knowledge skills technology innoventures

www.globsyn.com

Before We Start…

It is assumed that after going through the earlier session

you are now able to:

 Basics of Product
 Explain different types and levels of product
 Analyse hierarchy of products

22
www.globsyn.edu.in
www.globsyn.com

Session 23

Marketing Management I

 Topic to be covered in this session:

 New product development & Product Life Cycle (PLC)

33
www.globsyn.edu.in
www.globsyn.com

Session Learning Objectives…

At the end of this session you should be able to:

 Understand Product mix and product mix modification

 Explain Packaging, labelling, warranties
 Understand Product mix pricing
 Stages of Product Life-cycle
 Marketing strategies at different stages

44
www.globsyn.edu.in
www.globsyn.com

Product line and product mix (product assortment)

 Product systems: group of diverse but related items
that function in a compatable manner (ipod –
headphone, cables, cases, power and car accessories)

 Product item: specific version of a product designated

as a distinct offering from a company. Eg. Mach 3 is
product item from Gillette

 Breadth of Product line (product mix width): group of

product items that are closely related in terms of their
functions and benefits. Eg. Unilever’s personal care
and packaged food; Gillette’s product lines include
blades and razors & toiletories

55
www.globsyn.edu.in
www.globsyn.com

Product line and product mix (product assortment)

 Depth of product line (product line length): number of

product items it contains, depends on: the pattern of
consumer requirements, product depth of competition and
company’s resource, increase the depth to cater to multiple
consumer preferences, increase sales by segmenting the
market. Eg. Gillette MACH 3, Sensor, Trac III and Atra.

 Product mix: total set of brands marketed by a company.

Companies increase the width of their product mix to
spread their risk across many product lines rather than
depend on one or few of them. Also it helps brands to
capitalize on their established brand equity

66
www.globsyn.edu.in
www.globsyn.com

Product mix modification

 Modification takes place because of consumer preference
change, new customer segments, company’s competence
and priorities

 Product mix expansion: Achieved by increasing the depth

within a particular product line, that is, increasing the new
variants or increasing the number of product lines (my
research: impact of brand variance on gender in FMCG
sector: with special reference to toothpaste category
suggested no significant influence of variant on gender and
suggested that communication should be based on
psychographics rather than only demographics of a product.
)

77
www.globsyn.edu.in
www.globsyn.com

Product mix modification

 Line extension (line stretching): When a company adds
a similar item to an existing product line with the same
brand name, it is called line extension. Eg. Lifebuoy,
Lifebuoy +. Here some more depth is added to the
product line in order to appeal to more market segments

 Mix extension: When new product lines, related or

unrelated to the current product is added to the
portfolio. Company may use one of its existing brand
names or provide a new name to the product line. If the
company uses its existing brand to offer a new product
line, it is known as brand extension

8
8
www.globsyn.edu.in
www.globsyn.com

Product mix modification

 Trading up (up market stretch): introducing a premium
pricing to a product line to broaden its market and
enhance the line’s prestige. Problems include: if existing
brand name is used, then the company might have to
change its image for acceptance, loyal customers can
become confused and beyond their budget, new
customers may not be convinced, if different brand
name is used, then enormous resources to brand it needs
to be done.

99
www.globsyn.edu.in
www.globsyn.com

Product mix modification

 Trading down (down market stretch): lower priced
product is added to the product line attracting those who
cannot afford higher price with some features of higher
priced product. Problems include: higher priced
consumer can shift to lower price, damage the reputation
and image. Best strategy is to give a new brand name.
Two way stretch is also possible.
 Product mix contraction: achieved either by eliminating
an entire product line or few brands in the product
depth. Done to eliminate low profit / unprofitable
brands and earn higher profits from fewer brands.

10
10
www.globsyn.edu.in
www.globsyn.com

Product mix modification

 Repositioning: changing customers’ perception by changing
the product’s attributes and communication to consumers
 Product modification: changing the quality level of the
product to make it more appropriate for the target market,
functional modification to reflect changing customers’
requirements, to incorporate latest technology and style
modification to appeal to emerging aesthetic concerns.
 Planned obsolescence: modifying products so that those
that are already been sold becomes obsolete before actual
replacement. Modified product is substantially different and
better than earlier versions and people with earlier versions
feel disadvantaged or unfashionable.

11
11
www.globsyn.edu.in
www.globsyn.com

Packaging, labelling, warranties

 Packaging: all activities for designing and producing the
container for the product.
 Label: simple attached tag or an elaborately designed
graphic that is a part of the package.
 Warranty: It is a commitment to repair but no
commitment to replace; for products which are
vulnerable to break-downs; refunds are not given
 Guarantee: It is a commitment to repair and if not
replacement; for products which are not vulnerable to
breakdowns; refunds or replacements are given;

12
12
www.globsyn.edu.in
www.globsyn.com

Product mix pricing (maximizes profit based on total mix)

 Product line pricing: using price steps ( 3 steps low

medium and high with differentiated value - shirt)
 Optional pricing: prices based on choosing additional
features (eg. Automobiles, tourism package)
 Captive product pricing: ancillary pricing is higher in
proportion to the original product. (pen less expensive,
refill more)
 Two part pricing: fixed fee plus variable fee (amusement
park)

13
13
www.globsyn.edu.in
www.globsyn.com

Product mix pricing (maximizes profit based on total mix)

 By-product pricing: some goods like meat, petroleum

products and other products result in by-products
making it easier for the company to charge less for
original products
 Product bundling pricing: pure bundling occurs when
the firm offers its products only as a bundle forming a
tied-in-sales. Mixed bundling occurs when the seller
offers goods both individually and in bundles charging
less for the bundles than individual items purchased
separately.

14
14
www.globsyn.edu.in
www.globsyn.com

Can you now create a product of your

own strategically?

15
15
www.globsyn.edu.in
www.globsyn.com

Product life cycle

16
16
www.globsyn.edu.in
www.globsyn.com

Basics

 Positioning and differentiation must change as the

product, market and competition change over the
product lifecycle

 To have a life cycle means, the product:

– Has limited life
– Passes through different stages posing challenge,
opportunity and problems to sellers.
– Profits rise and fall at different stages
– Require different marketing, HR, financial,
manufacturing and purchasing at each stage

17
17
www.globsyn.edu.in
www.globsyn.com

4 stages of the cycle

 Introduction: slow sales growth as product is introduced
in the market. No profit and more expense
 Growth: rapid market acceptance and substantial profit
improvement
 Maturity: slowdown in sales growth as the product has
achieved acceptance by most potential buyers. Profits
may increase or decrease
 Decline: sales show a downward slope and profit erodes.
 Some interesting patterns are: growth slump maturity
patterns; cycle-recycle patterns; scalloped patterns
(successive growth due to new product category)

18
18
www.globsyn.edu.in
www.globsyn.com

Marketing strategy of introduction stage

 Profits low or negative, prices high and expenses are
high
 When to enter the market
 First can be rewarding but risky and expensive
 Later, to take note whether the firm can bring superior
technology, technology
 Speeding innovation can shorten product life cycles.
(research says that late entrant products on budget had
33% less profit than products which had exceeded
budget but was on time and had on 4% less profit)

19
19
www.globsyn.edu.in
www.globsyn.com

Introduction stage strategies

 First mover advantage (Campbell, Coca Cola, Hallmark):
high recall if product is good/ leader in establishing
attributes that product class should possess/ customer
inertia/ usually targeted at middle level customer/
economies of scale, technological leadership, patents/
more marketing and higher rate of repeat purchases
 Not all have succeeded: Bowman (hand calculators),
Apple’s Newton (personal digital assistant), Netscape
(search browser); Reynolds (ballpoint pen); Osborne
(portable computers) taken over by second mover
advantage

20
20
www.globsyn.edu.in
www.globsyn.com

Introduction stage strategies

 Weaknesses of the pioneers need to be explored and
taken advantage of.
 Pioneer can be divided into inventor (develop patent),
product pioneer (develop model) and market pioneer (to
sell profusely)
 Long term market leadership parameters: vision of a
mass market, persistence, relentless and novelty in
innovation, financial commitment and asset leverage
 Product market expansion grid (3x3)

21
21
www.globsyn.edu.in
www.globsyn.com

Growth stage strategies

 Rapid climb in sales/ early adopters start purchasing/
opportunities attract both the competitors and other
customers/new features and expand distribution
 Depending on demand, price stabilizes or falls as well as
promotion expenditures vary leading to a welcome
promotion-sales ratio as sales increase
 Profits increase as promotion costs spread over larger
volume, and unit manufacturing cost decreases faster
than price declines, owning to producer-learning effect.

22
22
www.globsyn.edu.in
www.globsyn.com

Growth stage strategies

 Companies must be alert to see any declining sales and if
it is, must immediately take adopt new strategies
 For sustained growth: improve product quality, adding
new models, new features and improving styling/ new
markets and distribution channels/ from awareness,
trials to preference and loyalty/ lower prices for price-
sensitive segment (spending on product improvements,
promotion and distributions/ profit – market share
trade-off)

23
23
www.globsyn.edu.in
www.globsyn.com

Maturity stage strategies

 This is the longest period in the cycle and the growth is slow
 Divided into 3 phases: growth, stable, decaying
 Growth (slow, no new channel but new competition)/ stable
(sales per capita flatten, most potential consumers have tried
the brand and future sales dependent on population growth
and replacement demand)/ decay (absolute sales level start
to decline and consumers switch brands)
 Sales slowdown creates overcapacity, intensifies competition,
weak competitor withdraw and few leaders dominate
through high volume and low cost
 There is an emergence a multitude of niche market, including
market specialist, product specialist and customizing firms

24
24
www.globsyn.edu.in
www.globsyn.com

Maturity stage strategies

 Decision for: whether to go for high volume low cost or
niche through low volume high cost or low and high end
segments
 Some companies abandon weaker products in search of
new and profitable ones.
 Changing the course of a brand can happen through

25
25
www.globsyn.edu.in
www.globsyn.com

Maturity stage strategies

 Market modification by expanding the market through
volume sales which include number of brand users x usage
rate per user. Both these parameters can be expanded, in the
case of expanding users, by converting non users or
competitor’s users to one’s brand or by entering a new market.
In the case of expanding usage rates, have consumers use
products in more occasions (soup for a variety of reasons); use
more of the product in one occasion (larger glass of juice); use
the product in new ways (antacid as a calcium supplement)
 Product modification through quality improvement, feature
improvement and style improvement
 Marketing program modification through price, distribution
and communication.

26
26
www.globsyn.edu.in
www.globsyn.com

Decline stage strategies

 Sales decline for a number of reasons, including
technological advances, shifts in consumer tastes, and
increased domestic and foreign competition

 As sales and profits decline, some firms withdraw.

Those remaining may reduce the number of products
they offer, exiting smaller segments and weaker trade
channels, cutting marketing budgets, and reducing
prices further. Unless strong reasons for retention exist,
carrying a weak product is often very costly.

27
27
www.globsyn.edu.in
www.globsyn.com

Decline stage strategies

Eliminating Weak Products: Besides being unprofitable,

weak products consume a disproportionate amount of
management’s time, require frequent price and inventory
adjustments, incur expensive setup for what are usually
short production runs and cast a negative shadow on
company image.

28
28
www.globsyn.edu.in
www.globsyn.com

Decline stage strategies

 Harvesting and Divesting: Strategies for harvesting and
for divesting are quite different. Harvesting calls for
gradually reducing a product or business’s costs while
trying to maintain sales. When a company decides to
divest a product with strong distribution and residual
goodwill, it can probably sell it to another firm.
 Acquiring a divested brand requires a revitalization
strategy with the existing awareness.
 If there are no buyers, then brand liquidation may
happen depending on the number of customers who still
possess the brand

29
29
www.globsyn.edu.in
www.globsyn.com

Decline stage strategies

 The process of what is to be done during the decline
stage are as follows: identify the declining product, form
a product review committee for recommending whether
to leave it alone, modify its marketing strategy or drop
it.

30
30
www.globsyn.edu.in
www.globsyn.com

Decline stage strategies

31
31
www.globsyn.edu.in
www.globsyn.com

Critiques
 Life-cycle patterns are too variable in shape and duration
to be generalized, and that marketers can seldom tell
what stage their product is in.
 A product may appear mature when it has actually
reached a plateau prior to another upsurge
 Rather than an inevitable course, the PLC pattern is the
self-fulfilling result of marketing strategies, and that
skilful marketing can in fact lead to continued growth

32
32
www.globsyn.edu.in
www.globsyn.com

Before We End…
It is assumed that after going through the current session
you are now able to:

 Generic understanding about the product mix

 Comprehend the product mix modification
 Understand issues related to warranty, packaging,
labelling
 Analyse the product mix pricing
 Stages of Product Life-cycle
 Marketing strategies at different stages

33
33
www.globsyn.edu.in
www.globsyn.com

Crib Sheet

Product mix modification: Generic product:

Product mix expansion
Line extension (line stretching)
Mix extension
Trading up (up market stretch):
Trading down (down market
stretch)
Product mix contraction
Repositioning
Product modification
Planned obsolescence
Warranty:
It is the commitment to repair but no
commitment to replace.
Product systems
Product item
Breadth of Product line
Depth of product line
Product Mix Pricing:
1.Product Line Pricing
2.Optional Pricing
3.Captive Product Pricing
4.Two Part Pricing
5.By-Product Pricing
6.Product Bundling Pricing

34
34
www.globsyn.edu.in
www.globsyn.com

Crib Sheet

Packaging: Marketing strategy:

All activities for designing and 1.Introduction: Speeding
producing the container for the innovation can shorten product life
product. cycles
2. Growth: Companies must be alert
Stages of PLC: to see any declining sales and if it is,
1.Introduction must immediately take adopt new
2.Growth strategies
3.Maturity 3.Maturity: Sales slowdown creates
4.Decline overcapacity, intensifies
competition
Label: 4.Decline: Sales decline for a
Simple attached tag or an elaborately number of reasons, including
designed graphic that is a part of the technological advances, shifts in
package. consumer tastes, and increased
domestic and foreign competition

35
35
www.globsyn.edu.in
www.globsyn.com

THANK YOU…

All information, including graphical representations, etc provided in this presentation is for exclusive use of current GBS
students and faculty. No part of the document may be reproduced in any form or by any means, electronic or otherwise, without
written permission of the owner.

36
36
www.globsyn.edu.in