Slide1: PRODUCT The Product Manager’s Interactions: The Product Manager’s Interactions Product
development Legal Fiscal Market
research Sales Publicity Purchasing Packaging Promotion
services Media Agency media dept.
Company media dept.
Media sales reps Premium suppliers
Researchers Suppliers Trade Research
Suppliers Suppliers Trade Suppliers PRODUCT MANAGEMENT: PRODUCT MANAGEMENT Pearson and Wilson have suggested five steps to make the product management system work better.
Clearly delineate the limits of the product manger’s role and responsibility for the product.
Build a strategy developemnt and review process to provide an agreed-to-framework for the product manager’s operations.
Take into account areas of potential conflict between product managers and functional specialists when defining their respective roles.
Set up a formal process that forces to the top all conflict-of-interest situations between product management and functional line management.
Establish a system for measuring results that is consistent with the product manager’s responsibilities. PRODUCT DEVELOPMENT AS INTENSIVE GROWTH STRATEGIES: PRODUCT DEVELOPMENT AS INTENSIVE GROWTH STRATEGIES ACQUISITION
Search for or buy other companies
Buy License/franchise` NEW PRODUCT DEVELOPMENT
In its own laboratory
Independent research or New product development agencies New Product - Original , Improved, Modified
& New Brands SIX CATEGORIES OF NEW PRODUCTS: SIX CATEGORIES OF NEW PRODUCTS New-to-the-world product. New products that create an entirely new market.
New-product line. New products that allow a company to enter an established market for the first time.
Additions to existing product lines. New products that supplement a company’s established product lines.
Improvements in/revisions to existing products. New products that provide improved performance or greater perceived value and replace existing products.
Repositionings. Existing products that are targeted to new markets or market segments.
Cost reductions. New products that provide similar performance at lower cost. PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE: PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE Shortage of important new-product ideas in certain areas. Some scientists think there are too few feasible new technologies with the investment potential that was provided by automobiles, television, computers, xerography, and wonder drugs in times past.
Fragmented markets. Keen competition is leading to increasingly fragmented markets. Companies have to aim new products at smaller market segments rather than the mass market, and this means lower sales and profits for each product.
Social and governmental constraints. New products have to satisfy public-interest criteria such as consumer safety and ecological compatibility. Government requirements have slowed down innovation in the drug industry and have complicated product-design and advertising decisions in such industries as industrial equipments, chemicals, automobiles, and toys.
Costliness of the new-product-development process. A company typically has to generate many new-product ideas in order to finish with a few good ones. Furthermore, the company has to face rising R&D, manufacturing, and marketing costs.
contd… PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE: PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE Capital shortage. Some companies with good ideas cannot raise the funds needed to research them. Venture capital has, in recent years, become much more cautious.
Shortened time span to completion. Many competitors are likely to get the same idea at the same time, and the victory often goes to the swiftest. Alert companies have to compress development time by using computer-aided design and manufacturing techniques, joint partners, early concept tests, and advanced marketing planning. Japanese companies see the challenge as “achieving better quality at a cheaper price at a faster speed than competitors.”
Shorter life spans for successful products. When a new product is successful, rivals are to quick to imitate it that the new product’s life cycle is considerably shortened. Thus IBM finds dozens of imitators offering IBM-compatible personal computers; and Apple finds foreign “knockoffs” of its computers being sold in the Far East. Summary of the New-Product-Development Decision Process: Summary of the New-Product-Development Decision Process Coordinate,
search for ideas
personnel Identify :
2. Their weights Develop alterna-
concepts Propose :
3. Promotion Prepare :
2. Cost analysis Conduct :
4. Packaging Go into
advertising Buy equipment
and go into full
distribution 1. Idea
Is the product
resources ? 3. Concept
Can we find a
good concept for
the product that
they would try? 4. Marketing
Can we find a
strategy? 5. Business
Will this product
meet our profit
goal? 6. Product
commercially? 7. Market
sales met our
expectations ? 8. Commerc-
plan Should we send
the idea back
development? Would it help to
modify our product
program ? D R O P Yes Yes Yes Yes Yes Yes Yes Yes Y
No No No No No No No No PRODUCT-MIX DECISIONS : PRODUCT-MIX DECISIONS A product mix (also called product assortment is the
set of all product lines and items that a particular
seller offers for sale to buyers.
Product-Mix Width Detergents Toothpaste Bar Soap Disposable Coffee
Ivory Snow 1930Gleem 1952 Ivory 1879 Pampers 1961 Folger’s 1963
Dreft 1933 Crest 1955 Camay 1927 Luvs 1975 Instant Folger’s 1963
Tide 1946 Denquel 1985 Lava 1928 High Point Instant 1975
Joy 1949 Kirk’s 1930 Folger’s Flaked Coffee 77
Cheer 1950 Zest 1952 Folger’s Decaffeinated 84
Oxydol 1952 Safeguard 1963
Dash 1954 Coast 1974
Ivory Liquid 1957
Bold 3 1976
Solo 1979 Three Levels of Product: Three Levels of Product Core
service Packaging Brand Features
name Quality Styling Warranty After
credit Installation Augmented
PRODUCT HIERARCHY: PRODUCT HIERARCHY Need family. The core need that underlies the product family. Example : security.
Product family All the product classes that can satisfy a core need with more or less effectiveness. Example : savings and income
Product class. A group of products within the product family that are recognized as having a certain functional coherence. Example : financial instruments.
Product line.. A group of products within a product class that are closely related because they function in a similar manner, or are sold to the same customer groups, or are marketed through the same types of outlets, or fall within given price ranges. Example : life insurance.
Product type. Those items within a product line that share one of several possible forms of the product. Example : term life.
Brand. The name associated with one or more items in the product line that is used to identify the source or character of the item(s). Example : Prudential.
Item. A distinct unit within a brand or product line that is distinguishable by size, price appearance, or some other attribute. The item is called a stockkeeping unit, or product variant. Example : Prudential renewable term insurance. PRODUCT CLASSIFICATIONS: PRODUCT CLASSIFICATIONS Durable Goods, Nondurable
Goods and services
Nondurable goods. Nondurable goods are tangible goods that normally are consumed in one or a few uses. Examples include beer, soap, and salt. Since theses goods are consumed fast and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference.
Durable goods. Durable goods are tangible goods that normally survive many uses. Example include refrigerators, machine tools, and clothing. Durable products normally require more personal selling and service, command a higher margin, and require more seller guarantees.
Services. Services are activities, benefits, or satisfactions that are offered for sale. Examples include haircuts and repairs. Services are intangible, inseparable, variable, and perishable. As a result, they normally require more quality control, supplier credibility, and adaptability.
PRODUCT CLASSIFICATIONS: PRODUCT CLASSIFICATIONS Consumer-Goods Classification
Convenience goods. Goods that the customer usually purchases frequently, immediately, and with the minimum of effort in comparison and buying. Example include tobacco products, soap, and newspapers.
Shopping goods. Goods that the customer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price and style. Examples include furniture, clothing, used cars, and major appliances.
Specialty goods. Goods with unique characteristics and/or brand identification for which a significant group of buyers are habitually willing to make a special purchasing effort. Examples would include specific brands and types of fancy goods, cars, hi-fi components, photographic equipment, and men’s suits.
Unsought goods. Goods that the consumer does not know about or knows about but does not normally think of buying. New products, such as smoke detectors and food processors, are unsought goods until the consumer is made aware of them through advertising. The classic examples of known but unsought goods are life insurance, cemetery plots, gravestones, and encyclopedias. PRODUCT CLASSIFICATIONS: PRODUCT CLASSIFICATIONS Industrial-Goods Classification
Materials and parts. Goods that enter the manufacturer’s product completely. They fall into two classes : raw materials, and manufactured materials and parts.
Capital items. Goods that enter the finished product partly. They include two groups : Installations and accessory equipment.
Supplies and services. Items that do not enter the finished product at all. PRODUCT-LINE DECISIONS: PRODUCT-LINE DECISIONS What is a Product?
A Product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.
A Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed though the same types of outlets, or fall within given price ranges. PRODUCT ATTRIBUTES: PRODUCT ATTRIBUTES QUALITY, FEATURES, DESIGN ADVANTAGE, BENEFITS
A product feature is any physical characteristic of a product.
The Product’s Features : So What ?
Size Terms Packaging Color
Quantity Flavour Taste Price
Service Quality Shape Uses
Delivery Ingredients Technology
A product advantage is the performance characteristic of a product that describes how it can be used or will help the buyer.
It is the fastest-selling soap on the market.
You can store more information and retrieve it more rapidly with our computer.
This machine will copy on both sides of the page instead of only one. PRODUCT ATTRIBUTES: PRODUCT ATTRIBUTES QUALITY, FEATURES, DESIGN ADVANTAGE, BENEFITS
A product benefit is a favourable result the buyer receives from the product because of a particular feature or advantage that has the ability to satisfy a buyer’s need.
Two-carat diamond ring -- image of success, investment, or to please spouse.
Camera film -- memories of places, friends, and family.
STP motor oil -- engine protection, car investment, or peace of mind.
Movie tickets -- entertainment, escape from reality, or relaxation.
General Example : Vacuum cleaner salesperson to householder. “This vacuum cleaner’s high speed motor (feature) works twice as fast (advantage) with less effort (advantage), saving you 15 to 30 minutes in cleaning time (benefit) and the aches and pains of pushing a heavy machine (benefit). BRAND DECISIONS: BRAND DECISIONS Brand. A name, term, sign, symbol, or design, or a combination of them, which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
Brand name. That part of a brand which can be vocalized -the utterable. Examples are Avon, Chevrolet, Disneyland, American Express, and UCLA.
Brand mark. That part of a brand which can be recognized but is not utterable, such as a symbol, design, or distinctive coloring or lettering. Examples are the Playboy bunny and the Metro-Goldwyn-Mayer lion.
Trademark. A brand or part of a brand that is given legal protection because it is capable of exclusive appropriation. A trademark protects the seller’s exclusive rights to use the brand name and/or brand mark.
Copyright. The exclusive legal right to reproduce, publish, and sell the matter and form of a literary, musical, or artistic work. BRAND DECISIONS: BRAND DECISIONS Branding Decision Brand Sponsor Decision Family Brand Decision Should a brand
be developed for
the product ? Who should
brand ? Should each
family-branded ? Brand
No brand Manufacturer’s
Mixed brands Individual brand
Blanket family name
names Brand Extension Multibrand Brand Repositioning
Decision Decision Decision Should other
given the same
brand name ? Should to or more
brands be developed
in the same product
category ? Should the
repositioned ? Brand extension
extension One brand
one brand Brand repositioning
repositioning An Overview of Branding Decisions BRAND DECISIONS: BRAND DECISIONS Family-Brand Decision
1. Individual brand names. This policy is followed by Procter & Gamble (Tide, Bold, Dash, Cheer, Gain, Oxydol, Duz) and Genesco, Inc.. (Jarman, Mademoiselle, Johnson & Murphy, and Cover Girl).
2. A blanket family name for all products. This policy is followed by Heniz and General Electric.
3. Separate family names for all products. This policy is followed by Sears (Kenmore for appliances, Kerrybrook for women’s clothing, and Homart for major home installations)
4. Company trade name combined with individual product name. This policy is followed by Kellog’s (Kellogg’s Rice Krispies and Kellogg’s Raisin Bran). BRAND DECISIONS: BRAND DECISIONS Family-Brand Decision
The brand name should not be a casual afterthought but an
integral reinforcer of the product concept.
1. It should suggest something about the product’s benefits. Examples : Coldspot, Beautyrest, Craftsman, Accutron.
2. It should suggest product qualities such as action or color. Examples : Duz, Sunkist, Spic and Span, Firebird.
3. It should be easy to pronounce, recognize, and remember. Short names help. Examples : Tide, Crest, Puffs.
4. It should be distinctive. Examples : Mustang, Kodak, Exxon. Packaging and Labeling Decisions: Packaging and Labeling Decisions Self-service. An increasing number of products are sold on a self-service basis at super markets and discounts houses.
Consumer affluence. Rising consumer affluence means consumers are willing to pay a litter for the convenience, appearance, dependability, and prestige of better packages.
Company and brand image. Companies are recognizing the power of well-designed packages to contribute to instant consumer recognition of the company or brand.
Innovational opportunity. Innovative packaging can bring large benefits to consumers and profits to producers. Toothpaste pump dispensers have captured 12% of the toothpaste market because for many consumers, they are more convenient and less messy. BRAND DIAGNOSIS: BRAND DIAGNOSIS LACOSTE PHYSIQUE PERSONALITY Discrete
Without fancy Individualism
distinction Neither hyperfeminine
transgeneration Belonging to a club RELATIONSHIP CULTURE CUSTOMERS CUSTOMERS
REFLECTION SELF-PROJECTION Quality shirt
Crocodile LACOSTE IDENTITY PRISM BRAND DIAGNOSIS: BRAND DIAGNOSIS IBM Confident,
square All data processing
reassurance Big business, , Ivy League
Order and collectiveness
East coast, Wall Street
‘I am a pro’ Those who take
their business seriously APPLE Intelligent,
cool Changing the organisation
new frontier Self-enhancement Young-minded,
all purposes Slide25: PRICE NINE MARKETING-MIX STRATEGY ON PRICE: NINE MARKETING-MIX STRATEGY ON PRICE 1. Premium
Strategy 2. High-value
Strategy 3. Superb-value
Strategy 4. Overcharging
Strategy 5. Average
Strategy 6. Good-value
Strategy 7. Rip-off
Strategy 8. False economy
Strategy 9. Economy
Strategy High Medium Low Price High Medium Low Product Quality SELECTING THE PRICE OBJECTIVE: SELECTING THE PRICE OBJECTIVE Survival
Maximum Current Profit
Maximum Current Revenue
Maximum Sales Growth
Maximum Market Skimming
Product-Qqality Leadership DETERMINING DEMAND: DETERMINING DEMAND 1. Unique value effect. Buyers are less price-sensitive when the product is more unique.
2. Substitute awareness effect. Buyers are less price-sensitive when they are less aware of substitutes.
3. Difficult comparison effect. Buyers are less price-sensitive when they cannot easily compare the quality of substitutes.
4. Total expenditure effect. Buyers are less price-sensitive the lower the expenditure is as a ratio to their income.
5. End-benefit effect. Buyers are less price-sensitive the less the expenditure is to the total cost of the end product.
6. Shared cost effect. Buyers are less price-sensitive when part of the cost is borne by another party.
7. Sunk investment effect. Buyers are less price-sensitive when the product is used in conjuction with assets previously bought.
8. Price-quality effect. Buyers are less price-sensitive when the product is assumed to have more quality, prestige, or exclusiveness.
9. Inventory effect. Buyers are less price-sensitive when they cannot store the product. Inelastic and Elastic Demand: Inelastic and Elastic Demand P1 P2 P’2 P’1 Q’2 Q’1 Q2 Q1 Price Quantity Demanded per Period Quantity Demanded per Period
(a) Inelastic demand (b) Elastic demand Estimating Costs: Estimating Costs 1,000 SRAC Cost per Unit Cost per Unit SRAC LRAC 1,000 2,000 3,000 4,000 Quantity Produced per Day Quantity Produced per Day (a) Cost behaviour in a fixed-size plant (b) Cost behaviour over different
size plants 1 2 3 4 Estimating Costs: Estimating Costs Current
Cost Curve A B TI $10
$6 $4 $2 100,000 200,000 400,000 800,000 C o s t p e r U n i t Accumulated Production PRICING METHOD: PRICING METHOD Markup Pricing
Markup Pricing = -----------------------------------
(1 - Desired return on sales)
Trarget Return Pricing
Desired return x Invested Capital
Target return price = Unit + ---------------------------------------
cost Unit Sales
Perceived - Value Pricing
Sealed-Bid Pricing PRICING METHOD: PRICING METHOD Low Price
this price High Price
this price Competitor’s prices Unique
Product and product
costs prices of substitutes features Major Considerations in Setting a Price 1,200 1,000 800 600 400 200 0 10 20 30 40 50 (Sales Volume in unit ‘0000) } Target Profit Total revenue Total Cost Fixed Cost Break-even Chart for Determining Target Return Price & Break-Even Volums D o l l o r s ( I n `0 0 0 ) Promotional Pricing & Discriminatory Pricing: Promotional Pricing & Discriminatory Pricing PROMOTIONAL PRICING
Loss leader pricing
Special event pricing
Psychological discounting DISCRIMINATORY PRICING
Time pricing HOW TO ADD VALUE THROUGH DIFFERENTIATED PRICING: HOW TO ADD VALUE THROUGH DIFFERENTIATED PRICING Plan for
pricing Set price
benefits Check whether
price point Ensure
marketing mix Ensure
value T H E L E S S O N S: T H E L E S S O N S THE STRATEGY : B&L invited comparisons with other lifestyle products for its premium-priced Ray-Bans
THE LESSON : DON’T LIMIT COMPARISONS FOR PREMIUM PRODUCTS WITHIN THE CATEGORY
THE STRATEGY : BPL established a leader’s position to justify the premium pricing for its fridges
THE LESSON : ESTABLISH A HIGH-VALUE AURA AROUND ONE PREMIUM PRODUCT
THE STRATEGY : Videocon priced its products below market levels without downgrading technology
THE LESSON : DON’T ALLOW LOWER PRICE TO CREATE AN IMPRESSION ON LOWER VALUE
THE STRATEGY : ConsCoffee built expectations around its Tata Café brand before unvelling a low price
THE LESSION : USE LOW PRICE AS A HIDDEN WEAPON WHEN DIFFERENTIATING BRAND
DISTRIBUTION PHYSICAL DISTRIBUTION: PHYSICAL DISTRIBUTION Nature :
Physical distribution involve planning, implementing, and
controlling the physical flows of materials and final goods
from points of origin to points of use to meet customer needs
at a point.
Many companies state their physical-distribution objective
as getting the right goods to the right place at the right time
for the least cost. MARKETING CHANNELS: MARKETING CHANNELS Marketing channels can be viewed as sets of interdependent organizations involved in the
process of making a product or service available for use of consumption. Functions and Flows Information
Title NUMBER OF CHANNEL LEVELS: NUMBER OF CHANNEL LEVELS Zero-level
(M-W-J-R-C) Manufacturer Retailer Jobber Wholesaler Wholesaler Retailer Retailer Consumer (a) Consumer marketing Channels NUMBER OF CHANNEL LEVELS: NUMBER OF CHANNEL LEVELS Manufacturer Industrial
sales branch (b) Industrial marketing channel CHANNEL-DESIGN DECISIONS: CHANNEL-DESIGN DECISIONS Analyzing Consumer Needs for Service Outputs
Product variety Establishing the channel Objectives and Constraints
Environmental Characteristics Identifying the Major Channel Alternatives: Identifying the Major Channel Alternatives
Types of Intermediaries
Number of Intermediaries
Selective distribution Evaluating Major Channel Alternatives: Evaluating Major Channel Alternatives Economic Criteria
Adaptive Criteria Company
sales force Manufacturers’
sales agency Break-Even Cost Chart
for the Choice between
a Company Sales Force
and a Manufacturer’s
Sales Agency. SB Level of Sales ( Rupees) Selling Costs (Rupees) RETAILING: RETAILING Nature and Importance of Retailing
Retailing includes all the activities involved in selling goods or
services directly to final consumers for their personal, nonbusiness
use. Types of Retailers :
Full-service retailing Store Retailers
Catalog Showroom RETAILING: RETAILING DIRECT MARKETING
Other media marketing
VOLUNTARY CHAIN AND RETAILER COOPERATIVE
WHOLESALING: WHOLESALING Nature and Importance :
Wholesaling includes all activities involved in selling goods or service
to those who buy for resale or business use.
Function of Wholesallers
Selling and promoting
Buying and assortment building
Management services and counseling TYPE OF WHOLESALERS: TYPE OF WHOLESALERS FULL-SERVICE WHOLESALERS
Mail-order wholesalers PHYSICAL DISTRIBUTION: PHYSICAL DISTRIBUTION Transportation Total cost per unit
cost per unit
cost per unit
Q* Order Quantity Cost per Unit (Rupees) Determining Optimal
Order Quantity Slide50: PROMOTION MARKETING COMMUNICATION : MARKETING COMMUNICATION MAJOR TOOLS
Personal selling COMMON COMMUNICATION/PROMOTION TOOLS: COMMON COMMUNICATION/PROMOTION TOOLS ---------------------------------------------------------------------------
Advertising Promotion Publicity Selling
Print and Contests,games Press kits Sales presentations
broadcast ads sweepstakes, Speeches Sales meetings
Packaging-outer lotteries Seminars Telemarketing
Packaging inserts Premiums and gifts Annual reports Incentive programs
Mailings,Catalogs Sampling Charitale Salesmen samples
Motion pictures Fairs and trade show donations Fairs and trade shows
House magazines Exhibits Public relations
Brochures and Demonstrations
Reprints of ads Low-interest financing
Display signs Trade-in allowances
Point-of-purchase Trading stamps
Symbols and logos
THE COMMUNICATION PROCESS: THE COMMUNICATION PROCESS Noise Response Feedback Message Media Sender Encoding Decoding Receiver Response Hierachy Models: Response Hierachy Models Stages “AIDA”
Model a b c d Cognitive
stage Attention Interest
Desire Action Awareness
Conviction Purchase Awareness Interest
Cognitive response Attitude
Intention Behavior Advertising: Advertising Public presentation
Impersonality Personal selling: Personal selling Personal confrontation
Response Sales Promotion: Sales Promotion Communication
invitation Publicity: Publicity High credibility
Dramatization Major Decisions in Advertising Management: Major Decisions in Advertising Management Objectives setting Communication
Objectives Budget decisions Affordable approach
Percent of sales
Objectives and task Message decision Message generation
Message execution Media decision Reach, frequency, impact
Major media types
Specific media vehicles
Media timing Advertising evaluation Communication
Sales impact Possible Advertising Objectives: Possible Advertising Objectives To inform :
Telling the market about a new product Describe available service
Suggesting new uses for a product Correcting false impression
Informing the market of a price change Reducing consumers’ fears
Explaining how the product works Building a company image
To persuade :
Building brand preference Persuading customer to purchase now
Changing customers’ perception of Persuading customer to receive a
product attributes sales call
Reminding consumers that the product may Keeping it in their minds during off
be needed in the near future seasons
Reminding them where to buy it Maintaining its top-of-mind awareness Types of Appeals: Types of Appeals -------------------------------------------------------------------------------------------------------
Types of Potentially Potential Type of Reward
Rewarding Experience -------------------------------------------------------------------------
with a Product Rational Sensor Social Eog Satisfaction
Results-of-Use-Experience 1. Get clothes 2. Settles 3. When you 4. For the skin
cleaner stomach upset care enough to you deserve
completely serve the best to have
Product-in-use Experience 5. The flour that 6. Real gusto 7. A deodorant 8. The shoe
needs no in a great guarantee for the young
sifting light beer social acceptance executive
Incidental-to-use Experience 9.The plastic 10.The portable 11.The furniture 12. Stereo for pack keeps television that identifies the man
the cigarette lighter in the home of with
fresh weight,easier modern people discriminating
to lift taste.
------------------------------------------------------------------------------------------------------- Message Execution: Message Execution Slice-of-life
Mood or image
Testimonial DECIDING ON THE MEDIA: DECIDING ON THE MEDIA Reach (R) : The number of different persons or households exposed to a particular media schedule at least once during a specified time period.
Frequency (F) : The number of times within the specified time period that an average person or household is exposed to the message.
Impact (I) : The qualitative value of an exposure through agiven medium (thus a food ad in Good Housekeeping would have a higher imact than in the Police Gazette.