module 1 products and product...

Management Science II Dr. S.Bharadwaj

Indian Institute of Technology Madras

MODULE 1

Products And Product Differentiation

Agenda

• Classification of products

• Levels of a product

• Product Differentiation

• Product Life Cycle

• Summary

Classification of Products

• How can products be classified?

• On what bases?

Classification of Products

On the basis of nature of product

• Goods Vs Services

On the basis of type of consumer

• Tangible Vs. Intangible

• consumer Product Vs. Industrial (Business to Business Product) e.g.

soap Vs. Printing Press

On the basis of durability of goods

• Durable Vs. Non-Durable

• TV Set Vs. Toothpaste

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Shopping Habits Classification

They can also be classified on the basis of shopping habits

• Convenience goods, shopping goods, specialty goods and

unsought goods

• Let us have a look at these

Convenience goods

• Fairly Inexpensive Goods and services that consumers buy frequently, quickly, and with a minimum of effort

• Further divided into staples, impulse goods and emergency goods


• Staples: These include goods that consumers buy on a regular

basis

• Examples would be bread, rice, atta, toothpaste and so on

• If you are a marketer of staples, what should you do?

• Availability is important: hence distribution strength is a great advantage

• Build the TOMA factor

• Inertia is there, and hence TOMA maybe important

• Sales promos and advertising important too

Then we have Impulse goods

• Goods that consumers pick up without planning, on a sudden urge

• What does one do as a Marketer?

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• Availability is important here too, no doubt about it

• Display is key

• Hence, chocolate always kept in the front

• Wrigley’s has attractive storage

• POP material important

Attractive packaging

• Sexy model on cover of magazines

• Building hedonic nature of product through advertising helps too

• Then we have emergency goods

• What are these and what are the marketing implications?

• These are goods that one would not normally need, but due to

some sudden circumstances, need desperately e.g. umbrella when

it rains, medicine when you are sick

• What are some marketing implications?

Preempt the need

• Duckback should offer deals now on raincoats

Can charge a premium when it rains

• However, poor relationship marketing

• Auto drivers are notorious for this

• Govt can also come down hard on you if you do this e.g.

Vegetables in SARS-hit Singapore

• Of course, availability is important

• Shopping goods are those that are bought relatively infrequently,

consumers put in some time and effort for these

• Examples would be clothing, furniture, TV

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• What are some marketing implications?

Advertising is very important, as is promotion, availability less so

• Building brand image is key

• Consumers may go to a different store if favourite brand is not there

• You are less dependent on the dealer here

• Need to have variety, features and models to suit different tastes

• Nallis for instance has thousands of designs

• Then we have specialty goods that are Goods and Services Consumers value and see as unique, so they are willing to expend considerable time and effort when purchasing them

• Examples would be luxury cars, fancy accessories like Louis

Vuitton and pens like Mont Blanc

• What do you do if you are Loius Vuitton

• Need to have a high price

• And quality to match

• Need to have plenty of brand building activities like advertising • Should not be available everywhere

• Hence, exclusive distribution the norm

• Ambience, shopping experience, décor, music all need to

have class e.g. 5-star hotel • Unsought goods are those that consumers are unaware of,

have not thought of buying or find that they need to solve an unexpected problem (usually serious)

• Examples would be when death occurs in family and life

insurance • Really new products

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What are the implications? Shopping Goods Classification

• Consumer education is key

• When cell phones came along, RPG Cellular spent whopping

amounts on ad

• Insurance companies spend a lot on personal selling

Levels of a Product

• One can strip a product down to its core, much like an onion, layer by

layer

• Consider the case of a car

Core Benefit

• the need that is satisfied by the product

• Transportation

Basic or Generic Product

• the fundamental element(s) that make(s) the product what it is

• here, the body, the chassis, the engine

Expected Product

• the basic product alone is not enough

• consumers expect some features

• a trunk, a dashboard

Augmented Product

• Certain Features that go beyond customer expectations

• for example, high power and high mileage

• similar to customer delight

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• today’s augmented product will become tomorrow’s expected

product e.g. airbags

Potential Product

• all possible enhancements a marketer can add to value package

• futuristic in nature

• computerized directions, cars running on water

• One should never rest on one’s laurels

• At the same time, one must be consumer-centric

Product Differentiation

• What is product differentiation, anyone?

• Creating a value package that is better/different

than competition’s in a way that is meaningful to the customer

• how is your product different ?

• The key phrase is “meaningful to the customer”

• A black toothpaste would be different but absurd!

• What is the need for differentiation?

• Different consumers have different tastes, same old will not do

• Consumers like to switch too

• Consumers like to be unique

• Novel stimuli are more noticed

• A white person here would be instantly noticed

• Need to stand apart from the crowd

• Else, will be a “me-too” product

• So how can one differentiate a product?

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Differentiation Through Quality

• Quality is the extent to which product meets customer needs and

wants

• Can be either Performance, Conformance, Durability or Style

Differentiation Through Performance Quality

• Example Procter & Gamble

• Tide, Crest, Ivory

• sheer performance sets them apart

• Maruti 800 to some extent

Product Differentiation - Methods Differentiation Through Conformance

• Zero Defect Quality, Standardization

• McDonald’s

• Japanese Cars

• Sundaram Fasteners

Differentiation Through Durability

• Godrej bureaus for instance

• Volvo trucks

Differentiation Through Style/Status

• Designer wear

• Rolex watches

• Mercedes Benz

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Differentiation Through Price

• Indian software companies for instance

Differentiation Through Channel Management

• Examples would Dell and Amazon

Differentiation Through Mass Customization

• Example would be National Bicycle Co in Japan, Dell Computers

Differentiation Through Innovation

• Sony, Apple, 3M

• And so on

Product Life Cycle All products have 4 phases

• Introduction

• Growth

• Maturity

• Decline

One must keep the maturity period going as long as possible

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