intense research and have fo take the purchasing decision by the manufacturers of equipment to mark their presence in the | very cautiously, Advertising can be used mark ce in | market. But, personal selling plays a very important role in the selling of these capital items by providing in- | depth knowledge to the buyer about the technicalities of the equipment. 12.5.3. Supplies es Supplies are those products and items which have low price, limited life span, and are used to support and facilitate the day-to-day operations ofan organisation but these products are not among the ingredients of the final product. indirectly in the production process of any product or in the management of ‘ms are bought frequently, e.g. stationeries, fuel, paper, paints, cleaning materiel bulbs, printer ink, fuses, ete, Unless ordered in huge quantities, the buyers of these supplies do no invest Tot of tige and bffore for making decision regarding the purchasing of these products. Because of this fact, the producers of these items focus more on advertising activities and the information related to these items are provided to the buyers in the form of catalogues. Sales force can be used when there isa possibility of large order. These are the items which are used i that process, These products and ite Scanned with CamScanner\l pester (Market f Manageme MBA Second 'FEMEN) Spy 26 1.2.5.4, Industrial Services irod by business organisations for s, {ndustia) services are those intangible products whieh ate Fea NY. On the production proses funetioning and operations, Although these services do not partciP on eannot continue Smoathy, become the part of final product but without these services, the proce ¥. Jegal consulting) nd maintenance ang yp: Dare the examples of industrial gent Business advisory services (management, advertising, and lee) ¢ Mariana eu Of cquipment, cleaning and servicing of machines: f° reements by small manufac Maintenance and repair services are commonly provided with the help ment. Reputation of s these are also offered by the manufacturers of original machines and equipmen': Teter and its staff are the factors which are primarily considered before selecting services, irery es vice rit FESS A sop, 3.2.5.5. Accessory Equipment Accessory equipment are those products which are used Process but they do not become the part of finished product, &.2 the office operations or during the produc meters, calculators, motors, hand tools, ete, These items which form a sub-category of accessory equipment are mainly the capital Products wien have loy Cpa and relatively shorter life span than that of installations, eg. calculators, laptops, Printer ete. Some type of accessory equipment are used directly in the production process such as hand tools, spray machines, ete, Whereas some accessory equipment are used indirectly in the production. A wide marketing strategy is required for the marketing of these items because of low price and the market constituted of buyers belonging to varying business backgrounds, Sellers are required to do heavy advertising in trade publications, business journals, and mailings to buying agents and other business customers. The intermediaries such as distributors and wholesalers act as the sales force for the marketing of these items, iin case the personal selling is needed. 3.2.5.6. Component Parts and Process Materials Component parts are those products and items which are used in finished product directly or require very litle Processing before becoming the part of physical product. They become the part of large final product, yet car be identified separately in final product. For example, CPU, keyboard, mouse aire used as component parts int computer system. Similar to a component part, a process material becomes the part of the final product or they are used in the Production process direetly; nonetheless they cannot be identified so easily in the final product. For example, manufacturer of biscuits might be a buyer of sugar to use it as a process material. The purchasers of these material and parts have very specific requirements about the features and specifications of the product. There can be a direct and close involvement by the buyers in the design and production of component and material; they ean also look for various suppliers through bidding, presree, In bah the coe personal contacts play a very important role in order to win the purchase orders from the buyers, Onee again significance of personal selling in the marketing strategy cannot be neglested, ” 3.3. PRODUCT LEVELS: HIERARCHY THE CUSTOMER VAL 3.3.1. Introduction In general, all the products whether tangible or intangible, are the ‘wants to constume or buy. It can be considered that all the produce offerings of a marketer which a custom! A j decisions designing the distinctive Features of products, services and ideas whee ear pees eae towards creating mnsumed, ink that the main ele For example, one can think that "ment of product desi ia ition! : i i si iti manufacturer is to design air conditioner which. consumes less electriony Seiaion foes aniaie ooeated functional elements of the product are very critical, the Y. In fact, the decisions relates complete pro : an wt aoa : Product contains more th EET TS Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 2 A marketer has to consider five different tevels of product during the process of product planning. Every level of product accumulates higher value to customer and all the five levels together form a customer value hierarchy, which is shown in figure 1.4, The key parts of the hierarchy are explained below: Benefc Basie Product Expected Product, Augen Product Poteaia Product Figure 1.4: Five Product Levels: Customer Value Hierarchy 3.3.2. Core Product Core benefit is the most important level of hierarchy. At this level, the customer is buying the essential benefit or service. Here, marketers are the benefit providers to customers. For example, guest of a hotel is buying rest and sleep, a woman at a spa resort is buying comfore and luxury. Core products are those offerings of a business organisation which have direct relationship with the core competencies of manufacturer. These products are further assimilated with different end products, either by the ‘manufacturer of the core product itself or by other organisation to whom the products are sold, and further the finished product is sold to the ultimate consumer. Core products can also be defined as the main products which are manufactured by a company and then sold to the customer. The actual benefits which a customer expects from the purchase of any product can be termed as a core benefit. Core benefits consist of the basic benefits or services that a customer actually wishes to purchase. These products are also known as flagship products. Commonly customers decide to purchase those products which can fulfil their needs. Many needs of a customer are satisfied after the consumption of products or services, yet some needs remain unsatisfied. For example, a customer is willing to buy those products which he can use easily or the products which do not possess any risk to him or due to which he gets recognition by other people of the group. In some conditions the core benefits ccan be obtained from the product itself (e.g. tooth brush), on the other hand, some benefits can be obtained by the other dimensions of the product (e.g. the design of bristles of a tooth brush which are more delicate on gums and easy to clean the plaque). Therefore, the most significant decision regarding product is associated with the core benefits of the product, which in turn can enhance the other features of product as well. 33.3. Actual or Basic Product In the next level, it is the job of marketer to transform the core benefit into a basic product. For example, a hotel room is the core benefit while, a bed, a bathroom, a desk, a chair, towels and a closet are the basic products. Here, the marketer needs to convert the core benefits into a basic or actual product. For example, a restaurant has a table, chair, cutleries, ete. These are the products which have those attributes which are inevitable for the > functioning of the product. ‘The actual product is physical and tangible in nature and anyone can use it for some purpose. For example, a colour television, that a customer can touch, he can experience the vivid colour and picture quality, and finally ‘can buy it. The actual product is slightly different from the core product but still the common consumers consider them as core product, i.e., they do not see any difference in the two. ' Scanned with CamScannera MBA Second Semester (Marketing Management) SPpy, Consumable product sometimes is different from the actual product and may lie within the actual product; these are the essential products, services, or ideas which a customer is willing to buy. For example, shampoo can be packed in such a bottle which makes the dispensing of shampoo easy. Here the consumable product is the shampoo which is used for cleaning hair, Here, it is Very important for a marketer to understand that among al the product decisions, the most vital is the eonsumable product, but sometimies the actual produet consists of several other decisions which include branding, packaging, labelling, features of product, etc. 3.3.4. Expected Product AL ihis level, the marketer needs to prepare an expected product, An expected product comprises of all those auubutes which a customer expects while buying a product. For example, a visitor ata restaurant expects clean {abit Sood quality food, quick services and vibrant ambience. Mostly, all restaurants try to provide these ‘attributes, but customers also look for least expensive restaurant along with these atributes. Whenever someone visits a restaurant, he expects a clean table, hygienic and quiet environment, soothing Huctiors, friendly hosts, and tasty food. This is called expected product and it makes the third level of product hierarchy. As most of the restaurants offer these types of services, so a customer will prefer those restaurants which offer good and tasty food that too at a cheaper price. The expected products are the set of those characteristics and features of products or services which a customer expects and agrees while purchasing the Product or service, Expected products constitute third level of product in which a marketer attempts to include all those features and traits which are,expected by a customer while taking decision regarding the purchase of the product. 3.3.5. Augmented Product The fourth level of product provides augmented product to its customers, which is beyond their expectations. These types of products have additional attributes and benefits which enable the customers to differentiate between the available product and other products offered by competitors. For example, a hotel may include fine dining and 24*7 room service, fresh flowers, a remote-control television set, rapid check-in and express check-out, which are all extended services provided by the hotel to build up a augmented product. Augmented products are the result of modification and improvement process performed by the manufacturer to upgrade the value of the product. ‘The manufacturer attempts to outdo each and every expectation of customers, The business organisations use marketing research to identify the scopes of improvement in the value of the product. The organisations can add some innovative and special features in products with the help of understanding developed through market analysis. ‘The elements which can be considered as a part of augmented product are as follows: 1) Guarantee: Guarantee is a kind of assurance from the manufacturer that the product will be able to meet expectation and if it fails in doing so, the manufacturer will accept the decision of customer to replace the exp pl the product, to repair it, or to get the refund of the product. 2) Warranty: Warranty provides sense of protection to the customer that even if the guarantee of the product is lapsed then also the repairing of the product or replacement of some parts of the product can be done by the manufacturer. 3) Customer Service: These are the supplementary services which are provided to the customer for the purpose of training and assistance regarding the handling and usage of the products. Such assistance is provided online, through telephone, or personally. 4) Complementary Products: Some additional products can be provided to customers in order to increase the value of the products. These are the items which improve styling of the product (e.g., cover of mobile phones), make the operation of the product easy (e-. carty bag for camera), or improve fonetionality ofthe product (e.g., remote with the television). ‘ sf a product is also affected by how a customer acqui Accessibility: The expected value of a produc - acquires the product, = how easily it can be purchased (€.8., available in local shops, delivered to home), time Fequired to obtain the product, and the availability of the product when itis required. Scanned with CamScannerJnuodution to Product and Branding (Unit 1 29 Nokia came up val the mobile phone “Nokia 5500 Sports” in 2006 which is water resistant. This provides an cere for the ghee emer Of using the phone freely in the rainy seasons. Similarly, Titan used the protective packaging for the alarm clocks claiming that ‘This is a clock for travellers with a protective shutter’, ‘The organisations Which include the product development as an integral part of their marketing strategy are able to produce augmented products very often. 3.3.6. Potential Product ‘The last and the fifth level is that which offers the potential product. This type of product covers all the prospective alterations and extensions that the product may go under in future, At this level, the companies make most of their efforts to find out new ways to gratify their customers and offer unique products to them. For example, an innovative transformation of the traditional hotel product can be like offering all-suite hotels where the occupant books a set of rooms. ‘The potential product can be seen as “tomorrow's product” including all the modifications and sophistications which can be done with the help of available economic, competitive, and technological factors. For example, the hydrogen or biodiesel powered vehicles can be considered as a potential product, A lot of investment is required in the research and development of such products, which is why only big organisations can take a step towards it. NEW PRODUCT DEVELOPMEN 3.4.1. Introduction The goods and services that vary considerably in terms of their attributes or intended usage in contrast with the goods manufactured previously by the same firm are termed as ‘new products’. It is a difficult task to define a new product. It involves novel ideas and offerings which are entirely different and new for the customers, Moreover, the relative view is considered highly useful in defining a new product, as the potential consumers who will be using the product for the first time,'may identify opportunities or problems for consideration. The concept of a new product is highly multi-dimensional, which has capabilities of satisfying the wants of desirous and interested stockholders. It also provides strategic competitive advantage to significant number of interested consumers. This also leads to significant opportunity for a firm to create value in the competitive market. There are various perspectives from which a new product could be defined. The following definitions are significant among them: According to Musselman and Jackson, “A product is said to be a new product when it serves an entirely new function or makes a major improvement in a present function.” According to Kotler, “New product mean original products, improved products, modified products and new brands which ate developed by the firm through its own research and development efforts and includes those products which the consumers see as new. A new product is thus perceived differently by different people. It is a need satisfying concept with benefit for buyers bundle of need satisfying features; for marketers, a way to add value; for intermediaries, an opportunity to design; for R&D and to assemble and process for production department”. Afier product planning, the next step is product development. The process of identifying the probability of Producing a product is called product development. Under this process, the feasibility and profitability of Producing a new product is assessed before making a final decision. According to Limpson and Darling, “Product development involves the adding, dropping, and modification of item specifications in the product line for a given period of time, usually one year”, New product development involves all the phases and functions in launching a new product or service. The Process starts with emergence of a new idea and ends with the commercialisation of new product in the market. New product development encompasses competitive pressure, cost challenges and increased Scanned with CamScannera . ii MBA Second Semester (Marketing Management) SPpy consumer expectations which rare The flowin 1S which helps the firm to develop an enhanced and better-quality ing market. Through acquisition or development, a firm can introduce new products in the market. The following are three forms of acquisition: 1) By buying other companies, 2 By acquiring patents fom other companies, o ») By purchasing license or franchise from another company. a a Booz, Allen, and Hamilton Classification Scheme for New Products Accord em 2nd Hamilton classified the new products into six categories which are explained below, The ce te Sitch classification, a marketer should closely scrutinise which is the best class for his product, classification scheme for the new products is shown in figure 1.5: 2. &. | @ : = 5 ] S ae 4 Low ‘High = Figure 1.5: Booz, Allen, and Hamilton Classification: ‘Scheme for New Products| 1) New-to-the-World: As the name suggests, it is that category of product which is launched in the market for the first time. They may also be called as really-new products. Since these products are new, their prospective customers are needed to be provided with appropriate knowledge about its working and the benefits it can provide, Once the product reaches the hands of customer, it starts attracting buyers. Thus, it can be said that the firms involved in its production will get the first mover advantage as no such product was present ia market before its launch. 2) Neweto-the-Firm: This category involves such products which are new to the company but not forthe murket, ie. they are already present in the market under the name of some other companies. ‘This meats that if the firm wants to produce such product, it actually wants to introduce a new product line. Hene®, new-to-the-firm products can also be known as new product-lines for the firms, 7 ‘on to Existing Product-Lines: This category can involve both new-to-the-firm and new-to-the- is .dding new prodi ‘i big firms keep on adding new products to the previous produttnes. This isd 3) Adi world products. Usually, pon for several reasons, the absolute one being “earning wyised: Those firms which believe in delivering ‘nothing but th iver 1e best’; on Neveing their products for delivering flawless services to the consumers. These mt hs, bee's epei0s revising ft and revised’. Generally, this category is found i organisations producing beauty product at electronic goods. sv ee p Scanned with CamScanner 4) Improved and ReIniroduction to Product and Branding (Unit 1) 31 5) Re-Positioning: It has been’ found that the products which are already being used can serve some other purposes as wel After realising this fact, the organisation may want to offer their products to ‘th new added features or usage value which is known as repositioning the product in the market. 6) Reduction in Cost: Manufacturing an entirely new product can prove to be an expensive affair. Yet, on close scrutiny the organisations can discover that similar product can be produced with lower expense, which would also help in bringing down the prices. Briefly, the cheaper version of an expensive product can be called cost reduction or reduction in cost. 1.4.3. Need for New Product Development The organisations which are aiming at advanced levels of growth have to consider the following points: 1) Meeting Changes in Consumer Demand: Change is a universal phenomenon in today’s time of science and technology. For example, a quick change in the food habits, comfort preferences, tastes, customs and traditions, needs and expectations, etc. can be seen. The organisations need to keep an eye on these changes taking place in their surroundings. Customers always give preference to the products which are better in terms of quality, fashion, price, etc. An organisation has to proactively respond to such vibrant demands, which in turn results in innovations in products and services. By doing this, the organisations can keep themselves updated and can strengthen their relationship with the customers. 2) Making New Profits: Manufacturing new products is important for earning profits; since existing products have less scope for enhancing profit levels, while new products have vast scope for it. On reaching the maturity stage of PLC, the gains acquired from the existing products start decreasing and diminishes gradually till the product reaches the decline stage. Hence, it becomes quite necessary for the organisations to come up with the new and innovative products that can replace the old product’ which is on the verge of declining. Such new products play an important role in growth of the organisation and sometimes they are the only source for the organisation to find new prospects of profit. 3) Handling the Environmental Threats: There are various environmental threats faced by a business organisation. One way to handle these threats is to find out a new product which is capable enough to combat against it. ‘These threats spring from various environmental factors, like socio-economic, technological, political, and demand and supply, etc. Moreover, the biggest threat that is always present in such environment is competition in the market and products. Hence, it becomes vital to fight these risk factors by introducing new products. More prospects of growth and development are opened through it, which further ensures endurance and feasibility for the organisation. It also distributes the risk factor among the old and new products. 4) Other Necessities: The other strategic needs for new product development are as follows: i) New products can provide the organisation a source for gaining competitive edge. ii) ‘They can ensure long-term financial return on the investments made. They also help in optimum utilisation of the available resources. iii) New products make best use of research and development, iv) They can provide new opportunities for making changes in the strategic plans of the company. ¥) New products can bring most out of the marketing practices and brand equity. vi) It enhances the corporate image of the organisation/brand. Scanned with CamScanner32 1.4.4, Failure of New Products i a a Every organisation has to significantly devote time, Money, et may product. Irrespective of the efforts put by the organisation, | of A Product failure crucially affects the organisation in terms Of PX, of employees. Therefore, it is very important to determi ester (Marketing Management) gp, 1d Semester ( Py MBA Secon! nerey (0 innovate and develop q ey perience failures, a ey, skills and € brand image and motivation ley f time, rrotnind the failure of a product. Some 2 the reasons are as follows: Dv 2) 3) 4) 5S) 6) 7) 8) 9) Failure of New Products ‘Overstimaton of Markt ‘Underestinaton of Market Sie Competition ___——— Tidequate Market Reseach a Foorroiet Dain LY ero inconect STP Approach = ‘Technical Issues: a High Production Coss = Wrong Entry Timing Ineffective Promotion Over-estimation of Market Size: A product will not be able to perform in the market, if the market size is over-estimated. This may lead to less revenue generation than the desired level, even if the quality of the product is good. Under-estimation of Market Competition: When a marketer fails to estimate the actual competition level and competitors’ strengths, then the product may have to deal with severe competition in the market, This often leads to failure of new products. Tnadequate Market Research: If a marketer is unable to study the market and makes erroneous Predictions about the customers’ needs and wants, then this may fail to satisfy the potential customers, Poor Product Design: A poorly designed product may cause wet inconvenience to cust. sing the Product. This is one of the major reasons of customers” to dislike pert elute about a product, Lack of Superiority: It is essential for a product to prove itself super, , 4 products available in the market. Sale of new products canmot te made'on the b si of sopecanes Goa made by the marketers. Hence, leading to the failure of new Products. sis Of superfluous cl Incorrect STP Approach: A product may fail to capture the the market, targets the target audience and positions the new new seb When a marketer incorrectly segments ew product, Technical Issues: While using a new product, if a custom discontinue purchasing the same product again, r faces any technical issues, then he m4 High Production Costs: When the price of a product is hi then this may lead to product failure. This occurs, when gh compared 0 the other produets in the market, production cost. i 10) Wrong Entry Timing: Ifa new product enters the market at the wi by entering late inthe market, then als the product may tan stabi fie BY making hasty decisions & 11) Ineffective Promotion: Ineffective. utilisation of pr. 'S position in the market. romoti customers remain unaware of the product’s attributes tM tools leag : to new ‘lure, The purchase the product. , and functions, Product fail to which customers do 10 Scanned with CamScannerIntroduction to Product and Branding (Unit 1) i 33 NEW PRODU. DEVELOPMENT PROCESS 4.51. Introduction New product development is an eight step process which involves all the key elements required for developing product. These steps are beneficial in getting information input and decision-making while developing a new product. Other than this, market research also plays a erucial role in th paeraabances mars . role in the process. The process of new product Tdea Generation Isthe idea worth i No considering? = Yes Idea Screening Is the product idea compatible with company No objective, stategies, and [> resources? ie ‘Concept Development and Testing ‘Can we find a good concept No. consumers say they <-> Yes Marketing Strategy Development Can we finda costeffective, No affordable marketing ¢ {>} strategy? Te mo Business Analysis Will this product meet our |_N profit goal? Pac Product Development Have we got a technically and commercially sound { __________Ne J) prodoct? [pe Yes Tver Market Testing ‘Send the idea back for Have productsalesmet |__p! product development?’ |__| expectations yrs ‘Commercialisation Modify the product or ‘Are product sales meeting |p] marketing program? No expectations? -—>) Yes t a Figure 1.6: New Product Development Process Scanned with CamScannerjarketing Management) SPpy MBA Second Semester (Marketing uM 15.2, Idea Generation ing new ideas to Teach the ‘The most vital and first step of new product development is gathering and — na companies involving Potential product options. Idea generation is considered as an on-going proce: ae it nisation applied to boost ideas such «is running focus groups with customers, orgal ket research techniques are ; i eral market resea tance from internal and extemal sources of the organisation, Sev esearch chu a : {oll-free telephone numbers, members, encouraging customer suggestions and complaints via website forms and This can also be done by and gaining secondary data sources. B where different creative thinkers collect to share thei ight on product development activities of compaiors though instorming is one of the significant research techniques used 10 Benet j es, leas and thoughts. These will help the group ers to ides a new prod Benerate one idea out of another which may lead to a wide range of new products. An ne ‘om ee i nothing but the product that a company can launch in the market in near future. Obviously, Reciea arias the company should be in accordance with the ideas of the new product. Also, the idens Be i * , Product should be adequate in number to offer a true choice of ‘opportunities to the consumers. i vide : ing 0 According to Drucker, the various sources of ideas of a new product can be divided into the following two categories: 1) Internal Sources: New 2» product ideas have the below mentioned salient internal sources: ments 5) Research and Development Departments: Generally, Research and Development departme is ae beneficial sources of new product ideas. But, only large business corporations have separate departments, ii) Technical Service Staffs: Technical staffs are relatively more exposed to the problems of aligning the Products manufactured by the company with the needs and wants of eonsumers. Therefore, they can be @ good source of new product ideas, iii) Company Salesmen: Similar to the t needs, and hence exhibits products, echnical service staff, a salesman also understands the consumers’ an identical tendeney to relate ideas; especially regarding the presentation of iv) Executive Personnel: Executives associated with the departments like res administration are generally more famitiar with the requirements and company. Hence, they are in a good position to generate ideas that are competencies and power. ¥) Company Sales Records: Scruti in determining that which product of the product portfolio is famous amon, . Product is failing to prove its presence, which product is in need of modifi ication, etc. Due to such Valuable information, company sales record is said to be a good source of information, Wi) Intermediaries: Various sales intermediaries such as retailers, distributors, dealers, ete, versed with the consumers” purchasing patterns and competitive e be a great source of information needed for idea of new product, vi) Top Management: Top management personnel including directors, owners, cte., can envision new product with the help of their knowledge, expertise, and experience. viii) Company Patent Department: Patent departments must also be recognised as important source of new product ideas. These personnel are trained and coached to comprehend in terms of new broducts External Sources: There are various extemal sources of new produet ideas, some of them ate discussag below: ') Consumers: The lead users of the products can act as a very important source of informatio: for th companies. The idea of famous product ‘Scotch-Brite — Never Scraich Soap Pad! of 3M is 4 Fesult of ¢ customer study. The study then conducted revealed that customers wish to have such soap pues ofa do not scratch the utensils. ich, carch, sales, production, and kely future progress of the according to the company s » are well ‘vironment; and therefore, they ean i) Competitors: Popular competitors (more specifically, the market leaders) can usually be CONSideteq one of the important sources of information. From these sourees, one can get the ideas ike w wd as ot variants should be made a part ofthe product line and which ones should be discontinued, Genes Companies want to expand their product portfolio, but the task of identifying the exact in diminishing returns becomes very difficult. In order to determine the most appropriate prodiye, iat of firm needs to analyse the product mix of the successful competitors. Because doing so an pe the various valuable information needed for determining the product mix. Vide Mr Scanned with CamScanner{ntroduction to Product and Branding (Unit 1) 35 iii) a Taventors: Freelance inventors were not considered as a significant source of new product aed fen en they have the credit of some significant product innovations on their name. Edwin ee a an Chester F. Carlson’s copying machine are the two best examples of it. Both ee eres ner Isjected by many blue-chip firms and were compelled to establish their own. ness enterprises; today almost eveyone is aware abot aroi vawin epee ery about the Xerox and Polaroid of Chester and ‘Trade Literature: Some companies gain information by searching several literatures. There are many examples where equipment and machinery designed and developed in different nations has later on become available and being sold in U.S. of Japan through various import channels. Therefore, by referring to the foreign literatures, a local business firm can develop identical equipment and technology, and launch it in domestic market before imports are made available in that country. v) Other Outside Sources: Outside sources of information comprise of trade shows, university research programmes, exhibits, consulting organisations, government research programmes, professional society meetings, etc. The major issue faced while using these sources is the technique of approaching these information sources without spending significant amount of energy and time. Idea Generating Methods A new idea can be generated in many ways; few of them are discussed below: 1) Focus Group: Under the focus group technique, a discussion is held among a group of people in order to decide a new business idea. This discussion is held in an organised style. These discussions require a moderator or a leader to sit with the group of individuals, and to conduct the discussions in an explicit and ‘open manner. Usually, focus group discussions are conducted for generating the ideas concerning the products such as cosmetics, healthcare products, apparel designs, jewellery designs, etc. This technique of generating business ideas is very efficient, practical, and less time consuming. Tdea Generating Methods Focus Group ‘Brainstorming Reverse Brainstorming (Check List Problem Inventory Analysis Synectcs Information from Publications ‘Seminars and Conferences Discussion with People ‘Day Dreaming and Fantasising 2) Brainstorming: Brainstorming is also a group technique of generating new and innovative ideas and business solutions. In this method, the group members are assembled together to participate in the discussion, and to contribute their creative inputs, In brainstorming session, the knowledge and experience of all the members are taken into consideration. The main purpose of these sessions is to canalise the ideas to a specific product or a product line. 3) Reverse Brainstorming: It is a technique identical to the technique of brainstorming in which the discontentment and disagreement is permitted and appreciated so as to generate new ideas and solutions. Reverse brainstorming concentrates on the negative facets like “the chances of failure of certain idea” “the reason which necessitates the change in product”, etc, By such kind of criticism, cross-questioning, and creative thinking, new and innovative ideas are generated. The manner of criticising the ideas and igniting discussion from it is known as Reverse Brainstorming. 4) Cheek List: Discussions based on a list of related issues form the basis of developing new ideas for a business, An entrepreneur tabulates a particular area of discussions and also lists out different statements, questions, and suggestions so as to conduct a thorough discussion and approach a creative business idea. There can be various kinds of questions for a specific product, few of which are listed below: i) Identify the users of the product as well as the method and purpose of using that product. ii) Describe the new and different ways of using the product. Scanned with CamScannering Management) SP a6 MBA Second Semester (Marketing Management) SPP 2 Suggest the possible ways to improve the Product in order to provide better value t© coneuien i" sie to iv) Enlist the substitute products available in the market, Identify their competitiveness. Is imegrate the features to develop a new and better product? ¥) Is it possible to transform the current product? If yes then will it be a good eas is, wot vi) What changes are possible and required in the product such as packing, colour, shape, size, . flavours, ingredients, etc.? vii) Will it be feasible to introduce substitute product? viii) Can the procedures and methods be changed to make them lighter and easier? ct ix) Can customers be attracted by using good quality components, by combining units, by approaching them differently, and by introducing more positive facets? iy [Menify the products which are sucessful in the markets of other countries, Also identify the reasons behind their popularity. xi) Identify and enlist the new %) Problem Inventory Analysis: This technique is designed in such a way that it tries to focus on the Problems for generating the new and creative ideas and solutions fer the Lecgaees This method is similar to the focus group method of idea generation, 6) Synectics: Gordon coined the concept of synectics, This technique is used to advance the process of creative problem-solving. Joining together distinct and evidently unrelated elements is termed as synectics, Under this method, problems and issues are defined by “maki iar” Fone wea OY. making the familiar strange”. In other words, the purpose of this technique is to define the issue with the help of familiar terms and to distort, transpose, and invert the familiar ideas to purposely make them strange and unfamiliar. This process can invert or alter the standaed expectations and standard ways of comprehending about how others will act; which in turn will give rise to new ideas. 7) Information from Publications: A large amount of information about different products and services is available in the printed format. The printed form includes advertisements, sales brochures, publicity posters, catalogues, etc., which are easily available to every person. These publications ean at times provide new ideas and business concepts. Products that are emerging in a certain product range in the market. 8) Seminars and Conferences: In order to address the emerging opportunities and challenges present in the business environment, several seminars and conferences are conducted by different institutions. Therefore, those who wish to enter or are new to business world can get alot of useful and important tips by attending such conferences and seminars. 9) Discussion with People: It is quite possible that if an entrepreneur is not open and attentive, he stands a chance to miss an opportunity to gain new ideas and solutions. An entrepreneur must be e 2004 listens with an open mind, ic. he must listen and consider the ideas and inputs provided by others. These qualities can definitely help him to identify the requirements, wants, preferences and tastes of individwats workin, with him. And this information can be beneficial to evolve products and services that indeed Possess the quality of fulfilling the needs of the customers. 10) Day Dreaming and Fantasising: When an entrepreneur fantasises about a certain product or Service Which hhe wishes to have in his life, it generates a business opportunity. For example, the concept of space pi Was just a fantasy few years back but now i is realty. Such dreams and fantasies ae regpgagit ra inventions of many products and services, .5.3. Idea Screenin; . nae wep at the ideas senersted inthe nt tp ae analysed nthe bs possible one islet {0264 rc pee ee effective! ‘ és . oFideas shad ephcarean iis tober of cas generated, based on which the ssrening ees may rong in rounds Like the first round comprising of judgements of deus by company exeetves, Whereas oth y ecesgh rounds may involve advanced research techniques. After the selection of few atv kas aout sting Hg idea is made, which includes is potential in terms of sles, profi, production cost, competitors responce ee, pan ideas are suitable then they are moved to the next stage of new product development f the Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 37 A new product-oriented company will at any given point of time usually have many new product deals with them. The real problem is to recognise which deal or the idea is more promising and attractive than the others. Under the new product development process, the stage of idea screening puts the different product ideas to stringent screening processes by product evaluation professionals and their committees. An organisation is required to continuously review and reconsider its estimate of the product's overall profitability of success, as and when the new product idea moves through the development process. This can be achieved by using the formula given below: Overall Profitability of Success = Profitability of Techni Commercialisation given ‘Technical Commercialisation Completion x Profitability of Completion x Profitability of Economic Success given ‘The principal basis for screening an idea can be classified under the headings enlisted below: 1) Market feasibility, 2) Management objectives, mission, vision, policies, and strategies, 3) Preliminary business analysis, 4) Legal, social, and environmental limitations, and 5) Technical feasibility. There are mainly two objectives on which the screening stage is based. First is to get rid of all those ideas which are evidently inappropriate of further consideration and the second is to select or shortlist from those remaining ideas which have enough potential to prove their worth. A company should be aware of the following types of errors while screening the ideas: 1) DROP Error: This error is committed when the company dismisses a good idea. For example, IBM happened to commit this error by assuming that the market for personal computer would be very small to operate for them. 2) GO Error: This error happens when the company allows a bad idea to move through development and commercialisation process which in turn causes product failures. These product failures can be of the following three kinds: i) Relative Product Failure: Under this scénario, the company manages to eam a profit but not as anticipated by the management, ii) Partial Product Failure: Here the company incurs a marginal loss as the total sales are able to cover all the variable costs and a significant part of fixed cost. iii) Absolute Product Failure: Here the company makes huge losses as the total sales are not even able to cover the variable costs. 3.5.4. Concept Development & Testing Once the marketer has finalised few ideas, he initiates towards the attainment of initial feedback from the customers, its employees, and distributors. These ideas are then represented to the focus groups through storyboards, board presentations, etc. For example, the customers may be shown the product concept by drawing the product idea on the whiteboard or an advertisement introducing the new product. They may also be presented with mock-up of ideas which may not be the actual functional version of the product idea. ‘The most feasible ideas selected by the organisation are put forward to the target audience. What do they think about the idea? Will it be practical and feasible? Will it offer the benefit that the organisation hopes? Or have they overlooked certain issues? It is not a working prototype, but just the idea or concept that is presented to the target audience. This is the next stage after the ‘idea screening’. Here a new product idea is put through to concept testing after undergoing the initial screening. The product concept comprises of transforming the basic idea into a particular set of characteristics and qualities the product will present to the prospective customers. In the meantime, the ‘product image’ deals with the process of deciding the manner in which the product must be viewed by: the consumers in the market, Also, it deals with how the product will be marketed to its Potential consumers. 4 Scanned with CamScanner* MBA Second Semester (Marketing Management) Spy, ‘Once a distinct and explicit product concept is evolved, it would be expected to anne oe petting itin the market. For the purpose of testing, company can either take the sample product or the sr bt (ting will generate feedback from the customers which will not only assist in discovering of an alterations or improvements in the product but it will also give certain hints regarding whether the product wi succeed in market, A Getailed version of the idea that is conveyed in important and consequential consumer terms is termed ag Product concept. The concepts need to be tested and developed with a view t0 conceptualise and execute an idea, 1) Concept Development: The following questions can be used to turn a product idea into several concepts; i) Who would be the users of the product? ii) When the customer would use the product? iii) How the customer would use the product? '§) Identify the fundamental advantages that would be provided by the product. Broadly, there are two steps involved in concept development; namely: 7 1) Product Concept Generation: As per the requisites stated in product specification, a design team Gevelops product concepts during the product generation phase. Later on, these concepts are assessed Gis the most favourable ones are chosen for further development. The process of Product Concept Generation starts with a aumber of consumers’ needs, wants, target specifications, etc., and finally ends With a number of product concepts out of which the team will chose one concept as a final concept. ii) Concept Selection: The process of concept selection is a decision-making effort made by a group of individuals. Normally, concept selection Stage is an important point in the entire product development Process. None of the concept solutions are so clear that they can be aimed at because every team member has his sound and valid beliefs/viewpoints on different solutions. Moreover, no company can afford wrong and ineffective decisions as they can always be damaging. Proper comprehension of the tules is a must for creativity and innovation. Experienced judgement is necessary for the conflicting interactions among regulatory and business model options, intellectual property, and reimbursement Also, such gonflicts occur very often. 2) Concept Evaluation or Testing: This phase of product development process comprises of proposing the Product concept to suitable target customers with a view to obtain their feedback and responses. With regards to this, a combined analysis is also done to estimate consumers’ inclination of interest for alternative concepts. During concept evaluation or testing, the utility values are also derived which the consumers associate with different levels of a product’s characteristics, The procedure of concept evaluation is also termed as concept testing. This process is used to estimate the success of a new product even before the stage of marketing and product launch, Cor defined as a quantitative research mechanism that thoroughly determines a performance of completely developed conceptual ideas that have been devel fulfilling consumer wishes. Thereafter, the process advances for reducing the concepts to a smaller and smaller number, till it reaches a viable set of conc evaluated, And the final step of concept testing involves an activity wherein prospective customers is requested to consider the ultimately selected new p: some questions, and to provide certain ratings. cept testing can be ind assesses the Probable oped for the purpose of large reservoir of product Pts that can be minutely a representative sample of oduct concepts, to answer lopment 1.5.5, Marketing Strategy Devel ; : After concept testing, a primary marketing strategy plan i develope. matting sty i St iach idea in the market. For this, a comprehensive plan is ing the i seat cameron, targeting and positioning strategy, with the expected sales and profs, yet zs ' Hons * / Fa ea sent ci a wih tb, irstly, i the pl, itioning of new product, estimated sales, market share and profitability goals to be Planned posit 3 achieved in the initial years. . 7 /, planned price and marketin, 2) Secondly, the strategy outlines the distibution strategy, pl 5 budget for the first year. the long-run and also the marketing-mi , te 3) Lastly, the plan defines the sales and profit in 8Y for future, Scanned with CamScannerIntroduction to Product and Branding (Unit 1) 39 1.5.6. Business Analysis In this stage, the large numbers of ideas are condensed to one or two ideas, by the marketer. During this stage, market research is used extensively to analyse the viabitity of product ideas. (In many situations, a product remains only an idea, if not found viable). The main aim of this step is to find out the valuable estimates of market size (ie., total market demand), operational costs (ie., production costs), and financial predictions (ie. sales and profits). Morcover, it is most significant to determine if the product is suitable for company’s overall mission and strategy. The market research can be directed in two ways, i.c., intemal and external. Internal market research may involve discussions with production and purchasing personnel whereas, external market research comprises of customer and distributor surveys, secondary research, competitor analysis, etc. Other than all this, the organisation must also scrutinise the financial viability of the product in the long-run such as cashflow generation, production cost, market share of the product and expected product life cycle. The next step after developing the product concept and marketing strategy, the management must assess the business attractiveness of the concept. With a view to do so, the management personnel must conduct a proper calculation of total costs, sales, and profits. 1) Estimating Total Sales: It is necessary for management to determine if the sales will be high enough to earn sufficient profits. The sum total of estimated first time sales, estimated repeat sales, and estimated replacement sales is equal to total estimated sales. ‘Purchase frequency” of the product is very crucial and it acts as a deciding factor for sales estimation as well. Based on purchase frequency, products can be of three different types which are explained below: i) One-Time Purchase Product: The sales figures increase at the starting for such type of products; and subsequently approach zero as most of the prospective customers are converted. The concept of one- time purchase product can be understood by considering the example of buying a home after retirement. ii) Infrequently Purchased Product: These types of products display replacement cycles either due to physical deterioration or eradication caused due to change in performances, styles, and attributes. Sales estimation of such products necessitates both the replacement sales as well as the first time sales. Industrial equipment; automobiles, etc. are few examples of such kind of products. iii) Frequently Purchased Product: For these kinds of products, the number of first-time customer increases at the beginning, decreases later on, and ultimately only few are left. As soon as the first-time buyers are served, repeat purchase orders start coming in; and finally, the sale curve falls to a plateau- like position indicating a level of constant repeat-purchase volume. Consumer non-durable items such as shampoos, detergents, bathing soaps, etc. are examples of frequently purchased products. 2) Estimating Costs and Profits: The management must forecast expected costs and profits after drafting the sales forecast. Usually, different financial measures are used by firms to assess the benefits of a new product proposal. Out of all such financial measures, risk analysis is the most complex, while the break- even analysis is the simplest of all. Business Analysis Techniques ‘A business analyst will normally make use of a series of generic business techniques while assisting the business changes, Some of the generic business techniques are discussed below: t Business Analysis Techniques ; PESTLE H | Hepayis f Most H | swor t ‘CATWOE H t ‘De Bono's Si Thinking Hats Five Wives H Moscow ‘VPECT 1) PESTLE: “PEST” or “Political, Economic, Social and Technological” analysis is one of the techniques of which provides a deep insight about the macro-environmental factors that affect the operations of a business. The level of importance given to these factors varies as per the industry in which a Scanned with CamScanner