What is a Product?

 Product is anything that can be offered to a market for

attention, acquisition, use, or consumption that might
satisfy a want or need.
 Broadly defined, “products” also include services,
events, persons, places, organizations, ideas, or mixes
of these.
Because of their importance in the world economy,
special attention needs to be given to services.
 Services are a form of product that consists of activities,
benefits, or satisfaction offered for sale that are essentially
intangible and do not result in the ownership of anything.
 A company’s market offering often includes both tangible
goods and services.
 At one extreme, the offer may consists of a pure tangible
good, such as soap, toothpaste, or salt - no services
accompany the product.
 At the other extreme are pure services, for which offer
consists primarily of a service. E.g. doctor’s services,
financial services
 Product Mix
A Product mix (or product portfolio) consists of all the
product lines and items that a particular seller offers for
sale.
Sony’s divers product mix consists of four primary product
businesses worldwide :
 Sony Electronics,

 Sony Computer Entertainment (games),

 Sony pictures Entertainment (movies, TV shows, music,

DVDs)
 Sony Financial Services (life insurance, banking, and

other offerings)
 Product Mix
A company’s product mix has four important dimensions:
width, length, depth, and consistency.
 Product mix width refers to the number of different product

lines the company carries. Sony markets a wide range of

consumer and industrial products around the world, from
TVs and PlayStation consoles to semiconductors.
 Product mix length refers to the total number of items the

company carries within its product lines. Sony typically

carries many products within each line. The camera and
camcorder line includes digital cameras, camcorders, photo
printers, memory media, and lot of accessories.
 Product Mix
 Product mix depth refers to the number of versions
offered of each product in the line. Sony has a very deep
product mix. It makes and markets tremendous range of
TVs – tube, flat panel, rear projection, front projection,
HD or low resolution - each in almost all the sizes.
 The consistency of product mix refers to how closely
related the various product lines are in end use,
production requirements, distribution channels, or some
other way. Sony’s product lines are fairy consistent in
that they perform similar functions for buyers and go
through the same distribution channels.
 Product Mix
The company can increase its business in four ways.
 Add new product line

 Lengthen its existing product lines

 Add more versions of each product and deepen its

product mix
 Pursue more product line consistency – or less –

depending on whether it wants to have a strong

reputation in a single field or in several fields.
 Product Line Decisions
 Beyond decisions about individual products and services,
product strategy also calls for building a product line.
 A product line is a group of products that are closely
related because they function in a similar manner, are
sold to the same customer groups, are marketed through
the same types of outlets, or fall within given price ranges.
 The major product line decision involves product line
length – the number of items in the product line.
 Product Line Decisions
Product line length is influenced by company objectives
and resources.
 Allow for upselling – BMW from 3-series models to 5-

and 7-series models

 Allow cross-selling – HP sells printers as well as

cartridges.
 To protect against economic swings: Gap runs several

clothing – store chains )Gap, Old Navy, and Banana

Republic) covering different price points.
 Product Line Decisions
A company can expand its product line in two ways:
Product Line Filling: adding more items within the
present range of the line.
Product line stretching: company lengthens its product
line beyond its current range. The company can stretch
its line downward, upward, or both ways.
 Taj is the flagship brand for the world’s most discerning travellers seeking
authentic experiences in luxury. Besides luxurious living and fine dining, Taj
Hotels also promise a whole new experience of tranquillity and total
‘wellness’ through Jiva Spas, a unique concept that brings together the
wisdom and heritage of the Asian and Indian philosophy of wellness and well-
being. 
 Taj Safaris is India's first and only wildlife lodges circuit that allows travellers
to experience the unparalleled beauty of the Indian jungle amidst luxurious
surroundings 
 Vivanta by Taj provides the new generation of travellers a contemporary and
creative hospitality experience that matches their work-hard, play-hard
lifestyles. 
 The Gateway Hotel chain is a pan-India network of hotels and resorts that
offers business and leisure travellers a contemporary hotel experience. 
 Ginger is IHCL’s revolutionary concept in hospitality for the value segment.
 Need of New Product Development

 Rejuvenate the decreasing sales and profits of existing

products. (Johnson and Johnson generates more than a
quarter of their sales from new products)
 Balanced portfolio of products by being innovative.
 New Products are strategic response to competition.
 A company becomes successful by using flanker brands, line
extensions and new products in competitive environment.
 Innovation is not restricted to new product development
but basically, it means discovering new ways to create
value.
 To Increase market share
 To enter into new market segments
 To enter into new product categories, etc.
Booz, Allen & Hamilton, Inc. (BAH)
Classification Scheme:
Based on Booz, Allen Hamilton
Framework New Products Classification:
 1. Technological Breakthroughs/New to the world
products- These products are absolutely new to the
world and will create their own market.
1. Technological Breakthroughs/New to the world
products-
 SinkPositive
Low-flow toilets are ubiquitous in the U.S., but every flush still
wastes fresh water on a task that does't require it—refilling the
toilet's bowl and tank. Sink Positive saves water by using a
toilet's freshwater refill cycle for hand washing, then
channeling the dirty sink water into the bowl. The system fits
as a lid on most standard toilets.

Vaccine Patch
Intercell's transcutaneous immunization patch provides a
needle-free alternative to injected immunizations.
 2. New product lines/ Product New to the
Company

Includes new brands and brand franchise extensions - Products that

take a firm into a category new to it. Ex.: P&G brand shampoo or coffee,
Hallmark gift items, AT&T Universal credit card, Canon laser printer,
McDonald’s McCafe drinks (lattes, cappucinos, frappes, smoothies, etc.) Airtel
Money
 3. Modified products/Additions to
existing product lines
– these products are new to the company but not to the
market.
- Includes product line extensions and flankers:
Products that flesh out the product line in current
markets. Ex.: Tide Liquid, Apple’s iMac, HP
LaserJet 7P.
 3. Modified products/Additions to
existing product lines
 A. (Product) line extension – Existing product line,
existing brand name: Derivatives of a company’s core
(anchor, flagship, parent) product – Additional colors,
sizes, flavors, styles shapes, scents, quality levels,
features, package sizes, forms, etc.
 Use if closely related items and for other reasons for using
a brand franchise extension strategy. E.g., iPhone, iPhone
3G, iPhone 3GS (video camera, faster processor); iPhone
4 (video calling, better reception, longer battery life, new
hardware design)
 3. Modified products/Additions to existing product lines

B. Flanker (Multibrand) – Existing product

line, new brand name (e.g., General Motors’
Saturn cars, Kellogg’s Kashi cereal).
‣ Use if…
…different brand image desired.
 Reasons for additions to existing product line
1. Add new markets (needs-and-wants groups)
2. Provide variety for current customers E.g., Cheerios
3. Upgrade/Downgrade: Product line stretching decisions
(vertical extensions) E.g., Gillette razors
 4. Significant Improvements/revisions to existing
products

“New and Improved” (next-generation product) – A

type of relaunching:
- Improvements/revisions/enhancements/upgrades to
existing products : Current products made better. Ex.:
P&G’s continuing improvements to Tide detergent, Ivory soap,
Reasons:
Changes in consumer tastes, technology, and competition
‣ + Types of N&I:
 1. Quality modifications – Changes in material or production
processes related to a product’s dependability and durability
 - Raise quality: To gain a competitive advantage
 - Reduce quality: To offer a lower price
4. Significant Improvements/revisions to existing
products
2. Functional modifications – Changes affecting a
product’s versatility, effectiveness, convenience or safety;
usually requiring product redesign.
E.g., greener, more energy efficient, faster,
lighter, smaller
E.g., Amazon E-Kindle Reader 2.0, video game
consoles
3. Aesthetic/Form modifications – Changes in the sensory
appeal of a product such as altering taste, texture, sound,
smell, or appearance.
E.g., New Coke
5. Repositionings

Products that are retargeted for a new

use/application. Also includes retargeting to
new users/new target markets.
Can be physical or psychological
repositioning, often entailing a new brand
image.
Ex.: Arm & Hammer baking soda sold as a
refrigerator deodorant; aspirin repositioned
as a safeguard against heart attacks;
Marlboro retargeted as a man’s cigarette.
 6. Cost Reductions

6. Cost Reduction :New products that provide the

customer similar performance but at a lower cost (better
value). May be more of a “new product” in terms of
design or production at the same or lower price.
 New-Product Development
 New-product development : The development of original
products, product improvements, product modifications,
and new brands through the firm’s own product-
development efforts.
 Only seven years after it unveiled its first iPod, half of
Apple’s revenues come from iPods and iTunes.
 New products are important – to both customers and
the marketers who serve them.
 Yet innovation can be very expensive and very risky.
 According to one estimate, 90 percent of all new
products in America fail.
New-Product Development Process
Idea Generation : The systematic search for new-product
ideas.
The New Product Development (NPD) process starts with
the search for ideas.
The greatest opportunities and highest leverage with
new products are found by uncovering the best
possible set of unmet customer needs or technological
innovations.
Idea Generation
Erich Joachimasthaler’s Demand –First Innovation (DIG) framework is
designed to provide companies with an unbiased view and an outside
– in perspective of demand opportunities. Which has three parts:
1. The Demand Landscape – Use observational, anthropological and
ethnographic methods or consumer self reports to map consumer
needs, wants and even beyond.
2. The Opportunity Space: Use conceptual lens and structured
innovative thinking tools to achieve market perspective from
different angles.
3. The Strategic Blueprint: Think about how the new product can fit into
customers lives and how it can be distinguished from competitors
 Idea Generation
 Interacting With Others
 Interacting With Employees
 Studying Competitions
 Adopting Creativity Techniques
 IBM’s “innovation Jam” : 46,000 ideas from 150,000
people in more than 160 countries over three days.
IBM plans to develop only 10 of them.
Sources of new-product ideas
 Internal Idea Sources : R&D, employees

Samsung’s Value Innovation Programme (VIP)

Centre
 External Idea Sources: distributors, suppliers,
competitors, customers
New-Product Development Process
Idea Screening :
 Screening new-product ideas in order to spot good

ideas and drop poor ones as soon as possible.

 Evaluation of idea against a set of general criteria
Concept Development and Testing
 Product concept : A detailed version of the new-

product idea stated in meaningful consumer terms.

 Concept development

 Concept testing: Testing new-product concepts with a

group of target consumers to find out id the concepts

have strong consumer appeal.
New-Product Development Process
 Marketing Strategy Development : Designing an initial
marketing strategy for a new product based on the
product concept.
 Business analysis : A review of the sales, costs, and
profit projections for a new product to find out whether
these factors satisfy the company’s objectives.
 Product development : Developing the product
concept into a physical product in order to ensure that
the product idea can be turned into a workable market
offering.
New-Product Development Process
Test Marketing : The stage of new-product development
in which the product and marketing program are tested
in realistic market settings.
 Standard Test Markets :

 Controlled Test Markets

 Simulated Test Markets

Commercialization : Introducing a new product into the

market.
 Brand
A brand is an offering from known source. A brand name
such as McDonald’s carries many associations in people’s
minds that make-up its image: burgers, cleanliness,
convenience, counter service, and golden arches.
The AMA defines a brand as “a name, term, design, sign or
symbol or a combination of them, intended to identify
the goods or services of one seller or group of sellers and
to differentiate them form those of competitors.”
A brand is thus a product or service whose dimensions
differentiate it in some way from other products or
services designed to satisfy the same need.
Role of Brands
Brands identify the source of or maker of the product and
allow consumers either individuals or organizations to
assign responsibility for its performance to a particular
manufacturer or distributor.
A Brand offers the firms legal protection for unique features
or aspects of the product.
The brand name can be protected through registered
trademarks; manufacturing process can be protected
through patents and packaging can be protected through
copyrights and proprietary designs.
Role of Brands
Brand loyalty provides predictability and security of
demand for the firm and it creates barriers to entry that
make it difficult for other firms to enter the market.
Loyalty translate into consumers willingness to pay a high
price often 20% to 25% more than competing brands.
Branding
A brand is a perpetual entity rooted in reality but
reflecting the perceptions and idiosyncrasies of
consumers.
Branding is endowing products and services with power of
a brand.
Its all about creating differences between the products
Its all about creating differences between the
products
Product vs. Brand

A product is something A brand is something that is

that is made in a factory bought by a customer.

A product can be copied A brand is unique.

by a competitor.

A product can be A successful brand

quickly outdated. is timeless.
Brand Equity

Brand equity is the added value endowed on products and

services. It may be reflected in the way consumers think,
feel and act with respects to the brand, as well as in the
prices, market share, and the profitability the brand
commands.
A powerful brand has high brand equity. Brand equity is the
differential effect that knowing the brand name has on
customer response to the product and its marketing.
It’s a measure of the brand’s ability to capture consumer
preference and loyalty.
A brand has a positive brand equity when consumers react
more favorably to it than to a unbranded version of the
same product.
It has negative brand equity if consumers react less favorably
than to an unbranded version.
 Product Life-Cycle
 A company’s products are born, grow, mature, and then
decline, just as living things do.
 To remain vital, the firm must continually develop new

products and manage them effectively through their life cycles.

Product life cycle : The course of a product’s sales and profits
over its lifetime. It involves five distinct stages:
 Product development

 Introduction

 Growth

 Maturity

 Decline
 Product Life-Cycle
 Product development begins when the company finds
and develops a new-product idea. During product
development, sales are zero and the company’s
investment costs mount.
 Introduction is a period of slow sales growth as the
product is introduced in the market. Profits are
nonexistent in this stage because of the heavy expenses of
product introduction.
Marketing objective : create product awareness and trial
 Product Life-Cycle
 Growth is a period of rapid market acceptance and
increasing profits.
Marketing objective : Maximize market share
 Maturity is a period of slowdown in sales growth
because the product has achieved acceptance by most
potential buyers. Profits level off or decline because of
increased marketing outlays to defend the product
against the competition.
Marketing objective : Maximize profit while defending
market share
 Product Life-Cycle
 Decline is the period when sales fall off and profits drop.
Marketing objective : Reduce expenditure and milk the
brand
Characteristics Introduction Growth Maturity Decline
Sales Low sales Rapidly Peak sales Declining
rising sales
sales
Costs High cost Average Low cost Low cost per
per cost per per customer
customer customer customer
Profits Negative Rising High Profits Declining
Profits Profits
Customers Innovators Early Middle Laggards
adopters majority
Competitors Few Growing Stable Declining
number number number
beginning
to decline
Strategies Introduction Growth Maturity Decline

Product Offer a basic Offer Diversify Phase out

product product brand and weak items
extensions, models
service,
warranty
Price Use cost-plus Price to Price to Cut price
penetrate match or
market beat
competitors
Distribution Build Build Build more Go
selective intensive intensive selective:
distribution distribution distribution phase out
unprofitable
outlets
Strategies Introduction Growth Maturity Decline

Advertising Build Build Stress brand Reduce to

product awareness differences level
awareness and and benefits needed to
among early interest in retain hard-
adopters and the mass core loyals
dealers market
Sales Use heavy Reduce to Increase to Reduce to
Promotion sales take encourage minimal
promotion to advantage brand level
entice trial of heavy switching
consumer
demand
 Place
 Value Delivery Network : The network made up of the
company, suppliers, distributors, and ultimately customers
who “partner” with each other to improve the
performance of the entire system in delivering customer
value.
 The “downstream” side of the “value delivery network”
concerns with the marketing channel organizations that
connect the company and its customers.
 Marketing channel (or distribution channel) : A set of
interdependent organizations that help make a product or
service available for use or consumption by the consumer
or business user.
 Place
 Intensive Distribution : Stocking the product in as many
outlets as possible.
Coca-Cola, Hindustan Unilever, Nestle
 Exclusive distribution : Giving a limited number of dealers
the exclusive right to distribute the company’s products in
their territories
Luxury automobiles
 Selective distribution : The use of more than one, but
fewer than all, of the intermediaries who are willing to
carry the company’s products
Most television and home appliance brands
 Consumer Marketing Channels
 Zero-level channel (direct marketing channel) – door
to door sales, telemarketing, TV selling, Internet
selling and manufacturrer-owned stores
 Place
Major Store Retailer Types
 Specialty stores: Carry a narrow product line with a deep

assortment such as sporting-goods stores, furniture stores,

bookstores
 Department stores : Carry several product lines – typically

clothing, home furnishings, and household goods – with

each line operated as a separate department managed by
specialist buyers
 Convenience stores : Relatively small stores located near

residential areas, open long hours seven days a week, and

carrying a limited line of high – turnover convenience
products at slightly highr prices.
 Place
Major Store Retailer Types
Discount stores : carry standard merchandise sold at lower
prices with lower margins and higher volumes.
Superstores : Very large stores traditionally aimed at
meeting consumers’ total needs for routinely purchased
food and nonfood items.
 Place
The Future of Retailing
 Growth of Nonstore retailing

 Retail convergence

 The rise of megaretailers

 Growing importance of retail technology

 Global expansion of major retailers

 Retail stores as “communities” or “hangouts”

 Promotion Mix ( Marketing
Communications Mix)
 Advertising – Any paid form of nonpersonal
presentation and promotion of ideas, goods, or services
by an identified sponsor.

 Sales Promotion – Short – term incentives to encourage

the purchase or sale of a product or service.

 Personal selling – Personal presentation by the firm’s

sales force for the purpose of making sales and building
customer relationships.
 Promotion Mix ( Marketing
Communications Mix)
 Public relations – Building good relations with the
company’s various publics by obtaining favorable
publicity, building up a good corporate image, and
handling or heading off unfavorable rumors, stories, and
events.

 Direct marketing - Direct connections with carefully

targeted individual consumers to both obtain an
immediate response and cultivate lasting customer
relationships.
 Promotion Mix ( Marketing
Communications Mix)
Elements in Communication Process
 Sender

 Encoding

 Message

 Media

 Decoding

 Receiver

 Response

 Feedback

 Noise
 Promotion Mix ( Marketing
Communications Mix)
Personal Selling – Personal presentation by the firm’s sales force
for the purpose of making sales and building customer
relationships.
Steps in the selling process
 Prospecting and Qualifying –The step in the selling process in

which the salesperson or company identifies qualified potential

customers.

 Preapproach - The step in the selling process in which the

salesperson learns as much as possible about a prospective
customer before making a sales call.
 Promotion Mix ( Marketing
Communications Mix)
 Approach – The step in the selling process in which the salesperson
meets the customer for the first time.

 Presentation and Demonstration - The step in the selling process in

which the salesperson tells the “value story” to the buyer showing how
the company’s offer solves the customer’s problems.

 Handling objections – The step in the selling process in which the

salesperson seeks out, clarifies, and overcomes customer objections to
buying.
 Promotion Mix ( Marketing
Communications Mix)
 Closing - The step in the selling process in which the
salesperson asks the customer for an order.

 Follow-up – The last step in the selling process in which

the salesperson follows up after the sale to ensure
customer satisfaction and repeat business.