Marketing Management - Ii: Unit

UNIT- 2
MARKETING MANAGEMENT -II

KEY CONCEPTS
2.1 PRODUCT MANAGEMENT: INTRODUCTION………………………………………….…………………….………………………………….….1

2.2 LEVELS OF PRODUCTS, ………………………………………….…………………….…………………………………………………………………….3
2.3 CLASSIFICATION OF PRODUCTS, ………………………………………….…………………….…………………………………………………......4
2.4 PRODUCT HIERARCHY, ………………………………………….…………………….……………………………………………………………………5
2.5 PRODUCT MIX STRATEGIES, ………………………………………….…………………….……………………………………………………………6
2.6 PRODUCT LINE STRATEGIES, ………………………………………….…………………….…………………………………………………………..6
2.7 PACKAGING AND LABELING, ………………………………………….…………………….……………………………………………………………8
2.8 NEW PRODUCT DEVELOPMENT PROCESS, ………………………………………….…………………….………………………………….….10
2.9 WHY NEW PRODUCTS FAIL, ………………………………………….…………………….…………………………………………………………...12
2.10 ADOPTION PROCESS, ………………………………………….…………………….……………………………………………………………….……13
2.11 DIFFUSION OF INNOVATION, ………………………………………….…………………….…………………………………………………….….14
2.12 PRODUCT LIFE CYCLE (PLC) ………………………………………….…………………….…………………………………………………………15
2.13 BRAND MANAGEMENT: MEANING, ………………………………………….…………………….……………………………………………….20
2.14 ADVANTAGES AND DISADVANTAGES OF BRANDING, ………………………………………….…………………….………………..….21
2.15 BRAND EQUITY, ………………………………………………………………………………………………….…………………….………………..….22
2.16 BRAND POSITIONING, ………………………………………………………………………………………………….…………………….……….…23
2.17 BRAND NAME SELECTION, …………………………………………………………………………………………….…………………….………. 24
2.18 BRAND SPONSORSHIP, ………………………………………………………………………………………………….…………………….………. 24
2.19 BRAND PORTFOLIO……………………………………………………………………………………………………….…………………….………. 25
ASSIGNMENT QUESTIONS…....…………………………………….……………………………………………………………………………………...…26
2.1 PRODUCT MANAGEMENT: INTRODUCTION
Product is core to any business enterprise and forms the most tangible expression offered by the firm in response to consumer
needs and wants. Issues pertaining to `product' therefore become key determinants of successful business strategy.
This unit briefly introduces to you the meaning, 'scope and major areas of responsibilities of product management function
within the organisation. The unit also familiarizes what a product is all about, mentioning the related conceptual issues of
product/product management. However each of these conceptual issues have been discussed exhaustively in the subsequent
units of this course as it is out of the purview of this unit.
PRODUCT MANAGEMENT MEANING

Among the four elements of marketing mix i.e. product price, place and promotion, you would agree that all business activities
commences and revolves around the first element namely the product. Thus product forms the core to any business enterprise.
You cannot imagine any role and relevance of other three elements i.e. price, place and promotion without a product. However
these elements their linkage and support is essential in designing the firms business strategy and making the product a success
in the market place.
Product management is an integral part of marketing function and includes a whole range of activities pertaining to product
planning and development and extends itself to brand building and management.
Every professionally managed and proactive manufacturing and marketing firms which respond to market needs resort to
product planning exercise in relation to its customers, relevant markets, competition and other market forces prevalent.
Product planning does include basic corporate plan and marketing plan from which the 'product plan emerges. Generally in
product plan we consider product strategies like product line its length and breadth, line stretching, bet upwards and
downwards.
The idea of introducing new products does also come under the purview of product planning. Product management also
considers conceptual issues like Product Life Cycle, planning for new product and its related issues on pricing, promotion and
distribution.
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All the conceptual issues related to product and its management have been discussed and dealt in detail in the subsequent
units of this course.
WHAT IS A PRODUCT ?
A product may be defined in a narrow as well as broad sense. In n narrow sense, it is a set of tangible physical aid
chemical (compound) attributes in an identifiable and readily recognizable form. In a broader sense we may look at it
in the form of an object, idea, service, person, place, activity, goods, or an organization. It can even be acombination of
some of these factors.
The product is much more than just a bundle of physical attributes, it’s the concept that customer buys. The product
is a bundle of satisfaction that a customer buys. It represents a solution that just what the manufacturer understand it to be.
To Philip Kotler, “A product is any thing that can be offered to the market for attention, acquisition, use or consumption it
includes physical objects, services, personalities, place and organization”
To Jerome McCarthy, “A product is more then a physical product with its related functional and aesthetic features. It includes
accessories, installation, and instruction on use, the package perhaps the brand name, which fulfills some psychological need
and assures that service facilities will be available to meet the customers need after purchase”
By and large all human beings irrespective of their economic status, social and cultural influences, literacy levels would buy
and use/consume various products during their lifetime thus deriving want satisfaction in relation to their inherent and latent
needs existing at a given point of time.
We purchase and use different kinds of products available in the market both tangible and intangible and -satisfy ourselves by
adoption. Having- agreed that products are indispensable to mankind. Lets now look into what the term "product" means to
the manufacturer. In simple terms products are offered to earn revenue which is the bread and butter for the firm to survive
and sustain. These products offered to the Market by the manufacturer may or may not be in response to human needs/wants.
The issues relating to how effectively and efficiently the marketer manages his firms products is out of the purview of this unit.
Basic Concepts
Hitherto products were what firms manufactured and sold to the consumer or end user. Such a traditional and conventional
practice lead to a market condition called the sellers market. On the contrary, today it's, a changed scenario and the focus is
shifted towards consumer orientation. Thereby offering products in response to the needs and wants of the consumer. This
metamorphosis also made the market condition change to buyers market. Thus the meaning of product is constantly and
continuously expanding.
A product means different things to different people for example purchase of car could be a basic need for transportation for
`X' while it could be a luxury or an expression of life style for `I'. Thus a product is any tangible, intangible offering that might
satisfy the needs or aspirations of a consumer.
Every marketer, at the stage of conception and while visulasing a product offering needs-to think of it at three levels. First and
foremost fundamental aspect, is the core benefit associated with the core product which the consumer derives by adoption
which also answers the question of why the buyer should buy, it. This way every product tries to satisfy some core benefit or
value. It is the task of the marketer, to disclose the underlying motives behind the purchase of the product. That is precisely
ascertaining from the buyer whether he is genuinely satisfied by having the product.
To make you understand what core-benefit and value is all about " Theodore Levit" pointed out categorically when he said:
"Purchasing agents do not buy drills, they actually buy its ability to make the same size holes".
Similarly, a consumer buys a CD player not as plastic box with electronic circuitry but a means to his recreation.
The core benefit or value in buying a refrigerator is to stock, preserve and keep food stuff fresh all through the day. At the
second level the marketer generally tries to identify a range of unique and tangible aspects in the form of specalised functions,
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product design, specifications, size etc. continuing the earlier example of CD player, the marketer, may offer, with detachable
speakers, portability, remote controlled with 3/4 band radio etc. This way one could think of umpteen number of such visible
specific conveinence. In case of refrigerator offering varied capacities ranging from 165 litrs and above with colors to match
your mood.
Eventually the last and yet an important level where the marketer should think of attracting more customers towards his firms
products is by way of offering augmented services. A good example could be Indica the small car from the Telco, a Tata
enterprise, stable, known as a major producer of trucks in India, encourages and adopts local technology, competitively priced
and offer ' value for money.
Types of Products
Product of all categories can be classified conveniently as:
Tangible Products ( touchable)
Intangible Products (Services)
Tangible products are those products which are visible to the naked eye and includes products of all categories from safety pin
to aeroplanes.
On the contrary, intangibles are characterized as being invisible to the naked eye, has no entity of its own and devoid of
physical attributes eg. consultancy, medical assistance, car servicing etc.
Augmented Features Tangible Specifications Core Benefits
Core benefits: What, the product means to the customer? For example, a refrigerator offers the generic benefits of storing,
preserving and cooling a food or similar items.
Tangible specifications: Features, colour, design, quality, size, weight: materials used in making the product, durability,
operating resource (say, diesel, petrol or electricity) & price.
Augmented features: Company name, brand image, warranty/guarantee for the whole machine or specific parts. It may
include dimensions like delivery, easy accessibility, credit, packaging, repair/service facilities.
2.2 LEVELS OF PRODUCTS,

You can say a product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies
consumers and is received in exchange for money or some other unit of
value.Marketers plan their market offering at five levels. Each level adds more
customer value, and together the five levels constitute a customer value hierarchy.
1. The most fundamental level is the core benefit: the fundamental service or benefit
that the customer is really buying. A hotel guest is buying “rest and sleep”;
2. At the second level, the marketer has to turn the core benefit into a basic
product: Thus, a hotel room includes a bed, bathroom, towels, and closet.
3. At the third level, the marketer prepares an expected product, a set of attributes
and conditions that buyers normally expect when they buy the product. Hotel guests
expect a clean bed, fresh towels, and so on.
4. At the fourth level, the marketer prepares an augmented product that exceeds
customer expectations. A hotel might include a remote-control television set, fresh flowers, and express check-in and checkout.
Today’s competition essentially takes place at the product-augmentation level. (In less developed countries, competition takes
place mostly at the expected product level.)
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DR MUKESH S TOMAR, 9575854003
5. At the fifth level stands the potential product, which encompasses all of the possible augmentations and transformations
the product might undergo in the future. Here, a company searches for entirely new ways to satisfy its customers and
distinguish its offer.
2.3 CLASSIFICATION OF PRODUCTS,
There are several ways of classifying products:

1) On the basis of the user status, products may be classified as consumer goods and industrial goods.
2) On the basis of the extent of durability, products may be classified as durable goods and non-durable goods.
3) On the basis of tangibility, products may be classified as tangible goods and nontangible goods. These non-tangible goods
are referred to as services.
1) Consumer goods: Are those products which are bought by the household or ultimate consumer for personal or non-
business use. For example, a tooth brush, a comb, a wrist watch.
 Convenience goods (Staple goods): A class of consumer goods that people buy frequently with least possible time
and effort are called convenience goods. These are the products the consumer wants to purchase frequently,
immediately, and with minimum effort. E.g. milk,bread, butter, eggs, soap, newspaper, biscuits, tooth pastes, etc
 Shopping goods: shopping refers to the activity of going to shops / stores and buying things.These are a class of
consumer goods that are purchased only after the buyer has spent some time and effort comparing price, quality,
style, colour of alternative products in competing stares. The purchaser of shopping goods lacks complete
information prior to the shopping trip and gathers information during it. E.g. dress material, jewellery, furniture,
appliances, and shoes.
 Specialty goods: A class of consumer goods with perceived unique characteristics, such that consumers are willing to
spend special effort to buy them are known as specialty goods. The buyer of specialty goods is well aware of what he
or she wants and is willing to make a special effort to obtain it. e.g. photographic equipments, TV sets, cars, mobile
phones, automobiles, etc
2) Industrial goods: Are those goods which are meant to be bought by the buyer as input in production of other products or
for rendering some services. Industrial products are meant for non-personal and commercial use. Industrial goods include
items like machinery, raw materials, components, etc.
 Raw materials: are those industrial goods that become part of another physical product. Raw materials include
goods found in natural state such as minerals, marine, products, land, products of forests, etc
 Fabricating materials into parts: have already been processed, to some extent, but may need further processing
before actual use. For example, pig irons (kacha loha) being converted into steel.
 Installation: They are manufactured industrial products, They alter the scale of operations in a firm, Normally,
installations are directly sold to the industrial user and middleman are not involved. Pre-sale and post-sale servicing
is required for these products.
 Accessory equipment: They are used to aid production operations of an industrial buyer and do not have an
influence on scale of operations of buyer. They do not form part of the finished product.
 Operating supplies: They are low priced, short-lived items purchased with minimal effort and could well be termed
as convenience goods of industrial field. They aid in the firm's operations without becoming part of the end product
e.g., lubricating oil, stationery, etc.
3) Durable and Non-durable goods: Tangible products with a long life and lasting of many years of active service to the
owner are termed as durable goods. Television, fan, refrigerator, pressure cooker etc., may be cited as examples of durable
goods. A durable product would require a lot of personal selling, and pre-sales and post-sales service.
Products which are consumed in one go or last few uses and get depleted on consumption are termed as non-durable
goods. These PRODUCT HIERARCHY are the products that have to be advertised heavily, with a view to inducing people to try
them out, and thus, build up brand preference and brand loyalty.
4) Services: are those separately identifiable, essentially intangible activities which provide want satisfaction, and which are
not necessarily tied to the sale of a product or another service.
2.4 PRODUCT HIERARCHY,

One of the things which confuses many beginners in Marketing is the product hierarchy. There are just too many types of
product classes like Product line, product mix, product type etc. To understand the product hierarchy, we will have to look not
at a single product but the business as a whole. So in this example, we can take Volkswagen as a company and we will try to
understand the Product hierarchy of Volkswagen.
1) Product need – Product need is the basic reason because of which the product exists. So the need for cars to exist is
because people want to travel. This is the basic product need which is fulfilled by Volkswagen cars.
2) Product family – The Product family defines the core need which the product satisfies. When we are talking of the product
family, we have to look at the complete business market and not at the individual market. So when travel is the basic
requirement, then there is an option of Plane travel, train travel, roadways travel, travel via passenger cars or transport
vehicles. In this case, the Product family is passenger travel and the product family of Volkswagen is Cars.
3) Product class – Product class and Product family are very similar in nature and can also be treated as synonyms. For
example – Volkswagen also manufactures bus which is a multi passenger transport vehicles and it also manufactures 2 seater
luxury cars. Thus when we categorize different products within the company (and not outside the company like in Product
family) then it is known as product class. Mercedes, for example, exists in cars and buses both predominantly. Thus, it has 2
common product classes where it is present.
4) Product line – The complete line of products within one class of products is known as the product line. So if we talk about
Volkswagen passenger cars, then we have the Volkswagen Polo and the Vento as well as different products within the
Volkswagen product line. At the same time, Audi is another brand owned by Volkswagen and is divided into multiple product
lines including the Q series. So Q series is just one Product line and there would be multiple such product lines of Audi. You can
read more about product line and product mix by clicking the link.
5) Product type – Within the Product line there are various product types. For example – If we talk of Hyundai’s I20, then
there is I20 Asta, I20 Magna as well as I20 Sportz. So I20 becomes a product type and the other models become product units
(explained below) Similarly, for any given series, within the series there are multiple models and these are the product types.
Audi’s Q6 or Q7 will also have various customized types on offer and these are known as product types. They are offered to
customers based on the budget of customers and their requirement of features.
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6) Product unit – The final aspect in the Product hierarchy is the product unit which is also known as the SKU. Continuing the
above example, the Hyundai I20 Asta is one Product unit and so is the Hyundai I20 Magna. So if the product is an independent
product and there is no other product type dependent on it, then it is an individual product unit.
Whether you take HUL, P&G or any such companies having multiple products and strategic business units, you can divide the
products based on the above product hierarchy.
2.5 PRODUCT MIX STRATEGIES

Businesses are continuously making critical decisions about their product range. Product decisions will include whether to
develop new products and how to manage existing products. The different ways firms manage the type and number of
products they sell and related terms i.e. product strategy and product objectives. The product strategy diagram below gets us
started, by explaining how your product mix can be split into product lines.
The diagram below shows how the product mix can be divided into product lines and that each product line's width and depth
is part of managing a firm's product mix.
Product Mix (Product Portfolio or Product Assortment)

The Product mix is the total number of different products a firm sells. Some firms will sell just one product, whilst others will
sell a large number of different products. For example Samsung's product mix includes mobile phones, netbooks, tablets,
televisions, fridges, microwaves, printers and memory cards. Firms should select their product mix carefully as they will need
to generate a profit from each of the products in the product mix.
Product Line
Firms may decide to split their product mix into groups known as product lines. A product line is a number of products
grouped together based on similar characteristics. The characteristic used to split products, will depend on the firm and its
product strategy. They include product price, product quality, who the product is aimed at (target group), and product
specification/features. For example Samsung's mobile phones are divided into product lines based on the following features;
touch screens, size and stick touch phones. Product lines help firms manage their products as product strategy can be designed
around product lines. This is useful if the firm has a large product mix as there is less need to concentrate on individual
product type strategy.
Product Line Length

The product line length shows the number of different products in a product line. A long product line has lots of different
products in it and a short product line has a small number of different products. The product manager's job is to work out how
many products to include in the product line. If there are too many product types in a product line, they will begin to compete
with each other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer
choice and send customers to competitors with a greater selection of products.
Product Line Depth

Some of the product types in a product line may be split again into groups, the product line depth shows how many subgroups
the product line contains. For example Samsung have split their mobile phones into the following product lines touch screens,
size and stick touch phones. Each of these product lines can be further split into subgroups like Samsung had 7 slider mobile
phones and 32 touch screen mobile phones, 32 is a deep product line.
Product Line Stretching

Product line stretching occurs when a business adds new product to the product line and the new product types are of a higher
or lower quality than existing products in the product line. If the new product types are cheaper or of a lower quality it is
known as a downward stretch. If the new product types are more expensive or of a higher quality it is known as an upward
stretch. Supermarkets often stretch product lines by offering value, standard and premium versions of their own brand
products. Product stretching enables firms to fill any Gaps they have identified in the market.
Product Mix Width

The product mix width is the number of product lines in the product mix. A wide product mix increases the type of customers a
firm can target. However it may involve a lot of work as each product line will require a strategy and management. It could also
reduce specialisation as it is difficult to offer every variant of a product type if you are selling lots of different types of product.
A narrow product mix may be easier to manage and allow the firm to specialise in particular product lines and product types.
However a small product mix reduces the type of customers a firm can target as they can't cater for everyone's product "needs
and wants".
Product selection is as important as the product you are selling. Firms need to strike a balance between giving customers
choice and trying to cater for everybody. Dividing products into product lines and the product line into further groups, helps
firms to develop product strategies. It can also help them identify which product ranges sell well and which do not.
2.7 PACKAGING AND LABELING,

A package is basically an extension of the product offered for sale. Sometimes thepackage is more important than the product it
contains as it contains the product andprotects it till the consumer is ready for the consumption or use. Some marketerseven
call packaging a 'fifth P', along with product, price, promotion and place.the packaging of a producthas become a major element
of the promotion of that product to the potentialconsumer. Packaging requirements therefore include:
1. Product Description:The pack must convey to the potential consumer not justwhat the product is, but what it does;
in terms of the benefits it offers
2. Product Image: The packaging must also match the required image, so that theboxes for expensive jewels look
expensive themselves
3. Product Value: The pack is often designed to make it contents look more thanthey really are.
4. Shelf Display: The pack should be designed to make the most of the shelfspace available which may mean making the
pack look more compact aspossible, so that more can be placed in the shelf.
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Packaging as a function consists of two distinct elements, (i) the positive aspects, viz.,the science and technology related to
package design, selection of packagingmaterials, etc, and (ii) the behavioral aspects, viz., the art of product design which is
associated with consumer motivation research, buying research, etc.
In marketing, packaging is defined as the activities of designing and producing the container or wrapper for a
product. The container or wrapper is called the'package'.
According to Philip Kotler and Gary Armstrong, the packaging may include up to three levels of material. The
primary package is the product's immediate container. If you consider a toothpaste, the tube holding the toothpaste isthe
primary package. The secondary package is the card board material that protects the primary package and that is thrown away
when the product is about be used.The shipping packaging is the packaging necessary to store, identify, and ship the product (a
carton in this case, which contains hundred toothpaste units). Finally labeling is part of packaging and consists of printed
information appearing on or with the package.
Function of Packaging
1. Protection: The primary function of packaging is to protect the products fromthe environmental and physical hazards to
which the product may be exposed intransit from the manufacturer's plant to the retailer's shelves and while ondisplay on the
shelves
2.Appeal: The package is increasingly being used as a marketing tool. The importance is also increasing due to the changed
structure of retail business, especially the emergence of self-service stores. In the case of consumer products, package serves as
a silent salesman. This is true, irrespective of whether the products are a luxury, semi-luxury or an ordinary everyday
useproduct, Consumer research on packaging concentrates on two aspects, which have aninfluence on consumer purchase
decisions. The first one is color and the secondis the package or container design. Almost all researchers have come to
theconclusion that each color has its own distinct characteristics and, therefore, has to be used in a package so that there is no
mismatch between what is expectedof the package and the color used in the packaging.
3. Performance: This is the third function of a package. It must be able toperform the task for which it is designed. This aspect
becomes crucial incertaintypes of packaging. For example, an aerosol spray is not only a package butalso an engineering
device. If the package does not function, the product itselfbecomes totally useless.
4.Convenience: The package must be designed in a way, which is convenient touse. It should be convenient not only to the end
user but also to the distribution channel members, such as wholesalers and retailers. From the inter-mediariesst and point the
convenience relates to handling and stocking of packages.
5.Cost-effectiveness: The package finally must be cost-effective. Packaging cost as a percentage of product cost varies
dramatically from one industry toanother, from less than one percent in engineering industry to more than tenpercent in the
cosmetics industry. It is important to appreciate that while analyzing packaging costs, it is not enough to consider only the cost
of package.
Packaging Strategies
We have already mentioned that packaging plays a greater role in the promotion ofthe product. Some of the widely used
promotional packaging techniques are follows
1) Discount Pack: A 'flash' in distinctive colour is superimposed on the package, announcing the special price discount being
offered. This is the most widely used form.
2) Coupon-Pack: A coupon of certain values, either as a part of the package or placed separately in the package, can be
redeemed after the purchase of the product.
3) Premium Package: A premium package can take three forms. If the premium accompanies the product within the package
then it is called in pack premium. If it accompanies the pack as a separate unit then it is called with pack premium, A coupon on
the pack allowing a discount is called on pack premium package.
4) Prime Packaging: A specially made package having either a re-use or prestige value is referred to as prime package. Instant
coffee packed in glass tumblers having colours is an example of the first type. The set of watches presented by Titan for the
married couple in a gold plated package called "Bandhan" is an example of a prime pack.
5) Self-Liquidators: The buyer has to send to the company a number of packages or part thereof as evidence of buying the
product in return, he may purchase additional quantity of the same product at reduced prices or be rewarded with a different
product. Several companies in India, in the processed food like Maggi and Top Ramen and Sargam Tea occasionally use this
technique.
6) Redesigning of the Package: Introduction of a new package can also be used as a promotional technique. For example, till
the very recent past, edible oils were packed in tin cans in India, which looked messy and dirty. Most of the larger firms have
now started using transparent one-liter PET (polyethylene terephthalate) bottles, which look gleaming and fresh.
7) Odd Size Packaging: Packaging can also be used ingenuously to avoid direct price comparison with the competing
products. This is done by a deliberate choice of odd size, while the competing brands follow a standard size. A recent example
in India is the launch of soft drinks by Pepsi in 200 ml bottles at Rs 5 when the industry standard was 300 ml at a price point of
Rs 7 and rest other players immediately followed the brand leader with a 200 ml, pack size. The size of Dove soap also is also
odd enough for the slim bathing soap category in Indian market.
8) Packaging the Product Line: Packaging can be used to develop a family resemblance in the packaging of its several
products. Identical packages or the packages with some common features are used for all the products of a product line. This
kind of packaging strategy had the benefits of umbrella branding. Under this strategy, when new products are added to a line,
promotional value associated with old products extends to the new ones.
9) Bundle Packaging: Placing more than one unit in one container is referred to as bundle or multiple packaging. This
packaging strategy increases the sales to a large extent. This is seen in bathing and washing soap category in India.
10) Packaging in Perishables: In specific product areas where shelf life is an integral issue, packaging brings a combination
of functional as well as promotional value. For example in ice cream business, the refrigerator serves as a status symbol for the
retailer and also with the sale of the brand.
Labelling Decision
The paper or the plastic wrapper attached to a bottle of medicine or a jam bottle carrying product information is
technically called a label. Labeling is regarded as part of marketing because packaging decision making involves the
consideration of the labeling requirements. The label helps in identification of the brand. It also describes several things about
the product. In a medicine bottle the label explains about the composition and maximumretail price to the customer with
directions of use and statutory warnings.
Normally alabel provides details about the manufacturer, the place of manufacturing, the date of manufacturing, its
contents, the directions for use and the safety measures involved inthe product use and expiry date. In many cases the label
also does the promotion function due to its highly visible graphics. A label must also carry the suitable instruction for the
proper disposal of the product and its package or at least a plea to consumers to avoid littering. As per the legal provisions a
label must carry anyspecific nutrition information, warnings and legal instructions as required by law. Most consumer
packaged goods are labeled with an appropriate Universal Product Code(UPC), an array of black bars readable by optical
scanner, The advantage of the UPC which allows computerized checkout and compiling of computer generated sales volume
information have become clear to distributors, retailers and consumersin recent years.
A good label is one which helps a potential buyer to make his decision by providingrelevant and correct information.
Apart from the information, which must bestatutorily given, the label should therefore provide:
i) Picture of the product, accurate as to size, colour and appearance
ii) Description of raw products used along with methods of processing
iii) Directions for use, including cautions against misuse
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2.8 NEW PRODUCT DEVELOPMENT PROCESS,

In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a
new product or service to market. There are two parallel paths
involved in the NPD process: one involves the idea generation,
product design, and detail engineering; the other involves
market research and marketing analysis. Companies typically
see new product development as the first stage in generating
and commercializing new products within the overall strategic
process of product life cycle management used to maintain or
grow their market share.
Significance of New Product Development

1. For survival and growth in the long run
2. To meet the requirements of customers
3. Modification or elimination of existing products
Stage 1 Idea Generation

Customers: Customers are sometimes able to discuss their requirements and offer ideas that will meet those problems.
Competitors: Systematic comparison or bench marking with the competition may offer good source of new product ideas.
Distributors: Suggestions from distributors and their problems in handling present products often thrown up new ideas.
Creative techniques: Brainstorming, focused interviews and technological forecasting enable one to find out the latent
capabilities of innovations.
External world: The external world, especially the use of their technology, offers a good source of ideas for implementation in
the home market.
Research and development: Create new product ideas through R&D. From initial generation of ideas to full commercialization
and well into the mature age of a product, the developers should strive to control what is in their power to control a do to
monitor what is beyond their control.
Stage 2. Idea Screening

A company should motivate its employee to submit new ideas to an idea manager whose name and phone number are widely
circulated. Idea should be written down and reviewed each week by an idea committee. The company then sorts the proposed
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ideas into three groups promising, survival and rejects. Promising ideas: is researched by the committee member who reposts
back to the committee. Surviving ideas: is move into a full scale screening process
In screening ideas a company must avoid two types of errors. A DROP error occurs when the company dismisses an
otherwise good idea. It is extremely easy to find fault with other people’s idea. A GO error occurs when company permits a
poor idea to move into development and commercialization. The purpose of screening is to drop poor ideas as early as
possible.
Stage 3 Concept Development and Testing

Concept development involves asking question such as the following:
Need: Do customers find a strong perceived need for the benefit offered?
Trust: Do they believe that the new product has the benefits claimed?
Communicability: Do customers easily understand the key benefits being offered?
Usage: Does it offer easy adoption?
Perceived Value: Do Customers see it as offering value at the price being considered?
After the working area is defined, concept generation begins, often at a hectic pace. Ideas flow fast and in most cases rejection
is equality fast. The team looks for the few fast and inmost cases rejection is equally fast. The team looks for the few concepts
the warrant concepts development – the evolving of an original ideation attempt into a specific statement of need, form and
technology that can be evaluated.
Concept Evaluation Often considered the heart of the new products process, the EvaluationState is long, involved, and difficult.
Evaluation actually begins when the strategist evaluates the organization’s abilities. And it continues long after a product is
marketed since a product often needs revision to remain competitive. Concept testing and other prescreening marketing
research prepare the team for the actual screening evaluation. This evaluation is a full, detailed analysis of the proposal. If the
concept passes screening, technical development begins. The technical work produces prototypes, which can then be evaluated
and if all goes well, the finished product can be prepared for use testing.
Stage 4 Marketing Strategy Development

Following a successful concept test, the new-product manager will develop a preliminary strategy plan for introducing the new
product into the market. The plan must consist of three parts.
The first part describes the target markets size, structure and behaviour; the planned product positioning and the
sales, market share, and profit goals sought in the first few year. The second part outlines the planned price, distribution
strategy and marketing budget for the first year. The third part of the marketing strategy plan describes the long-run sales and
profit goals and marketing-mix strategy over time
Stage 5 Business Analysis

Management needs to prepare sales; cost and profit projections to determine whether they satisfy company objectives. If they
do, the concept can move to the development stage. As new information comes in, the business analysis will undergo revision
and expansion.
 Estimating Total Sales
 Estimating Costs and Profits
Stage 6 Product Development

The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality
function deployment (QFD). The methodology takes the list of desire customer attributes (CAs) generated by market research
and turns them into a list of engineering attributes (EAs) that the engineers can use.
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1. Physical prototypes: the R&D department will develop one or more physical version of the product concept. Its goal is to
find a prototype that embodies the key attributes described in the product concept statement, that performs safely under
normal use and conditions, and that can be produced within the budgeted manufacturing costs.
2. Customer tests: when the prototypes are ready, they must be put through rigorous functional tests and customer tests.
Alpha testing is the name given to testing the product within the firm to see how it performs in different applications. A> The
rank-order method B> The paired-comparison method and C> The monadic-rating.
Stage 7 Market Testing

After management is satisfied with functional performance, the product is ready to be dressed up with a brand name and
packaging and put into a market test. The stage at which the product and the marketing program are introduced to a more
realistic market settings. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into
the expense of a product launch. The amount of test marketing varies with the type of product. Costs of test marketing can be
enormous and it can also allow competitors to launch a “me-too” product or even sabotage the testing so that the marketer
gets skewed results.
Consumer goods market testing: in testing consumer products, the company seek to estimate four variables: trial, first repeat,
adoption and purchase frequency.
 Sales wave research: sales offering trial to a sample of consumer in successive periods.
 Simulated test marketing: test in a simulated shopping environment to a sample of consumers
 Controlled test marketing: a few stores that have agreed to carry new products for a fee
 Standard test markets: full marketing campaign in a small number of representative cities. (How many test cities?
Which cities? Length of test? What information? What action to take?)
Business goods market testing business goods can also benefit from market testing. Expensive industrial goods and new
technologies will normally undergo alpha testing (with in the company) and beta testing (with outside customers). During beta
testing, the vendor’s technical people observe how test customers use the product, a practice that often exposes unanticipated
problem of safety and servicing and alerts the vendor to customer trainings and servicing requirements.
A second common test method for business goods is to introduce the new product at trade shows. The vendor can observe how
much interest buyers show in the new product how they react to various features and terms and how many express purchase
intentions or place orders.
Stage 8 Commercialization
Management’s decision that the new item is worth marketing either in a test market situation or in a full – scale launch – is
called the point of commercialization. Pilot processes are then converted to full-scale manufacturing. Final design
specifications are written. Marketing strategy is finalized, including actual brand, packaging, service commitment etc. The team
gradually moves the company from tentative exploration of a concept into production and marketing of a new product.
 When (Timing) First entry, Parallel entry and Late entry
 Where (Geographic strategy)
 To whom (Target market prospects)
 How (Introductory market strategy)
2.9 WHY NEW PRODUCTS FAIL,

The failure rate seems to vary depending on whom you speak to. Harvard Professor Clayton Christensen was attributed with
saying that the failure rate is very high i.e. 80% – 90% (which he disputes) whereas others think it is closer to 40%. But no
matter who you believe one thing is true – launching a new product (or service) is a high-risk strategy. I thought it would be
interesting to see if there is any consensus as to the reasons why! My 5 reasons why new products fail looks something like
this.
1. A lack of independent and unbiased research into the market and target audience
One of the characteristics of a successful entrepreneur is that they are determined, let nothing stand in their way and have a
unique feel for what the customer wants. Steve Jobs for example, was not a fan of market research. He famously said “You can’t
just ask customers what they want then try to give that to them. By the time you get it built, they’ll want something new.” Great
entrepreneurs might succeed because they’re passionate and determined to do so and because they don’t take no for an
answer, but that’s not without having done their due diligence first!
2. The product falls short of claims made and suffers bad reviews
Companies often make extravagant claims about their products and consumers lose interest, which is a particular problem in
this technological age when one person can spread bad news to thousands. Microsoft reportedly poured no less than $500
million into the launch of Windows Vista for which it had high expectations, with a “Wow Starts Now” advertising campaign.
But the software had so many compatibility and performance problems that even Microsoft’s most loyal customers revolted.
Vista was a flop, with Apple heavily criticising it in an ad campaign (“I’m a Mac”), causing many consumers to believe that Vista
had significantly more problems than it did.
3. The product defines a new category and requires substantial consumer education—but they don’t understand
it.
Many new products demonstrate classic “Red ocean thinking” and break new ground by offering consumers a different
product to the competition. This is a key reason why new products fail as if the consumer doesn’t understand the point of
difference or if they don’t understand what makes the product unique, they will simply stay with what they are used to. For its
biggest launch since Diet Coke, Coca-Cola identified a potential new market: 20- to 40-year-old men who liked the taste of Coke
(but not its calories and carbs) and liked the no-calorie aspect of Diet Coke (but not its taste or feminine image). C2 was
introduced in 2004 with a $50 million advertising campaign but failed dismally as their target audience couldn’t see the need
for the new product, so they stuck with what they were familar with.
4. Simple margin rules make bad pricing policy.
Price is the important element of the marketing mix as it’s the only thing that brings in revenue – everything else is a cost. Too
often though firms have a plan for all products achieving a hurdle margin or better and while having an overarching margin
target might seem wise, it actually causes issues. Firms tend to either underprice some offerings, leaving money on the table, or
overprice others and not allowing the money to reach the table in first place. Instead, companies need to understand the value
of the benefits their offering delivers to customers compared to alternatives, and then price according to that value.
5. Weak launch or a poorly executed launch
Most new products require a reasonable degree of promotional support to build brand awareness and to access distribution
channels and retailers. A limited launch budget or a poorly executed launch is another reason why new products fail. Combine
this with adverse media attention (or negative consumer sentiment on social media) usually related to deficiencies in the
product design, price level, or early use problems experienced by consumers and you have a recipe for failure. The launch of
the BlackBerry Q10 was a classic – launched too late with no demand for the product. (Who are Blackberry I hear you ask!)
2.10 ADOPTION PROCESS,

Adoption process is a series of stages by which a consumer might adopt a NEW product or service. Whether it be Services or
Products, in todays competitive world, a consumer is faced with a lot of choices. How does he make a decision to ADOPT a new
product is the Adoption process.
There are numerous stages of adoption which a consumer goes through. These stages may happen before or even after the
actual adoption.
Product adoption process - 1

Awareness – This is the area where major marketeers spend billions of dollars. Simply speaking, if you are not AWARE of the
product, you are never going to BUY the product.
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Interest and Information Search – Once you are aware, you start searching for information. Whether it be your daily soap,
your car or for that matter your home, you wont buy it unless you KNOW about it.
Evaluation / Trial – Evaluation is wherein you test or have a trial of the product. This is pretty difficult in services as services
are generally intangible in nature. However service marketing managers do find ways of offering Trial packs to users.
Comparatively, it is pretty easier in Product marketing and finds a major usage in BTL ( Below the Line) sales promotion.
Adoption – The actual adoption of the product. Wherein the consumer finally decides to adopt the product.
Although this is a well scripted adoption process, however consumers might tend to skip over the whole process. For example
your wife asks you to buy a product for her. Would you go through the process of actually collecting information, Evaluating it
and than making a decision??? I dont think so!!! So in this case (Word of Mouth) the consumer tends to directly adopt the
product rather than going through stages. This is one of the primary reason word of mouth is so much in demand.
On the other hand, The process might end in Rejection. Any of the stages can result in rejection of the product. No brand recall,
No interest generated, Trial improper, Product didnt satisfy, so on and so forth. The task of the marketer here is to understand
what is involved in the psychological adoption process of consumers for particular product and service in order to be able to
positively influence such consumers at appropriate stages. Only when this process has been understood we can encourage our
consumers to actually purchase the product / service offering.
For example –
Product trial may be an important stage to be completed before adopting some new products such as newly flavored soft
drinks, prompting marketers to offer free samples of the products in supermarkets. One strategy adopted in FMCG’s is to give
away small trial-sized packages of products such as shampoos or laundry detergents to encourage adoption. Yet, in adopting
other products such as mobile phones, awareness, interest, and evaluation become more essential. Thus in these sectors,
marketers emphasize on marketing communications and promotions to lead consumers towards adopting their product.
Finally, Market research needs to be done by marketers to understand the time and effort taken by the consumer in each stage
of the adoption process so as to lead the consumer to the final stage of ADOPTION.
2.11 DIFFUSION OF INNOVATION,
Diffusion of Innovations theory

The Diffusion of Innovations theory by Everett Rogers in a practical way. After reading you will understand the basics of this
powerful marketing tool.
Introduction
Each product has a certain useful life. It is not about the degree of wear and tear and the maintenance of quality of each
separate product, but also about market value. In his Diffusion of Innovations theory, sociologist Everett Rogers examines this
in greater detail and focuses on at what rate a new product or idea spreads through a certain group. His Diffusion of
Innovations is particularly famous in the marketing world.
Diffusion of Innovations theory
In his theory on Diffusion of Innovations, Everett Rogers describes a product’s innovation life cycle. In this cycle theory he
distinguishes five stages in which the product may find itself with five different user groups that accept the product or idea.
These determine the success of a product. Through his theory it becomes clear how a product or idea develops among the
users. Depending on the stage of the product, several adjustments take place, for example much or little promotion or a high or
low sales price.
Innovators
When a product is put on the market the first individuals to buy the product are the ‘innovators’. This small group of people
wants to be the first to try the product and they are willing to take risks. These exclusive users in this group are therefore trend
setters. Subsequently, the product will become increasingly popular and sales will increase.
Early adapters
Just like the innovators, the early adapters like to try out new things and they are not afraid to invest in new products. This
group is significantly larger than the ‘innovators’ group and often they already know much about the new product. Because of
this knowledge they play an important role in word- of- mouth advertising with respect to the new product as a result of which
sales will increase strongly.
Early majority
The early majority group loves trends, but prefers to wait and see before making a purchase. The product will be bought in
droves by this group of people. The product will become extremely popular and this will cause a landslide in demand.
Late majority
The late majority group actually lags behind and will only buy the product after many other people have bought it and its
popularity is already decreasing. The reason why this group does not buy the product from the start has to do with confidence
in the product. This group has to be absolutely certain that they are not making a bad buy. The product is also sold frequently
in this ‘late majority’ stage.
Laggards
The laggards group lags behind (consciously or unconsciously) in the trend and does not like innovation or change. It is not
until the product is not much in demand any more and is about to leave the market that this group decides to buy the product
after all. The most obvious reason is that this group waits until the sales price is lowered.
Market position
To maintain a good market position, companies look to sell their products to the five groups. By offering similar products to
different groups, companies will spread their risks. In the Netherlands, Philips does this with their coffee machines. They still
carry old-fashioned filter coffee machines for the ‘laggards’. The Senseo coffee machine with its adaptations and innovations is
meant for the ‘early’ and ‘late majority’ groups. Luxury espresso machines are meant for the ‘early adapters’ and the copy of
the so-called Nespresso coffee machine aims at the ‘innovators’. This machine will make drinking coffee exciting and
pleasurable.
2.12 PRODUCT LIFE CYCLE (PLC)

A company’s positioning and differentiation strategy must change as the product, market, and competitors change over the
product life cycle (PLC) To say that a product has a life cycle is to assert four things:
(1) Products have a limited life;
(2) Product sales pass through distinct stages with different challenges, opportunities, and problems for the seller;
(3) Profits rise and fall at different stages of the product life cycle; and
(4) Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage.
Most product lifecycle curves are portrayed as a bell-shape. This PLC curve is typically divided into four stages
 Introduction: A period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this
stage because of the heavy expenses incurred with product introduction.
 Growth: A period of rapid market acceptance and substantial profit improvement.
 Maturity: A period of a slowdown in sales growth because the product has achieved acceptance by most potential
buyers. Profits stabilize or decline because of increased competition.
 Decline: The period when sales show a downward drift and profits erode.
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a) Growth slump maturity pattern: often characteristics of small kitchen appliances such as handled mixtures and bread
makers. Sales grow rapidly when the product is first introduced and then fall to a petrified level that is sustained by late
adopters buying the product for the first time early adopters replacing the product.
b) The cycle recycle pattern: often describes the sales of new drugs. The pharmaceutical company aggressively promotes its
new drug and this produces the first cycle. Later sales start declining and the company gives the drug another promotion push,
which produces a second cycle usually smaller magnitude and duration.
c) The scalloped pattern: here sales pass through a succession of life cycles based on the discovery of new product
characteristics, uses or users. The sales of nylon for example show a scalloped pattern because of the many new uses-
parachutes, hosiery, shirts, carpeting, boats sails, automobile tires that continue to be discovered over time.
Style, fashion and fad life cycle
Style: is a basic and distinctive mode of expression appearing in a field of human endeavor. Style appears in homes; clothing
and are.
Fashion: is a currently accepted or popular style in a given field. Fashion pass through four stages: distinctiveness, emulation,
mass fashion and decline.
Fads: are fashions that come quickly into public view, are adopted with great zeal, peak early and decline very fast.
Stage – 1 Marketing strategies at Introduction stage and the Pioneer advantage

Because it takes time to roll out a new product and fill dealer pipelines, sales growth tends to be slow at this stage.
Buzzell identified several causes for the slow growth: delays in the expansion of production capacity, technical problems,
delays in obtaining adequate distribution through retail outlets, and customer reluctance to change established behaviors.
Profits are negative or low in the introduction stage because of low sales and heavy distribution and promotion
expenses. Much money is needed to attract distributors. Promotional expenditures are high because of the need to (1) inform
potential consumers, (2) induce product trial, and (3) secure distribution.
Companies must decide when to enter the market with a new product. Most studies indicate that the market pioneer
gains the most advantage. Such pioneers as Amazon.com, Cisco, Coca-Cola, eBay, Eastman Kodak, Hallmark, Microsoft, and
Xerox developed sustained market dominance. However, the pioneer advantage is not inevitable some cases due to
inappropriate product mix and marketing strategies. Five factors are very important for the market pioneer for long term
market leadership they are: vision of a mass market, persistence, relentless innovation, financial commitment and asset
leverage. The pioneer should visualize the various product market it could initially enter basing on the profit potential of each
product market, knowing that it cannot enter all of them at once.
The marketing task for a pioneer firm is to stimulate demand for the new product and also to reduce the break-even
time.
A) Rapid skimming: involves high price and high promotion.
This strategy also works when the market size for the product
is large and the threat form competition is imminent. E.g.
consumer electronics.
B) Slow skimming: high price low promotion works under the
assumption that firm has sufficient time to recover its pre-
launch expenses. Many industrial products, more specifically
renewable energy resources, laser technology or
petrochemicals may fall under this category.
C) Rapid penetration: low price and high promotion, works if the objectives are market share and profit maximization in the
long run, and the market is characterized by intensive competition or other entry barriers. Japanese firms adopted this
strategy to launch their product in North America and Europe. Later, South Korean, Taiwanese and Hong-kong based firms
used the same strategy to uproot Japanese and other local competitors, leading India firms like Nirma and T-Series and
followed this strategy.
D) Slow penetration strategy: low price, low promotion delivers results when the threat from competition is minimal, market
is large and predominantly price sensitive and majority of the market is familiar with the product. E.g. Maruti Udyog’s initially
offered Suzuki 800.
Stage- 2 Marketing strategies at Growth Stage

The growth stage is marked by a rapid climb in sales, as DVD players are currently experiencing. Early adopters like
the product, and additional consumers start buying it. Attracted by the opportunities, new competitors enter with new product
features and expanded distribution. Prices remain where they are or fall slightly, depending on how fast demand increases.
Companies maintain or increase their promotional expenditures to meet competition and to continue to educate the market.
Sales rise much faster than promotional expenditures, causing a welcome decline in the promotion-sales ratio. Profits increase
during this stage as promotion costs are spread over a larger volume and unit manufacturing costs fall faster than price
declines owing to the producer learning effect.
During this stage, the firm uses several strategies to sustain rapid market growth as long as possible:
(1) Improving product quality and adding new product features and improved styling;
(2) Adding new models and flanker products;
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(3) Entering new market segments;

(4) Increasing distribution coverage and entering new distribution channels;
(5) Shifting from product-awareness advertising to product-preference advertising; and
(6) Lowering prices to attract the next layer of price-sensitive buyers.
Stage – 3 Marketing Strategies: Maturity Stage

At some point, the rate of sales growth will slow, and the product will enter a stage of relative maturity. This stage normally
lasts longer than the previous stages, and poses formidable challenges to marketing management. Most products are in the
maturity stage of the life cycle, and most marketing managers cope with the problem of marketing the mature product.
The maturity stage divide into three phases: growth, stable and decaying maturity. In the first phase the sales growth
rate starts decline, in the second phase sales flatten on a per capita basis of market saturation. In the third phase, decaying
maturity, the absolute level of sales starts to decline, and customers begin switching to other products.
The sales slowdown creates overcapacity in the industry, which leads to intensified competition. Competitors
scramble to find niches. They engage in frequent markdowns. They increase advertising and trade and consumer promotion.
They increase R&D budgets to develop product improvements and line extensions.
Three strategies for the maturity stage are market modification, product modification, and marketing-mix
modification:
A) Market modification. The company might try to expand the market for its mature brand by working to expand the number
of brand users. This is accomplished by (1) converting nonusers; (2) entering new market segments (as Johnson & Johnson did
when promoting baby shampoo for adult use); or (3) winning competitors’ customers (the way Pepsi-Cola tries to woo away
Coca-Cola users). Volume can also be increased by convincing current brand users to increase their usage of the brand. Like 1.
Use the product on more occasions. 2. Use more of the product on each occasion. 3. Use the product in new ways.
B) Product modification. Managers try to stimulate sales by modifying the product’s characteristics through quality
improvement, feature improvement, or style improvement.
Quality improvement aims at increasing the product’s functional performance—its durability, reliability, speed, taste.
Feature improvement aims at adding new features e.g. size, weight, materials, and additives, accessories that expand
the product performance, versatility, safety or convenience. New features build the company’s image as an innovator and win
the loyalty of market segments that value these features.
Style improvement: aims at increasing the products esthetic appeal, it gives a unique market identity. Yet it invites
problem 1. It is difficult to predict wither people and which people will like a new style. 2. A style change usually requires
discontinuing the old style and the company risks losing customer.
C) Marketing program modification. Product managers can try to stimulate sales by modifying other marketing program
elements. They should ask following questions
 Price: would a price cut attract new buyers? If so should the list price be lowered, or should prices be lowered
through price specials, volume or early purchase discounts, fright cost absorption, or easier credit terms?
 Distribution: can the company obtain more product support and display in existing outlets? Can more outlets be
penetrated? Can the company introduce the product into new distribution channels/
 Advertising: should advertising expenditures be increased? Should the message or copy be changed? Should the
media mix be changed? Should the time frequency or the size of the ads be changed?
 Sales promotion: should the company step up sales promotion – trade deals, cents-off coupons, rebates, warranties,
gifts and contests?
 Personal selling: should the number or quality of salespeople be increased? Should the basis for sales force
specialization be changed? Should the sales territories be revised? Should the sales force incentives be revised? Can
sales call planning be improved?
 Services: can the company speed up delivery? Can it extend more technical assistance to customers? Can it extend
more credit?
Stage-4 Marketing Strategies: Decline Stage

The sales of most product forms and brands eventually decline for a number of reasons, including technological advances,
shifts in consumer tastes, and increased domestic and foreign competition. All of these factors lead ultimately to overcapacity,
increased price cutting, and profit erosion. As sales and profits decline, some firms withdraw from the market. Those
remaining may reduce the number of products they offer. They may withdraw from smaller market segments and weaker
trade channels, and they may cut their promotion budget and reduce their prices further.
In a study of company strategies in declining industries, Harrigan identified five possible decline strategies:
1. Increasing the firm’s investment (to dominate the market or strengthen its competitive position);
2. Maintaining the firm’s investment level until the uncertainties about the industry are resolved;
3. Decreasing the firm’s investment level selectively, by dropping unprofitable customer groups, while
simultaneously strengthening the firm’s investment in lucrative niches;
4. Harvesting (“milking”) the firm’s investment to recover cash quickly; and
5.Divesting the business quickly by disposing of its assets as advantageously as possible.
The appropriate decline strategy depends on the industry’s relative attractiveness and the company’s competitive strength in
that industry. A company that is an unattractive industry but possesses competitive strength should consider shrinking
selectively. A company that is in an attractive industry and has competitive strength should consider strengthening its
investment.
Locating product or Brands in their Life cycles

The approach to locating a product or brand in its life cycle involves environment scan and trend analysis. Specifically, this
involves the following procedures:
1. Analysis of historical sales and growth trends in the brand and industry per se.
2. Analysis of recent trends in the market-place: specifically, this involves analyzing recent trends regarding the number
and strength of competitors; the quality and performance and perceived benefits of competitor products; shift in
distribution channels, if any; and the relative advantage the brand product enjoys over competitors in the market-
place.
3. Analysis of development of short-term tactics of competitors.
4. Analysis of historical information regarding life cycles of similar and related products.
5. Based on the above analysis, project brand or product sales.
6. Estimate probable years remaining for the brand or product.
7. Fix brand or product’s position in the life cycle.
Characteristics Introduction Growth Maturity Decline

Sales Low sales Rapidly rising sales Peak sales Declining sales
Costs High cost per customer Average cost per Low cost per customer Low cost per customer
customer
Profits Negative Rising profit High profit Decline profit
Customer Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable number Decline number
beginning to decline
Marketing objectives Create product Maximum market share Maximizing profit while Reduce expenditure
awareness and trial defending market share and milk the brand
Strategies Offer a basic product Offer product Diversify brands and Phase out weak
Product extensions, service, items models
warranty
Price Charge cost plus Price to penetrate Price to match or best Cut price
market competitors
Distribution Build selective Build intensive Build more intensive Go selective: phase out
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distribution distribution distribution unprofitable outlets

Advertisement Build product Build awareness and Stress brand difference Reduce to level needed
awareness among early interest in the mass to retain hard core
adopters and dealers market loyal.
Sales promotion Use heavy sales Reduce to take Increase to encourage Reduce to minimal
promotion to entice advantage of heavy brand switching level.
trial consumer demand
Critique of the Product Life-Cycle Concept

Advantage
1. The PLC concept is best used to interpret product and market dynamics.
2. As a planning tool, this concept helps managers characterize the main marketing challenges in each stage of a
product’s life and develop major alternative marketing strategies.
3. As a control tool, this concept helps the company measure product performance against similar products launched in
the past.
Disadvantage
1. The PLC concept is less useful as a forecasting tool because sales histories exhibit diverse patterns, and the stages
vary in duration.
2. Critics claim that life-cycle patterns are too variable in their shape and duration. They also say that marketers can
seldom tell what stage the product is in:
3. A product may appear to be mature when it is actually only in a plateau prior to another upsurge.
4. One final criticism is that the PLC pattern is the result of marketing strategies rather than an inevitable course that
sales must follow.
5. An obsession with PLC may lead a firm to kill its product or brand in the belief that it has reached the decline phase.
2.13 BRAND MANAGEMENT: MEANING,

Understanding Brand - What is a Brand ?
Brands are different from products in a way that brands are “what the consumers buy”, while products are “what
concern/companies make”. Brand is an accumulation of emotional and functional associations. Brand is a promise that the
product will perform as per customer’s expectations. It shapes customer’s expectations about the product. Brands usually have
a trademark which protects them from use by others. A brand gives particular information about the organization, good or
service, differentiating it from others in marketplace. Brand carries an assurance about the characteristics that make the
product or service unique. A strong brand is a means of making people aware of what the company represents and what are
it’s offerings.
To a consumer, brand means and signifies:
 Source of product  Less search cost
 Delegating responsibility to the manufacturer of  Quality symbol
product  Deal or pact with the product manufacturer
 Lower risk  Symbolic device
Brands simplify consumers purchase decision. Over a period of time, consumers discover the brands which satisfy their need.
If the consumers recognize a particular brand and have knowledge about it, they make quick purchase decision and save lot of
time. Also, they save search costs for product. Consumers remain committed and loyal to a brand as long as they believe and
have an implicit understanding that the brand will continue meeting their expectations and perform in the desired manner
consistently. As long as the consumers get benefits and satisfaction from consumption of the product, they will more likely
continue to buy that brand. Brands also play a crucial role in signifying certain product features to consumers.
To a seller, brand means and signifies:

Basis of competitive advantage
Way of bestowing products with unique associations

Way of identification to easy handling
Way of legal protection of products’ unique traits/features
Sign of quality to satisfied customer
Means of financial returns
A brand, in short, can be defined as a seller’s promise to provide consistently a unique set of characteristics, advantages, and
services to the buyers/consumers. It is a name, term, sign, symbol or a combination of all these planned to differentiate the
goods/services of one seller or group of sellers from those of competitors. Some examples of well known brands are Mc
Donald’s’, Mercedes-Benz, Sony, Coca Cola, Kingfisher, etc.
A brand connects the four crucial elements of an enterprise- customers, employees, management and shareholders. Brand is
nothing but an assortment of memories in customers mind. Brand represents values, ideas and even personality. It is a set of
functional, emotional and rational associations and benefits which have occupied target market’s mind. Associations are
nothing but the images and symbols associated with the brand or brand benefits, such as, The Nike Swoosh, The Nokia sound,
etc. Benefits are the basis for purchase decision
The American Marketing Association defines a brand as:

“A brand is a name, term, sign, symbol, design, or a combination of these, intended to identify the goods and services of one
seller or group of sellers and to differentiate them from those of competitors”.
A brand is different from other assets such as patents and copy write which have expiry dates. Consumer view a brand as an
important part of a product and branding can add a value to a product. Consumer’s perception of a product is very much
dependant upon the brand. When a consumer becomes loyal to any brand he or she start saying that I want Godrej, I want Bajaj
etc. The best brands convey a warranty of quality. Thus, we can say that brand gives identity to the product. It tells about
quality of product. Brand loyal as know very well the features and benefits of the product each time they buy.
From the seller’s point of views also, the brand name gives the whole summary about the product. It provides legal protection
for unique product feature. Marketer should develop a deep set of positive associations for the brand. Marketers must know at
which level to anchor the brand identity. It would be a big mistake to promote only attributes. Firstly, because the buyers are
not as mature and interested in the attributes of the product as the benefits. Second, competitors can easily copy attributes.
Third, current attributes may become less desirable tomorrow.
2.14 ADVANTAGES AND DISADVANTAGES OF BRANDING,

Advantages:
A.Gives identity to the product
B.Makes it distinguishable from the other products.
C.Creates customer loyalty.
D.Creates and maintains organisation goodwill.
Disadvantages:
A. High investment required.
B.May create negative image, if the brand fails in the market.
C.Unwillingness on part of the customers to pay extra amount for branded goods.
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2.15 BRAND EQUITY,

Brand Equity encompasses a set of assets linked to a brand’s name and symbol that adds to the value provided by a product or
service to the consumers. There is always underlying expectation that the brand will deliver the satisfaction it has promised. A
consumer expects a certain standard of quality and satisfaction which the manufacturer has to make sure and that the product
lines up to that expectations, otherwise the consumer will stop buying that product. Simply speaking that brand identities
primarily exist in the minds of its customers. A brand is his or her evaluation of performance of that brand. And if his
evaluation is positive the customer is willing to pay more for a particular brand over another similar product. This is the
strength of Brand Equity. “The brand equity refers to the value inherent in a well known brand name. From a consumers’
perspective, brand equity is the added value bestowed on the product. Brand equity facilitates the acceptance of new products
and the allocation of preferred space, and enhances perceived value, perceived quality and premium pricing option. Because of
the escalation of new product costs and high rate of new product failures, many companies prefer to leverage their brand
equity through brand extensions rather than risk launching a new brand.
Brand equity enables companies to charge a price premium e.g. researchers have estimated that because of colgate brand
equity, the colgate pamolive company is able to price colgate toothpaste about 37 cents higher than competitive store brands
with objectively identical attributes.
A brand with strong brand equity is very valuable asset. According to one estimate, the brand equity of Malboro is $ 45b; Coca
Cola– $ 43b, IBM– $ 18b, Disney– $ 15b & Kodak– $ 13b. The worlds’ top brands include Coca-cola, Campbell, Disney, Kodak,
Sony, Mercedes-Benz, McDonalds.
A relatively new strategy among some marketers is co-branding. The basis of co-branding is in which two brand names are
featured on a single product. For example, Hero-Honda, Maruti-Suzuki to use another product’s brand equity to enhance the
primary brands equity.
Brand equity ensures a high level of consumer brand awareness and loyalty. Because of high brand extension e.g. Coca-Cola-
Diet coke, it allows more leverage in bargaining with distributors and retailers. Customers are ready to pay a premium because
of perceived reliability, trust worthiness, as well as the positive image of superior quality that the brand commands. The major
assets of brand equity are:
(i) Brand awareness: This refers to the strength of a brands presence in the mind of the consumer. Awareness is measured
according to the recognition and the recall of brand.
(ii) Perceived Quality: Perceived quality means level of expected quality that product holds in the mind of consumer, are
buying; and in that sense, it is the ultimate measure of the impact on the mind of consumer.
(ii) Brand Loyalty: A brand’s value to the company is a measure of customers’ loyalty towards a brand. Since a company
consider loyalty as a major assets which encourages and justifies loyalty buildings program, which, in turn, helps create and
enhance Brand Equity.
Brand Personality: In totality brands holds more meaning and importance than tangible or perceivable product seems to
offer.
This is a highly promised concept, both in theory and practical relevance, when it comes to positioning brands with non
functional values, in form of feeling it arouse in consumer: Raymond- a complete man, Cadbury’s– a gift of love. Many brand
strategy statements nowadays refer to the personality of the brand. However, brand managers using these statements often
tend to define character for several brands in the company’s line in more or less identical terms e.g. for many OTC (over the
counter) remedies, the Brand character is monotonously described as caring and efficient. So, the key lines in building different
and distinct brand personality.
The purpose of positioning by brand personality is lost if we are unable to define a desired personality for our brand which is
clearly distinct from the personalities of competing brands and sister brands in our own product line. Now the question arises:
what is Brand image? Brand personality?
David Ogilvy, writing, on the image and the brand, regards ‘image’ and ‘personality’ as synonymous. “The manufacturer who
dedicates his advertising to building the most favourable image, the most sharply defined personality, is the one who will get
the largest market share at the highest profit in the long run”.
Christine Restall of Meann- Erickson draws a distinction.
“Brand image refers to rational measurements like quality, strength, flavour. Brand personality explains why people
like some brands more than others even then when there is no physical difference between them”.
It would seem that Restall considers brand personality as being made up of the emotional association of brands and brand
image, of its physical features and benefits.
The brand image represents the essence of all the impressions or imprints about the brand that have been made on the
consumers mind. It includes impression about the physical features and performance; impression about functional benefits
from using it; imagery and symbolic meaning it evokes in the consumer’s mind. Brand image indeed is the ‘totality’ of brand in
the perception of the consumer.
Brand personality is that aspect of the brands totality which bring up in the mind of the consumers its emotional overtones and
it symbolisms its characterisations, if you will. The great operational utility of brand personality is that when the consumer
cannot distinguish brands by their physical features or functional benefits, he is invited to look at their so-called human
characteristics. It makes his task simpler in judging whether it is his kind of product or not.
So, brand image represents the totality of impressions about the brand as selected and adopted by the consumer’s perception.
It embraces the brands physical and functional aspects and also it symbolic meanings. The brand personality, on the other
hand, dwells mainly in these symbolic aspects. It must match the target prospect’s self concept “I see the brand in myself’.
2.16 BRAND POSITIONING,

Brand positioning refers to “target consumer’s” reason to buy your brand in preference to others. It is ensures that all brand
activity has a common aim; is guided, directed and delivered by the brand’s benefits/reasons to buy; and it focusses at all
points of contact with the consumer.
Brand positioning must make sure that:

 Is it unique/distinctive vs. competitors ?
 Is it significant and encouraging to the niche market ?
 Is it appropriate to all major geographic markets and businesses ?
 Is the proposition validated with unique, appropriate and original products ?
 Is it sustainable - can it be delivered constantly across all points of contact with the consumer ?
 Is it helpful for organization to achieve its financial goals ?
 Is it able to support and boost up the organization ?
In order to create a distinctive place in the market, a niche market has to be carefully chosen and a differential advantage must
be created in their mind. Brand positioning is a medium through which an organization can portray it’s customers what it
wants to achieve for them and what it wants to mean to them. Brand positioning forms customer’s views and opinions.
Brand Positioning can be defined as an activity of creating a brand offer in such a manner that it occupies a distinctive place
and value in the target customer’s mind. For instance-Kotak Mahindra positions itself in the customer’s mind as one entity-
“Kotak ”- which can provide customized and one-stop solution for all their financial services needs. It has an unaided top of
mind recall. It intends to stay with the proposition of “Think Investments, Think Kotak”. The positioning you choose for your
brand will be influenced by the competitive stance you want to adopt.
Brand Positioning involves identifying and determining points of similarity and difference to ascertain the right brand identity
and to create a proper brand image. Brand Positioning is the key of marketing strategy. A strong brand positioning directs
marketing strategy by explaining the brand details, the uniqueness of brand and it’s similarity with the competitive brands, as
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well as the reasons for buying and using that specific brand. Positioning is the base for developing and increasing the required
knowledge and perceptions of the customers. It is the single feature that sets your service apart from your competitors. For
instance- Kingfisher stands for youth and excitement. It represents brand in full flight.
There are various positioning errors, such as-

Under positioning- This is a scenario in which the customer’s have a blurred and unclear idea of the brand.
Over positioning- This is a scenario in which the customers have too limited a awareness of the brand.
Confused positioning- This is a scenario in which the customers have a confused opinion of the brand.
Double Positioning- This is a scenario in which customers do not accept the claims of a brand.
2.17 BRAND NAME SELECTION,

Marketers have to decide, while branding the product, which brand names to use. Four strategies are available.
1. Individual names
In this, company gives separate name to each product. So if the product fails or appears to have law quality, the company’s
name is not hurt e.g. sprite by Coca-cola.
2. Blanket Family Names
In this case company gives corporate name to the product. Development cost is less because there is no need for name
research as heavy expenditures to create bran; l name recognition. Furthermore, sale of product is likely to be more if the
corporate image is good e.g. Bajaj, Godrej, IBM.
3. Separate Family Names for All Products
Here company after inventing different family names for different quality lines within the same product class e.g. HLL has
different brand names within soap category ego Liril, Lux, etc.
4. Company trade name combined with individual Product Names
Some manufactures tie their company name to an individual brand name for each product, e.g. Kellogg’s Rice Krispies, Kallog’s
Raissin Bron and Kallog’s Corn Flakes. Care should be taken at the time of deciding brand name. It should suggest something
about the products benefits. Examples- Boost, Sunsilk, Ayur etc. It should suggest about product qualities e.g. 5star
chocolates, milk maid, Lazer blades.
It should be easy to pronounce, recognise, and remember e.g. Godrej, IBM, Sony. It should not carry poor meanings in other
countries and languages e.g. Nova is a poor name for a car to be sold in Spanish speaking; it means ‘doesn’t go’.
2.18 BRAND SPONSORSHIP,

Brand sponsorship is a marketing strategy in which a brand is supporting an event, activity, person or organization.
Everywhere we go we can witness sponsorship investments: music festival, football games, beneficial events and so on.
Sponsorship allows big, medium and small brands to partner with other companies as well as event agencies in order to
generate a relationship that aims to economically gratify both the sponsor and the sponsee. But how does it really work and
what is the expected return?
Breaking Down Brand Sponsorship

A well-known scenario is when a global brand (let’s think at Coca-Cola) spend a lot of money to become official sponsor of the
World-Cup. What are the benefits coming from this investment?
Increase brand awareness/visibility: whether you are a newborn brand or a well-established company, sponsoring is an
activity that can help you gain awareness or increase your visibility addressing a broader target.
Increase your sales/acquire customers: this is the ultimate goal for every business. Getting to the top of the mind of new or
existing customers not only increase awareness but can also directly drive sales, according to how the sponsorship is coherent
with your marketing plan.
Gain publicity: can you imagine a startup that get to be the sponsor of an important event or sport club? Seems like a natural
consequence that media will talk about this. Furthermore, people will share news on social networks. As a result, you can gain
good exposure – all this for free!
Differentiate from the competition: if you find yourself in a very competitive and profit-shrinking market, being the sponsor
of a big event or organization can give you the chance to stand out as a leader in your field
Increase brand loyalty/premium prices: true especially for sport sponsorship. In fact, it is statistically proven that, for
example, fans of a particular team are more willing to buy from the sponsor than from its competitors. This leads to brand
loyalty, which leads itself to customers being less sensitive to premium prices
Increase your CSR reputation/brand image: finally, sponsoring a charitable event or a foundation can enhance your brand
image as a caring company. As a result you will be able to witness a profit increase on the long term.
2.19 BRAND PORTFOLIO

Definition
A brand portfolio is simply the collection of brands under a company’s control. Small businesses with just one shop may have
only a single brand, but large and multinational corporations may have dozens of distinct brands in their portfolios. In some
cases, a business may present the same product or line under different brands in different markets; each of these brands is a
component of the company’s brand portfolio.
Examples
As of publication, General Motors has 14 brands in its portfolio. These brands include Buick, Cadillac, Chevrolet and OnStar in
the United States. International brands include Baojun, Holden, Jiefang, Vauxhall and Wuling. GM also sells adapted versions of
many of the cars sold as Chevrolets in the United States under the Opel brand in international markets.
Types
Large brand portfolios consist of up to three types of brands. A sub-brand maintains the greatest distance from the parent
company and may present itself to the public as a somewhat separate organization. An endorsed brand is presented as an
offering of the parent company rather than as a distinctly different line of products. If an organization introduces an entirely
new brand, it may use some of the parent company’s marketing heft and recognition to help the new line gain momentum;
these introductions are known as new brands.
Advantages
Brand portfolios allow businesses to compete in many different marketplaces with an array of product lines. The different
brands under which the company presents its products and services allow the organization to differentiate its products from
its other lines. GM, for example, uses its Cadillac brand to compete in the luxury market, participates in the work truck arena
under the GMC brand and operates under the OnStar brand in the in-car services marketplace. An active brand portfolio can
use energy and momentum from one brand to energize others that may be slowing. In addition, organizations can help reduce
costs by centralizing strategy, administrative and operational support and even manufacturing processes, across brands. If one
brand fails to perform, the organization can often sell or discontinue that brand with minimal impact on other aspects of its
portfolio.
Portfolio Size
The size of an organization’s brand portfolio can vary significantly from industry to industry and even from business to
business. While there is no ideal number of brands, professional business consultants at McKinsey & Company recommend
keeping brand portfolios as small as possible to minimize administrative expenses associated with operating multiple brands.
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Assignment Question's -
1. Discuss the scope of a product. Elucidate the term taking two products of your choice and comment on the
satisfaction you derived by adoption.
2. Product mix and line decisions are viewed as strategic tools to increase market share and keep competition at bay.
Discuss.
3. What are the Pros and Cons for product management as a separate functional area not falling under the purview of
marketing function. Explain.
4. What factors determine the decision to offer new products by the marketer?
5. Do small firms that manufacture one or two products need to be concerned about developing and managing new
products? Why or why not?

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UNIT- 2

MARKETING MANAGEMENT -II

2.1 PRODUCT MANAGEMENT: INTRODUCTION………………………………………….…………………….………………………………….….1

2.1 PRODUCT MANAGEMENT: INTRODUCTION

PRODUCT MANAGEMENT MEANING

Augmented Features Tangible Specifications Core Benefits

2.2 LEVELS OF PRODUCTS,

2.3 CLASSIFICATION OF PRODUCTS,

There are several ways of classifying products:

2.4 PRODUCT HIERARCHY,

2.5 PRODUCT MIX STRATEGIES

Product Mix (Product Portfolio or Product Assortment)

Product Line Length

Product Line Depth

Product Line Stretching

Product Mix Width

2.7 PACKAGING AND LABELING,

2.8 NEW PRODUCT DEVELOPMENT PROCESS,

Significance of New Product Development

Stage 1 Idea Generation

Stage 2. Idea Screening

Stage 3 Concept Development and Testing

Stage 4 Marketing Strategy Development

Stage 5 Business Analysis

Stage 6 Product Development

Stage 7 Market Testing

2.9 WHY NEW PRODUCTS FAIL,

2.10 ADOPTION PROCESS,

Product adoption process - 1

2.11 DIFFUSION OF INNOVATION,

Diffusion of Innovations theory

2.12 PRODUCT LIFE CYCLE (PLC)

Style, fashion and fad life cycle

Stage – 1 Marketing strategies at Introduction stage and the Pioneer advantage

Stage- 2 Marketing strategies at Growth Stage

(3) Entering new market segments;

Stage – 3 Marketing Strategies: Maturity Stage

Stage-4 Marketing Strategies: Decline Stage

Locating product or Brands in their Life cycles

Characteristics Introduction Growth Maturity Decline

distribution distribution distribution unprofitable outlets

Critique of the Product Life-Cycle Concept

2.13 BRAND MANAGEMENT: MEANING,

To a seller, brand means and signifies:

Way of bestowing products with unique associations

The American Marketing Association defines a brand as:

2.14 ADVANTAGES AND DISADVANTAGES OF BRANDING,

2.15 BRAND EQUITY,

2.16 BRAND POSITIONING,

Brand positioning must make sure that:

There are various positioning errors, such as-

2.17 BRAND NAME SELECTION,

2.18 BRAND SPONSORSHIP,

Breaking Down Brand Sponsorship

2.19 BRAND PORTFOLIO

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