IM Chaps 7,9

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Product Strategy & New Product Development Chapter 7

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This session learning objectives : To define an industrial product To understand changes in product strategy To understand the Product Life-Cycle (PLC) theory and its application to marketing strategies Developing product strategies to existing products Managing innovation & new product development To understand marketing strategies for industrial (business) services

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Definition of an Industrial Product not only a physical entity but a complex set of economic technical legal personal relationship between the buyer and seller. Mr. Ashok Oza of Cummins (seller) Mr. Vinod Kapur of RIL (buyer)

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From a customers point of view : A product is a combination of: Basic properties (generic product – fundamental benefits) Enhanced properties (tangible – features, styling, quality) Augmented properties (intangible – after sales, warranties, attractive payment terms) From a customers point of view : A product is a combination of: Basic properties (generic product – fundamental benefits) Enhanced properties (tangible – features, styling, quality) Augmented properties (intangible – after sales, warranties, attractive payment terms) TABLET MAKING MACHINE

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Basic Basic Enhanced

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Ashok Kumar Singh, Sales & Service Engr. Enhanced Styling Augmented After sales service

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Factors demanding change in product strategy Customer Needs Technology Government policies (Liberalisation) PLC

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Introduction Growth Maturity Decline Sales Profits PRODUCT LIFE CYCLE

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FOUR STAGES of PLC Introduction (Nano, Xylo) Growth (Alto, Santro) Maturity (Maruti 800, Omni) Decline (Ambassador, Fiat)

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3 FACTORS THAT GOVERN PLC Customers’ changing needs Changes in technology Changing competition

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APPLICATION OF PLC THEORY TO MARKETING STRATEGIES Introduction stage Depends on user’s habits Acceptance Immediate Took time Marketing strategies differ

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PLC Growth stage (High rate of growth of Sales & Profits) Three essential steps for the marketer : Improve/innovate product design (more benefits) Improve distribution channels (availability) Reduce price (as increased volume of production)

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PLC Maturity stage Two things happen : No. of competitors increase Profits decline (i.e. profit as a %age of sales) Marketing strategy should be: Enter new markets (export markets ?) Concentrate on existing customer satisfaction Cut marketing, production, R&D…costs & maintain profit margins

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PLC Decline stage Two things happen : Competition (price) is more severe Sales and profits decline The Marketer should adopt the following strategies : Withdraw the product & develop a substitute product Reduce marketing and other expenses (make profits) Hunt for new technologies ( Westerwork – Schlick )

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When YOU go out there ( in the ‘jungle’ called ‘industry’) : Maintain (or continue) the product and its marketing strategy Modify the product and change the marketing strategy Eliminate (or drop) the product or product line Add new product or product lines

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NEW PRODUCT DEVELOPMENT – THE PROCESS The seven stages (of the process) Idea generation Idea screening Concept development & testing Business Analysis Product development Market testing Commercialisation Lets discuss each step………

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Idea Generation Customers Your sales team Competition Brainstorming Recognition / payments for best ideas If you want to have a cup of ‘chai’ – have it in your customer’s office

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2. Idea screening

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2. IDEA SCREENING New product idea rating: Company objectives and strategies Marketing experience and effectiveness Production capabilities R&D know how Availability of raw materials Financial resources

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3. CONCEPT DEVELOPMENT & TESTING PALLET TRUCK MANUAL ELECTRIC Cap: 30 kgs. Cap: 70 kgs.

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4. Business Analysis

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4. BUSINESS ANALYSIS The purpose of ‘business analysis’ is to develop a projection of estimated sales, costs, profitability (over 5-7 years) Analysis of : Required investment/s Market potential, sales forecasts, competition analysis Costs of product development, manufacturing and marketing Likely price levels and profitability

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PRODUCT DEVELOPMENT

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5. Product Development The process where: Engineers and technicians create the desired product R&D develops several prototypes Marketing provides constant feedback to R&D

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Market Testing

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6. MARKET TESTING Alpha (internal) and Beta (external) testing Trade shows Dealer showrooms Test marketing

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7. Commercialisation

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7. COMMERCIALISATION Commercialized or ‘launched’ – when introduced to a target market ACTIVITIES INCLUDE Training of sales force Product catalogs Price lists Intro advertisements Adequate stocks Dealer/distributor network in place

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SERVICES – MARKETING IMPLICATIONS

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Intangibility Management Consultants / Lawyers Reference lists

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Inseparability Produced / consumed Jai Mata Service We repair all electrical gadgets

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Variability Service quality is variable

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Perishability Non-ownership

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Services – Marketing implications Characteristics Examples Marketing implications Intangibility (not seen / felt) Management consulting Reference list/s 2. Inseparability (produced/consumed) Machinery repairs/service Effective training of service personnel 3. Variability (Service quality is variable) Management education Develop quality standards 4. Perishability Airline seat, hotel room Use pricing, discounting 5. Non-ownership Hotel rooms, car rentals Communicate advantages, flexibility

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This session learning objectives were : To define an industrial product To understand changes in product strategy To understand the Product Life-Cycle (PLC) theory and its application to marketing strategies Developing product strategies for existing products Managing innovation & new product development To understand marketing strategies for industrial (business) services

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END OF CHAPTER 7

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Managing the Personal Selling Function Chapter 9

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Major roles of personal selling Help customer define the buying problem Provide effective pre-sale customer service Represent the customer at own factory/HQ

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1. Help customer define the buying problem YOUR CUSTOMER

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2. Effective customer service (Pre & Post sales)

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3. Represent customer at own factory/HQ

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SOME APPROACHES TO PERSONAL/B2B SELLING Relationship selling Sales Force Automation (SFA) Team Selling Multiple Distribution Channels

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Are you a successful or average salesperson ? Great product knowledge Enthusiastic presentation Ensure good customer service Good listener Superior branch/regional organization Better relationship Answer objections better Better initial impression

Organizational need based initiatives:

Organizational need based initiatives Branch vrs Zonal concept Area Liaison Office RESMO Office cum Residence

The Selling Process:

The Selling Process Prospecting Qualifying (Segmenting) Preparation Presentation Closing Post-sales service

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Types of Sales Organizations Geographical Organization Product Organization Combination of Geographic & Product Combination of Geographic & Market-oriented

Geographical Sales Organization:

Geographical Sales Organization Area Office Coimbatore Area Office Pune Nasik Carrier Aircon Eureka Forbes KOEL Atlas Copco Sandvik

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Product organization Non-gear Gear

Combination: Geographic – Product Organization:

Combination: Geographic – Product Organization

Combination: Geographic – Product Organization:

Combination: Geographic – Product Organization L&T Godrej Thermax ITC

Geographic – Market-Oriented Sales Organizations:

Geographic – Market-Oriented Sales Organizations Manager Advertising Manager MR

Previous Organization: One Zone:

Previous Organization: One Zone Tata Motors Ashok Leyland

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Training Industrial Salespersons Contents in initial training Company info Product info Market info Sales policies & procedures Selling techniques Experienced salespersons Management development programs Communicating skills Forecasting techniques HR skills

You are posted to Bangalore as Regional Sales Manager (South Zone) :

You are posted to Bangalore as Regional Sales Manager ( South Zone ) New Manager New subordinates Multiple Product Groups New to customers

ABC Analysis of INDUSTRIAL CUSTOMERS:

ABC Analysis of INDUSTRIAL CUSTOMERS Each salesperson assigned the task of contacting 10-15 industrial customers Each salesperson collects data on requirements (current year & subsequent year) Quantity requirement converted to value requirement (Quantity x INR = Value requirement) Total value of all customers and then Customers listed in descending order of potential A: Top 10% customers (potential of 70% sales); B: Next 20% (potential of 20% sales); C: Balance group of 70% customers (potential of 10% sales) Monthly visit plans (Per month: A -4times, B -2times; C -once) Top level courtesy calls to all A & B customers

Management of Major & National Accounts:

Management of Major & National Accounts MAJOR ACCOUNT Bajaj Auto KOEL Godrej NATIONAL ACCOUNT HAL BHEL TATA group

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END OF CHAPTER 9

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CASE STUDY Precision Steel Tubes Ltd. Case study No: 4 Pages 330 - 332

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Precision Steel Tubes CRCA coils

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