levels of producut ( marketing )

THE PRODUCT

• Products are almost always combinations of the tangible and intangible. The entire package is sometimes referred to as the augmented product.

• The mix of tangibles and intangibles in the augmented product varies from one product or service to another.

THE PRODUCT

• Product is a key element in the market offering. Marketing mix planning begins with formulating an offering to meet target customers’ needs or wants.

• The customer will judge the offering by three basic elements : product features and quality, services mix and quality, and price appropriateness.

COMPONENTS OF THE MARKET OFFERING

Attractiveness of the market offering

Value based pricing

Product features and quality

Services mix and quality

PRODUCT LEVELS

• In planning its market offering, the marketer needs to think through five levels of the product.

• Each level adds more customer value, and the five constitute a customer value hierarchy.

( Contd…. )

FIVE LEVELS OF THE PRODUCT

(1) CoreProduct

(2) Basic Product

(3) ExpectedProduct(4) Augmented

Product

(5) PotentialProduct


• (1) Core Product / Core Benefit : The fundamental service or benefit that the customer is really buying.

• (2) Basic Product : At the same level, the marketer has to turn the core benefit into a basic product.

• (3) Expected Product : A set of attributes and conditions buyers normally expect when they purchase this product.


• (4) Augmented Product : The marketer prepares an augmented product that exceeds customer expectations.

• Today’s competition essentially takes place at the product-augmentation level. ( In less developed countries, competition takes place mostly at the expected product level ). ( Contd.….. )


( Augmented Product )

• According to Levitt : The new competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.


Some things should be noted about product-augmentation strategy :

• First, each augmentation adds cost. The marketer has to ask whether customers will pay enough to cover the extra cost.

• Second, augmented benefits soon become expected benefits. For gaining competitive advantage one will have to search for still other features and benefits.


( product-augmentation strategy )

• Third, as companies raise the price of their augmented product, some competitors can offer a “ Stripped-down ” version at a much lower price. Thus alongside the growth of fine products we see the emergence of lower-cost products for the clients who simply want the basic product.


• (5) Potential Product : encompasses all the possible augmentations and transformations the product might undergo in the future. Companies search for new ways to satisfy customers and distinguish their offer.

• ( Successful Companies add benefits to their offering that not only satisfy customers but also surprise and delight them. ) “ The best way to hold customers is to constantly figure out how to give them more for less. ”

PRODUCT DIFFERENTIATION

The challenge before the product marketers is to create relevant and distinctive product differentiation. The product differentiation may be based on :

• Physical Differences ( eg., features, performance, conformance, durability, reliability, design, style, packaging )

• Availability Differences ( eg., available from stores or orderable by phone, mail, fax, internet )

PRODUCT DIFFERENTIATION

• Service Differences ( eg., delivery, installation, training, consulting, maintenance, repair )

• Price Differences ( eg., very high price, medium price, low price, very low price )

• Image Differences ( eg., symbols, atmosphere, events, media )

CHALLENGES FOR PRODUCT INNOVATORS

Any successful differentiation will tend to draw imitators. The innovator faces three choices :

• Lower the price to protect market share and accept lower profits.

• Maintain the price and lose some market share and profits.

• Find a new basis to differentiate the product and maintain current price.

PRODUCT CLASSIFICATION

ON THE BASIS OF PRODUCT CHARACTERISTICS :DURABILITY, TANGIBILITY AND USE (consumer or industrial )

(1) NON-DURABLE

(2) DURABLE

(3) SERVICES

( CONTD . )

(1) NON-DURABLES

• These are tangible goods normally consumed in one or few uses. Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available at many locations, charge only a small mark up and advertise heavily to induce trial and build preference.

(2) DURABLES

• These are tangible goods that normally survive many uses. Normally require more personal selling and service, command a higher margin, and require more seller guarantees.

(3) SERVICES

These are intangible,

inseperable,

variable and

perishable products.

Normally require more quality control, superior credibility, and adaptability.

PRODUCT CLASSIFICATION

ON THE BASIS OF CUSTOMER SHOPPING HABITS :

(1) CONVENIENCE GOODS

(2) SHOPPING GOODS

(3) SPECIALITY GOODS

(4) UNSOUGHT GOODS

(1) CONVENIENCE GOODS

• are goods that the customer usually purchases frequently, immediately, and with a minimum of efforts.

• (A) Staples: Consumers purchase on a regular basis.

• (B) Impulse Goods: are purchased without any planning or search efforts.

• (C) Emergency Goods: are purchased when a need is urgent.

(2) SHOPPING GOODS

• are goods that the customer , in the process of selection and purchase, characteristically compares on such basis as suitability, quality, price and style.

• (A) Homogeneous Shopping Goods: are similar in quality but different enough in price to justify shopping comparisons.

• (B) Heterogeneous Shopping Goods: differ in product features and services that may be more important than price.

(3) SPECIALITY GOODS

• are goods with unique characteristics or

brand identification for which buyer is

willing to make a special purchasing

effort.

(4) UNSOUGHT GOODS

• are goods the consumer does not know

about or does not normally think of

buying. These goods require advertising

and personal selling support.

PRODUCT STRATEGY

• Calls for coordinated decisions on :

• (1) Product Mix

• (2) Product Line

• (3) Individual Product

• (4) Service Product

PRODUCT MIX

• A product mix (also called product assortment) is the set of all products and items that a particular seller offers for sale.

• A total group of products that an organization markets.

• A company’s product mix has a certain width, length, depth and consistency.

DIMENSIONS OF PRODUCT MIX

• The width of company’s (say HLL’s)

product mix refers to how many different

product lines the company carries, such

as bathing soap, detergents, shampoos,

toothpaste, food products.


• The length of a company’s product mix

refers to the total number of items in its

product mix. Thus in each of the product

line HLL has a number of product items.

Eg., in the product line of bathing soaps,

HLL has several product items like Lux,

Liril, Lifebuoy, Pears.


• The depth of a company’s product mix refers to how many variants are offered of each product in the line. Thus if close up toothpaste comes in three formulations and in three sizes, Close up has a depth of nine (3x3). The average depth of HLL product mix can be calculated by averaging the number of variants within the brand groups.


• The Consistency of the product mix refers to how closely related the various product lines are in end-use, production requirements, distribution channels, or some other way. HLL’s product lines are consistent insofar as they are consumer goods that go through the same distribution channels.


• These four dimensions of the product mix provide the handles for defining the company’s product strategy. The company can expand its business in four ways.

• 1. The Co. can add new product lines, thus widening its product mix.

• 2. The Co. can lengthen each product line.• 3. The Co. can add more product variants to

each product and deepen its product mix.• 4. The Co. can pursue more product-line

consistency or less, depending upon whether it wants to acquire a strong reputation in a single field or participate in several fields.

PRODUCT LINE

• A product line is a group of products that are closely related, because they perform a similar function, are sold to the same customer groups, are marketed through the same channels or fall within the given price ranges.

• The product mix may be composed of several product lines.

PRODUCT LINE ANALYSIS

• Product line managers need to know the sales and profits of each item in their line in order to determine which items to build, maintain, harvest,, or divest. They also need to understand each product’s market profile, i.e. how their product line is positioned against competitors’ product lines (The Product Map).

PRODUCT PORTFOLIO MANAGEMENT

• Product Line Length : . Downward Line Stretching . Upward Line Stretching . Two Way Stretching

Present

Product

NewProduct

Low HighLow

High

Price

Quality

Present

New

Present

New

New

(Downward) (Upward) (Two Way)

PRODUCT PORTFOLIO MANAGEMENT

• Filling in the Product Line ( adding more

items within the present range of line )

• Product Line Modernization

• Product Line Featuring

• Product Line Pruning

INDIVIDUAL PRODUCT DECISIONS

• Product Attribute Decisions

• Brand Decisions

• Brand Positioning

• Packaging and Labeling

DEFINITION OF BRAND

• American Management Association defines brand as follows :

“ A brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors. ”

THE MEANING OF BRAND

• The brand is not a product but it gives the product meaning and defines its identity in both time and space.

• Brands are a direct consequence of the strategy of market segmentation and product differentiation.

• Companies want to stamp their mark on different sectors and set their imprint on their products.

BUILDING THE BRAND

• “The art of marketing is the art of brand building. When something is not a brand, it will probably viewed as a commodity. Then price is what counts. When price is the only thing that counts, the only winner is the low-cost producer.” . ( Philip Kotler )

BRAND NAME DECISIONS

• Individual Names

• Blanket Family Names

• Separate Family Names for all products

• Company Trade name combined with

individual product names.

BRAND NAME

• It should suggest something about the product’s benefits.

• It should suggest something about product qualities.

• It should be easy to pronounce, recognize and remember.

• It should be distinctive.• It should not carry poor meanings in

other countries and languages.

BRAND IDENTITY AND ASSOCIATION

• A brand identity or association is anything that is directly or indirectly linked in memory to a brand. The most common association is that of product attributes or customer benefits.

• A brand’s associations are assets that can differentiate, provide reasons to buy, instil confidence and trust, affect feelings towards a product and the use experience, and provide the basis for brand extension.

BENEFITS OF BRAND AWARENESS

• First, awareness provides the brand with a sense of familiarity, and people like the familiar.

• Second, name awareness can be a signal of presence, commitment, and substance. The logic is that if a name is recognized, there must be a reason.

• Third, the salience of a brand will determine if it is recalled at a key time in the purchasing process.

BRAND LOYALTY

• First, brand loyalty reduces the marketing costs of doing business, since existing customers are relatively easier to hold.

• Second, brand loyalty represents a substantial barrier to competitors. Excessive resources are required when entering a market in which existing customers must be enticed away from an established brand that they are loyal to.

• Third, Brand loyalty provides trade leverage.• Fourth, a relatively large, satisfied customer base

provides an image of a brand as an accepted, successful, and enduring product.

• Finally, brand loyalty provides the time to respond to competitive moves.

DEFINITION OF BRAND EQUITY

• Brand equity is a set of assets and liabilities linked to a brand’s name and symbol that add to or substract from the value provided by a producer or service to a firm and / or that firm’s customers.

• Brand equity generates value to the customer that can emerge either as a price premium or enhanced brand loyalty.

BRAND EQUITY

Brand

AwarenessBrand Identity

BrandLoyalty

PerceivedQuality

BrandEquity

( Powerful brands have high brand equity, higher brand loyalty.)

TOOLS FOR BUILDING BRAND

• Advertising

• Sponsorship of games and events

• Social Causes

• Public Facilities

• Founder’s personality

BRAND STRATEGY DECISIONS

• Line Extensions

• Brand Extensions

• Multibrands

• New brands

• Co-brands

BRAND STRATEGY DECISIONS

Product Category

Existing New

BrandName

Existing

New

Line

ExtensionBrand

Extension

Multibrands New Brand

Names

LINE EXTENSION• Line extension occurs when a company

introduces additional items in the same product category under the same brand name, usually with new flavours, forms, colours, added ingredients, package sizes and so on.

• Line extensions generally have a higher chance of survival than new products.

• On the down side extensions may lead to the brand name losing its specific meanings; Ries and Trout call this “ Line Extension Trap .”

BRAND EXTENSION

• Brand Extension occurs when a company decides to use an existing brand name to launch a product in the new category.

• Brand Extension offers a number of advantages.

-Instant recognition and earlier acceptance

-Saves considerable advertisement costs

BRAND EXTENSION

• Brand Extension also involves risks.

- The new product might disappoint buyers and damage their respect for company’s other products.

- The brand name may loose its special positioning in the consumer’s mind through over extension - a phenomenon called “ brand dilution .”

MULTI BRANDS

• A company will often introduce additional brands in the same product category.

- One of the motives for multibranding is to establish different features and/or appeal to different buying motives.

- It also enables the company to lock up more distributor shelf space and protest its major brand by setting up flanker brands.

NEW BRANDS

• When a company launches products in a

new category, it may find that none of its

current brand names are appropriate.

• When the present brand image is not

likely to help the new product, companies

are better off creating new brand names.

CO-BRANDS

• Co-branding occurs when two different

companies pair their respective brands in

a collaborative marketing effort.

• Each brand sponsor expects that other

brand name will strengthen brand

preference or purchase intention.

PRODUCT LIFE CYCLE

• The Product Life Cycle ( PLC ) is an important concept in marketing that provides insights into a product’s competitive dynamics.

• To fully understand the concepts of PLC , one should first understand its parent concept, the demand and technology life cycles.

DEMAND / TECHNOLOGY LIFE CYCLE

• Marketing thinking should not begin with a product or even a product class, but rather with a need.

• The product exists as one solution among many to meet a need.

• A need is satisfied by some technology.• Each new technology normally satisfies

the need in a superior way and it shows a demand-technology life cycle.

• The PLC portrays distinct stages in the sales history of a product.

DEMAND-TECHNOLOGY-PRODUCT LIFE CYCLES

Time

Sales

STAGES IN THE PRODUCT LIFE CYCLE

Sales &

Profits

TimeIntroduction Growth Maturity Decline

STAGES IN THE PRODUCT LIFE CYCLE

• By identifying the stage that a product is in, or may be headed toward, companies can formulate better marketing plans.

• Products require different marketing, financial, manufacturing, purchasing and personnel strategies in each stage of their life cycle.

• Marketers must pursue appropriate marketing strategies in each stage of PLC.

• Today, in order to succeed, it is absolutely essential to constantly improve products to increase the value offered to customers, ( V = B/P ).

• The success of competitors is based on creating value for the customer by differentiating their product, ( Competitive Differential ).

EXTENDING THE PRODUCT LIFE CYCLE

Sales

Time•( When the sales of a product starts declining marketers may choose suitable strategy for further growth of product /business/enterprise.)

PRODUCT LIFE CYCLE

Reasons for change in behavior of PLC :• --Changes in the consumer needs and

preferences• --Advancing Technology• --Competition, Government Policies etc.• --Changes in number of potential buyers

Stages in PLC : Introduction, Growth, Maturity, And Decline.

MARKETING STRATEGIES IN THE INTRODUCTION STAGE

Promotion

Price

High Low

High

Low

Rapid SkimmingStrategy

SlowSkimmingStrategy

Rapid Penetration

Strategy

Slow

Penetration

Strategy

MARKETING STRATEGIES IN THE GROWTH STAGE

• It improves product quality and adds new product features and improved styling.

• It adds new models and flanker products (i.e., products of different sizes, flavors, and so forth that protect the main product ).

• It enters new market segments.• It increases its distribution coverage and enters

new distribution channels.• It lowers prices to attract the next layer of price-

sensitive buyers.• It shifts from product-awareness advertising to

product-preference advertising.

MATURITY STAGE

• Sales are increasing but at a decreasing rate.

• Profits are beginning to decline.

• Price competition increases.

• The manufacturer assume a greater share of the total promotional effort in the fight to retain dealers and shelf space in their stores.

MATURITY STAGE

To understand better, we can devide Maturity Stage into three stages :

• Growth Maturity : When the rate of sales growth starts to decline because of distribution saturation.

• Stable Maturity : When the rate of sales growth starts declining due to market saturation.

• Decaying Maturity : The sales level starts to decline as some of the customers move towards other competitive and substitute products.

MARKETING STRATEGIES IN THE MATURITY STAGE

• Market Modification

• Product Modification

• Marketing Mix Modification


Market Modification• Expand number of users :

- Convert non-users

- Enter new market segments

- Win competitors’ customers• Increase annual usage :

- More frequent use

- More usage per occasion

- New and more varied uses


Product Modification• A strategy of quality improvement aims at

increasing the product’s functional performance - its durability, reliability, speed, taste.

• A strategy of feature improvement aims at adding new features ( for example - size, weight, materials, additives, accessories ) that expand the product’s versatility, safety, or convenience.


Product Modification (contd.)

• A strategy of style improvement aims at increasing the product’s aesthetic appeal. The periodic introduction of new car models amounts to style competition rather than quality or feature competition.


Marketing Mix Modification

• Prices

• Distribution

• Advertising

• Sales Promotion

• Personal Selling

• Services

MARKETING STRATEGIES IN THE DECLINE STAGE

• Identifying the Weak Products

To do this, many companies appoint a product-review committee with representatives from marketing, R&D, manufacturing and finance. The product review committee makes a recommendation for each dubious product--leave it alone, modify its marketing strategy, or drop it.

MARKETING STRATEGIES IN THE DECLINE STAGE (Contd.)

• Determining Marketing Strategies :

( Go Strategy )

Continuation Strategy :

-Increasing the firm’s investment ( to dominate the market or strengthen the competitive position )

- Maintaining the firm’s investment level until the uncertainties about the industry are resolved. (Contd.)

MARKETING STRATEGIES IN THE DECLINE STAGE (Contd)

• Determining Marketing Strategies : ( Go Strategy )

Concentration Strategy :- Decreasing the firm’s investment level

selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches.

Harvesting Strategy :- Divesting the business quickly by disposing of

its assets as advantageously as possible.

MARKETING STRATEGIES IN THE DECLINE STAGE (Contd)

• The Drop Strategy- When a company decides to drop a product, it

faces further decisions. If the product has strong distribution and residual goodwill, the company can probably sell it to another firm.

- If the company can’t find any buyers, it must decide whether to liquidate the brand quickly or slowly. It must also decide on how much parts inventory and service to maintain for past customers.

NEW PRODUCT DEVELOPMENT PROCESS

• (1) Idea Generation• (2) Screening• (3) Concept Development and Testing• (4) Marketing Strategy• (5) Business Analysis• (6) Product Development• (7) Market Testing• (8) Commercialization

THE CONSUMER ADOPTIONPROCESS (STAGES IN THE ADOPTION PROCESS )

• Awareness : The consumer becomes aware of the innovation but lacks information about it.

• Interest : The consumer is stimulated to seek information about the innovation.

• Evaluation : The consumer considers whether to try the innovation.

• Trial : The consumer tries the innovation to improve his or her estimate of its value.

• Adoption : The consumer decides to make full and regular use of the innovation.

ADOPTER CATEGORIZATION ON THE BASIS OF RELATIVE TIME OF ADOPTION OF INNOVATIONS

Time of adoption of innovations