marketing mix decisions (u-2)

Marketing Mix Decisions; Product Decisions-Classification of products

PIMGM.B.A.-II Semester

1Unit II

What is a Product?

• “ … the need satisfying offering of a firm …”

• what you buy, that satisfies what you want to be able to do

What is a Product?• what you buy, that satisfies what you want

to be able to do• it can be “good feeling” cause you bought

some cosmetics and someone said you looked pretty

• it could be a happy stomach cause you bought a meal that tasted great

• it could be easier homework cause you bought new software for your computer

Strategic Planning for Product

PlaceProduct PricePromotion

Brand

Type of Brand:Individual or

familyManufacturer or

dealer

Warranty

None, full, orlimited

Package

Protection,Promotion,

(or both)

Target Market

ProductIdea

Physicalgood/service

FeaturesQuality levelAccessoriesInstallationInstructionsProduct line

What is a Product?• “Most customers think about product in

terms of the total satisfaction …”

• this can lead to statements such as “we don’t sell cars, we sell safety ! “

• we don’t sell houses, we sell homes

“… A product’s ability to satisfy a customer’s needs or requirements …”

Quality is often tied in to comparison with what the competitor does at the same price

- always important to remember the “Competitive Environment”

What is product?• Anything that can be offered to a market for

attention, acquisition, use, or consumption that might satisfy a want or need.

Physical Products: Tide, Ford, ChevyServices: Haircuts, Nails, Travel PlanningPersons: Presidents, Stars, AnnouncersPlaces: Vacation Spots, States, Cities Events: Olympics, Concerts Organizations: Red Cross, Heart Association.Idea: Healthy Food, Exercise, Yoga

Service and Experience

• Service—Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Five Product Levels

Potential product

Augmented product

Expected product

Basic product

Core benefit

Levels of Product

• Core product• Actual product• Augmented product

Core product• Core benefit or service

• Core Product: What is the buyer really buying? .... Core benefits, Problem Solving services.

• Examples:Lipstick....... Beauty, Hope, not lip colorDrill Bit ...... A finished project, 1/4” Hole, but not a bit

Actual product

• Product Attributes:• Quality Level: Lexus....• Features: Sunroof, Walnut Trim,... • Styling: Sleek, Sporty• Brand Name: Lexus• Packaging: Style and Grace

Augmented product• Consists of Additional Consumer Services and

Benefits....Augmented benefits may become expected benefits

• Installation• After-sale service• Warranty• Delivery and credit• Attached benefit

Examples :

• Camcorder: Complete solution to picture-taking problems. Warranty on parts and workmanship, Instruction on

how to use camcorder, Toll free number for questions and problems

• Haircut: Doctor’s Exam: few tangible featuresPark Lane Hotel, Hong Kong: Candy on hotel pillow, basket of fruit, manager escorts you to room, Pillbox hat white uniforms, messaging service (printed and voice), toiletries.

• Perfume: Fantasy, memories, hopes, dreams, romance, passion, femininity, success, life style, self-expression, exclusivity

Augmented product

Product classifications

• Consumer products• Industrial product• Organizations, persons, places, and ideas

Product classifications

• Durable Goods:Products used over an extended period of time: Refrigerators, Autos, Furniture

• NonDurable GoodsConsumed in one or a few uses:Soap, Salt, food products

• Services:Activities, benefits or satisfactions for sale:Haircuts, repairs

• Consumer GoodsGoods and services consumers buy frequently, immediately, with a minimum of comparison or buying effort:

Convenience GoodsShopping GoodsSpecialty GoodsUnsought Goods

Consumer product

• Convenience products• Shopping products• Specialty• unsought

ConsumerProductClasses

Convenience

Specialty

Unsought

Shopping

Consumer Product Classes

Specialty ProductsSpecialty Products Unsought ProductsUnsought Products

Shopping ProductsShopping ProductsBuy less frequently> Gather product information> Fewer purchase locations> Compare for:

• Suitability & Quality • Price & Style

Convenience ProductsConvenience Products

Special purchase efforts> Unique characteristics> Brand identification> Few purchase locations

New innovations> Products consumers don’t want to think about. >Require much advertising & personal selling

Buy frequently & immediately> Low priced> Many purchase locations> Includes:

• Staple goods• Impulse goods• Emergency goods

Consumer-Goods Classification

Different Classes• ConvenienceConvenience goods and services goods and services

• things consumer wants to buy frequentlythings consumer wants to buy frequently• minimum effort, low riskminimum effort, low risk• small amount of money, not much timesmall amount of money, not much time

• ShoppingShopping goods and services goods and services• ““stuff” people buy after they “shop & compare”stuff” people buy after they “shop & compare”

• SpecialitySpeciality goods and services goods and services• jewellery, special clothingjewellery, special clothing• special entertainmentspecial entertainment

• UnsoughtUnsought• things people don’t want to buy, but have to eg. things people don’t want to buy, but have to eg.

Auto insurance, funeral planAuto insurance, funeral plan

Con

sum

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oods

Cla

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:

Classes of Consumer ProductsClasses of Consumer Products

Impulse ProductsImpulse Products

ConvenienceConvenience ShoppingShopping SpecialtySpecialty

GoodsGoods

ServicesServices

PO

P

14-1

$$

ATM

Different Classes• ConvenienceConvenience goods and services goods and services

• things consumer wants to buy frequentlythings consumer wants to buy frequently• minimum effort, low riskminimum effort, low risk• small amount of money, not much timesmall amount of money, not much time

three typesthree types

1. Staples 1. Staples - bought routinely- bought routinely

2. Impulse products2. Impulse products- unplanned purchases- unplanned purchases

3. Emergency products3. Emergency products- bought immediately- bought immediately

Con

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oods

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:

Different Classes• ShoppingShopping goods and services goods and services

• ““stuff” people buy after they “shop & compare”stuff” people buy after they “shop & compare”• they have the time to compare pricesthey have the time to compare prices• Homogenous - stuff that is the sameHomogenous - stuff that is the same

simply pick the lowest pricesimply pick the lowest priceeg. Condensed milk, eg. Condensed milk,

• Heterogeneous - stuff that is different, so the Heterogeneous - stuff that is different, so the customer will take time to compare features customer will take time to compare features and pricesand prices- “some retailers carry competing brands”- “some retailers carry competing brands”

Con

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Different Classes• SpecialitySpeciality goods and services goods and services

• jewellery, special clothingjewellery, special clothing• special entertainmentspecial entertainment• ““Willingness to search, not extent of searching, Willingness to search, not extent of searching,

makes it a specialty product”makes it a specialty product”• if people are willing to look and look at different if people are willing to look and look at different

products, before they commit, it is a specialty products, before they commit, it is a specialty itemitem

Con

sum

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:

Different Classes• UnsoughtUnsought

• things people don’t want to buy, but have to eg. things people don’t want to buy, but have to eg. Auto insurance, funeral planAuto insurance, funeral plan

• the only way to sell this is to convince people of the only way to sell this is to convince people of the benefit because the benefit is not easily the benefit because the benefit is not easily seen by the average person.seen by the average person.

Con

sum

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oods

Cla

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:

Industrial Product

• Material and parts• Capital items• Supplies and services

Classifying Goods & Servicesfor the Business Market

Entering Goods Foundation Goods

Facilitating Goods

Raw Materials - Farm Products - Natural Products (e.g., iron ore, lumber)Manufactured Materials/Parts - Component Materials - Component Parts (e.g., tires, microchips)

Installations - Buildings & Land Rights - Fixed Equipment

Accessory Equipment - Light Factory Equipment (e.g., lift trucks) - Office Equipment

Supplies - Operating Supplies (e.g., lubricants, paper) - Maintenance & Repair Items (e.g., paint)Business Services - Maintenance & Repair Services - Business Advisory Services

Classifying Goods & Servicesfor the Business Market

Individual Product Decisions

• Product Attribute Decisions:

Product Quality:At Ford, Quality is Job #1

Product Features: Strip down vs full featured. What features improve

the product?Product Design

Black and Decker cordless tools, Steelcase furnitureBose audio equipmentHerman Miller furniture

Product Line and Product Mix


2Unit II

Product-line decision

• Product mix• Product-line analysis• Product –line length

Product mix(assortment)

• The set of all products and items that a particular seller offers for sale.

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

• Width:how many different product lines. (Avon: cosmetics, jewelry, fashions, household items)

• Length:the total number of items. (many different brands: Tide, Joy, Dash, Gain)

• Depth:how many variants are offered of each product in the line. (Colgate : many formulations and sizes)

• Consistency:how closely related the various product lines are in end use,production requirement,distribution channels, or some other way.

Product Mix

WidthWidth - number of different

product lines

WidthWidth - number of different

product lines

LengthLength - total number of itemswithin the lines

LengthLength - total number of itemswithin the lines

Depth Depth - number of versions of each product

Depth Depth - number of versions of each product

Product Mix - Product Mix - all the product

lines offered

Product Mix - Product Mix - all the product

lines offered

Cons

iste

ncy

Product Mix Breadth and Length

Detergents Toothpaste

Bar Soap Deordorants

Fruit Juices

Lotions

Product Line Length

Ivory Snow Dreft Tide Joy Cheer Oxydol Dash Cascade Ivory Liquid Gain Dawn Era Bold 3 Liquid Tide Solo Ariel

Gleem Crest Complete Denquel

Ivory Camay Lava Kirk’s Safegard Coast Oil of Olay

Secret Sure

Citrus Hill Sunny Delight Winter Hill Texsun Lincoln Speas Farm

Wondra Noxema Oil of Olay Camay Raintree Tropic Tan Bain de Soleil

Product Mix Breadth

Example: Proctor & Gamble: Length is 42

Proctor and Gamble BrandsLate 1980's P&G had 83 advertised brands. Annual Sales of $20 Billion.

In the U.S. It had the No. 1 brand in 19 of the 39 categories it competed in. Average Market share of 25%. 50+% share of the laundry detergent market.

Citris HillPringles ChipsCitris HillBountyPampersLuvsCharminWhite CloudPuffsBannerWondra (Hand Cream)Head and SholdersDowny

Kirk'sLavaZestSafegardCoast

CrestGleemDenquel

Ivory SnowTideCheerGainBold 3DashDeftOxydolEraSolo

Product Mix Management

• Product mix expansion– Line extension– Mix extension

• Product alteration– Improve an existing product by giving it a new

design, a new package, new uses, etc• Product mix contraction

– Eliminate an entire product line or reduce assortments within it

Product-line analysis

• Sales and profit• Market profile

Product-Line Length

• Line Pruning• Line Stretching

– Downmarket– Upmarket– Two-way

• Line Filling• Line Modernization• Line Featuring & Line Pruning

Product Line Management• Line Pruning

– Removing unprofitable/obsolete/redundant products from a product line that may eat the sales of other products in the line

• Line Stretching– Adding a new product to the existing product line

beyond the current range– Types:

• Upward stretching• Downward stretching

• Line Filling– Introducing new products within the current range of

an incomplete line

Product Line Management

• Line Modernisation – Items in a product line are modified

• Line Featuring– Selecting a few attractive products from a line and

promoting them aggressively to attract attention to the total product line

Line stretching

• Downmarket stretch• Upmarket stretch• Two-way stretch

• Product Line Length: (Full Vs. Incomplete line) Expanded by Product Line Stretch and Filling Stretch: Upward, Downward, Two-way

Product-Line Length

Price:

High

Low

QualityLow High

PresentProducts

New Products

New Products Downward

Upward

Examples:Marriott: Marquis, Courtyard,Fairfield Inn,Residence Inn

Product Line Fill:Sony Walkmans:Solar PoweredWaterproofUltralightTape, CD, MD, MP3

Two-Way Product-Line Stretch: Marriott Hotels

QualityEconomy SuperiorStandard Good

Pri

ceP

rice

High

Aboveaverage

Average

Low Fairfield Inn(Vacationers)

Courtyard(Salespeople)

Marriott(Middle

managers)

MarriottMarquis

(Topexecutives)

Line filling

• Quality—price analysis

New Product Development


3Unit II

New-product development

• What is new product?• Major stages in new product development

What is new product?

• Original products• Product improvements• Product modifications• New brands that the firm develops through its

own research and development efforts

New Product and its Need• New Product

– Original Product– Product Improvement– Product Modifications– New Brands

• Need– Changes in customer needs– Technological advances– Competitive challenges– Replace ageing products

Major stages in new product development

• Idea generation• Idea screening• Concept development and testing• Marketing strategies• Business analysis• Product development• Test marketing• Commercialization

New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

Strategies For Obtaining New Products

AcquisitionAcquisition

AcquiredCompanies

AcquiredCompanies

Acquired Patents or Products

Acquired Patents or Products

AcquiredLicenses

AcquiredLicenses

Strategies for Obtaining New Product Ideas

New Product Development(R & D Department)

New Product Development(R & D Department)

Acquisitions

• Acquired Companies• Acquired Patents or Products• Acquired Licenses

Probability of Success

ProbabilityProbabilityof technicalof technicalcompletioncompletion

OverallOverallprobabilityprobabilityof successof success ==

Probability ofProbability ofcommercializationcommercialization

given technicalgiven technicalcompletioncompletion

XXProbability ofProbability of

economiceconomicsuccess givensuccess given

commercializationcommercializationXX

Concept Development & Testing

1. Develop Product Ideas into Alternative Product Concepts

1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the ProductConcepts with Groups of Target Customers

2. Concept Testing - Test the ProductConcepts with Groups of Target Customers

3. Choose the Best One3. Choose the Best One

High price/oz.High price/oz.

Lo

w in

Lo

w in

cal

ori

esca

lori

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Low price/oz.Low price/oz.

Hig

h in

calories

Hig

h in

calories

Product & Brand Positioning

((a) Product-positioninga) Product-positioningmapmap

(breakfast market)(breakfast market)

ExpensiveExpensive

Slo

wS

low

InexpensiveInexpensive

Qu

ickQ

uick

Baconandeggs

Pancakes Instantbreakfast

Coldcereal

Hotcereal

b) Brand-positioningb) Brand-positioningmapmap

(instant breakfast market)(instant breakfast market)

Brand C

Brand BBrand A

Consumer-Goods Market Testing

Sales-Wave

ResearchTest offering trail to

a sample of consumers in

successiveperiods.

Sales-Wave

ResearchTest offering trail to

a sample of consumers in

successiveperiods.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

StandardTest Market

Full marketing campaignin a small number of representative cities.

StandardTest Market

Full marketing campaignin a small number of representative cities.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

New Product Development: Sequential

• Idea Generation• Idea Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development • Test Marketing• Commercialisation

New Product Development: Flow of Responsibility

Product Planners Designers Engineers

Manufacturers Marketers

Sequential Development: Benefits and Limitations

• Benefits– Have control on product development– Reduce product failure chances

• Limitations– Slow– Competitor gets the time to imitate

New Product Development: Simultaneous

• Specialists from different functional areas of an organisation work together in developing new product , such as:– Design– Manufacturing– Marketing– Sales

Causes Of New Product Failures

• One study estimated that as many as 80% of new consumer packaged products failed.

• Only about 40% of new consumer products are around 5 years after introduction.

• Why?– Inadequate market assessment– Lack of market orientation– Poor screening and Project evaluation– Product design problems– Product incorrectly positioned, priced or advertised– Costs of product development– Competitive actions

Improving New-product Success

• New product success depends on having a:– Unique superior product (one with higher quality, features,

and value in use), &– Well-defined product concept (a defined target market,

product requirements, and benefits).

• To create successful new products, the company must:– understand its customers, markets and competitors, &– develop products that deliver superior value to customers.– The company must also understand the method used by the

customer when he adopts a new product.

2 1/2%Innovators

13 1/2%Early

adopters

34%Early

majority

34%Late

majority16%

Laggards

Time of adoption innovations

Adopter Categorization of the Basis of Relative Time of Adoption of Innovations

Product Life Cycle


4Unit II

Definitions of Product Life Cycle (PLC)

• The succession of stages a product goes through

• The course of a product’s sales and profits over its lifetime

• Life of a product in the market with respect to business/commercial costs and sales measures

Applicability Of The PLC Concept

• Life cycles exist for Product categories or classes as well as brands within such categoriesExample : Cigarettes is a product category within which Wills Filter Kings is a brand

• Product categories typically have longer life cycles than the brands within themExample : While the TV market is very much in existence, many brands within it have become extinct

• It provides a good framework for product planning

Product Life Cycles (PLC)

• The course of a product’s sale and profit over it lifetime.It involves five distinct stages:

product development, introduction, growth, maturity, and decline.

Sales & Profit Life Cycles

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

TimeTimeSal

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ales

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rofi

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rofi

ts (

Rs.

)(R

s.)

Stages Of PLC

• Introduction• Growth• Maturity• Decline

Introduction stage

• The product life-cycle stage in which the new product is first distributed and made available for purchase.

Four IntroductoryMarketing Strategies

Rapid-Rapid-skimmingskimmingstrategystrategy

Rapid-Rapid-skimmingskimmingstrategystrategy

Rapid-Rapid-penetrationpenetration

strategystrategy

Rapid-Rapid-penetrationpenetration

strategystrategy

Slow-Slow-penetrationpenetration

strategystrategy

Slow-Slow-penetrationpenetration

strategystrategy

Slow-Slow-skimmingskimmingstrategystrategy

Slow-Slow-skimmingskimmingstrategystrategy

PricePrice

LowLow

HighHigh

PromotionPromotionHighHigh LowLow

Growth stage

• The product life-cycle stage in which a product’s sales start climbing quickly.

Maturity stage

• The stage in the product life cycle in which sales growth slows or levels off.

• Modify the market,the product,and the marketing mix.

Decline Stage

• The product life cycle stage in which a product’s sales decline

Characteristics of PLC Stages

• Introduction stage: – A new product or a modified product– No or little competition – Initial costs are high (huge investments)– Profits are non-existent due to heavy expenses of product

introduction (high distribution and promotion costs) – No sales revenue; Slow sales growth– Demand has to be created by generating awareness

among people – Target market mainly comprises the innovators and early

adopter categories

• Growth stage:– Growth in product demand as the product gains rapid market

acceptance – Costs reduce as scale of operation increases due to growing

demand – Sales volume increase significantly ; sales increase– Profits start increasing– Consumer trials pick up and product gains wider acceptance – Public awareness increases– Product begins to get adopted by the early adopter category

and also to the early majority– Cost per person increases– Competition increases slowly as many players come with very

similar product offering (Market Expansion) – Market share tends to stabilise


• Maturity stage:– A product is mature when it has become a familiar offering– Overcapacity in the market leads to greater competition– Its consumer base is large and has the early majority and

the late majority categories of consumers– Sales volume peaks but sales growth slows down due to

increase in competition – Costs are very low as the product is well established in the

market – Profits level off or decline as marketing costs increase– Number of competitive offerings increase – Weak players leave


• Decline stage:– Sales volume decrease or stabilise– Profits and product sales fall as technologically superior

substitutes enter the market or customer needs change – Customer base reduces and may include few laggards – Competition becomes less– More innovative products are brought in the market due to

changing customer needs, technological advances and competition

– Profit depends more on challenge of production or distribution efficiency than increase in sales


The Stages Of Product Life Cycle

SALES

TIME

A B C D

A - INTRODUCTION

A period of slow sales growth as the product is Introduced in the market

B: GROWTH

A period of rapid market acceptance and substantial profit improvement

SALES

TIME

A B C D

C: MATURITY

A period of slowdown in the sales growth. Profitstabilises or declines

D: DECLINE

A period when sales show a downward drift andprofits erode

The Stages Of Product Life Cycle

Product Life Cycle Characteristics

Introduction Growth Maturity Decline

Sales Low sales Rapidly rising Stabilised Declining peak sales Costs High initial cost Average cost Low cost Low cost Profits Negative Rising Peak, stabilising Low,

declining Competitors Few Growing Stable Low

Customers Innovators Early adopters Early majority, Laggards & early majority late majority & some laggards

Marketing Strategies In The Stages Of PLC

• Introduction stage: – Marketing objectives typically are to increase consumer

awareness and trial– Product offered is a basic one with one or two models only– Price is typically cost plus or could be dependent on the

nature of the product– Promotion objectives are focussed on providing information

and building awareness for the new product– Distribution depends on the product category and target

segment ; limited number of products available in a few channels of distribution

• Growth stage:– Marketing objectives are to expand distribution and increase market

shares– Company enters new market segments– Product differentiation is done to set the product apart from that of

competitive offerings – The price becomes competitive and aims at penetrating the maximum

market ; maximise market share ; Prices are reduced due to increase in competition

– Advertising with focus on brand building along with creating awareness

– Product mix is widened with extensions at this time to accommodate the growing market

– Distribution becomes intensive ; Company increases number of outlets and adopts new distribution channels


• Maturity stage:– Marketing objective is to defend market share and combat

competition – Modifications

• Market modifications• Product modifications in R & D department• Marketing mix modification

– Product Differentiation– Price is competitive ; price wars – Promotion is competitive and reminder ; Stresses brand

differences and benefits ; Promotion: a wide variety of media is used; advertising and sales promotion increase

– Product mix is further expanded or maintained– Distribution is intensive and extensive


• Decline stage:– Marketing objectives could be to either cut back on

marketing costs OR revive the brand by modifying its product mix, repositioning OR by terminating the brand

– Marketers try to push up profits by reducing marketing spend and through cost cutting

– Maintain, harvest or drop the ageing product ; product pruning

– Intense price cutting to liquidate stocks – Distribution is selective and limited – Promotion is aimed at liquidating the available product– Product mix is phased out, contracted or renewed


marketing mix decisions (u-2)

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