Unit : 8

Product
• A product is something that is manufactured for
sale in the market.
• Customer needs are met by the usage of products.
• Product is one of the main components of
marketing—all marketing activities revolve
around the product.
• Products can be tangible or intangible.
• Tangible products are known as goods while
intangible products are called services
• A product can be defined as
– “A good, idea, method, information, object, or
service that is the end result of a process and
serves as a need or want satisfier. It is usually a
bundle of tangible and intangible attributes
(benefits, features, functions, uses) that a seller
offers to a buyer for purchase.”
Product – Definition in Marketing
• A product is what a seller has to sell and what a buyer has to
buy it satisfies the needs of customers.
• Customers purchase products because they are capable of
realizing some benefits to the purchaser.
• A marketer can satisfy the needs and wants of his customers
by ‘offering something’ in exchange for money. And this
‘offering’ is basically a product.
• The product is one of the important elements of the 4Ps of the
marketing mix.
• It consists of a bundle of tangible and intangible attributes
that satisfies consumers.
• It is not just a bundle of physical attributes, but a bundle
of perceived benefits which satisfy consumer’s needs.
• A bad product not only generates bad name for the firm
but also affects negatively the price set for the product,
dissuades the channel members and reduces the
believability of the promotional measures
• “A product is a set of tangible physical attributes in an
identifiable form” (W.J. Stanton).
• According to W. Alderson “A product is a bundle of
utilities consisting of various product features and
accompanying services”.
 Product – Features of a Product
• Tangibility:
– Products are tangible in nature, customers can touch, seen or feel a products.
– For example, car, book, computer etc.
• Intangible Attributes:
– Service products are intangible in nature, services like, consultancy, banking, insurance
etc.
– The product may be combination of both tangible and intangible attributes like
restaurants, transportation, in case of a computer it is a tangible product, but when we
will talk of its free service provided by dealer, then the product is not only a tangible
item but also an intangible one.
• Associated Attributes:
– The attributes associated with product may be, brand, packaging, warranty, guarantee,
after sales services etc.
• Exchange Value:
– Irrespective of the fact that whether the product is tangible or intangible, it should be
capable of being exchanged between buyer and seller for a mutually agreed price.
• Customer Satisfaction:
– A product satisfies the customer needs and wants of customers, value of products is also
determined by the level of satisfaction given by a product after purchase.
 Characteristics of Product
• It can be a single commodity or a service; a group of
commodities or a group of services; a product service
combination, or even a combination of several products
and services.
• Its meaning is determined by the needs and desires of the
consumer. The purpose of a product is to satisfy some need
of the consumers. The buyers purchase problem-solving
and time for creativity when they purchase a computer
system.
• It may be durable such as those that are expected to deliver
a stream of satisfaction over a period of time,
 Characteristics of Product
• Products may be luxuries which might be
needed as a symbol of prestige and status such
as car, a well- furnished bungalow in a posh
colony or necessities which are needed to keep
the body and soul together, such as bread,
milk, sugar, etc.
• It may be an agricultural, mineral, forest or
semi­-manufactured or manufactured product.
 Consumer Product Classification
• Convenience Goods
– Inexpensive, frequently purchased.
– Little effort needed to purchase them.
– Staples, Impulse and emergency goods.
• Shopping Goods
– Not as frequently as convenience products
– Costly
– Consumer does research before purchase.
• Specialty Goods
– Unique features
– Consumer is prepared to pay a premium price.
• Unsought Goods
– Those good that consumers do not know or
– Doesn’t think of buying.
 Durability and Tangibility
Nondurable Goods
– Tangible goods consumed in one or few uses
– Purchased frequently
– Strategy : availability , low priced , heavily
advertised
Durable Goods
– Tangible goods that survive many uses
– Require more personal selling and service
– Higher margins and requires seller guarantee
 FMCG Product Categories

• There are mainly 4 product categories in

FMCG:
• Home and Personal Care (Home Care and
Personal Care)
• Foods and Beverages
• Cigarettes
• Alcohol
• Household Care: It can be divided into the
following categories
• Fabric wash - Laundry soaps and Synthetic
detergents
• Household cleaners - Dish/utensil cleaners,
floor cleaners, Toilet cleaners, Air fresheners,
Insecticides and Mosquito repellants, Metal
polish and Furniture polish
• Personal Care: It can be divided into the following categories
– Oral Care - Toothpaste
– Skin Care - Creams, Lotions, Jellies
– Hair Care - Hair Oil, Shampoos
– Personal Wash - Soaps
– Cosmetic & Toiletries
– Talcums
– Deodorants
– Perfumes
– Paper Products - (tissues, diapers, sanitary)
– Shoe care
• Foods • Beverages
– Confectionary
– Tea
– Staples/ Cereals
– Bakery products - Biscuits, – Coffee
bread, cakes – Juices
– Snack food – Bottled water
– Chocolates
– Ice cream
– Health beverages
– Processed fruits – Soft drinks
– Vegetables
– Meat
– Dairy products
– Branded flour, rice, sugar
 Product Mix
• The product mix is a combination of products
manufactured or sold by the same organization
• Smaller or medium firms usually offer products that
are related to each other while bigger ones go for large
scale diversification
• Dealing with multiple products enables a firm to
expand its customer base and spread risk among its
various offerings
• The product mix includes both product lines and
product items
• Product Line:
– Product line is a group of products that are closely
related either because they satisfy a class of need,
or used together, are sold to the same customer
group, are marketed through the same types of
outlets, or fall within given price ranges or that are
considered a unit because of marketing, technical,
or end-use considerations.
– For example, The Sunsilk range of shampoos and
conditioners constitute a product line.
• Product Item:
– It is a distinct unit within the product line that is
separate from others on basis of colour, size, price
or other attributes
– For example, Sunsilk Thick and Long shampoo is
a product unit distinguishable from other items in
the product range
 Structure of Product Mix
• Width:
– Width of the product mix means the number of
different product lines found within the company.
– Thus, breadth is measured by the number of
product lines carried.
– For example, Bajaj group has a number of
subsidiaries under it producing bulbs, fluorescent
lights, mixers and grinders, toasters, motorcycles,
pressure cookers and a host of other products.
• Depth:
– Depth of the product mix refers to the average number
of items offered by the company within each product
line.
– It is measured by assortment of sizes, colours, models,
prices and quality offered within each product line.
– For instance, Hindustan Unilever offers a number of
variants like Lux Fresh Splash, Strawberry and cream,
Peach and cream, Sandal and cream, etc. within the
product line Lux soaps.
• Consistency:
– The consistency of product mix points out how
closely related the various product lines are in
terms of consumer behaviour, production
requirements, distribution channels or in some
other way.
– For example, the products produced by the General
Electric Company have an overall consistency in
that most products involve electricity in one way or
the other.
• According to Kotler, all three dimensions of product mix
have a market rationale.
• By increasing the width of the product mix the company
hopes to capitalize on its good reputation and skills in
present markets.
• By increasing the depth of its product mix, the company
hopes to entice the patronage of buyers of widely differing
tastes and needs.
• By increasing the consistency of its product mix, the
company hopes to acquire an unparalleled reputation in a
particular area of endeavour.
 Types of New Products
• New-to-the-World Products
– New-to-the-world products are innovative products
that create an entirely new market, like water purifiers.
• New Product Lines:
– New products that allow a company to enter an
established market like LCD television.
• Additions to Existing Product Lines:
– New products that supplement a company’s
established product lines like Fair and Lovely for men.
 Types of New Products
• Improvements and Revisions of Existing Products:
– New products that provide improved performance or greater
perceived value and replace existing products, examples are
books and software.
• Repositioning:
– Existing products that are targeted to new markets or market
segments, this is beneficial in expansion of market.
• Price Differentiation:
– Sometimes due to increasing competition in the market, the
manufacturers have to offer the product with same features
and functions but at lower price.
 Product Hierarchy
• Need-Family:
• It is a core need that underlies the existence of a product family
• These products satisfy a core need of the group of people or of an individual.
• They are called products from the “Need Family”. Eg. Hunger is core need which
is satisfied by food.
• Product-Family:
• These consist of all the product classes that can satisfy a core need with
reasonable effectiveness. It comprises of varieties of product within this group,
which compete with one another to satisfy the same need.
• These are ‘family of products satisfying the same need’. Eg. Fast foods, Snacks,
Veg. Thali, etc.
• Product Class:
• It is a group of products within the product family recognized as having a certain
functional coherence.
• A group of products, within this family of products, having similar characteristics
are labelled as product class or product category. Eg. Fast Foods.
 Product Hierarchy
• Product Line:
– It is a group of products within a product class which are closely related to
each other since they perform a similar function, are sold to the same customer
groups, are marketed through the same or channels, or fall within the given
price ranges.
– A product line may consist of different brands, or a single family brand, or
individual brand that has been line extended. Eg. Burgers, Pizzas, etc.
• Product Type:
– It is a group of items within a product line that encompasses one of several
possible forms of the product. Eg. Chicken burger.
• Item (Stock Keeping Unit or Product Variant):
– It is a distinct unit within a brand or product line which is distinguishable by
size, shape, price, appearance, or some other attribute. Eg. Burger King’s
Jumbo Chicken burger.
 Levels of Product
• Core Product
– It includes the key feature of a product. It forms the basis for other product
offering levels.
– For example, the key feature of a car is to travel from one place to another.
Therefore, a simple and small car with no additional features is a core product.
• Basic Product:
– It includes some added benefits along with the basic feature of a product. For
example, a clean and spacious car is the basic product.
• Expected Product:
– It refers to a product that is desired by customers.
– It varies from individual to individual depending on other factors, such as social
class.
– For example, a customer buying a car may expect an air conditioner and music
system in it.
• Augmented Product:
– It includes additional attributes of a product as compared to products
offered by competitors.
– The additional benefits satisfy rational customers more in terms of value.
– For example, a car may have special in-built features, such as LCD TV
or refrigerator.
• Potential Product:
– It compares the benefit derived from the product in future with the
current product.
– It creates a value for customers beyond their expectations.
– For example, a high technology gadget car with good ambience and
comfort is a potential product.
 Product Design
• Changes in design are largely dictated by whether
they would improve the prospects of greater sales,
and this, over the accompanying costs.
• Changes in design are also subject to cultural
pressures.
• Most products fall in between the spectrum of
“standardization” to “adaptation” extremes.
• The application the product is put to also affect
the design
 Factors encouraging standardization are

• Economies of scale in production and

marketing
• Consumer mobility – The more consumer’s
travel the more is the demand
• Technology
• Image, for example “Japanese”, “made in”.
 Factors encouraging adaptation are
• Differing Usage Conditions:
• These may be due to climate, skills, level of literacy,
culture or physical conditions.
• General Market Factors:
• Incomes, tastes etc. Canned asparagus may be very
affordable in the developed world, but may not sell well
in the developing world.
• Government:
• Taxation, import quotas, non-tariff barriers, labeling,
health requirements.
• History:
• Sometimes, as a result of colonialism,
production facilities have been established
overseas.
• Financial Considerations:
• In order to maximize sales or profits the
organization may have no choice but to adapt
its products to local conditions
 Product Decision
• Decisions regarding the product, price, promotion
and distribution channels are decisions on the
elements of the “marketing mix”
• Errors in product decisions are legion for e.g. - for
example large horsepower tractors may be totally
unsuitable for areas where small scale farming exists
and where incomes are low
• The decision whether to sell globally standardized or
adapted products is too simplistic for today’s market
place
Product – Elements of Production Decisions

• The main elements to consider are the

• production process itself,
– Specifications,
– Culture,
– The physical product,
– Packaging,
– Labeling,
– Branding,
– Warranty and
– Service
 Production Process
• The key question is, can we ensure continuity of
supply?
• In manufactured products this may include
decisions on the type of manufacturing process
– artisanal, job, batch, flow line or group
technology.
• In many agricultural commodities factors like
seasonality, perishability and supply and
demand have to be taken into consideration
• Quantity and quality of horticultural crops are
affected by a number of things
• These include input supplies (or lack of them),
finance and credit availability, variety
(choice), sowing dates, product range and
investment advice.
 Specification
• Specification is very important in agricultural
products
• Some markets will not take produce unless it is
within their specification
• Specifications are often set by the customer,
but agents, standard authorities (like the EU or
ITC Geneva) and trade associations can be
useful sources.
• Quality requirements often vary considerably
for e.g. - In the Middle East, red apples are
preferred over green apples
• In export the quality standards are set by the
importer
 Culture
• Product packaging, labeling, physical
characteristics and marketing have to adapt to
the cultural requirements when necessary
• Religion, values, aesthetics, language and
material culture all affect production decisions.
 Physical Product
• The physical product is made up of a variety of
elements.
• These elements include the physical product and the
subjective image of the product
• Consumers are looking for benefits and these must be
conveyed in the total product package
• Physical characteristics include range, shape, size,
color, quality, quantity and compatibility
• Subjective attributes are determined by advertising,
self-image, labeling and packaging
 Packaging
• Packaging serves many purposes
• It protects the product from damage which could be
incurred in handling and transportation and also has a
promotional aspect
• It can be very expensive. Size, unit type, weight and
volume are very important in packaging
• The customer may also decide the best form of packaging
• Costs of packaging have always to be weighed against
the advantage gained by it
• Increasingly, environmental aspects are coming into play
 Labeling
• Labeling not only serves to express the contents of the
product, but may be promotional
• The EU is now putting very stringent regulations in force
on labeling, even to the degree that the pesticides and
insecticides used on horticultural produce have to be listed
• This could be very demanding for producers, especially
small scale, ones where production techniques may not be
standardized
• Labels may have to be multilingual, especially if the
product is a world brand
 Product Development
• The entire product development process is
characterized by a number of factors which
complicate its conduct
• For products that require a substantial amount
of technical research and development work,
the period from the original concept of the
idea until commercialization is typically five
to ten years
• Preliminary screening of new-product ideas.
• The time substantial amounts of expenditures are authorized
for research and development.
• Authorization for prototype manufacture and market or use
testing.
• The decision regarding full-scale manufacture and marketing
• New products that are quite similar to the present line in
production and selling characteristics will not require a
process of development so elaborate or as long as those that
are more alien to the established knowledge and know-how
of the company organization.
 NEW PRODUCT DEVELOPMENT
PROCESS
• These include at least the following phases:
– Generating new-product ideas.
– Preliminary appraisal of new product ideas and
selection of projects.
– Product and market research.
– Process research.
– Prototype testing in production and marketing.
– Commercialization.
 Generating New-Product Ideas
• It is almost a truism that new product ideas
should match the capabil­ities of the enterprise
and be generated in sufficient number to
present a real choice of opportunities. Both
internal and external sources should be
consulted
• Internal Sources:
• Stimulating a flow of ideas internally is largely
a matter of gaining and holding the interest of
groups in the organization.
• One means of doing this is to provide adequate
machinery for prompt acknowledgement,
review, and decision regarding new-product
ideas submitted by insiders
• Internal sources of new-product ideas are
– Research and Development Departments
– Technical Service Staffs
– Company Salesmen
– Executive Personnel
– Company Sales Records
– Company Patent Departments
• External Sources
• The most common are probably competitors,
free-lance inventors, and trade literature.
• Competitors:
• Successful competitors can often be a source
of valuable clues concerning the number of
items or models which should be included in
the product line.
• Free-Lance Inventors:
• Although not the important source of new- product opportunities
they once were, free-lance inventors are still credited with some
important product innovations
• Trade Literature:
• Literature searches, both in United States pub­lications and those of
foreign countries, have proved fruitful for some companies
• In a number of instances, equipment developed in foreign countries
has later appeared in the United States through import channels
• Other Outside Sources:
• These include professional society meetings, trade shows, exhibits,
government research programs, university research programs, and
consulting organizations
 Preliminary Appraisal
• This phase has two major purposes. The first is to eliminate
ideas that are clearly unworthy of further consideration
• The second is to select from among the remainder those
with enough promise to warrant ex­ploratory work by
technical research
• Major considerations in the appraisal of a new-product idea
usually include expected profit potential, the competitive
situation, the general adaptability of the company to the
new product, and the scale of in­vestment that would be
necessary in relation to the funds the company has available
• Major considerations in the appraisal of a new-
product idea usually include
• expected profit potential
• the competitive situation
• the general adaptability of the company to the
new product and
• the scale of in­vestment that would be necessary
in relation to the funds the company has available
• Many new-product ideas involve problems of
technical design
• Produc­tion considerations also enter in the
form of the nature of production facilities
required, approximate costs of production,
availability of ma­terials, and continuity of
their supply
 Product and Market Research
• This phase includes the technical, economic, and
market research car­ried on after an idea has been
selected as a project after the preliminary appraisal.
• The amount of technical research necessary will
vary greatly, depending on the difficulties involved
in achieving a satisfactory product.
• The more similar the new product is to those
currently being manufactured, the less likely is the
need for significant amounts of technical work.
• During this phase, the physical properties of
the new product are de­termined, small
quantities are prepared in the laboratory,
research on possible uses is initiated,
preliminary work on patents starts, and pre­
liminary estimates of production costs are
made
• It is usually advisable to prepare a study of the economic possibilities of the
new product at this time which would seek answers to such questions as:
– What is the precise market or segment of the market in which the new product
promises the greatest benefit to users?
– How much effort will be needed to generate an acceptable revenue, and how much
will it cost?
– How much new investment must customers make in order to use the new product?
– How much change must customer firms make in their present pro­duction techniques
and routines to use it?
– Have customers got the technical and application skills needed to use the new
product?
– How many people in the typical customer firm must be convinced before a sale can
be made and how hard are they to reach?
– How solid are relations between the typical customer and his pres­ent supplier?
– What buying motivation can we offer the customer, such as reduc­tion in cost, an
increase in attractiveness and volume of the end product, or possible increase in its
price?
– What risks will the user of the new product incur?
– How fast will any information we may supply permeate the typical customer firm?
– Are there any built-in customer roadblocks to trying or adopting the new product?
 Process Research
• In point of time, this phase may overlap the preceding
one as the technical group begins to investigate the
most feasible way of producing the new product and
developing information needed for patent applica­tion.
• The best way to test various manufacturing
techniques may be to build a pilot plant and produce
the product in small quantities.
• Quality control problems are also investigated during
this phase.
 Prototype Testing
• With modest amounts of the product available,
market development personnel can begin field
testing with a selected group of customers who agree
to cooperate, often in return for assurances of
preferential treat­ment if the product proves
satisfactory
• During this phase there is often a review by an
appropriate executive committee which makes
recommendations concerning the future dis­position
of the project
• The regular sales organization would begin
familiarizing its members with the product,
and promotional strategy would be worked out
along with decisions concerning selling
methods
• It also would be necessary about this time to
choose a brand name for the product and
determine package design.
 Commercialization
• New products approved for commercialization enter the
final phase of the development process
• During the period required to get into full- scale production
various activities, such as package design, promotional
literature, and advertising copy can be com­pleted
• Depending on the similarity of the new product to present
products and its estimated market potential, it might be
assigned to an existing division, to a new division
specifically established for it, or to a new enterprise owned
wholly or partially by the developing company
 Product Life Cycle
• Products, like people, have life cycles.
• The product life cycle is broken into four stages:
introduction, growth, maturity, and decline
• This concept is used by management and by
marketing professionals as a factor in deciding when
it is appropriate to increase advertising, reduce prices,
expand to new markets, or redesign packaging.
 How Product Life Cycles Work
• A product begins with an idea, and within the confines of modern
business, it isn't likely to go further until it undergoes research and
development and is found to be feasible and potentially profitable.
• At that point, the product is produced, marketed, and rolled out
• The product introduction phase generally includes a substantial
investment in advertising and a marketing campaign focused on
making consumers aware of the product and its benefits.
• Assuming the product is successful, it enters its growth phase.
Demand grows, production is increased, and its availability
expands
• The stage of a product's life cycle impacts the
way in which it is marketed to consumers.
• A new product needs to be explained, while
a mature product needs to be
differentiated from its competitors
 Product Life Cycle Stages 
• Introduction Stage
• This stage of the cycle could be the most expensive
for a company launching a new product
• The size of the market for the product is small, which
means sales are low, although they will be increasing
• On the other hand, the cost of things like research and
development, consumer testing, and the marketing
needed to launch the product can be very high,
especially if it’s a competitive sector.
• Growth Stage
• The growth stage is typically characterized by a
strong growth in sales and profits, and because
the company can start to benefit from economies
of scale in production, the profit margins, as well
as the overall amount of profit, will increase
• This makes it possible for businesses to invest
more money in the promotional activity to
maximize the potential of this growth stage
• Maturity Stage 
• During the maturity stage, the product is established
and the aim for the manufacturer is now to maintain the
market share they have built up
• This is probably the most competitive time for most
products and businesses need to invest wisely in any
marketing they undertake
• They also need to consider any product modifications
or improvements to the production process which
might give them a competitive advantage
• Decline Stage 
• Eventually, the market for a product will start to shrink,
and this is what’s known as the decline stage
• This shrinkage could be due to the market becoming
saturated (i.e. all the customers who will buy the product
have already purchased it), or because the consumers are
switching to a different type of product
• While this decline may be inevitable, it may still be
possible for companies to make some profit by switching
to less-expensive production methods and cheaper markets
Nontraditional Product Life
Cycles
Styles, Fashions, and Fads
• Fashion product life cycles last a shorter time than basic product
life cycles.
• By definition, fashion is a style of the time.
• A large number of people adopt a style at a particular time.
• When it is no longer adopted by many, a fashion product life cycle
ends. Fashion products have a steep decline once they reach their
highest sales.
• The fad has the shortest life cycle. It is typically a style that is
adopted by a particular sub-culture or younger demographic group
for a short period of time.
• The overall sales of basic products are the highest of the three types
of products, and their life cycles are generally the longest.
• Fashion opinion leaders (celebrities,
magazines, early adopters) are the next most
likely adopters of a fashion product. They
copy the fashion innovators and change the
product into a popular style. The product is
produced by more companies and is sold at
more retail outlets.
 DIFFUSION
OF
INNOVATION
 Definition

• Every market has groups of customers who differ in

their readiness and willingness to adopt a new
product. An innovative product spreads (diffuses)
through a market not in one straight course but in
successive, overlapping waves.
• Most populations show the following pattern in the
adoption of new consumer goods: innovators (2
percent of population), early adopters (14 percent),
early majority (34 percent), late majority (34
percent), and laggards (16 percent).
• Diffusion is the process by which an
innovation is communicated through certain
channels over time among the members of a
social system.
• Given that decisions are not authoritative or
collective, each member of the social system
faces his/her own innovation-decision that
follows a 5-step process:
• Knowledge – person becomes aware of an innovation
and has some idea of how it functions,
• Persuasion – person forms a favorable or unfavorable
attitude toward the innovation,
• Decision – person engages in activities that lead to a
choice to adopt or reject the innovation,
• Implementation – person puts an innovation into use,
• Confirmation – person evaluates the results of an
innovation-decision already made.
 Elements of Diffusion of Innovations
• The key elements in diffusion research are:
• Innovation
• Rogers defines an innovation as "an idea, practice, or object that is
perceived as new by an individual or other unit of adoption”.
• Communication channels
• A communication channel is "the means by which messages get from one
individual to another”.
• Time
• "The innovation-decision period is the length of time required to pass
through the innovation-decision process“ ."Rate of adoption is the relative
speed with which an innovation is adopted by members of a social system”.
• Social system
• "A social system is defined as a set of interrelated units that are engaged in
joint problem solving to accomplish a common goal”.
 Types of Innovation-Decisions

• There are three types of innovation-decisions

within diffusion of innovations. Two factors
determine what type a particular decision is:
• Whether the decision is made freely and
implemented voluntarily and
• Who makes the decision.
• Based on these considerations, three types of
innovation decision have been identified:: Optional
innovation-decisions, collective innovation-
decisions, authority innovation-decisions.
• Optional Innovation-Decision This decision
is made by an individual who is in some way
distinguished from others in a social system.
• Collective Innovation-Decision This decision
is made collectively by all individuals of a
social system.
• Authority Innovation-Decision This decision
is made for the entire social system by few
individuals in positions of influence or power.
 Adoption Process
• A series of stages a potential buyer goes
through in deciding to buy and make
regular use of a new product.
 Stages of the Adoption Process

• Awareness

• Interest

• Evaluation

• Trial

• Adoption
 Diffusion
• The process in which the adoption of an
innovation is spread and adopted throughout
the marketplace over time.
 Innovation
“…an offering that is new to the marketplace… a
product, service, or idea…consumers within a
market segment perceive as new and that has
an effect on existing consumption patterns.”
 Most Important Inventions That Changed
Everyday Life- India

1. LPG (Propane) 9. Death of the Post

2. Pressure Cooker Card”- Use of Fax
3. Photocopier and e-mail
4. Word Processor replaced
5. Air Conditioner
6. Cable Television
7. Telecom Revolution
8. The Chip
 Five stages of the adoption process
• Knowledge :In this stage the individual is first exposed to
an innovation but lacks information about the innovation.
• During this stage of the process the individual has not
been inspired to find more information about the
innovation.
• Persuasion :In this stage the individual is interested in the
innovation and actively seeks information/detail about the
innovation.
• Decision: In this stage the individual takes the concept of
the innovation and weighs the advantages/disadvantages
of using the innovation and decides whether to adopt or
reject the innovation.
• Implementation :In this stage the individual employs
the innovation to a varying degree depending on the
situation.
• During this stage the individual determines the
usefulness of the innovation and may search for
further information about it.
• Confirmation: Although the name of this stage may
be misleading, in this stage the individual finalizes
their decision to continue using the innovation and
may use the innovation to its fullest potential.
 Adopter Categories
• The adoption of an innovation follows an S
curve when plotted over a length of time. The
categories of adopters are:
• Innovators,
• Early adopters,
• Early majority,
• Late majority, and
• Laggards.
• Innovators are the first individuals to adopt an innovation.
Innovators are willing to take risks, youngest in age, have
the highest social class, have great financial lucidity, very
social and have closest contact to scientific sources and
interaction with other innovators.
• Early Adopters This is second fastest category of
individuals who adopt an innovation.
• These individuals have the highest degree of opinion
leadership among the other adopter categories.
• Early adopters are typically younger in age, have a higher
social status, have more financial lucidity, advanced
education, and are more socially forward than late
adopters.
• Early Majority Individuals in this category
adopt an innovation after a varying degree of
time.
• This time of adoption is significantly longer
than the innovators and early adopters.
• Early Majority tend to be slower in the
adoption process, have above average social
status, contact with early adopters, and show
some opinion leadership
• Late Majority Individuals in this category will adopt
an innovation after the average member of the society.
• These individuals approach an innovation with a high
degree of skepticism and after the majority of society
has adopted the innovation.
• Late Majority are typically skeptical about an
innovation, have below average social status, very little
financial lucidity, in contact with others in late majority
and early majority, very little opinion leadership.
• Laggards Individuals in this category are the last to
adopt an innovation.
• Unlike some of the previous categories, individuals in
this category show little to no opinion leadership.
• These individuals typically have an aversion to change-
agents and tend to be advanced in age.
• Laggards typically tend to be focused on “traditions”,
have lowest social status, lowest financial fluidity, oldest
of all other adopters, in contact with only family and
close friends, very little to no opinion leadership.
 Portfolio Analysis
• Portfolio analysis is an examination of the
components included in a mix of products with
the purpose of making decisions that are
expected to improve overall return
 What Does Portfolio Analysis Mean?

• When a company markets a range of different

product or services it is required to conduct
portfolio analysis periodically
• This means to analyze each product separately
in terms of profitability, contribution to the
company’s income and growth potential
• This analysis facilitates the identification of
products that are not profitable at all or play
poorly within the group
 BCG Matrix
The BCG Matrix (Growth-Share Matrix) was created in the
late 1960s by the founder of the Boston Consulting Group,
Bruce Henderson, as a tool to help his clients with efficient
allocation of resources among different business units.
It has since been used as a portfolio planning and analysis tool
for marketing, brand management and strategy development.
• The BCG Matrix helps a company with multiple business
units/products by determining the strengths of each
business unit/product and the course of action for each
business unit/product.
• The BCG Matrix helps managers classify business
units/products as low or high performers using the
following criteria:
• Relative market share (strength of a business unit's position
in that market)
• Market growth rate (attractiveness of the market in which a
business unit operates)
 Stars
• BUs/products characterized by high-growth
and high- market share. They often require
heavy external investment to sustain their
rapid growth as they may not be producing
any positive cash flow. Eventually, their
growth will slow, and they will turn into cash
cows.
 Cash Cows
• BUs/products characterized by low-growth,
high-market share. These are well established
and successful BUs that do not require
substantial investment to keep their market
share. They produce a lot of cash to be used
for other business units (Stars and Question
Marks) of the company.
 Question Marks
• BUs/products characterized by low-market
share in high-growth markets. They require a
lot of financial resources to increase their
share since they cannot generate enough cash
themselves. The crucial decision is to decide
which Question Marks to phase out and which
ones to grow into Stars.
 Dogs
• BUs/products with low-growth, low-market
share. In addition, they often have poor
profitability. The business strategy for a Dog is
most often to divest. However, occasionally
management might make a decision to hold a
Dog for possible strategic repositioning as a
Question Mark or Cash Cow
GE/McKinsey Matrix
 Strategic Emphasis
• This matrix was designed to overcome the
shortfalls that companies were encountering
with the BCG matrix and to fill the requirement
to compare numerous and diverse businesses.
• The scope of application for this model extends
from a corporate level to a business level
incorporating the products making up the
business.
 The Approach

• This model suggests that the long run

profitability of each unit is influenced by the
unit’s business strength and that the ability and
incentive of a firm to maintain or improve its
position in a market depends on the industry
attractiveness.
Factors that Affect Industry Attractiveness

• There are several factors which can help determine

attractiveness. These are listed below:
• Industry size
• Industry growth
• Market profitability
• Pricing trend
• Competition intensity
• Overall risk and returns in the industry
• Opportunity to differentiate products and services
• Distribution structure
Factors that Affect Business Strength
• Strength of assets and competencies
• Relative brand strength
• Market share
• Customer loyalty
• Relative cost position
• Distribution strength
• Record of technological or other innovation
• Access to finance and other investment resources
• The three cells at the top left hand side of the matrix are the
most attractive in which to operate and require a policy of
investment for growth – these are usually coloured green.
• The three cells running diagonally from left to right have a
medium attractiveness, are coloured yellow and the
management of businesses within this category should be
more cautious and with a greater emphasis being placed on
selective investment and earning retention.
• The three cells at the bottom right hand side are the least
attractive, therefore coloured red and management should
follow a policy of harvesting and / or divesting unless the
relative strengths can be improved.