Introduction to Product Management : Introduction to Product Management What is a product ? : What is a product ? Merchandise: commodities offered for sale; "good business depends on having good merchandise"; "that store offers a variety of products"
An artifact that has been created by someone or some process; "they improve their product every year"; "they export most of their agricultural production"
A quantity obtained by multiplication; "the product of 2 and 3 is 6“ Contd… : Contd… A chemical substance formed as a result of a chemical reaction; "a product of lime and nitric acid"
A consequence of someone's efforts or of a particular set of circumstances; "skill is the product of hours of practice"; "his reaction was the product of hunger and fatigue"
Intersection: the set of elements common to two or more sets; "the set of red hats is the intersection of the set of hats and the set of red things" Product to cover offerings that fall into one of the following categories: : Product to cover offerings that fall into one of the following categories: Goods – Something is considered a good if it is a tangible item. That is, it is something that is felt, tasted, heard, smelled or seen. For example, bicycles, cell phones, and donuts
Services – Something is considered a service if it is an offering a customer obtains through the work or labour of someone else. Services can result in the creation of tangible goods (e.g., a publisher of business magazines hires a freelance writer to write an article) but the main solution being purchased is the service. Unlike goods, services are not stored, they are only available at the time of use (e.g., hair salon) and the consistency of the benefit offered can vary from one purchaser to another (e.g., not exactly the same hair styling each time). Contd… : Contd… Ideas – Something falls into the category of an idea if the marketer attempts to convince the customer to alter their behaviour or their perception in some way. Marketing ideas is often a solution put forth by non-profit groups or governments in order to get targeted groups to avoid or change certain behaviour. This is seen with public service announcements directed toward such activity as youth smoking, automobile safety, and illegal drug use. Categories of Consumer Products : Categories of Consumer Products Convenience Products – These are products that appeal to a very large market segment. They are generally consumed regularly and purchased frequently. Examples include most household items such as food, cleaning products, and personal care products. Contd.. : Contd.. Shopping Products – These are products consumers purchase and consume on a less frequent schedule compared to convenience products. Consumers are willing to spend more time locating these products since they are relatively more expensive than convenience products and because these may possess additional psychological benefits for the purchaser, such as raising their perceived status level within their social group. Examples include many clothing products, personal services, electronic products, and household furnishings. Slide 8: Specialty Products – These are products that tend to carry a high price tag relative to convenience and shopping products. Consumption may occur at about the same rate as shopping products but consumers are much more selective. In fact, in many cases consumers know in advance which product they prefer and will not shop to compare products. But they may shop at retailers that provide the best value In addition to the three main categories above, products are classified in at least two additional ways: : In addition to the three main categories above, products are classified in at least two additional ways: Emergency Products – These are products a customer seeks due to sudden events and for which pre-purchase planning is not considered. Often the decision is one of convenience (e.g., whatever works to fix a problem) or personal fulfilment (e.g., perceived to improve purchaser’s image).
Unsought Products – These are products whose purchase is unplanned by the consumer but occur as a result of marketer’s actions. Such purchase decisions are made when the customer is exposed to promotional activity, such as a salesperson’s persuasion or purchase incentives like special discounts offered to certain online shoppers. These promotional activities often lead customers to engage in Impulse Purchasing. Categories of Business Products : Categories of Business Products Raw Materials – These are products obtained through mining, harvesting, fishing, etc., that are key ingredients in the production of higher-order products.
Processed Materials – These are products created through the processing of basic raw materials. Electrical wire is an example. Contd… : Contd… Advanced Components – These are products that use basic components to produce products that offer a significant function needed within a larger product. Yet by itself an advanced component does not stand alone as a final product. In computers the motherboard would be an example since it contains many basic components but without the inclusion of other products (e.g., memory chips, microprocessor, etc.) would have little value.
Product Component – These are products used in the assembly of a final product though these could also function as stand alone products. Dice included as part of a children’s board game would be an example.
MRO (Maintenance, Repair and Operating) Products – These are products used to assist with the operation of the organization but are not directly used in producing goods or services. Office supplies, parts for a truck fleet and natural gas to heat a factory would fall into this category. Components of a Product : Components of a Product On the surface it seems a product is simply a marketing offering, whether tangible or intangible, that someone wants to purchase and consume. In which case one might believe product decisions are focused exclusively on designing and building the consumable elements of goods, services or ideas.
Augmented Product Core Benefits : Core Benefits People make buying decisions that satisfy their needs. While many needs are addressed by the consumption of a product or service, some needs are not. For instance, customers may need to be perceived highly by other members of their group or need a product that is easy to use or need a risk-free purchase. In each of these cases, and many more, the core product itself is the benefit the customer receives from using the product.
In some cases these core benefits are offered by the product itself (e.g., floor cleaner) while in other cases the benefit is offered by other aspects of the product (e.g., the can containing the floor cleaner that makes it easier to spread the product). Consequently, at the very heart of all product decisions is determining the key or core benefits a product will provide. From this decision, the rest of the product offering can be developed. Actual Product : Actual Product The core benefits are offered through the components that make up the actual product the customer purchases. For instance, when a consumer returns home from shopping at the grocery store and takes a purchased item out of her shopping bag, the actual product is the item she holds in her hand.
Within the actual product is the consumable product, which can be viewed as the main good, service or idea the customer is buying. For example, while toothpaste may come in a package that makes dispensing it easy, the Consumable Product is the paste that is placed on a toothbrush. But marketers must understand that while the consumable product is, in most cases, the most critical of all product decisions, the actual product includes many separate product decisions including product features, branding, packaging, labelling, and more. Augmented Product : Augmented Product Marketers often surround their actual products with goods and services that provide additional value to the customer’s purchase. While these factors may not be key reasons leading customers to purchase (i.e., not core benefits), for some the inclusion of these items strengthens the purchase decision while for others failure to include these may cause the customer not to buy. Items considered part of the augmented product include Contd.. : Contd.. Guarantee – This provides a level of assurance that the product will perform up to expectations and if not the company marketing the product will support the customer’s decision to replace, have it repaired or return for a refund.
Warranty – This offers customers a level of protection that often extends past the guarantee period to cover repair or replacement of certain product components.
Customer Service – This consists of additional services that support the customer’s needs including offering training and assistance via telephone or online.
Complementary Products – The value of some product purchases can be enhanced with add-on products, such as items that make the main product easier to use (e.g., laptop carrybag), enhance styling (e.g., cellphone face plates) or extend functionality (e.g., portable keyboard for PDAs).
Accessibility – How customers obtain the product can affect its perceived value depending on such considerations as how easy it is to obtain (e.g., stocked at nearby store, delivered directly to office), the speed at which it can be obtained, and the likelihood it will be available when needed. Key Product Decisions : Key Product Decisions The actual product is designed to provide the core benefits sought by the target market. The marketer offers these benefits through a combination of factors that make up the actual product.
These factors include:
Consumable Product Features
Labelling Consumable Product Features : Consumable Product Features Features are characteristics of a product that offer benefits to the customer. In most cases, the most important features are those associated with the consumable product since they are the main reason a customer makes a purchase. For this tutorial we separate the benefits of consumable product features into two groups:
Psychological Benefits Product Features and Functional Benefits : Product Features and Functional Benefits Customers derive functional benefits from features that are part the consumable product. For instance, a plasma television includes such features and benefits as:
Feature- Functional Benefit screen size -offers greater detail and allows for more distant viewing, screen resolution -viewing provides clear, more realistic picture, surround sound -immerses all senses in the viewing experience, remote control- allows for greater comfort while viewing
These features are called functional because they result in a benefit the user directly associates with the consumable product. For marketers functional benefits are often the result of materials, design and production decisions. How the product is built can lead to benefits such as effectiveness, durability, speed, ease-of-use, and cost savings to name just few. Product Features and Psychological Benefits : Product Features and Psychological Benefits For customers psychological benefits represent certain benefits they perceive to receive when using the product though these may be difficult to measure and may vary by customer. These benefits address needs such as status within a group, risk reduction, sense of independence, and happiness. Such benefits are developed through promotional efforts that target customer’s internal makeup In addition to determining the type of features to include in a product, the marketer faces several other decisions related to features: : In addition to determining the type of features to include in a product, the marketer faces several other decisions related to features: Quantity & Quality vs. Cost - For the marketers an important decision focuses on the quantity and quality of features to include in a product.
Is More Better? – Even if added cost is not a major concern, the marketer must determine if more features help or hurt the target market’s perception of the product. A product with too many features could be viewed as too difficult to use.
Who Should Choose the Features? – Historically marketers determined what features to include in a product. However the technology, and especially the Internet, offer customers the opportunity to choose their own features to custom build a product. Branding : Branding Branding involves decisions that establish an identity for a product with the goal of distinguishing it from competitors’ offerings. In markets where competition is fierce and where customers may select from among many competitive products, creating an identity through branding is essential. It is particularly important in helping position the product
While consumer products companies have long recognized the value of branding, it has only been within the last 10-15 years that organizations selling component products in the business-to-business market have begun to focus on brand building strategies. The most well-known company to brand components is Intel with its now famous "Intel Inside" slogan. Intel’s success has led many other b-to-b companies and even non-profits to incorporate branding within their overall marketing strategy. Brand Names and Brand Marks : Brand Names and Brand Marks At a very basic level branding is achieved through the use of unique brand names and brand marks. The brand name, which may be either the individual product name or a name applied to a group or family of products, is important for many reasons including suggesting what the product is or does (e.g., Mop-and-Glow). The name is also what we utter when we discuss the product (i.e., word-of-mouth marketing).
The brand mark is a design element, such as a symbol (e.g., Nike swoosh ), logo (e.g., Yahoo! graphic), a character (e.g., Keebler elves) or even a sound (e.g., Intel inside sound), that provides visual or auditory recognition for the product. Advantages of Brands : Advantages of Brands A strong brand offers many advantages for marketers including:
Brands provide multiple sensory stimuli to enhance customer recognition.
Customers who are frequent and enthusiastic purchasers of a particular brand are likely to become Brand Loyal.
Well-developed and promoted brands make product positioning efforts more effective. This “benefit = brand” association provides a significant advantage for the brand that the customer associates with the benefit sought.
Firms that establish a successful brand can extend the brand by adding new products under the same “family” brand. Such branding may allow companies to introduce new products more easily since the brand is already recognized within the market.
Strong brands can lead to financial advantages through the concept of Brand Equity in which the brand itself becomes valuable. Packaging : Packaging Nearly all tangible products (i.e., goods) are sold to customers within a container or package that, serves many purposes including protecting the product during shipment. In a few cases, such as with certain produce items, the final customer may purchase the product without a package but the produce marketer still faces packaging decisions when it comes to shipping to the store. Thus, for many products there are two packaging decisions:
Final Customer Package
Distribution Channel Package Packaging: Final Customer Package : Packaging: Final Customer Package When the final customer makes a purchase he or she is initially exposed to the Primary Package – the outermost container that is seen and touched by the final customer. This primary package can be further divided into the following:
First-Level Package - This is packaging that holds the actual product (e.g., Tylenol Bottle).
Second-Level Package – In some cases the first-level package is surrounded by one or more outer packages (e.g., box holding the Tylenol Bottle). This second-level package may act as the primary package for the product.
Package Inserts - Marketers use a variety of other methods to communicate with customers after they open the product package. These methods are often inserted within, or sometimes on, the product’s package. Insertions include information such as instruction manuals and warranty cards, promotional incentives such as coupons, and items that add value such as recipes and software. Packaging: Distribution Channel Package : Packaging: Distribution Channel Package This packaging is used to transport the customer package through the supply chain. It generally holds multiple customer packages and also offers a higher level of damage protection than that of customer packaging. Factors in Packaging Decisions : Factors in Packaging Decisions Protection – Packaging is used to protect the product from damage during shipping and handling, and to lessen spoilage if the protect is exposed to air or other elements.
Visibility – Packaging design is used to capture customers’ attention as they are shopping or glancing through a catalog or website. This is particularly important for customers who are not familiar with the product and in situations, such as those found in grocery stores, where a product must stand out among thousands of other products. Packaging designs that standout are more likely to be remembered on future shopping trips.
Added Value – Packaging design and structure can add value to a product. For instance, benefits can be obtained from package structures that make the product easier to use while stylistic designs can make the product more attractive to display in the customer’s home.
Distributor Acceptance – Packaging decisions must not only be accepted by the final customer, they may also have to be accepted by distributors who sell the product for the supplier. For instance, a retailer may not accept packages unless they conform to requirements they have for storing products on their shelves. Slide 29: Cost – Packaging can represent a significant portion of a product’s selling price. For example, it is estimated that in the cosmetics industry the packaging cost of some products may be as high as 40% of a product’s selling price. Smart packaging decisions can help reduce costs and possibly lead to higher profits.
Expensive to Create - Developing new packaging can be extremely expensive. The costs involved in creating new packaging include: graphic and structural design, production, customer testing, possible destruction of leftover old packaging, and possible advertising to inform customer of the new packaging.
Long Term Decision – When companies create a new package it is most often with the intention of having the design on the market for an extended period of time. In fact, changing a product’s packaging too frequently can have negative effects since customers become conditioned to locate the product based on its package and may be confused if the design is altered.
Environmental or Legal Issues – Packaging decisions must also include an assessment of its environmental impact especially for products with packages that are frequently discarded. Packages that are not easily bio-degradable could draw customer and possibly governmental concern. Also, caution must be exercised in order to create packages that do not infringe on intellectual property, such as copyrights, trademarks or patents, held by others. Labeling : Labeling Most packages, whether final customer packaging or distribution packaging, are imprinted with information intended to assist the customer. For consumer products, labeling decisions are extremely important for the following reasons.
Labels serve to capture the attention of shoppers. The use of catchy words may cause strolling customers to stop and evaluate the product.
The label is likely to be the first thing a new customer sees and thus offers their first impression of the product.
The label provides customers with product information to aid their purchase decision or help improve the customer’s experience when using the product (e.g., recipes).
Labels generally include a universal product codes (UPC) and, in some cases, radio frequency identification (RFID) tags, that make it easy for resellers, such as retailers, to checkout customers and manage inventory.
For companies serving international markets or diverse cultures within a single country, bilingual or multilingual labels may be needed.
In some countries many products, including food and pharmaceuticals, are required by law to contain certain labels such as listing ingredients, providing nutritional information or including usage warning information. Product Concepts : Product Concepts Objectives : Objectives To Understand the Concept of a Product
To Understand How to Classify Products
To Become Familiar With the Concepts of Product Item, Product Line, and Product Mix and Understand How They Are Connected
To Become Familiar With the Product Adoption Process
To Understand Why Some Products Fail and Some Products Succeed What’s a Product? : Good
Idea What’s a Product? Product : Product A product is anything that can be offered to the market to satisfy a want or need
Core benefit that the customer is really buying
In a hotel, customer is buying rest and sleep
Basic product through which the core benefit is delivered to the consumer
A room, bed, bathroom, desk, closet Product : Product Expected product “the set of attributes that the consumers expect as obvious along with the product (otherwise dissatisfaction)
Clean bed, pillow, fresh towel, soap, lamp, fan etc.
Augmented product “attributes / features that exceed consumer expectation” which leads to happiness of the consumer
TV with cable, good interior design & décor, good food etc.
Cost benefit trade off
Today’s augment tomorrow’s expected
Easy to copy Product : Product Potential product “all possible augmentation and transformation that the product may go through in future” which leads to customer delight
Bar inside the room, fruit bowl, computer facilities etc. Classifying Products : Classifying Products Consumer
Business Consumer Products : Consumer Products Convenience
Staples, impulse, emergency Slide 39: Consumer Products Shopping
Heterogeneous Consumer Products : Consumer Products Specialty Consumer Products : Consumer Products Unsought Business Products : Installations
Accessory Equipment Business Products Business Products : Business Products Raw Materials
Component Parts Business Products : Business Products Process Materials
Supplies Business Products : Business Services Business Products Product Line & Product Mix : Product Line & Product Mix Product Item Product Line & Product Mix : LAMPS
Desk Product Line Product Line & Product Mix Selected Acme Furniture Co. Products Product Line & Product Mix : Product
Line 1 Product
Line 2 Product
Line 3 Selected Acme Furniture Co. Products TABLES
Desk Product Line & Product Mix Product Mix Product Line & Product Mix : Product
Line 1 Product
Line 2 Product
Line 3 Selected Acme Furniture Co. Products TABLES
Desk Product Line & Product Mix Length of Product line Product Line & Product Mix : Product
Line 1 Product
Line 2 Product
Line 3 Selected Acme Furniture Co. Products TABLES
Desk Product Line & Product Mix Width of Product Mix Product line Analysis : Product line Analysis Understand each product line’s market profile and performance
Sales and profit
Identification of significant product attributes of each product in the different product lines
Identification of competition in the market (different levels) for each product
Comparison of the positioning theme against the various competitors against the backdrop of the characteristics of the target markets Product related decisions : Product related decisions The profiling and analysis of performance leads to some decision making by the product / brand managers
Optimal product line length
Line pruning etc. Optimal Product line length : Optimal Product line length Line stretching (up market ~ down market)
Two – way
JND (just noticeable difference) Markets for a hotel chain : Markets for a hotel chain Quality Price Other Product line decisions : Other Product line decisions Line modernization
Which product items to be used as show piece to attract consumers for the whole product range
Line pruning (removal of deadwoods) Brand Decisions : Brand Decisions A name, term, sign, symbol, design or combination of them, intended to identify the goods and services of one seller or group of sellers and differentiate them from competitors
Seller’s promise to deliver a specific set of features, benefits and services constantly to the buyers Brand Decisions : Brand Decisions A brand communicates the following six levels of meanings
User Brand Decisions : Brand Decisions To brand or not to brand
Brand sponsor decision
Manufacturer brand (HLL, Bajaj etc.)
Distributor brand (private brand) (Shopper Stop)
Licensed brand (Parker, Levi etc.) Brand Decisions : Brand Decisions Brand name decisions
Individual name (Lux, Liril etc.)
Blanket family name (Amul products, Godrej product lines etc.)
Separate family names (TISCO, TELCO, TCS etc.)
Company – Individual name (Bajaj Chetak, Bajaj Super etc.) Brand Decisions : Brand Decisions Brand strategy decisions
Co-brands Brand Decisions : Brand Decisions Brand repositioning decision
Brand should be repositioned
Brand should not be repositioned Packaging : Packaging Packaging includes the activities of designing and producing the containers for the products
Bottle containing the shampoo
The cardboard box containing the bottles
Shipping package Packaging : Packaging Factors influencing the growing use of packaging in marketing
Company and brand image
Innovation opportunity Labeling : Labeling May be a simple tag or complex graphics
May carry only the brand name or a lot of other information
May be voluntary or enforced by law
Promotion Adoption Process : Adoption Process Awareness
Adoption Slide 66: Adoption Process Product Adopter Categories 100% of eventual
adopters Slide 67: 2.5% Innovators Adoption Process Product Adopter Categories Slide 68: 2.5% Innovators 13.5% Early Adopters Adoption Process Product Adopter Categories Slide 69: 2.5% Innovators 13.5% Early Adopters 34% Early Majority Adoption Process Product Adopter Categories Slide 70: 2.5% Innovators 13.5% Early Adopters 34% Early Majority 34% Late Majority Adoption Process Product Adopter Categories Slide 71: 2.5% Innovators 13.5% Early Adopters 34% Early Majority 34% Late Majority 16% Laggards Adoption Process Product Adopter Categories Why Some Products Fail and Others Succeed : Why Some Products Fail and Others Succeed Failure to Meet Customer Needs
Ineffective or Inconsistent Branding
Technical or Design Problems
Overestimation of Market Size
Insufficient Distribution 80 to 90% Fail. Why? Why Some Products Fail and Others Succeed : Why Some Products Fail and Others Succeed Failure to Meet Customer Needs
Ineffective or Inconsistent Branding
Technical or Design Problems
Overestimation of Market Size
Insufficient Distribution 80 to 90% Fail. Why? The Emerging Marketing Environment : The Emerging Marketing Environment Increased competition
Proliferation of brands and Product categories
Increased choice to the consumer
Transformation from a Seller’s Market to a Buyer’s Market Slide 75: Total Product Concept
Servicization of Products and Productization of Services
Differentiation-Both Tangible and Intangible
Vectors of Differentiation Slide 76: The more commoditised the market the more branding matters.
Anything can be branded. Slide 77: HP,Motorola ,Intel
What is an opportunity can only be decided if there is a strategy. Otherwise, there is no way to tell what genuinely advances the organisation towards its desired results, and what is diversion and splintering of resources.-- P.F.Drucker Slide 78: The Sustainable Competitive Advantage The Way You Compete
Distribution Strategy Basis of Competition
Assets and Competencies Where You Compete
Product-Market Selection Whom You Compete Against
Competitor Selection SCA Slide 79: New Product Development Product-Line Strategy Product Platform Strategy Product
Vision Product Strategy Process Structure Product Platform : Product Platform Product Platform is a set of subsystems and interfaces that form a common structure from which a stream of derivative products can be efficiently developed and produced
Product Platforms Must be Managed, Rejuvenated.
Managing the Journey up the Value Curve-The case of Indian Firms Slide 81: Strategic window concept
Strategic inflection point Slide 82: OK, YOU SHOULD NOW . . . Understand the Concept of a Product
Understand How to Classify Products
Be Familiar With the Concepts of Product Item, Product Line, and Product Mix and Understand How They Are Connected
Understand the Concept of Product Life Cycle and Its Impact on Marketing Strategies
Be Familiar With the Product Adoption Process
Understand Why Some Products Fail and Some Products Succeed Thank You : Thank You