scuola di ingegneria industriale e · ariston thermo group, its organization and operations as well...

POLITECNICO DI MILANO

SCUOLA DI INGEGNERIA INDUSTRIALE E

DELL’INFORMAZIONE

Master of Science in Management Engineering

AN ANALYSIS ON PRODUCT STRATEGIES & PRODUCT

MARKETING ACTIVITIES OF ARISTON THERMO GROUP

Supervisor: Claudio Dell’Era Author: Umut Aykut Celik

Company Supervisor: Fabio Buca Matricola: 850988

2016/2017 ACADEMIC YEAR

UMUT AYKUT CELIK | POLITECNICO DI MILANO | 2016-2017 1

ACKNOWLEDGEMENT

This work addresses to my internship experience at Ariston Thermo SpA in their Milan

Headquarter during the period of June – December 2017.

First of all, I would like to express my sincere gratitude to Ariston Thermo SpA for

providing with this great opportunity. I am thankful for all the support and the contribution

from all my colleagues, but especially I would like to thank my company supervisor Fabio

Buca who has always been there to support me all along this journey.

I also would like to thank all my professors and every other staff of Politecnico di Milano for

everything they have done to create a value in our lives. A special thank goes to my

professor and my academic supervisor Claudio Dell’Era for his kindness and his

understanding from the first day to the last along the process.

Last but not least, I am truly grateful to have my family and my friends always beside me. I

could have not been able to achieve all these without their support and motivation. They

mean a lot to me.


ABSTRACT

The most important part of marketing, the source of value, is our understanding of

customers, what customers want, and how to align product offers to their needs and

purchase models. Product Marketing is the function accountable for the success and

growth of a product by connecting customer needs to product capabilities. The value of

Product Marketing comes from its deep understanding of markets, customers and their

needs.

This work is a project report which touches upon the marketing and the management

activities for the most important part of a business: The Product. The work is based on a

work experience in the Product Marketing function.

The report begins with a brief of objectives explaining the motivation behind the work and

the internship program at Ariston Thermo, an Italian group company. It is one of the

world's leading companies in thermic comfort, offering a complete range of heating and

water heating products, systems, services and solutions designed to provide the maximum

degree of comfort with the minimum use of energy mostly under the main brand Ariston

and several other brands depending on the geography and the product segment.

An introductory chapter is given to provide readers with the necessary information about

Ariston Thermo Group, its organization and operations as well as the scope of the

internship. A company overview following by an organizational structure and an industry

analysis will be presented.

Furthermore, a theoretical literature review comes with a content that supports the

practices and activities of the internship. This content is a result of a literature review and

of the academic background of the author. The basic marketing concepts and terms are

defined, then the product element of the marketing mix is elaborated together with the

concepts of product marketing and product management. A case study framework is used

to support eh connection between the theoretical content and the real life practices.

Examples and cases from Ariston Thermo Group are provided based in the scope of this

framework.

Product marketing and management activities of Ariston are depicted from the eyes of a

product marketer based on real experiences. An overview of the general functioning and

tasks of a product marketer together with a content of specific activities related to the

smart, connected product technologies are provided. Lastly, results of the report take

place in the conclusion part along with a discussion for future improvements.

Key words: product marketing, product management, product life cycle management

(PLM), new product development (NPD), connectivity, smart products, energy efficiency,

heating, thermic comfort


IL SOMMARIO

La componente più importante del marketing, la sua vera fonte di valore, è saper

comprendere i clienti, i loro desideri e di conseguenza modellare secondo i loro bisogni e

schemi d’acquisto l’offerta dei prodotti. Il Product Marketing è la funzione responsabile del

successo e della crescita di un prodotto grazie al diretto collegamento tra i bisogni del cliente

e le capacità di produzione. Il grande valore del Product Marketing deriva dalla sua profonda

comprensione dei mercati, dei clienti e dei bisogni di questi ultimi. Questo elaborato è il

resoconto di un progetto sviluppato per analizzare gli aspetti di marketing e di gestione della

componente principale di un’attività: il prodotto e si basa su un’esperienza lavorativa nel

settore del Product Marketing.

Lo scritto ha inizio con la presentazione degli obiettivi e la spiegazione delle motivazioni che

hanno condotto al progetto di tirocinio presso l’azienda italiana Ariston Thermo. Si tratta di

una delle compagnie leader nel mondo per quanto riguarda il comfort termico, che offre una

gamma completa di prodotti di riscaldamento e riscaldamento dell’acqua, sistemi, servizi e

soluzioni disegnate per offrire il maggior comfort possibile abbinato al minor dispendio di

energia. Il tutto è realizzato dal marchio principale Ariston Thermo Group e da numerosi

altri marchi che variano a seconda della geo localizzazione e dal segmento di produzione.

Il capitolo introduttivo fornisce al lettore, oltre all’obiettivo del tirocinio, informazioni a

proposito dell’Ariston Thermo Group, della sua organizzazione e operazioni.

Successivamente viene fornito uno sguardo generale dell’azienda seguito da un’analisi

della struttura organizzativa e industriale.

Inoltre, è possibile individuare una sezione di letteratura a sostegno delle pratiche e attività

svolte durante il tirocinio. Si tratta di una ricerca che attinge sia da documenti di settore che

dalla formazione accademica dell’autore. In questa parte vengono definiti i concetti e la

terminologia di base per passare successivamente all’elaborazione della componente

prodotto unita ai concetti base del Product marketing e Product Management. Viene

descritto anche un caso studio con lo scopo di supportare la relazione tra il contenuto teorico

e le pratiche di ogni giorno. In aggiunta vengono forniti casi studio provenienti dall’Ariston

Thermo Group.

Le attività di marketing e gestione del prodotto della Ariston vengono descritte dal punto di

vista di un addetto al marketing del prodotto e si basano su esperienze reali. Vengono quindi

forniti uno sguardo generale sul funzionamento e sui compiti di un addetto al marketing e

un resoconto sulle attività specifiche che riguardano le tecnologie necessarie. In

conclusione, vengono riportati i risultati della ricerca svolta, insieme ad una breve

elaborazione degli ipotetici miglioramenti applicabili in futuro.

Parole chiave: Product Marketing, Product Management, Product Life cycle Management

(PLM), New Product Development (NPD), connettività, prodotti intelligenti, efficientamento

energetico, riscaldamento, comfort termico


TABLE OF CONTENTS

ACKNOWLEDGEMENT ............................................................................................................................ 1

ABSTRACT .............................................................................................................................................. 2

SOMMARIO ........................................................................................................................................... 3

LIST OF FIGURES ..................................................................................................................................... 6

LIST OF TABLES ....................................................................................................................................... 7

OBJECTIVES OF THE INTERNSHIP ............................................................................................................. 8

CHAPTER 1 INTRODUCTION ................................................................................................................. 10

1.1. Company Overview – Ariston Thermo Group ....................................................................................... 10

1.2. Organizational Structure of the Group .................................................................................................. 13

1.2.1. The RDC Department……………………………………………………………………………………………………………13

1.2.2. Domestic Heating Segment…………………………………………………………………………………………………..15

1.3. Industry Overview ................................................................................................................................. 16

1.3.1. Energy Challenge………………………………………………………………………………………………………………….16

1.3.2. Market Overview………………………………………………………………………………………………………………….18

1.3.3. Competition Overview………………………………………………………………………………………………………….20

CHAPTER 2 THEORETICAL BACKGROUND ............................................................................................. 22

2.1. Marketing .............................................................................................................................................. 22

2.1.1. International Marketing ................................................................................................................. 23

2.1.2. The Marketing Mix ......................................................................................................................... 24

2.1.3. Product/Promotion in International Marketing ............................................................................. 26

2.2. Product Marketing ................................................................................................................................. 27

2.2.1. The Product .................................................................................................................................... 28

2.2.1.1. Classification of Products…………………………………………………………………………………………………..29

2.2.2. Product Management .................................................................................................................... 30

2.2.3. Product Range ................................................................................................................................ 31

2.2.4. Product Strategy ............................................................................................................................. 32

2.2.5. Product Life Cycle & Marketing Implications ................................................................................. 32

2.2.5.1. Introduction Phase…………………………………………………………………………………………………………….33

2.2.5.2. Growth Phase……………………………………………………………………………………………………………………34

2.2.5.3. Maturity Phase………………………………………………………………………………………………………………….34


2.2.5.4. Decline Phase…………………………………………………………………………………………………………………….35

2.2.6. New Product Development ............................................................................................................ 36

CHAPTER 3 PRODUCT MARKETING & MANAGEMENT ACTIVITIES IN ARISTON . .................................... 42

3.1. Material Master Data Management Process for New Materials ......................................................... 42

3.1.1. Use of Finished Good Codes .................................................................................................... 43

3.1.2. Code Creation .......................................................................................................................... 43

3.1.3. Material Master ....................................................................................................................... 44

3.1.4. Material Master Data Management-Sales Views .................................................................... 46

3.2. Slow Moving/Obsolete Products Analysis ............................................................................................ 48

3.3. Monthly Business Review ..................................................................................................................... 51

3.4. Marketing Material Management ........................................................................................................ 54

3.5. Coordination of RDC Markets ............................................................................................................... 57

CHAPTER 4 A PRODUCT MARKETING CASE FROM ARISTON: SMART CONNECTIVITY .............................. 59

4.1. The Connectivity Project ....................................................................................................................... 59

4.2. Connectivity Market Analysis ............................................................................................................... 60

4.3. Ariston Smart Connectivity Products .................................................................................................... 61

4.3.1. Value Proposition for Consumers ............................................................................................ 61

4.3.2. Value Proposition for Professionals .......................................................................................... 62

4.3.3. Market Positioning of Ariston ................................................................................................... 63

4.4. Connectivity Performance Analysis ...................................................................................................... 64

CHAPTER 5 CONCLUSION & FUTURE DISCUSSIONS .............................................................................. 67

APPENDIX………………………………………………………………………………………………………………………………………………69

BIBLIOGRAPHY ..................................................................................................................................... 70


LIST OF FIGURES

Figure 1: Revenues by business segment................................................................................................ 10

Figure 2: Sales & employees by geographic area ..................................................................................... 11

Figure 3: Sales & employees by business segment .................................................................................. 11

Figure 4: Global map of Ariston Thermo Group ...................................................................................... 12

Figure 5: Organizational structure schema of the group ................................................................................. 13

Figure 6: Global map of RDC markets ..................................................................................................... 14

Figure 7: Organizational schema of RDC Department .............................................................................. 15

Figure 8: Global CO2 emissions graph .................................................................................................... 16

Figure 9: Energy consumption in Europe by sector ................................................................................. 16

Figure 10: Average residential energy consumption in Western Europe ........................................................ 17

Figure 11: Areas of intervention to curb CO2 .......................................................................................... 17

Figure 12: Evolution of global heating industry per geography ................................................................ 18

Figure 13: Evolution of Western Europe per segment ............................................................................. 19

Figure 14: Evolution of Western Europe per geography .......................................................................... 19

Figure 15: Evolution of developing markets per segment ................................................................................ 20

Figure 16: Evolution of developing markets per geography ...................................................................... 20

Figure 17: Marketing funnel .................................................................................................................. 27

Figure 18: Levels of the product ............................................................................................................ 29

Figure 19: Product management positioning in a company ..................................................................... 30

Figure 20: Phases of the life-cycle of a product ............................................................................................... 33

Figure 21: New product development (NPD) steps.................................................................................. 38

Figure 22: Use of finished good codes .................................................................................................... 43

Figure 23: Code creation process between different departments ........................................................... 44

Figure 24: A material master ................................................................................................................. 44

Figure 25: Material data management flow between company functions ..................................................... 47

Figure 26: Stock cover index (SCI) and Material status (MS) graph ........................................................... 48

Figure 27: Life-cycle of a product in Ariston ............................................................................................ 48

Figure 28: Process flow of obsolescence database management ............................................................. 50

Figure 29: Stock values of different boiler models .......................................................................................... 51

Figure 30: Stock quantities of different boiler models..................................................................................... 51


Figure 31: Example of a product guide ............................................................................................................ 55

Figure 32: Example of a product catalogue page ..................................................................................... 56

Figure 33: Example of a product booklet ................................................................................................ 57

Figure 34: Market outlook of smart Wi-Fi thermostats ............................................................................ 60

Figure 35: Positioning map of new Ariston smart thermostat product ..................................................... 64

Figure 36: Result format of AristonNet application download analysis ..................................................... 65

Figure 37: Result format of online registration analysis ........................................................................... 66

LIST OF TABLES

Table 1: Marketing mix of Ariston .......................................................................................................... 25

Table 2: Summary of PLC characteristics and appropriate marketing responses ....................................... 35

Table 3: Material types on SAP and their usage ...................................................................................... 42

Table 4: Material statuses associated with material types and company functions ................................... 46

Table 5: Relation between material status and sales status ............................................................................ 47

Table 6: Relation between material type and item category group .......................................................... 47

Table 7: Format of the analysis results for each RDC area ....................................................................... 52

Table 8: Format of the analysis results for each RDC market .......................................................................... 52

Table 9: Further monthly analysis .......................................................................................................... 53

Table 10: Further monthly analysis .................................................................................................................. 53

Table 11: Result of the analysis for all product lines in all markets ........................................................... 54

Table 12: Competitor benchmark for smart thermostats......................................................................... 63

Table 13: YTD sales analysis format of connected heating products ......................................................... 65


OBJECTIVES OF THE INTERNSHIP

The internship that Ariston Thermo Group, an Italian group company, offered me was a

great opportunity to apply my theoretical knowledge that I gained at my master study into

practice in an international context. I was offered to be a part of a program called

International Career Program (ICP). The program is designed for international (non-Italian)

master students to provide them with an internship training session for 6 months in the

Headquarter of the company until their graduation and then to relocate them to other

countries depending on their feedback and internship performance.

There were several reasons that positively influenced my decision to take this new

challenge. First of all, the program offers a broader development opportunity than a regular

internship, considering the provided trainings, extend of responsibilities and its future

promises. Furthermore, I wanted to join a multinational company with strong Italian roots

and company culture. This would help me to engage the working culture of the country

where I live and to understand its effects on a global level. Eventually, after a long and a

selective assessment process, I was offered to be a part of Rapid Developing Countries

(RDC) Marketing Team in Milan HQ Office. Within the RDC Marketing Team, I was

assigned to be a Product Marketing Trainee being responsible of the Heating Category

which includes boiler and renewable heating system product ranges. Description of the

role and objectives of the internship are as following:

Directly reporting to the Central Product Marketing Manager of Heating Systems,

supporting the coordination of local country/marketing managers for developing and

implementing the marketing strategy for rapidly developing markets according to the

overall regional marketing strategy;

Managing the life cycle of the product line (PLM), according to strategic guidelines,

market needs and competition strategies;

Participation in the definition of range, positioning and target price for each product

of the business line;

Understanding and analysing the business potential & competition for each product

of the portfolio, assuring consistency and coordination between different

departments;

Monthly business analysis with a focus on recent product launches, slow

moving/obsolete products and the connectivity project;

Ensuring a smooth go-to-market strategy and communication for smart connectivity

products.

Besides my main objectives and tasks that are mentioned above, I have been a central

point of communication for several departments including Brand Marketing, Production,

Planning, Sales, Logistics as well as the local company offices and external agencies. My

communication and language skills provided me with an ability to coordinate all these


entities and to ensure a smooth management of my product categories. Throughout the

internship, I had opportunities to apply the theoretical knowledge of Strategy & Marketing,

Leadership & Innovation, Branding & Communication, Business & Industrial Economics,

Design Strategy, Design Management Lab and Digital Technologies courses that I

attended to at Politecnico di Milano Management Engineering Program.


CHAPTER 1 – INTRODUCTION

This introductory chapter is meant to provide readers with the necessary information about

Ariston Thermo Group, its organization and operations as well as the scope of the

internship. It will enable readers to interpret the upcoming chapters of this project report. A

company overview following by an organizational structure and an industry analysis will be

presented.

1.1. Company Overview – Ariston Thermo Group

Ariston Thermo, an Italian group company, is one of the world's leading companies in

thermic comfort, offering a complete range of heating and water heating products,

systems, services and solutions designed to provide the maximum degree of comfort with

the minimum use of energy mostly under the main brand Ariston and several other brands

depending on the geography and the product segment. Thermic comfort is the core

business of the group where it operates with Ariston, Elco, Chaffoteaux, ATAG, Racold,

NTI and HTP (recently joined in the group) brands. 89% of the total revenue is generated

by the thermic comfort business in which the group offers boilers, water heaters, heat

pumps, air conditioners, solar heating systems, system accessories and services. On the

other hand, the group operates in two other small business segments which are

Components where the company offers heating elements and thermostats under the

Thermowatt brand; and Burners where burner products/services are offered under the

Elco, Cuenod and Ecoflam brands. These business segments together generate the 11%

of the total revenue. (See Figure 1) [5]

Figure 1: Revenues by business segment


In 2016 the Group sold 7 million products in over 150 countries, reaching a turnover of

€1.43 billion euros with 89% of it generated outside Italy. It has 6,900 employees, 59

companies and 22 production sites and 19 R&D centres in the world. Figure 2 and Figure

3 below, show the distribution of the revenue and the number of employees by the

geographical area of the presence and by the type of the business segment.

Figure 2: Sales & employees by geographic area Figure 3: Sales & employees by business segment

As well as a strong position in European markets, Ariston Thermo has a leading position in

key emerging markets. In Figure 4, the green areas are the ones in which Ariston Thermo

has a direct commercial presence meaning that the company has an operational office in

the area. The black dots in the same figure represent the industrial presence of the

company meaning that it has a production plant in the area. [5]


Figure 4: Global map of Ariston Thermo Group

Ariston Thermo’s commitment to energy efficiency is expressed through its constant

stream of new solutions based on renewable energy sources such as solar thermal

systems and electric heat pumps as well as improvement of the efficiency of traditional

products (such as boilers and water heaters) and investment in new projects for the future.

The underlying objective is to offer an optimal combination of comfort, energy savings and

care for the environment. All over the world, Ariston Thermo is synonymous with comfort,

energy efficiency and respect for the environment, thanks to its high efficiency products, its

plants in compliance with the most advanced production standards and excellent pre- and

after-sales customer support services. The Group has now a leadership position in the

global thermic comfort market for domestic, commercial and industrial spaces. More than

200 million people, in 150 countries live with an Ariston Thermo product. Ariston Thermo

operates in three different sectors with leading brands and an extensive range of products

and services. [5]


1.2. Organizational Structure of the Group

The top organizational structure of Ariston Thermo Group is explicitly shown in Figure 5.

Rapid Development Countries (RDC) part will be elaborated further as the internship has

taken a place at this entity.

Figure 5: Organizational structure schema of the group

1.2.1. The RDC Department

RDC refers to rapidly developing countries. Since these countries have significantly

different market characteristics and dynamics than those mature ones, the company has

decided to separate the management of the region. Basically, the region includes all the

areas except from Western Europe, China, Southeast Asia and Pacific which are managed

by different entities. Therefore, it is the biggest geographical unit in the company and

contains more than 80% percent of the total number of countries where Ariston Thermo

has distribution operations. (See the red area in Figure 6)


Figure 6: Global map of RDC countries

The region is managed by a regional director who is a general manager with

responsibilities ranging from marketing to controlling. The RDC department works as a

strategic business unit of the company with a specific team based in Milan Headquarter

(except from the Sales Representatives who are located in Fabriano HQ). The department

includes its own allocated HR, Controlling, Sales, After Sales and Marketing teams with a

bigger focus on the Marketing team since the central control on local markets is an

important part of the company’s strategy.

In order to manage the local markets more efficiently, the region is divided into sub-areas

that are managed by area managers. The areas are followings: RUC Area (Russia,

Uzbekistan, Caspian), India, East Europe & Americas, MEA (Middle East & Africa) and

TRC Area (Turkey, Romania, Caucasus). All area managers are directly reporting to the

Region Director as well as to the RDC Marketing Manager. These sub-areas are also

divided into smaller management divisions which are the countries themselves in some

cases. The countries have their own country managers and area marketing managers. In

Figure 7, the organizational structure of RDC department is visualized.


Figure 7: Organizational schema of RDC Department

The RDC Marketing Team, at which I have been working, consists of Product Marketing,

Digital Marketing and CRM (Customer Relationship Management) functions. The Product

Marketing function is the core part of the team with a direct influence on both product and

market strategies. The Product Marketing Team is also divided in terms of product

categories. The first segment, so called “Domestic Heating Segment”, manages 3 out of 4

product lines of the company: Boilers, Renewable Heating Systems and Air Conditioners.

The second segment is called “Water Heating” and manages only water heaters because

this segment has the biggest number of types and models. The third and the last segment

is called “Commercial Heating” which manages specific heating and water heating

products that are used for commercial and industrial purposes. Each segment has a

Product Marketing Manager and one junior position assisting to the manager. As I

mentioned in the objectives of the internship part, I have been managing the marketing

operations for the heating segment products

1.2.2. Domestic Heating Segment

Basically, rather than water heaters* and commercial products, all the product lines of the

company are included in this segment. The main product lines covered by the scope are

boilers, renewable heating systems and air conditioners (cooling and heating functions

together). These product lines have deeper classifications in terms of the technology and

physical structure of the product. All product lines and classifications of the Domestic

Heating Segment are shown on Appendix-1.


Boilers are still the biggest line of the segment in terms of sales volume and production

capacity. However, rising trend of sustainable technologies affect this market as well

therefore the demand for renewable heating systems is increasing. Likewise, Ariston

Thermo is also shifting its focus more to these technologies. Heat pumps are the most

innovative and advanced products among the renewable technologies.

Another recent focus of the company is the connected technologies. For that reason, there

is an ongoing process on the connectivity and within the RDC Marketing Department, this

process is also managed by the Heating Segment. Particularly, it has been my focus and

responsibility during the internship.

* Space heating products might also include a water heating function but in our terminology these products

are not called water heaters. Water Heater refers to the devices with only water heating function.

1.3. Thermic Comfort Industry Overview

1.3.1. The Energy Challenge in the Sector of Thermic Comfort

The world’s energy consumption is increasing, and with-it CO2 emissions: the planet’s

environmental sustainability is at risk. Every year, both domestic and commercial global

consumption of primary energy increases proportionally to the social, economic and

industrial development of emerging countries, and adds to the already significant

consumption of Western countries. Analysing Europe alone, energy consumption and the

related emissions are caused by three main areas: 24% is attributable to the industrial

sector, 27% to transportation, and 28% to domestic and commercial thermic comfort. (See

Figure 9) Thermic comfort is particularly important in residential energy consumption. On

average, final energy consumption for domestic heating represents approximately 67% of

total consumption, and increases up to 80% if energy consumption for water heating is

considered. [14] (See Figure 10)

Figure 8: Global CO2 emissions graph Figure 9: Energy consumption in Europe by sector


Figure 10: Average residential energy consumption in Western Europe

According to the 2016 report of the International Energy Agency, if we consider the total

number of possible areas of intervention for curbing CO2 emissions by 2040, 39% derives

from the energy efficiency of products used by end users. (See Figure 11) More efficient

products can contribute to substantially reducing the forecast increase in annual

emissions. [15]

Figure 11: Areas of intervention to curb CO2

Taking this fact into consideration, efficient products and processes can make a decisive

contribution to reducing energy consumption and environmental impact without sacrificing

comfort. Ariston Thermo intends to play a lead role in this scenario. Being aware of the

impact that its industry produces in terms of energy consumption and atmospheric

emissions, Ariston Thermo has placed energy efficiency at the heart of its sustainable

growth strategy. By 2020, the Group aims to carry out 80% of its business with high-

efficiency or renewable energy solutions. Ariston Thermo offers a wide range of highly


energy efficient products which reduce consumption compared to traditional systems. The

Group develops and produces solutions which harness renewable energy sources: solar

thermal systems and heat pumps derive clean energy from the sun and air to heat spaces

and produce hot water.

1.3.2. Market Overview

Heating business (hydronic heating generators + solar collectors + cylinders) was accounted to

be 13 billion € in 2016 and it is expected to grow to almost 15 billion € in 2021. Despite the

growth expectations, the industry can be considered as a slow growing one. Renewable

heating sources as well as the commercial heating segment are expected to grow the

most in terms of volume. As it is the case in other similar sectors, mature markets (mainly

Western Europe) are forecasted to grow the least whereas Chine and rapidly developing

markets are expected to grow fast. In Figure 12, evolution of the global heating industry

per geography is depicted by numbers. [14]

As a global trend, regulations and government incentives are steering the high efficiency

products. The fastest growing player, China, is shifting from coal to gas and electricity as

the heating source. The most regulated region in terms of energy regulations is Europe.

European Union has already introduced ErP (Energy-related Products) Directive long time

ago as a guideline for the industry. The EU is pushing the use of heating heat pumps

(HHP) which are the most efficient heating products in the industry. One of the biggest

markets, Turkey, is projected to apply ErP regulations in 2018. These are the key changes

that will shape the future of the global heating business.

Figure 12: Evolution of global heating industry per geography


Western Europe is still the biggest market for the sector in spite of its declining growth

rate. In Figures 13 and 14, evolution of the Western European market is shown in terms of

product segment and country. According to the analysis, the market is expected to grow

with an annual rate of 1.3%. Looking at the product segment, standard efficiency wall-hung

boilers (WHB SE) are expected to get smaller by 7.2% annual rate due to the regulations

whereas heating heat pumps (HHP) are estimated to grow at 5.0% annual rate. The

consumption is highest in Germany and it seems to stay so. However, the biggest growing

markets seem to be Italy and France which are the biggest markets for Ariston Thermo.

Figure 13: Evolution of Western Europe per segment Figure 14: Evolution of WE per geography

High efficiency wall-hung boilers segment (WHB HE) is growing mainly related to positive

outcomes on GDP recovery in Europe. Some price erosion expected in the long-term.

WHB SE segment is declining but still present in 2021. Legal installations in common

chimneys and possible illegal installations are visible in some ErP markets. HHP domestic

and commercial segments are expected to grow fast.

Developing markets (China is not included) are expected to grow at an annual rate of 3.4%

and to have a significant effect on the industry. As Figure 15 shows, currently standard

efficiency boilers are the biggest segment with a negative trend. High efficiency boilers are

expected to pass the traditional ones and be the biggest segment in 2021 with a 32%

share. [14] This is mainly because of the growing environmental awareness of the

customers in those markets and the possible introduction of ErP regulations in some of

those markets, especially in Turkey which is projected to grow the most. (See Figure 16)


Figure 15: Evolution of developing markets per segment Figure 16: Evolution of DM per geography

1.3.3. Competition Overview

The main competitors of Ariston Thermo are the strong German players in the sector.

German giants Vaillant, Bosch and Viessman are the most challenging competitors at

global level. These firms operate with local brands in some markets thanks to the

acquisitions. For example, Czech brand ProTherm and Turkish brand Demirdokum are the

important local brands owned by Vaillant. German Buderus and Junkers in Italy belong to

Bosch Group. Baxi, Baymak and De Dietrich are the important brands of Dutch BDR

Therma Group. In some countries, those big parent brands operate with their main brands

together with their local sub-brands. In some cases, it is an important strategic move to

keep the local brand as it is to not to lose a market share such as In Turkey where there

several strong local brands. Other important global competitors of Ariston Thermo are the

followings: Electrolux (Sweden), Ferroli (Italy), Navien (Korea-USA), A.O.Smith (USA).

On the other hand, Ariston Thermo Group follows the acquisition strategy like many of its

biggest rivals. Usually the main brand, Ariston, exists in all the markets where the group

has distribution operations and is the most visible one in most cases. However, in some

markets Ariston brand is not the primary brand. For example, Germany, Switzerland,

Austria are the markets where the Elco brand is the primary one. Chaffoteaux is the

group’s most powerful brand in France and some other French speaking countries. In

Netherlands, ATAG, a Dutch brand the group acquired a few year ago is the primary

player. On the other hand, in USA and in Canada, the group only operates with the

recently acquired brands HTP and NTI which are well-known brands in these markets.

Likewise, in India the old local Racold brand is the only group member in the market.


Acquisition is the strategy to grow in the international market for Ariston Thermo. Hence,

the group is growing fast but in an inorganic way. On the other hand, this strategy allows

the group to learn new technologies from those acquired firms and to increase its research

and innovation capability to gain competitive advantage. Besides, this strategy decreases

the marketing and operation costs as the incumbent firm already know the market as well

as the local consumers knows the brand. In order to sustain the acquisition strategy a

constant positive cash flow is necessary. Thus, the firm keeps the costs and debts under

control and aims to maximize the cash earnings.


CHAPTER 2 – THEORITICAL BACKGROUND

In this chapter, a theoretical background will be presented in order to understand the

content of upcoming chapter in a better way and to be familiar with the some particular

terms. This background is a result of a literature review and of the academic background

of the author. First of all, the basic marketing concepts will be explained. Then the product

element of the marketing mix will be elaborated together with the concepts of product

marketing, product management, product life cycle management (PLM) and new product

development (NPD). Throughout the chapter, examples and real life cases from Ariston

Thermo Group will be given. This will support the connection of the topic with the other

chapters.

2.1. Marketing

Noted Harvard Professor of Business, Theodore Levitt, states that the purpose of all

business is to "find and keep customers". [17] The only way to achieve this target is to

possess a competitive advantage. You need to convince buyers that what you offer to

them meets their particular need or desire at that particular time. If you can achieve to offer

this advantage consistently, eventually the buyer will consider your offer the only

alternative and purchasing your product will be a habit. Assuring this commitment, which is

the ultimate target for all businesses, can only occur with the support of an effective

marketing plan. Hence, the particular role of marketing is to support businesses to identify,

satisfy and retain the target customers. Marketing is much more than just selling products

and making money; it is a connection between people and products, between companies

and customers.

Tracing the evolution of the various definitions of marketing proposed during the last 30

years reveals two trends: 1. expansion of the application of marketing to non-profit and

non-business institutions; e.g. charities, education, or health care; and 2. expansion of the

responsibilities of marketing beyond the personal survival of the individual firm, to include

the betterment of society as a whole. These two factors are reflected in the official

American Marketing Association definition published in 1988. [17]

“Marketing is the process of planning and executing the conception. Pricing,

promotion, and distribution of ideas, goods, and services to create exchanges that

satisfy individual (customer) and organizational objectives.”

Marketers monitor and investigate the changing needs of commerce and promotion and

create products and services designed to meet those needs. Marketing involves sales,

advertising, promotion, retail management, marketing research, pricing, physical

distribution, new product introduction, branding, international business, and e-commerce.

Virtually all businesses and organizations, as well as government agencies, have


marketing needs. However, companies cannot just concentrate on domestic markets if

they are to remain competitive. Global marketing allows marketing managers to look for

growing target markets and product opportunities overseas.

2.1.1. International Marketing

Companies throughout the globe have realized that they have saturated their local markets

and have started searching for growth opportunities elsewhere. Thanks to the strong

emergence of China and Eastern Europe, international marketplace has grown extremely.

However, tapping into other markets is a complicated business and we have witnessed

that many companies failed miserably. This operation requires more than just taking an

existing local marketing strategy and ejecting it into another geography. It is necessary for

companies to tailor their marketing strategies and management processes.

Both in local and international marketing there are similar processes and frameworks. We

start with doing a market research, then select target markets, utilize several tools of

marketing (i.e. 4P), create a budget and measure the results. On the other hand, there are

uncontrollable parameters such as socio-economic factors, political environment,

competition and culture, all make it necessary to make adjustments in the marketing

management. [17]

At the minimum involvement level, international marketing involves the organization in

making marketing decisions across the national borders. At a higher involvement level, it

involves the organization in building production and management facilities overseas and

coordinating marketing strategies across markets. It highly depends on the potential

offerings of the market and company’s targets in that market. For instance, as it is

mentioned in Chapter 1, Ariston Thermo has 3 international involvement levels: It has 22

production sites in 13 countries where it aims to involve at a maximum level with all

operations; it has 59 operating companies / offices in 36 countries where it has commercial

entities to manage sales, marketing and logistics operations; and finally its products are

being distributed and sold in 150 countries where it might not any legal entity but still

involves in marketing decisions.

Hence, how international marketing is defined depends on the level of involvement of the

company in the market. Technically, the existing possibilities are the following:

Domestic Marketing: In this case, the company manipulates a bunch of

controllable variables such as the product, price, distribution and promotion; in a

large uncontrollable external environment consisting different cultural values,

competitors, legal and economic structure within a specific geography.

International Marketing: The company operates across markets where both

controllable and uncontrollable variables differ. Controllable factors such as price

and cost structures, distribution channels or types of advertisements might differ


significantly. Degree of commitment for the international marketing strategy can be

defines as following:

o Export Marketing – The company markets its products across boundaries.

o Multinational Marketing – In this case, marketing activities include operations

in multiple countries. There is a sort of impact or control on the marketing

activities from another country, other than the one where the products are

being sold. Each market is seen as independent and a profit centre on its

own.

o Global Marketing - The entire firm’s aim is to explore and select global

marketing opportunities with the target of gaining a global competitive

advantage. The main target is to achieve a synergy in the overall operation

and to benefit from exchange rates, tax differences, labour markets and

different market opportunities. The logic of the strategy is that the whole

organization would be greater than the sum of each entity.

Ariston Thermo is a good example for the evolution of these marketing strategies. It

started as a domestic marketer in Italy, eventually exported its products to a few regional

markets, grew to become a multinational marketer, and today is a global marketer,

establishing manufacturing plants in foreign countries as well as hiring local labour,

partnering local agencies and adopting to countries’ cultural norms. As it moved from one

level to the next, it also reconsidered and updated its attitudes towards marketing and

business strategy. Currently the group’s motto is “Global vision, local action” meaning that

there is a common vision to go for all markets but the way to reach this vision might

require different actions across the markets.

To sum up, the good marketer is the one who achieves to manipulate the controllable tools

of the marketing mix within the uncontrollable environment. [17] Conducting the necessary

research and understanding the differences of the marketing environment within a specific

country are essential for the success.

2.1.2. The Marketing Mix

After the objectives and the marketing plan are defined, the marketer must determine the

way to achieve these. This produces a set of general strategies that must be refined into

actionable and achievable activities. The marketing mix-product, price, promotion, and

distribution—represents the way in which an organization's broad marketing strategies

are translated into marketing programs for action. [17]

Product: Products (and services) is the primary marketing mix element that meets

the customers’ needs and desires. It provides a link between the organization and

its customers. Marketing organizations must be ready to alter products as dictated

by changes in competitive strategies or changes in other elements of the

organization's environment. Many organizations have a vast array of products in


their mix. Ideally, each of the products is profitable. This is often not the case, so

some tough decisions must be made concerning the length of time an unsuccessful

product is kept on the market.

Distribution: The organization's distribution system moves the product to the final

consumer. Because there are many alternatives when selecting a distribution

channel, marketing management must have a clear understanding of the types of

distributors, of the trends influencing those distributors, and of how those

distributors are perceived by customers.

Communication (Promotion): The product's benefits must be communicated to

the distributors and to the final customers. Therefore, the marketing organization

must provide marketing information that is received favourably by distributors and

final customers. Marketing organizations, through promotion, provide information by

way of advertising, sales promotions, salespeople, public relations, and packaging.

Price: Finally, marketers must price their products in such a way that customers

believe they are receiving fair value. Price is the primary means by which customers

judge the attractiveness of a product or service. Moreover, price is a reflection of all

the activities of an organization. Finally, price is a competitive tool, in that it is used

as a basis for comparison of product and perceived value across different

organizations.

The marketing mix for Ariston is briefly described on the following table: (Table 1)

ARISTON

PRODUCT PRICE PLACE PROMOTION

* Space Heating |

Water Heating |

Cooling Systems

* Related parts &

services

* Cost mark-up pricing

strategy

* Market average prices

* Price segmentation in

product ranges

* Retailers &

Wholesalers

* Dealers

* Service companies

* E-commerce

* Traditional channels

(TV, Radio, Press)

* Web, Social Media

* Campaigns

* Exhibitions & Fairs

Table 1: Marketing mix of Ariston

When making decisions about the variables of the marketing mix one has to keep in mind

their interrelation and the fact that they need to be coordinated with the other elements of

the marketing program. In order to remain competitive, organizations need to combine

product, price, promotion, and distribution in way that differentiates themselves

advantageously from competitors.

After the design and the evaluation of a marketing program, its implementation is crucial. It

will ultimately decide about the success of the campaign. Considerations should therefore

include the best place where to promote the product, a way how a product reaches the

final customer, price and a commission rate for the salespeople. A marketing manager is


responsible for choosing the way of implementing the terms of the plan. In the course of

the active marketing plan, a manager continuously has to gather information regarding the

effectiveness of the chosen measurements. This includes data about sales, profits,

consumers’ feedback as well as the reactions of competitors. After the collection of the

relevant figure, they need to be analysed and conclusions regarding potential new

problems and opportunities must be drawn by the marketing manager.

Problems and opportunities are even more extended on the international marketing level.

The marketer has to follow a structured strategy to adapt the marketing mix elements into

different market characteristics. In the following section, two of these elements, product

and promotion will be elaborated in terms of international marketing means.

2.1.3. Product/Promotion in International Marketing

Keegan [19] has highlighted the key aspect of marketing strategy as a combination of

standardization or adaptation of product and promotion elements of the mix and offers five

alternative and more specific approaches to product policy:

One Product, One Message, Worldwide: Many strategists argue that this strategy

will be adopted for most of the products in the future as the globalization level

increases. Yet, in reality a limited number of products might claim to have achieved

it already.

Product Extension, Promotion Adaptation: The product stays the same, but the

promotion strategy is adopted to e new customer segment or to particular demands

of individual countries.

Product Adaptation, Promotion Extension: This is usually used if local needs for

the product vary but the promotional campaign achieve an international appeal.

Dual Adaptation: Differentiation of strategies for both product and promotion for

each market.

Product Invention: This strategy is usually adopted by firms from developed

countries to supply products to less developed countries.

Ariston generally follows the “Dual Adaptation” strategy and differentiates both products

and promotion strategies in different markets. However, we cannot conclude that Ariston

utilizes different product and promotion strategies for every single market. Some markets

show similar characteristics hence a segmentation is possible. For example, some

markets have strict energy consumption regulations therefore it is not possible to sell low

efficiency products in those markets. On the other hand, some markets, such as Russia,

have natural gas with a very low price therefore it is not so logical to promote more

expensive products with a high efficiency motivation in those countries. This kind of


segmented product and promotion strategies provide Ariston with more efficient operations

and more effective marketing capabilities in such a fragmented sector.

Positioning is a key success factor for the customer’s perception of the product. However,

it is not quite applicable to use the same positioning strategy for the countries at different

stages of economic development since the customer segments and buying occasions may

differ significantly across the countries. For example, while Kentucky Fried Chicken (KFC)

and McDonald's restaurants aim at everyday eating for the mass market in the developed

countries, in less-developed countries they are perceived as places for special-occasion

eating, and are beyond the reach of the poorest segments of the population. [17]

The product positioning, therefore, must vary in some dimensions. In confirming the

positioning of a product or service in a specific market or region, it is therefore necessary

to establish in the consumer perception exactly what the product stands for and how it

differs from existing and potential competition by designing an identity that confirms the

value of the product. [17]

2.2. Product Marketing

Product marketing is the process of bringing a product to market. This includes deciding

the products positioning and messaging, launching the product and ensuring salespeople

and customers understand it. Product marketing aims to drive the demand and usage of

the product. It's one of the few job functions that touches product, marketing and sales. It

all comes down to knowing the target customer and testing to find ways to learn more

about them and how best to interact with them. There are basically three level of focus for

marketers in terms of the customer objective. Product marketing is the last part of the

funnel where the marketer is closest to the customer, s/he is both a market expert and a

product expert. (See Figure 17) [16]

Figure 17: Marketing funnel


Product marketers are the ones who write the positioning and messaging for products and

new features. They think about how to drive demand and usage of those products and

features. They also think about the competitive landscape and the market. The function

support the sales team to sell more and close more deals. Product marketers are focused

more on marketing to customers than prospects and leads. Shortly, the product marketing

function has a job to bring products to market. That includes everything from setting the

positioning and messaging, to running product launches, to making sure the sales team

understands how to talk about the product and making sure customers understand how to

use it.

2.2.1. The Product

The product is at the heart of the marketing exchange. If the product is not able to meet

the customer expectations, then all effort would be in vain. A product is a complex entity,

but it can be represented as a series of four layers corresponding the core product, the

tangible product, the augmented product and the potential product. [18] (See Figure 18)

The core product is the essential meaning of the product and conveys its main

message. This is mostly related to the primary benefits that are expected by the

consumers. For example, Ariston’s core product can be considered as everlasting

comfort as its products convey this message and offers it as the core benefit.

The tangible product is the physical extent of the core product. For Ariston case,

boilers or water heaters are the tangible products being physical forms of the core

product, the everlasting comfort.

The augmented product represents add-on extras that are not an essential part of

the product but are used to further improve the benefits of the product. Again for the

Ariston case, such add-on extras could be an extended warranty or a full

maintenance package for those who seek to have a long-lasting comfort.

The potential product represents a vision of what the product could be in the future.

The marketer asks ‘How can we further improve this product?’ and aims the

continuous improvement to define the potential product. For example, a wi-fi

connected heating system used to be a potential product for Ariston in the near

past.


Figure 18: Levels of the product

Having discussed the components of a product, it is now relevant to examine ways of

classifying products in order to facilitate the design of appropriate product strategies.

2.2.1.1. Classification of Products

The process of developing a successful marketing program for single products is

challenging. In order to facilitate the process, a number of classification systems have

evolved that provide a variety of strategies. [17]

The following paragraph presents the classification of consumer goods whereas there are

different categories of classifications.

Convenience Products: Consumers usually put little effort into situations where

they buy convenience products. Convenience is hereby more important than brand

loyalty and products of this category correspond with the routine response buying

situation. Low involvement products and convenience products have similar

marketing implications. [18]

Shopping Products: Since the purchase of shopping products is riskier than the

one of other items, consumers often gather information beforehand and evaluate it

before buying them. Before buying this sort of products, consumers often get

consultation from specialist sources or friends. An individual’s perception of the

importance and complexity of the purchase classifies a product into this category.

That is why the view on what is a convenience good or what makes an item a


shopping good varies from person to person. Marketers should therefore focus on

every part of the marketing mix instead of focusing only on the product. [18]

Speciality Products: Speciality products are also being called ‘high-involvement’

and ‘complex’ products. Shopping products could be classified as high involvement

items. While shopping products could be said to be high in involvement, this is

qualitatively different in that the perceived risk is high and the product is infrequently

purchased. Which goods are considered a speciality product highly depends on the

individual perception of consumers. [18] Ariston products for example might be

qualified as speciality products since they are not frequently purchased whereas

other consumers might be perceiving them as shopping products. The perception of

a specific customer group influences and changes the marketing strategy for certain

products.

2.2.2. Product Management

Effective product management is the critical success factor to make a product successful

across its life-cycle and across markets. With increasing institutionalization of a consistent

and empowered product management role, the success rate of projects in terms of

schedule predictability, quality and project duration improves. Explanatory factors for this

positive impact of product management include leadership and teamwork, managing risks

and uncertainty, mastering stakeholder needs, and accountability towards agreed

business objectives with one empowered individual across the whole product life-cycle. [6]

Product management is the business management of a product (including solution or

service) over its life cycle with the objective of generating the biggest possible value to the

business. The success of product development is measured in delivering the right

products at the right time for the right markets. Product management must hold a particular

position in the organization to be successful. It translates between strategy and

implementation, such as in requirements development (See Figure 19).

Figure 19: Product management positioning in a company


From the rather tangible IT systems in finance and industry to the many applications we

are using on an almost daily basis to ubiquitous computers in smart phones, automotive

and consumer electronics, products must be managed from strategy to concept and

development and market entry and of course throughout the life-cycle including

maintenance, service, variant and version management etc. When looking in the rear

mirror we see many companies and endeavours which failed due to overemphasizing

technology and not sufficiently implementing a sound business strategy. [1] Take

Netscape. For many of us it was the first experience of the Internet. In 1995 it had a

market share of 80% - more than enough to stay in the pole position forever, as

companies such as Google or Amazon show. But already in 1997 it slowed down, lost

market share, and in 2003 went into bankruptcy. What went wrong? One of the managers

put it in simple words: “We had no product management; it was just a collection of

features” [3]. More recently and in another domain, a previous Nokia senior manager

claimed that the lack of product management is the primary reason for their loss of market

share in the past years [3]. On the other hand, we all admire companies such as Apple or

Google for their excellent product management.

2.2.3. Product Range

Most of the firms, like Ariston, offer a range of different products rather than a single

product. The sum of all product variants offered by the firm is called the product mix or the

product portfolio mix. The product mix consists of different lines and items. It might be

divided into a number of product lines which is a group of products that are strongly related

to each other. For example, Ariston organizes its mix into boilers, water heaters,

renewable systems and air conditioners to reflect the particular production requirements

and problems for each line.

The product mix width corresponds the number of different product lines the company has.

In the simple Ariston case the width of the mix is four. A product line consists of a number

of product items. These are the individual products or brands (e.g. P&G) each with its own

characteristics and price. The product line length addresses to the number of items within

the product line. Product line depth refers to the number of variants of each item within the

product line. Again for the Ariston case, if we consider the product line depth for the

heating product line we can obtain the variants of WHBH, WHBS, FSBD, CYLB and AHE.

(See Appendix – 1 for the descriptions)

These definitions of product mix width, length and depth provide a reference to a particular

set of products, allowing the marketer to analyse the mix and to make strategic decisions

to define and maintain the product ranges. The product line manager must know the

contribution of each item to the revenue and profits so that s/he can take strategic or

tactical actions. Another objective of a product line manager must be making decisions to

https://re-magazine.ireb.org/issues/2014-3-gaining-height/product-management/#fn-3

https://re-magazine.ireb.org/issues/2014-3-gaining-height/product-management/#fn-3


whether to lengthen the product line by adding products or to deepen current products by

adding more variants.

2.2.4. Product Strategy

Product strategy is a part of the marketing strategy and should harmonize with it. The

strategy contains the product objectives, product plans and the product management

strategies. There must be reason for all product related activities and these reasons are

expressed in the form of specific objectives. There are several objectives of a firm when it

makes a strategic decision on the product.

Sales growth can be considered as a universal objective as a result of the introduction of a

new product or the improvement s of an existing product. Another objective related to the

sales growth is finding new uses for the existing products. Using excess capacity is

another common product objective. This objective is mostly a short term consideration, in

the long run only the products that generate a sustainable profit should be retained

regardless of the excess capacity problem. Maintaining or increasing the market share is

also an objective of many firms. In this case, the focus is on the competitive position rather

than targeting a level of profit. Differentiating the product is the main strategy to achieve

this objective. Developing a full line of products is another popular objective. The sales

force of a firm usually provides a suggestion for this objective by stating that they need a

more complete product line to offer their customers. Expanding the product to a new

market segments is a common objective too. Companies often introduce new products to

target and capture new customer segments. [17]

Once the product objectives are determined, it is time to start to develop a product plan.

Product life cycle (PLC) concept is the best tool to explain the product planning process.

2.2.5. Product Life Cycle and Marketing Implications

There are different phases of sales trend of a product throughout its life span. There are

times when it grows, times when it is stable and when it declines usually when it is

outperformed by a new product which satisfies consumer needs better. The PLC (Product

Life Cycle) is a model that supports marketers to describe the common levels of sales

growth and decline that can be observed over the lifetime of a product. The PLC illustrates

the four key phases that any product might probably experience between the time of its

launch and the time it disappears from the market. These stages are Introduction, Growth,

Maturity and Decline. [18] (See Figure 20)


Figure 20: Phases of the life-cycle of a product

2.2.5.1. Introduction Phase

Right after its entrance to the market, the sales of a product will be slow and the profit, if

there is any, will be quite small as a lead time required for marketing efforts to show their

effect. Since the product is new and unexperienced to them, customers might be unwilling

to purchase the product. Moreover, the firm is unlikely to fully utilize its production capacity

and is not capable of benefiting from the economies of scale at this stage. This is another

reason of low profitability. Costs are even higher at this stage as a result of product

development and launch activities. Increasing the awareness of the product among the

target segment and to promote the trial of the product are the main objectives of the

marketer at this stage.

There are several marketing strategies to be used for introducing a new product.

Depending on the characteristics of the product and the competition, there are two pricing

strategy options:

Price skimming – Setting a high initial price, reduce it on the market grows.

Price penetration – Setting a lower price, lower than a sustainable level in long-

term, expand the market as soon as possible.

Many products are not able survive at the introduction phase of the PLC. This is mainly

because if customers do not get satisfied with their initial purchase, mostly they do not

make any repeat purchase and of course do not recommend it to others. It is vital to


ensure that the products offer unique benefits to customers and customers are aware of it.

This is a crucial point to survive and to grow the business.

2.2.5.2. Growth Phase

Products, which achieve to meet the market needs or to touch upon previously untapped

needs in the first stage, are able to enter a growth stage. In this stage, sales start climbing

up quickly. Firms start generating profits as sales revenues grow faster than costs. On the

other hand, competitors will have time to assess the firm’s products and observe their

impacts on the market. Therefore, some competitors might respond with improvements to

their existing products or launch a new product into the market. As the market is growing

as well, the new competitors can increase their sales numbers by appealing new

customers rather than attacking each other on price.

2.2.5.3. Maturity Phase

This stage is defined as the phase at which a product’s sales growth slows down or

becomes steady. In this stage, firms tend to decrease their prices and increase their

promotions to steal customers from the competitors. As the competition intensifies, some

players are forced to exit from the market also known as the shake-out point. Only the

strongest players stay to dominate a more stable market. This stage lasts longer than the

previous stages and probably makes it more difficult to manage the marketing effort. A

strong price competition and an increased marketing campaigns are more common at this

stage in order to retain the customer loyalty.

There are three different strategies for product managers to follow at this stage: innovating

in the market (market development), modifying the product (product development) and

changing the marketing mix (marketing innovation).

Market Development: The aim is to increase the consumption of the current

product. The firm targets new customers and new markets without changing the

product. Alternative target could be the re-position the brand to target a different

segment which grows faster than the current target segment.

Product Development: Here, the decision is to modify product characteristics to

attract new customers or to promote more use of the product. The change might be

an improvement in quality, style or feature.

Marketing Innovation: It addresses a change in one or more elements of the

marketing mix. The firm can offer an improved service, make price cuts, take

advantage of advertising campaigns or move into new market channels as the ways

of innovating the marketing mix.


2.2.5.4. Decline Phase

Oftentimes substitute products offer superior benefits to consumers and thereby cause a

decline in sales. There generally exist three different strategies which might be followed in

this stage:

Harvesting: This strategy involves little or no marketing support to a product and

enables a company to maximize the life of the item. Cash can be generated and

time to establish new products can be found. A slow decline in sales gives the

company the chance to find alternative ways to generate revenue and to adjust the

cash flow.

Phased Withdrawal: This strategy sets a cut-off date for the product. Before mid-

stages might be initiated to pull the product from certain channels or areas.

Contracting or Selling: The retention of loyal customers can be reached using two

strategies. One suggests selling the brand to a niche operator whereas the other

proposes a subcontract for its marketing and/or production. These strategies are

especially beneficial for smaller firms which are able to offer the product’s market a

satisfactory return. Also the originating organization of a product has an advantage

since it can dispose of a product it did no longer want. That way consumers can

purchase their preferred items and the subcontractor or buyer can acquire know

how in marketing a brand which otherwise would have been hard to establish.

Table 2: Summary of PLC characteristics and appropriate marketing responses


All in all, there are different characteristics of each stage of the PLC and there are

different strategic implications of these characteristics. In Table 2, the summary of the

PLC characteristics and the appropriate marketing responses for each stage are shown

explicitly.

2.2.6. New Market Offerings | New Product Development

A company’s future strongly depends on the development of new products. In this process,

marketers play a decisive role. They identify ideas and evaluate them while cooperating with

R&D as well as other departments. This continues throughout the whole development

process and includes every stage of it. Improved or replacement products and services are

mainly responsible for maintaining or building sales. New to the world products on the

contrary have the ability to transform whole industries and companies. They might even

somehow change people’s lives. [7]

New products and services however face a lot of challenges which their low success rate

indicates. The range of new products reaches from new- to- the- world products to items

with minor improvements or revisions of existing products. The number of products which

truly can be considered is rather low and most new-product activity is actually focusing on

the improvement of already existing products. That way less than 10% of all newly

introduced products are actually innovative. [8] Although it seems radical innovations can

damage a company’s bottom line it is allegedly new products which carry the greatest cost

and risk. If radical innovations succeed they are the ones that have the capacity to create a

greater sustainable competitive advantage than ordinary products. As a result, they are able

to produce significant financial rewards.

Having a strong R&D and a marketing partnership is crucial for companies in order to

introduce a radical innovation. Also having the right corporate culture is necessary so that a

company finds itself in a place where it is able to cannibalize existing products, tolerate risk

and maintain a future market orientation. In order to estimate the demand for radical

innovations only a few reliable techniques exist. Amongst them focus groups can highlight

customers’ interests and needs for radical innovations. A probe- and- learn approach, which

is based on observations and feedback of early users’ experiences as well as on online

chats or product- focused blogs, might be more suitable for marketers. [9]

The time it takes to bring products to the markets of retailing, consumer goods, electronics,

autos and other industries has been drastically reduced. In a fast-paced economic

environment where also the velocity of new- product introductions have been accelerated,

continuous innovation has become a necessity. Companies which under such

circumstances fail to develop new products make their existing products or services

vulnerable to changing customers’ needs and tastes. New technologies, short product life

cycles, increased domestic and foreign competition, and especially new technologies are

just additional threats to firms which fail to innovate. As an example for a company that in


the past failed to recognize its own product as an innovation stand Kodak. The American

technology company Kodak has held for a long time a leading position in the vanishing

traditional film market. It was the first that began working intensively on the development of

a new business model that involved product development processes towards digital

photography. Having invented the first digital camera in 1975, Kodak’s management

however refused to see digital photography as a disruptive technology for decades. [11]

Identifying and rapidly seizing new market opportunities characterizes innovative firms. Their

ability to innovate successfully stems from their positive attitude towards risk taking. The fact

such firms routinize innovation processes while working in teams allows its employees to

experiment and even fail which contributes to their success.

Incremental innovation generally means the exploration of new markets by tweaking

products for new customers. Variations on a core product are being used to stay one step

ahead of the market and to create solutions for industry-wide problems. The majority of

established companies rely on incremental innovation. Younger companies tend to create

disruptive technologies. Those are less expensive and more likely to alter the competitive

space. Due to their fear of threatening their investment, establish companies leave more

time to invest into disruptive technologies. When they finally do, such companies suddenly

find themselves facing serious new competition with whom they often cannot keep up. In

order not to find themselves in that sort of situation, incumbent firms are advised to

thoroughly monitor the preferences of both customers and noncustomers. This would allow

them to uncover evolving customer needs that are difficult-to articulate.

The new- product specialists Cooper and Kleinschmidt revealed in a study of industrial

products that the number one success factor is a unique, superior product. With a 98 percent

rate of success, superior products surpass ones with a moderate and a minimal advantage

that account only for 58 and 18 percent respectively. [12] Amongst other success factors a

well- defined product concept is similarly important for a company’s success. This includes

the careful definition and the assessment of the target market, product requirements, and

benefits before proceeding. Also technological and market synergy, quality of execution in

all stages, and market attractiveness should be considered from a company’s perspective.

Another finding of Cooper and Kleinschmidt suggests that products designed only for

domestic markets tend to show a high failure rate, low market share, and low growth. On

the contrary products designed for the world market or at least neighbouring countries

achieve significantly more profits at home and abroad. However, the percentage of products

in their study that were designed with an international orientation only accounted for 17

percent. [12] In conclusion it can be stated that adopting an international perspective in

designing and developing new products can only be beneficial for firm even though they are

only going to be sold on the home market.


Figure 21: New product development (NPD) steps

The stages in the new-product development process are shown in Figure 21. Many firms

have parallel sets of projects working through the process, each at a different stage. Think

of the process as a funnel: A large number of initial new-product ideas and concepts are

winnowed down to a few high-potential products that are ultimately launched. But the

process is not always linear. Many firms use a spiral development process that recognizes

the value of returning to an earlier stage to make improvements before moving forward.

i. Idea Generation: In order to find ideas, companies depend on a variety of sources. In

the best case, employees, customers, competitors, distributors, suppliers and others

generate a few good ones, after having collected a big amount of ideas. Many innovative

ideas come from those employees who are involved in making the products and selling

them to customers, such as the R&D department. Also, staff working in production and

marketing are particularly valuable due to their knowledgeable about the technology and

the needs of the market.

Big Companies such 3M, M&S or Toyota have recognized the importance of ideas and are

implementing most of the ideas they are receiving throughout a year. So does Toyota

claim to implement about 85 percent of the over 2 Million ideas the car manufacturer

receives every year from employees. [18] When it comes to choosing a certain range of

ideas, most companies take a number of approaches which does not change the fact that

coming up with many new product ideas is however unlikely to happen.

ii. Idea Screening: Within the idea screening phase, ideas are first scanned and the ones

that appear to be unsuccessful or inappropriate are then deleted. There are three main

factors that predict the success of an idea: the idea’s compatibility with the firm’s corporate


strategy, the potential demand for the product and the firm’s capability to exploit the

product opportunity.

A technique used for assessing new product ideas involve the comparison of a potential

product idea against criteria of acceptable new products. For doing so, a simple checklist

is often being used that allows to rate the new product idea against the old one e.g. on a

scale ranging from very good to poor in respect to criteria such as: value added, sales

volume, patent protection, effect on present products, and so forth. There are some

disadvantages to this procedure as it is not easy to declare what exactly is fair or poor and

issues of the time and expense associated with each idea are not addressed, nor does it

instruct with regard to the scores. Another way of assessing new product ideas assigns

importance weights to the checking criteria. Then products are rated on a point scale

measuring product compatibility. These scores are later multiplied by their respective

weights and added to yield a total score for the new product idea.

iii. Concept Development & Testing: Only produces that have succeeded within the

screening phase are going to be tested on their potential market which means that product

features must be understood by customers. To do so, one needs to make a difference

between a product idea and its positioning concept. The former constitutes the new

physical good or functional service whereas the latter is the choice of target market

segment and benefit proposition. It is important to distinct between the two of them as new

products can have different positioning strategies. Within the NPD process, it is important

to test alternative positioning concepts which involves the presentation of alternative

beneficial propositions to different potential target markets.

iv. Marketing Strategy Development: It is the responsibility of the new- product manager

to develop a preliminary three-part strategy plan for introducing the new product into the

market. [7] The first part of it does not only describes the size of the market but also its

structure and behavior. The planned product positioning, sales, market share and profit

goals sought in the first few years are included as well. The planned distribution strategy,

and marketing budget for the first year constitute the second part of the three- part

strategy. Finally, the third part deals with the long-run sales, the profit goals and the

marketing-mix strategy over time.

v. Business Analysis: In order to be able to make projections regarding production,

marketing and finance, the product concept needs to be specified. This happens within the

fifth stage of the new product development procedure. The following needs to be defined

in detail:

Description of target markets.

Forecast of sales volume.

Indication of product positioning.

Judgement of likely competitor reactions.


Calculation of potential sales losses from existing products as customers switch to

the new product (known as cannibalization).

Specification of the new product features, including quality levels.

Assessment of achievable price levels.

The distribution strategy.

Statement of promotional requirements.

A financial statement will follow. Based on the marketing assessment, calculations can be

made to project:

Sales value.

Variable costs of production.

Incremental fixed costs.

The contribution and profitability of the new product.

vi. Product Development: The product development stage is the one where the product

concept is made into a physical product. This is done by the R&D and/or the engineering

department. Before turning ideas into workable products big investments are made to

ascertain their suitability. In case an idea has made it into the actual product development

phase, a close cooperation between the different functional areas of the firm is crucial.

Every area then takes responsibility for a different task. The design of the product is led by

development experts. The manufacturing department will be searching for low production

costs and marketing and distribution will try to achieve the correct marketing mix, sales

and logistics. In order to assess the functional performance, efficiency, safety and

apparent benefit test with potential customers are made. Pack tests are meant to check

the ease of use as well as performance and product image for consumer goods. Research

can be conducted to test advertising effectiveness and consumer attitudes towards

projected pricing levels.

vii. Market Testing: Before it comes to commercialization, test marketing aims at testing

all the variabilities in the marketing plan including elements of the product. It is an actual

launching of the total marketing program although it is done on a limited basis. There is a

difference between initial product testing and test marketing. The producer is the one who

totally initiates product testing by selecting a number of people that is then provided with

the test product. Often some sort of incentive is given to ensure participation.

Test marketing means the test cities, where a certain item is being placed, represent the

national market. Test consumers therefore have to decide by themselves whether or not to

buy a product. If they do, they purchase the product with their own money. The test

product must compete with the existing products in an actual marketing environment. This

makes a market test an accurate simulation of the national market and serves as a risk

reducing method. Its goal is to enhance the profitability of a product or service. Like that,


final adjustments can still be made in the marketing mix before introducing an item on a

large scale.

viii. Commercialization: After a product has gone through the development process it is

finally on its way to the market. A lifecycle marketing plan is supposed to accompany the

item on its long journey to success. It therefore needs to be able to support this venture in

more than one way. A complete marketing program involves therefore additional decisions

about distribution, promotion, and pricing.

The ability of the organization to consistently produce new products and effectively

manage existing products looms as one of the most important and difficult tasks faced by

the company. New products can be acquired from several internal and external sources.

The firm can employ basic research, applied research, and development to develop new

products. Or they can use the external route: mergers and acquisitions, licenses and

patents, and joint ventures. This chapter provided an overview of the components that

constitute a product, and the product planning process.


CHAPTER 3 - PRODUCT MARKETING & MANAGEMENT ACTIVITIES IN ARISTON

In this chapter, product marketing and product management activities of Ariston will be

depicted from the eyes of a product marketer based on real experiences. An overview of

the general functioning and tasks of a product marketer together with some specific

activities will be provided. Theoretical knowledge coming from the previous chapter will be

transferred into a practice in this chapter.

3.1.2. Material Master Data Management Process for New Materials

The company utilizes SAP software as an enterprise resource planning tool to manage

business operations and customer relations.

All material types that are defined on the system and in which cases they are used can be

seen in the Table 3.

Table 3: Material types on SAP and their usage

Any production material such as finished goods, semi-finished goods, hybrid materials etc.

(spare parts included), in order to be managed on SAP, has to have master data,

respective objects and material status = P3.

Any material to be sold has to have sales status = V3 in the sales views of the relative

distribution channel. Before changing the sales status, is obligatory to check if the material

status is P3 in the sales division.


3.1.3. Use of Finished Goods Codes

Every material that is to be sold to the end-customer must have a finished goods codes

with following rules:

Finished Product: 7-digit code. SAP material type finished product (ZPF) product

hierarchy which specify the product family (Wall Hung Boiler, Small Water Heater

etc.)

Accessory: 7-digit code. SAP material type finished product (ZPF), product

hierarchy which specify the BU (Business Unit) and then 99 for accessories e.g. 10

99 xxx Water Heater Accessories, 40 99 xxx Heating Accessories etc.

Spare Part: 8-digit code. SAP material type Finished Product (ZPF), product

hierarchy which starts with 98 and then comes the BU code e.g. 98 10 xxx Water

Heater SP, 98 40 xxx Heating SP etc.

A Raw Material or a Semi Finished Good with 12-digits can be used in:

• More Finished Goods BOM (Bill of Materials)

• One Accessory BOM

• One Spare Part BOM

Only in the intercompany sales cases, a product can be sold with the same code.

(See Figure 22)

Figure 22: Use of finished good codes

3.1.4. Code Creation

Numerical codes are generated in GMMD. Code opening on SAP is done once for all

plants where code is requested, copying from a product model which is correctly opened in

all needed plants. The transaction (ZMMCMAT) that opens the codes, resets the more


important fields (costs, material status etc.). If it is necessary, the code can be further

extended for other plants.

Thus, the company needs a process that involves more people from more departments, in

all plants to check, eventually modify and/or complete the respective parts of Material

Master Data (MMD). Figure 23 illustrates the process between different departments:

Figure 23: Code creation process between different departments

3.1.5. Material Master

A material master is composed by more views of the data related to the type, management

(production, logistics and sales) and costing of the material. An example of material master

Figure 24:

Figure 24: A material master


An object is a series of data which is required and is subsidiary to complete the material

master. The objects that are defined on the system are:

Bill of Material (BOM)

Working cycles

Production versions

Info record

Costing

Cost collector

Phase-in Material Status

N0 = Material master created

N1 = Material master checked for materials with BOM

N2 = Material master checked for purchasing materials or BOM for subcontract

N3 = Material with cost validation flag (optionally used by R&D)

P0 = Costing-ready material

P1 = Inactive temporarily

P2 = Pre-production

P3 = Active material

Phase-out Material Status

P4 = Pre-exhaustion (Phase-out)

P5 = Not procurable

P7 = RM/SFG Obsolete in the plant, but sold to other plants

P8 = Obsolete with stock

P9 = Obsolete without stock

NM = Avoided Material (Cannot be used)

D3 = Active documentation

Material statuses associated with the certain material types and the company functions

that manage these statuses are shown explicitly on the Table 4:


Table 4: Material statuses associated with material types and company functions

3.1.6. Material Master Data Management - Sales Views

Every material which must be sold, must have the sales status =V3 for the requested

distribution channel. Before creating the sales views or, if already exists, before setting the

proper sales status it’s compulsory to check if material status is = P3 either in the sales

plant (and in the delivery plant in case of triangular trade).

Activities for Sales Statuses

V1 = Cannot be sold: it is impossible to ascribe Customer orders (PM)

V2 = Can be sold: warnings on sales (PM)

V3 = Can be sold: (Person in charge of MKTG Area)

V4 = Can be sold but Obsolete: it is impossible to schedule a new production (Person in

charge of MKTG Area)

V5 = Cannot be sold Obsolete: it is impossible to sell the material (Person in charge of

MKTG Area)

V6 = Warning Substitution

V9 = Obsolete without stock

VA = Enter 0 + Item Code

Relation between the material status and sales status is shown in the Table 5:


Table 5: Relation between material status and sales status

Table 6: Relation between material type and item category group

Figure 25: Material data management flow between company functions


3.2. Slow Moving / Obsolete Products Analysis

In Ariston Thermo Group, there are two drivers to identify the obsolescence risk: Stock

Cover Index (SCI) and Material Status (MS). (See Figure 26)

Figure 26: Stock cover index (SCI) and Material status (MS) graph

The Material Status (MS) of a code is a parameter of the SAP master data that identifies in

which step (along the product life cycle) the code is.

For the calculation, we used MS of Production Plant for FG and the specific MS of the

Plant for R.

In the Figure 27, lifecycle of a product is shown:

Figure 27: Life-cycle of a product in Ariston


The Stock Cover Index (SCI) is the parameter that identifies the obsolescence. It is

defined as the ratio between the stock (stock in transit included) at month-end and the

sales/uses of the last 12 months. Hence;

If the uses/sales are zero, the SCI is conventionally equal to 9999. When the quantity of

sales or uses has a greater Value of Reversal movement (total uses or sales with positive

SAP sign) the SCI is fixed at 9999.

SCI RM is defined as the ratio between the stocks (transit included) at the month-end and

the Uses of the last 12 months. The SCI should be calculated code by code for each plant,

so that the same code can have different SCI Value depending on the plant.

Exception for all RM Spare Part(SP) warehouse, it is calculated considering the sum of

the stock in spare part plants, divided by the sum of the uses of SP plants. The same SCI

for all RM Spare Parts.

months12last Uses

Stock

SCI

SC FG is calculated considering the sum of the stock (transit included) of all the

warehouses on SAP, divided by the sum of the sales of all the corporate SAP companies

(commercial divisions on SAP). In this way the Stock Cover Index is the same for one

code in each SAP warehouse.

months12last Sales

StockIndexCoverStock

For the sake of safety, the valid sales for the SCI calculation of corporate SAP companies

are only the external ones. In this way the SCI is higher than the single calculation in the

company.

For the sake of safety, from the P5 material status onward, the SCI is not reversible,

even if the calculation shows a lower value. This means that SCI (month n) ≥ SCI (month

n-1). This is to avoid that once the sales of the code restart due to devaluation, it stops

again because the SCI (and the related devaluation) decreases.

Product Managers for FG and Plant Managers for RM, have the right to exclude some

codes (valid only for P3 codes) from the obsolescence calculation, due to commercial /

productive or strategic decisions. The PMs should justify the exclusion decision, but the

months12last Uses/Sales

StockIndexCoverStock


final decision belongs to the Local Controlling which can refuse the exclusion in case

of – according his assessment – the rationale is insufficient.

All in all, in Figure 28, we can see the process flow of obsolescence database

management.

Figure 28: Process flow of obsolescence database management

At each monthly closing, the Group Industrial Accounting sends a file to the Local

Accounting and the BU/Area Controllers with the detail of the obsolete codes. These data

are useful for any analysis or manual adjustments. I am using these data to monthly

analyse the performance and cost of slow moving and obsolete products of my category.

This analysis leads me to share a Monthly Obsolescence Analysis Report.


Figure 29: Stock values of different boiler models

Figure 30: Stock quantities of different boiler models

3.3. Monthly Business Review

Monthly business review is a report of an analysis that is done in the first week of every

month in order to provide the Product Marketing team and the top management with an

insight on the sales performance of the previous month and year-to-date (YTD) period. I

have been responsible of this activity for my product category and markets since the

beginning of my program. The report is a tool used in RDC Marketing Department

therefore the analysis includes only the markets in the RDC region.

Table 7 is the generic format of the analysis results for each RDC area (e.g. MEA area).

This table is developed for all sub-areas of RDC which were mentioned in the previous


chapters. Furthermore, as it is shown on Table 8 the same analysis format is applied to the

individual markets/countries in an area. (e.g. South Africa in MEA area)

The logic of the analysis is to compare actual YTD numbers with the same period of

previous year (Y-1) and with the YTD budget which defines the target of the issued

market. The first column shows the second level business lines (BL2) which are the types

of the second level product range classification of the firm’s products. It makes sense to

make this elaboration into the second level to make the most out of the analysis. Four

important parameters are elaborated in the analysis. These are the most important

performance indicators for the sales analysis:

sold quantity (QT)

sales turnover (TO)

average selling price (ASP)

percentage gross margin (GM %)

Table 7: Format of the analysis results for each RDC area

Table 8: Format of the analysis results for each RDC market

In order to make the report more readable for the beneficiaries I have decided to use

arrows and colours in the columns of actual YTD numbers. Arrows represent the

comparison between the current year and the previous year. Hence, the green arrow

shows that the actual number in the related cell improved compared to the previous year’s

number. The red arrows represents the decline of the parameter compared to the previous


year. On the other hand, red coloured numbers are used to make the comparison of actual

numbers and budget numbers more visible. Hence, if a number is written in red colour, it

means that the performance of the related parameter could not meet the target. This

simple design makes the report much easier to read and to interpret especially for the top

management considering their limited time. Moreover, every table in the report is

supported by some explanatory comments that give an idea about the main drivers,

problems and highlights of the market which had an impact on the results. These

comments make the report more than just a pure data analysis.

Until this point, the fixed content of the Monthly Business Review, which exist in the review

every month without an exception, was described. However, there is an additional content

which includes more detailed analyses of some specific markets and product models

especially the recent launches. As it is seen in Table 9, the same four parameters (QT,

TO, ASP, GM %) are analysed and compared between the last month, the previous month

and the budget of the last month. Please note that in the previous analysis YTD numbers

were compared whereas here we compare MTD numbers to have a better interpretation of

performance improvement or decline of particular product models on that we focus at that

time. Besides that, for the new markets and new products obviously we do not have any

(Y-1) data.

These detailed analyses provide us with a lot of useful information about the potential of

markets and products. Products are analysed in sub-models and sizes. For instance, in

Table 10, a product range called Alteas-X is analysed into more detail and we can see the

monthly numbers of the same model but with different power capacities (24, 20, 32 and

35). In the table above, the numbers are shown for the markets where Alteas-X model has

been sold. This is just an example but this analysis is done for many different product

ranges and markets, especially the new ones which the firm still tries to understand their potential

and trends.

Table 9 & 10: Further monthly analysis


Finally, the numbers of all main product lines and the total numbers of all RDC region are

shown on one single table. (See Table 11) I am responsible of the analysis of all product

lines except the Water Heaters (WH), so that the Boilers, the Renewables and the Air

Conditioners. The WH Team shares their analysis with me and I consolidate with my

analysis, eventually share the complete report with product marketing managers, top

management and area managers. According to the results of the report, we communicate

with local marketing teams and country managers to interpret the results together and to

take the necessary actions for further improvements.

Table 11: Result of the analysis for all product lines in all markets

3.4. Product Marketing Material Management

After developing the product and defining its marketing strategy, the job is not done yet. A

strategy cannot be realized without an effective communication of it. Therefore, it is quite

important for Ariston Product Marketers to ensure that the product offers and values are

being communicated clearly both to customers and to internal entities. The most effective

mean to achieve this target is to develop and manage a list of handful marketing materials.

Throughout the program, it has been one of my objectives to manage this material

management process for my category of products. I have designed, organized or updated

several materials both for the internal communication, with other departments or local

markets, and for the external communication with professional partners or end-customers.

BL1 BL2 BL3 Qt TO ASP GM % Qt TO ASP GM %

WATER HEATERS EWH MEWH 1.577.051 111.475.602 71 38,9% 1.540.928 115.891.409 75 38,9% 1.644.508 119.505.656 73 40,7%

SEWH 853.776 51.362.935 60 44,4% 823.498 49.737.652 60 45,9% 897.366 53.012.467 59 45,0%

BEWH 143.133 17.818.447 124 35,4% 160.852 22.385.634 139 36,8% 130.044 17.366.906 134 35,7%

EIWH 138.406 4.505.868 33 37,8% 131.327 4.095.831 31 37,7% 139.400 4.472.860 32 40,4%

GIWH GIWH 89.908 6.897.772 77 25,3% 88.359 6.892.800 78 32,4% 122.000 8.549.826 70 30,0%

GSWH GSWH 31.080 7.483.176 241 31,2% 24.542 6.594.321 269 38,0% 29.070 7.192.637 247 34,8%

WATER HEATERS Total 2.833.354 199.543.800 70 39,2% 2.769.506 205.597.645 74 40,1% 2.962.388 210.100.352 71 40,7%

BOILERS WHBH WHBH 75.183 40.842.230 543 43,6% 104.444 56.112.689 537 43,5% 89.544 47.688.770 533 43,5%

WHBS WHBS 132.204 41.883.599 317 35,5% 133.643 42.184.709 316 34,4% 134.099 42.524.368 317 35,8%

WHBC WHBC 1.595 2.826.008 1.772 32,8% 1.849 3.234.138 1.749 35,2% 1.984 3.599.667 1.814 38,8%

FSBC FSBC 165 1.966.736 11.920 38,4% 195 2.672.283 13.704 33,0% 221 2.568.791 11.623 38,6%

CYLB CYLB 5.581 1.671.053 299 30,8% 6.157 1.851.360 301 32,2% 5.459 1.722.144 315 33,8%

FSBD FSBD 331 294.299 889 24,6% 295 304.647 1.033 28,2% 283 234.360 828 21,9%

BOILERS Total 215.059 89.483.926 416 39,0% 246.583 106.359.826 431 39,1% 231.590 98.338.100 425 39,6%

RENEWABLES RESW RESW 11.772 6.353.068 540 32,5% 17.334 9.359.412 540 29,2% 21.985 10.318.422 469 33,2%

REHW REHW 2.016 1.415.437 702 33,9% 2.615 1.952.821 747 34,5% 2.855 1.989.748 697 32,6%

RESC RESC 14.337 1.593.660 111 28,9% 13.104 1.348.128 103 30,1% 16.000 1.417.568 89 30,0%

CYLR CYLS 3.465 1.475.462 426 29,2% 2.993 1.282.595 429 26,8% 2.196 1.080.949 492 28,9%

CYLH 9 5.685 632 33,9% 18 11.289 627 33,7% 15 18.646 1.243 37,8%

REHP REHP 187 437.326 2.339 19,2% 255 619.329 2.429 27,6% 235 485.005 2.064 35,2%

REOT REOT 941 160.029 170 26,3% 1.175 190.391 162 25,6% 1.077 180.348 167 28,2%

RENEWABLES Total 32.727 11.440.666 350 31,1% 37.494 14.763.965 394 29,6% 44.363 15.490.687 349 32,6%

CONDITIONING CON CON 2.983 505.963 170 22,3% 4.911 1.299.809 265 25,6% 3.664 721.516 197 23,6%

CONDITIONING Total 2.983 505.963 170 22,3% 4.911 1.299.809 265 25,6% 3.664 721.516 197 23,6%

3.084.123 300.974.355 98 38,8% 3.058.494 328.021.245 107 39,2% 3.242.005 324.650.655 100 40,0%TOTAL

Y-1: YTD Oct YTD Oct Budget: YTD Oct

Qt TO GM %ASP


The structure and the level of technical content of the material is absolutely depend on the

target audience.

Figure 31: Example of a product guide

In order to communicate the product specifications and PI-PO (product phase-in & phase-

out) details to local marketing teams, “Product Guide” materials are created. These

materials are developed mostly for new product launches or for product updates to ensure

a smooth phase-out process of the obsolete product and the phase-in process of the new

coming one. The content includes a market analysis and a competition benchmark for the

product range as well as basic installation details to enable local markets to communicate

their installers and service companies. In Figure 35, there is an example page of a product

guide made for smart thermostats in the scope of the connectivity project.

Another important marketing material that has to be managed by the product marketing

team is the product catalogue. It is the most influential material for the sales of products. It

is created and managed by the marketing team but it is used almost by all departments

especially by the sales department. Product catalogues are developed separetely for each

product category. This is mainly because not all product caegories are sold in all countries.

Hence, it makes more sense to make them spesific for the product categories. A product

catalogue contains the description, the code, technical details, benefits, designs and

images of a product. It is designed mainly for the customers therefore the language and

the contaent of the material are simple. Figure 36, shows a page from the boiler catalogue


of Ariston. The information given aims to differentiate the products by stating its

superiorities.

Figure 32: Example of a product catalogue page

Management of catalogues involves the coordination of the brand management team and

several design agencies to have the best possible design for the materials. At the end, the

product marketer is not responsible of designing a catalogue but is responsible of defining

the content and communicating the brand values to those external collaborators.

There are many other marketing materials to transfer the values of Ariston products to

stakeholders. Commercial booklets, leaflets and other creative materials are used to

express the benefits of products. Below, an example of a booklet is shown. (Figure 37) It is

created to communicate the value proposition of new Ariston heat pumps to customers.


Figure 33: Example of a product booklet

As long as those marketing materials are related to the marketing of a product, the product

marketing team is the part which makes the decisions and manages the process. This is a

crucial process for the company, in order to make the sense of all the previous stages

such as analysing the market, defining a product strategy and developing a new product.

Still, taking advantage of marketing materials requires an effective coordination of the local

markets which are actually the ones need them the most.

3.5. Coordination of RDC Markets

As I stated in “the objectives of the internship” part, I had a role of being the centre of the

communication between several departments. More specifically, as a product marketer I

have been coordinating the information flow from the central office to RDC local marketing

departments all around the globe, and vice versa. (See RDC markets on Figure 6 in

Chapter 1) This objective does not refer to only transfer of the information, but also the

interpretation and filtering of it before forwarding it to the target function. Having a high

level of knowledge both about products and markets enables the product marketer to

execute this type of task.

Direct communication between the local markets and the production team is not preferred

by the company since it might cause a mass and reductant communication. Hence, the

local marketing teams consider the product marketers as the door to the central office and

production plants whenever they need an information or material about the products.

Since, the product marketers already possess an extensive knowledge on the products

and the needs of that particular market, s/he can find the necessary information to share


with the market. In some case, especially when the need requires too technical details, the

product marketer asses the question and ask a support from the other units such as

production or R&D. In this case the role of information filtering takes a part and prevents

the unnecessary communication mass. Likewise, any updates on products or on marketing

strategies decided by the central office is communicated to the local markets through

emails or the Brand Centre which is an online platform managed by the marketing team to

support the internal communication and material flow. Furthermore, the marketing

materials that are mentioned in the previous section, are shared to related markets

through the same platform. Other than being an intermediary entity between the local

offices and the central office, the RDC product marketing team is also responsible of

coordinating the relationship between different RDC countries, taking support from the

area and country managers.

I have taken advantage of my international experiences and languages that I speak in

order to achieve this objective. Having lived in many different countries and had chances

to know different cultures provided me with more flexibility and capability to coordinate all

those countries and people. Although English is the official common language of the

corporate, having the ability to speak other languages made everything more efficient.


CHAPTER 4

A PRODUCT MARKETING CASE FROM ARISTON: SMART CONNECTIVITY

This chapter enables readers to understand how to implement product marketing

strategies into a specific product case in Ariston. Product marketing and management

activities that are mentioned in Chapter 3, will be elaborated further for a particular product

type which plays a crucial role in the company’s vision: Smart connectivity products.

4.1. The Connectivity Project

As the Internet and smart devices involve more and more into our lives, connectivity

becomes an important challenge for all industries. Connected technology and services

offer huge business benefits to companies. It enables them to provide efficient and

intelligent operations to their customer while making customers’ lives a lot easier.

Especially, in the heating industry where the customer’s comfort means everything,

connectivity technology and services can be considered as a point of parity, a must have

for the market.

Taking this fact into consideration, Ariston Thermo expands its connectivity service by

offering smart thermostats and by equipping some of its products with integrated Wi-Fi

technology. The smartphone App enables simple, intuitive and functional remote

management of home heating systems. At any time, users can take control of their home

heating system, check on its operation and adapt it to their specific needs.

Ariston Thermo believes in innovation at the service of domestic technology and commits

to developing increasingly more advanced and user-friendly connectivity solutions, in order

to offer maximum comfort to its customers at any time, savings right at hand, and the

assurance of an effective support service, even remotely. Ariston Thermo offers a wide

range of connected products, systems and services to manage heating, cooling and the

production of hot water. Smart thermostats and products with integrated Wi-Fi technology

for thermic comfort.

Ariston Thermo believes in connectivity as a tool for a true domestic ecosystem, a single

environment where objects communicate with each other, with customers and with the

support service to offer an exceptional user experience, guaranteeing maximum safety

and energy efficiency. The future is the networked management of an ecosystem through

connectivity solutions with a single, simple, intuitive interface, enabling not only the control

of single components, but also the integrated monitoring of the entire system to maximise

efficiency, and reduce consumption and environmental impact.


4.2. Connectivity Market Analysis

In the last years four main general behaviour have been registered among wall hung boiler

producers:

System controlling by mobile phone or tablet. Thermoregulation system integrated

in ‘Home system management’

Improvement of ‘smart’ functionalities as Internet weather, Geo-fencing, Voice

Command etc.

Greater importance to aesthetics, design and materials

Focus on energy efficiency and consumption saving.

Figure 34: Market outlook of smart Wi-Fi thermostats

Figure 31, illustrated the market outlook of smart Wi-Fi thermostats comparing to 2015 to

2016.

The market is at the early stage and the category «Connected Comfort» is still under

construction in all the countries. But there is a continuous and an increasing interest from

all the stakeholders. Consumers are interested in Smart Home technologies. Two of the

most common needs are remote controlling of the domestic comfort and energy saving.

On the producers’ side, big producers are investing in connectivity, the show off at ISH

Exhibition in Frankfurt, which is the world's leading trade fair for the combined topic of

water and energy, was the evidence. New comers are emerging in most of the EU

countries: Amazon, Google and Apple support the growth of the market with their

innovation effort.

In the professional channel of Ariston, where the company sells connectivity devices

together with heating products through dealers and wholesalers, the launch of connectivity

products has already taken off in all markets. The company needs to feed the after-launch

process with trainings to professional partners to strengthen the trust and commitment.

POS (Points-of-sales) investments are necessary to animate stores and to take attention

of consumers. Still, more time is needed to complete the launch in this fragmentary

channel.


On the other hand, in the Service Co. channel, where the company sells directly

connectivity devices through after sales services, the launch is still on process. Again more

investment in trainings to increase overall awareness and confidence seems to be a good

strategy. Another strategy would be exploiting the benefit of remote diagnosis to

differentiate the Service Co. offer to end users.

Connectivity is becoming part of the core business, all countries completed the launch and

started to sell-in. Together with sell-in, we need to monitor online registration rate too. This

is truly important for the business because the main benefits of the connectivity can only

be realized if the customer registers to the system and activates the features. Creating an

effective relationship between the installer and the Service Co. thanks to dedicated

meetings and trainings held by Service companies will definitely increase the sell-out and

online registrations. In this way, installers install the product while Service Co activates the

connectivity and propose the remote diagnosis. Together with “My Ariston” double points

for NET models, an incentive program detecting remote control and remote diagnosis

activation for installers and service companies could be useful too.

4.3. Ariston Smart Connectivity Products

As it is mentioned before, there are two main customer segments of Ariston: consumers

(end-users) and professionals (installers and service companies). It is because the product

can be sold directly to the end-user or can be sold to the installer first and then the end-

user buys from the installer. On the other hand, service companies are also a target

customer group because Ariston wants to sell their service offerings through them.

Therefore, Ariston connectivity products have different benefits, hence different value

propositions, for different customer groups.

4.3.1. Value Proposition for Consumers

Ariston smart thermoregulation products offer 3 main values to end-user: comfort, energy

saving and peace of mind usage.

Comfort: Managing and controlling the product from anywhere is easier than ever. It is

possible to warm or cool the space and to have hot water ready on-demand. Ariston NET

offers a better way to maximize the comfort at home: in winter, in cooling, with frost

protection mode, in summer and whilst the user is on holiday. It adapts the comfort level

according to users’ habits and overrides the schedule when the plans suddenly change.

Moreover, it is possible to set different temperatures for different zones of the house.

Through the same app, even different houses are manageable.

Energy Saving: It improves the way of energy usage by monitoring the consumption and

by scheduling the use of energy more efficiently. Energy consumption reports are provided


by the device to increase the awareness of energy consumption and to save from the

energy costs. The system is also able to give tips and advices to save even more energy

at home.

The ‘AUTO’ function of smart boilers significantly reduces energy consumption because it

optimizes the functioning of the boiler according to the internal/external home temperature

to reach the desired temperature. On the other hand, leaving the heating device on at one

temperature all day long wastes significant amounts of energy. Fine adjustment of the

heating and cooling periods, thanks to the two temperature management, can reduce the

energy bill significantly.

Peace of Mind: The service centre platform monitors the product performance every day

all day long, for real-time problem solving and continuous remote assistance. If something

goes wrong, a real-time push notification is received by the user. A real-time notification is

also pushed to the after sales service centre, providing the description of the error. The

problem can be immediately identified and, if possible, fixed by the service centre remotely

in the shortest possible time or by arranging a visit to the user’s house. The app also

reminds the user when is the annual service of the appliance is due.

4.3.2. Value Proposition for Professionals

A New Way to Serve Clients: Thanks to the innovative remote control, the app advises

consumers in case of functioning problems. Moreover, the service centre monitors the

product performance every day all day long, for real-time problem solving and continuous

remote assistance.

With the product’s remote functionality, it is possible to avoid any delays by offering the

best possible support to the customers. Thanks to constantly updated data, the service

centre is able to offer customized actions to reduce energy consumption and to extend the

life cycle of the products.

Be Closer to Customers: Thanks to the remote diagnostic system and 24/7 monitoring, it

is possible to be closer to customers, recognize their needs and create individual

solutions. Aftersales Service Co. can communicate directly with the end user. From the

homepage of each plant a push notification can be sent directly to the end-user’s

smartphone (with Ariston NET app already installed).

Time Management and Cost Planning: Thanks to the innovative technology, each after

sales service can manage daily business and schedule its tasks easily and efficiently.


4.3.3. Market Positioning of Ariston

The new smart thermoregulation products of Ariston are at the high-end of the market.

They are much more user-friendly than the previous versions of Ariston smart products

and have superior features and design. On the other hand, the price is higher than the

previous version but it is still on the average level compared to other brands. That makes

Ariston products more appealing for the consumer.

In order to evaluate the positioning of Ariston smart products in a better way, I have

executed a competitor research and a competitor benchmark for the product category. As

you can see in Table 12, CUBE, the new thermoregulatory product of Ariston, has

competitive features. The German players such as Bosch,Vaillant and Viessman entered

this market before Ariston therefore they have more experience but with the new product it

will be possible to compete with these players, even to outperform them in several areas.

Table 12: Competitor benchmark for smart thermostats

There are two different customer segments for heating brands: consumers (end-users)

and installers who are the ones buying from the producer and selling to the consumer in

most cases. As it is seen in the positioning map, Figure 32, Ariston product differentiated

itself most for the installers. It is one of the leading brands in terms of after sales service

offering with the remote diagnosis feature. On the other hand, in the consumer segment

high-end innovation brands Nest and Honeywell are the top ones as they do not focus on

the service area. They have niche products for users. If we compare Ariston with its peer


competitors, we see that together with Bosch, they outperform other brands in both

segments.

Figure 35: Positioning map of new Ariston smart thermostat product

4.4. Connectivity Performance Report

Regarding the importance of this operation for the company, a performance measurement

system becomes necessary. Connectivity Performance Report is a tool used by the RDC

Marketing Team to answer that need. It is a monthly report which is based on the analysis

of the previous month and year-to-date (YTD) numbers. I have been the responsible

person coordinating the data analysis and interpretation, and communicating this report to

the top management and to the local markets.

The report contains the analysis of three different KPIs that are used to measure the

performance of connectivity platform: Sell-in numbers of smart connectivity products,

number of downloads of AristonNet mobile app and number of online registrations to the

platform. The data is analysed country by country for both Heating and Water Heating

segment products.

The first and probably the most important indicator is the sell-in number. Sell-in number

corresponds the actual sales of the smart thermoregulation accessories that enable the

core products (boilers & water heaters) to have the connectivity technology. As it is shown

on the Table 13, those smart products can be sold individually (Acc Phase 1&2) or can be

included in a bundle with other core business products (Boiler bundle etc.). Monthly and

YTD sell-in numbers are compared to the forecast numbers which are defined by the

central office and the local market together. Measuring the sales performance of the smart

products is essential as it is the first step to enable customers to connect their products to

each other and to the AristonNet online platform.


Table 13: YTD sales analysis format of connected heating products

The second indicator is the number of downloads of AristonNet mobile application which is

available both on Android and Apple stores. This is an important indicator to follow

because even if a customer purchases a smart thermoregulation product, especially when

it is included in a boiler bundle, they do not always download the application which is

necessary to use the connectivity feature. The boilers and the thermoregulation

accessories can still connect to the Internet to each other without the app, however the

customer needs to download the app to be able to connect his/her phone or tablet to the

devices and control the whole system through the platform. This number also gives an

idea about the performance and capabilities of the service companies and installers that

Ariston is partnering with. Because, they are the touchpoints to the end users and it must

be one of their targets to make sure that the users download the app and start using the

connectivity feature. Hence, I have been analysing the weekly download data of all the

markets to keep up the performance of this indicator. The result format of the analysis can

be seen in Figure 33. The graph shows the sum of weekly downloads and the rolling trend

in a particular market.

Figure 36: Result format of AristonNet application download analysis


The third and the last indicator I have included in my analysis is the number of

registrations to the online Ariston platform. This is the last but not the least step of the

process. It is really important for the company that the customer registers online to the

system with his/her data after downloading the app. The most important benefit of having

smart products for the company, besides the customer satisfaction, is to have a big

amount of data about the customers. Therefore, encouraging customers to register online

is a crucial operation for the company. It has many benefits for the customers as well since

it enables them to receive maximum service support such as remote diagnosis and

maintenance by using the shared data. As a result of this, the weekly online registration

data analysis is included in the report. As it is seen in Figure 34, sum of number of

registrations and the rolling registration trend give an idea about the performance of the

market.

Figure 37: Result format of online registration analysis

The results of this report are shared with the top management as well as the marketing

and the service departments of local market to support them in the decision-making

process.

Smart and connected thermoregulation products are the future of the industry. Analyses

and researches already show that the industry is going to that direction and companies

that do not increase their innovation capabilities accordingly, will most likely be out of the

game. Ariston is already aware of this fact and started to make strategic moves to enable

its capability such as acquiring high-tech companies in the smart product sector.


CHAPTER 5 - CONCLUSION & FUTURE DISCUSSIONS

In this very last chapter, the report will come to an end with a conclusion part. Results of

the activities and analyses that are mentioned in the previous chapters will be stated and

interpreted. Finally, a discussion for future improvements will follow.

To sum up, I would like to underline the main points discussed in previous chapters to see

what kind of insights have been gained throughout this study. Following the structure

introduced in the summary, business overview, challenges of the thermic comfort industry,

activities of a product marketer, how to manage a product in its life-cycle and how to

overcome industry challenges with the product strategy, have been discussed in the light

of a combination of theoretical research and real life implications from Ariston Thermo The

outcome in terms of the points supported with the work, can be listed as follows:

Rapidly developing countries (RDC) have a huge potential for the thermic comfort

industry likewise the most of other industries. Companies have to adapt their

product and marketing strategies to the dynamics of those markets if they want to

grow at a global level. It seems like the trend in product marketing is to offer one

common global message but implement in different ways in different markets.

Energy efficiency is the biggest challenge of this industry. Mature markets are

already strictly regulated in terms of energy efficiency of thermic products and

emerging markets have a tendency to go into the same direction as well. Besides

the government regulations, consumers are becoming more sensitive about the

environment and tend to be more selective on the environmental effects of the

product that they purchase. All these reasons make it necessary for companies to

follow a relevant product strategy and to transfer a right message to consumers.

Smart and connected thermoregulation products are the future of the industry.

Analyses and researches already show that the industry is going to that direction

and companies that do not increase their innovation capabilities accordingly, will

most likely be out of the game. Ariston is already aware of this fact and started to

make strategic moves to enable its capability such as acquiring high-tech

companies in the smart product sector.

It is crucial for companies to introduce new product ranges when the current ranges

are either at their maturity phase or at their decline phase. Product marketers

always have to look for the ways to possess growing product segments while

targeting to make maximum profit from those mature segments. In Ariston’s case,

boiler and water heater product ranges are already at their maturity phase and the

competition is very high. That is why it makes sense to invest in renewable heating

systems such as solar collectors or heat pumps which promise more growth

potential.


Eventually, product marketing function sits at the intersection product, customer and

market. Therefore, it is important to be close to the production and the sales functions as

much as to the marketing. Product marketers have an important role in companies both

before and after a product launch. Before the launch, product marketers decide on the

positioning, messaging and overall go-to-market strategy for a product. After the launch,

they support sales enablement and try to drive the demand and overall market success of

the product. Therefore, product marketing activities need to be managed by

interdependent teams throughout the whole lifecycle of products of a company. Likewise,

Ariston Thermo also needs to focus on growing and fostering the product marketing

functions in order to realize the future improvements that are discussed above.


APPENDIX – 1


BIBLIOGRAPHY

[1] Ebert, C.: Global Software and IT: A Guide to Distributed Development, Projects, and

Outsourcing. Wiley, USA, 2012.

[2] Ebert, C. and S. Brinkkemper: Software Product Management - An Industry Evaluation.

Journal of Systems and Software, 2014

[3] Ebert, C. and S. Brinkkemper: Have You Spoken to Your Product Manager Recently?

14. IEEE International Requirements Engineering Conference (RE06), Proceedings. IEEE

Computer Society Press, pp. 322, Los Alamitos, USA, Aug. 2006.

[4] SPMBOK: Software Product Management Body of Knowledge. See

at: http://ispma.org/spmbok/ Last accessed on 01. Feb. 2014

[5] http://www.aristonthermo.com/en Ariston Thermo Group company website

[6] https://www.pddnet.com/article/2012/04/product-development-process-team-

deliverables - by Howard W. Stolz, PMP

[7] Marketing Management – Kotler Keller

[8] “Enabling Multifaceted Innovation,” IBM Global Business Services, www

935.ibm.com/services/us/ gbs/bus/pdf/g510-6310-executive-brief-enablingmultifaceted.

pdf, 2006.

[9] Steve Hoeffler, “Measuring Preferences for Really New Products,” Journal of Marketing

Research 40 (November 2003), pp. 406–20; Glen Urban, Bruce Weinberg, and John R.

Hauser, “Premarket Forecasting of Really New Products,”Journal of Marketing 60 (January

1996), pp. 47–60.

[10] Andy Grove, “Think Disruptive,”Condé Nast Portfolio, December 2007, pp. 170–75;

Ashish Sood and Gerard J. Tellis, “Technological Evolution and Radical Innovation,”

Journal of Marketing 69 (July 2005), pp. 152–68.

[11] Steve Hamm, “Speed Demons,” BusinessWeek, March 27, 2006, pp. 69–76.

[12] Robert G. Cooper and Elko J. Kleinschmidt, New Products: The Key Factors in

Success (Chicago: American Marketing Association, 1990).

[13] John Hauser, Gerard J. Tellis, and Abbie Griffin,“Research on Innovation: A Review

and Agenda for Marketing Science,” Marketing Science 25 (November–December 2006),

pp. 687–717.

[14] World Energy Outlook Report 2016

[15] Ariston Company Profile 2017

https://re-magazine.ireb.org/issues/2014-3-gaining-height/product-management/#a-1




http://ispma.org/spmbok/

http://www.aristonthermo.com/en

https://www.pddnet.com/article/2012/04/product-development-process-team-deliverables

https://www.pddnet.com/article/2012/04/product-development-process-team-deliverables


[16] Marketing: Real People, Real Decisions. Solomon, Stuart, Carson & Smith. Perason

Education Canada Inc. 2003

[17] Introducing Marketing. John Burnett. 2010

[18] Fundamentals of Marketing. Marilyn A. Stone & John Desmond. Routledge, 2007.

[19] Warren J. Keegan, "Conceptual Framework for Multinational Marketing," Columbia

Journal of World Business, Vol. 7, November 1973, p.67.

scuola di ingegneria industriale e · ariston thermo group, its organization and operations as well...

Documents