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In customers' point of view: a product is a combination of basic(fundamental benefit), enhanced(features, styling and quality) and augmented(intangible benefits) properties.
A successful marketer knows what constitutes a total product package in the minds of prospective customers.
Booz, Allen & Hamilton have identified six categories of new product
New-to-the-world products
New product lines Additions to existing product lines Improvements in / revision in existing products Repositioning Cost reductions
High
Low
7% Repositioning
Low
High
According to the concept the product tends to go through different cycle/stages like (i)Introduction stage, (ii)Growth stage, (iii)Mature satge, (iv)Decline stage
PLC concept highlights about the long term planning for a new product including the impact of profits at later stages.
PLC should be understood well to estimate the profit potential and ROI. PLC curve for a Hi-tech Product-Ex Electronics and Telecommunication, New Product Development cost and time are high, Introduction and Growth stages are long but maturity and decline is short. The profits from a product reaches the peak before the sales reach the peak(growth stage)
NPD
I&G
Time
Growth Stage:In this stage, industrial marketer has to focus marketing strategies on areas like:
Improve product design to offer more benefits or product features to cover wider segments of the market Improve distribution so that product availability to customers is strong Reduce the price as increased volume of production lowers the cost.
Maturity Stage:As the product enters the maturity stage, the number of competitors entering the market increases resulting in decline in the growth of profits. Strategies adopted are:
Enter new market Ex:If a product matures in domestic market, it may have a good export market. Keep exixting customer satisfied
Cut costs in marketing, production and other costs to maintain profit margins.
Decline Stage:In this stage the competition is more severe, and concurrently the sales and profits decline. Strategies adopted are:
Withdraw the product from the market Develop a substitute product for replacement Further reduce the marketing and other expenses substantially to make some profits
The decline tend to proceed rapidly since new technologies make products obsolete.
Develop a trend analysis for the past 3-5 yrs based on the value of sales, profit as a percentage of sales, market share, prices and competitors. Examine recent trends in the number and nature of competitors, market share, rankings, their product performances Analyze short term competitive tactics like new product development and plant expansion Project product sales and profits for the next 3-5 yrs
Estimate the number of profitable yrs in the PLC of the product and fix the product's position in the life cycle curve
Based on the above analysis, decide the product strateegies for the existing products.
B.Product/Technological
Present size
Growth potential Current or new customers
Degree of innovation
Differential advantages Lead time over competition Estimate product life Experience with technology Technical feasibility Competing technologies
Amount of competition
Strength of competition Price conciousness
Technical service
Channel Impact of present products
Initial Investment Expected sales revenue Sales-profit ratio Estimated ROI Manufacturer's cost to price ratio Expected cash flow
Industry sales-catagorised as Growth, Stable and Decline. Company sales-catagorised as Growth, Stable and decline.
Ex:A firm's product quality is considered to be inferior to its competitors, however the after sales service is superior than the competitor. The firm can reposition itself by improving its product quality substantially and maintaining its superior service. After improving the quality the firm can set price slightly higher than the competitors, and can improve on its profitability.
Continue/Maintain the product and its marketing strategy Modify the product and change the marketing strategy
The firms with weak new product development process are beaten by competitors who copy the products but have superior quality and market effectiveness.
Prices of the new products are much higher than the value perceived by the customers. The company wants to recover the cost of the product development too quickly.
Success Factors:
Product superiority and uniqueness gives a competitive edge over competitors. Market knowledge is important as the firm understands the needs and wants of target markets Technical and product capabilities are important as they are required to translate the product concept into product development and commercial production.
process by which potential ideas are generated, evaluated, directed and turned into products is called New Product Development Process. Stages in New Product Development Process:
The
Idea generation
Ideas screeening Concept development and testing Business Analysis
5)Product Development
6)Market Testing
7)Commercailisation
Idea Generation:Any initial product idea should aim at solving a specific problem and provide customer benefits.
The should support and enhance the firms strategic thrust.
The firm must defines its objectives of the new product clearly.
The new product ideas are often generated by sales persons, customers, distributors, suppliers, design engineers and managers.
Idea Screening:The primary purpose of idea screening is to select those ideas which are likely to succeed. Procedure for screening new product ideas:
Is the new product idea in line company's objectives? Do we have adequate resources to make it successful?
1. Company Objectives and Strategy 2. Marketing Experience and effectiveness 3. Production capabilities and facilities 4. R&D 5. Availability of raw materials 6. Financial resources and profitability
TOTAL
Products that are inovative and new to the world Product that are new to the company and not new to the market Improvements in the existing products in the existing markets
The firm develops the new product into different alternative product concepts.
Each product concept is tested with customer. The concept with the strong customer appeal is choosen.
Ex: A firm wants to develop a pallet truck to carry materials in the shop floor and warehouse, it creates the following concepts:
Concept 1. A manual truck-compact-low cost-max load upto 20Kgs Concept 2. An electric truck-medium cost-2 different speeds-max load upto 30Kgs Concept 3. An electric truck-high cost-heavy duty-3 speeds-max load upto 50Kgs
Concept Testing- the new product concepts are tested in the prospective customer organizations.
The concept testing is done by using a technique called virtual reality. The customer can operate the simulated product. The users and key decision makers are then interviewed and the following questions are asked:
Which of the concept did you like the most and why?
Are the products different or similar to the products used by you? What improvements do you suggest in the product features? For what uses you prefer the manual and electric pallet truck?
The answers to these questions would help the company to decide which product concept has a strong appeal.
Business Analysis: The purpose of business analysis is to develop an estimated projection of sales, cost, and profitability of the proposed product.
Its a detailed analysis in terms of:
Required investment in plant, equipment, working capital and market development Market potential, sales forecast, customer and competitor analysis Costs of product development, manufacturing and marketing the product
Product Development: Its a process in which engineers and technicians create the desired product.
R&D develops prototypes of the product concept.
It will confirm or negate the cost estimation of the product with the performance parameters.
The marketing team will have constant touch with the R&D dept. to inform the requirements of the customer. The challenge of the R&D is to achieve both performance and cost objectives.
Market Testing:Different testing methods adopted are: (a) Alpha and Beta testing, (b) Introduction of new products at trade shows, (c) Testing in distributor/dealer showroom, (d) Test Marketing. Alpha and Beta testing: Testing the product which are priced high, or with new technologies, internally in the company.
Its done to evaluate the performance parameters and operating costs. If the results are satisfactory the company will go for second stage of beta testing at potential users' site.
Trade Shows:a large no of prospective buyers are exposed to the new product. It helps to find customers' reaction, purchase intentions and placement of orders. The disadvantage is that the new products get exposed to the competitors.
Dealer Showrooms:the product is sold through the distribution channel and is tested at places, and can gain information on customers' attitude, preferences and actual sales. Test Marketing: the product is tested in a limited geographical area under normal marketing situations. The information received hepls the management to take effective decision when the product is launched.
Introductory advertisements
Adequate stocks Customer service
Geographical strategy
Target market segments Marketing mix strategies
3. Variability-Quality of services are highly variable depending on who provides, when, and where they are provided
Standardisation of output and uniformity in quality are difficult to achieve. Service providers should emphasis on quality standards, develop systems to minimize errors, and try to automate.
CHARACTERISTICS
EXAMPLES
MARKETING IMPLICATIONS
When demand fluctuates service firms, have difficult problems Plan capacity around peak demand Use pricing and other methods to achieve close match between demand and capacity
5. Non-Ownership (Service buyers uses but not own the services purchased
Service marketer should communicate advantages of non ownership-reduction in labour and overheads, and flexibility.
Service Differentiation: Most common method used is to conduct a MR to determine important attributes of the customer, and it varies according to the type of industry. Industrial customers choose customers whose perceived quality of service meets or exceeds the expected quality.
The service package can include innovative features to differentiate it from competitors.
Service delivery schedule can be achieved better than the competitors. The firm can develop a more comfortable physical environment in which the service is defined.
4) Specialization and experience is consideredto assess the service provider's capability over the competitors
Service Packages: Its a product tool of service marketing.
4)to decide how the service will be provided to the customer(service delivery system)
Service Pricing:Differential pricing strategy is used to manage the fluctuating demand. Usually firms offer special pricing for various services depending on the need basis.
Service Promotion:Similar to the product promotion. The industrial buyers are more influenced by the word of mouth communication.
The marketers promote the word of mouth communication from their existing satisfied customers to talk to potential customers to feature in the promotional brochures and advertisements. Industrial customers prefer to deal with those who provide superior service. So service providers play major role in personal selling.
In service promotion the intangible items are translated into tangible attributes of service bu showing pictures of buildings, equipments and personnel.
Promoting customer contact people by including them in the advertisement has found success in marketing of services. Service Distribution:decisions on distribution are taken to make the service package available to the target service buyers. In this method either the service buyer firm goes to the service provider or vice-versa.
In the distribution channel, the intermediaries are used as it provides a wider coverage of market, cost effective, availability of bundeled services.
Ex:Airline booking, real estate buying or selling. Franchising is another channel of distribution. It helps in rapid expansion of market without much capital investment. Ex:Recruitment agencies, factory cleaning, housekeeping distribute through franchise dealership.
Miscellaneous repairs Motion pictures Amusements and recreation Healthcare Legal services Private education
Personal services (including dry cleaning, tax preparation, and hair cutting)
Business services (including temporary agencies and business software developers) Automotive services
Social services
Museums, zoos, and botanical gardens Membership organizations (including houses of worship and clubs)