UNIT III MARKETING PROGRAMME
Product: A product is any thing that can be offered to a market that might satisfy a want or need
FEATURES OF PRODUCT:
Tangibility: It should be perceptible by touch, seen, or feeling.
Intangible attribute: The product may be intangible in the form of service like banking or insurance services.
Associated attribute: Product may have such attributes like brand, package, warranty.
Exchange value: It should have exchange value and must be capable of being exchanged between seller and buyer for mutually agreed price.
Customer satisfaction: Product should have the ability to offer value satisfaction to the consumer.
LEVELS OF PRODUCT:
Core Product: It is the fundamental service or benefit that the customer is buying.
Eg: A hotel guest buys "rest and sleep"
Basic Product: It is the second level, the marketer turns core benefit into a basic product.
Eg: A hotel room includes a bed, bathroom, desk etc.
Expected Product: It is the third level, and a buyer normally expects a set of attributes and conditions when purchase product.
Augumented Product: The marketer prepares an augmented product that exceeds customer expectations i.e product containing additional features, services and benefits so that customers able to distinguish his product from competitors.
Eg: A hotel room may include TV with remote control, fresh flowers, and fine room service.
Potential Product: It includes all augmentation and transformation the product might undergo in the future.
A group of products that are closely related products, that function in a similar manner and are sold to the same customer groups, are marked through the same types of outlets.
For example :- Nike produces several lines of athletic shoes, Motorola produces several lines of telecommunications products and AT&T offers several lines of long distance telephone services.
Major product line decision is the product line length (number of items in the product line). Product line length is influenced by company objectives and resources.
PRODUCT LINE STRATEGIES:
Product Line Stretching: Product line stretching occurs by two ways i.e upward and downward stretch.
Downward Stretch: Company may stretch its product line at lower end by introducing product with low price (or economy) enabling the product accessible to majority of customers.
Upward Stretch: A company may stretch its line upward by introducing a premium product in order to increase its growth rate or higher margins.
Eg: Nirma initially launched Nirma yellow towards lower end, later launched Nirma super for upper end customers.
Product Line Filling: A product line can be filled by adding additional product items. The strategy is followed to make more profits, to satisfy dealers, to use excess capacity etc.
Product Line Modernization: In some cases, company modifies or modernizes some of the products in terms of colors, shapes, sizes to make them attractive.
Product Line Deletion/Pruning: Some times company's may delete or drop a product or entire product line when these products are not generating minimum sales. Then it decides to delete entire product line.
Eg: Gillette dropped its watches product line.
Product mix refers to set of all product lines and items that a particular seller offers for sale.
Avon's product mix consists of four major product lines. Cosmetics, Jewelry, fashions and household items. Each products line consists of several sub lines. For example, cosmetics breaks down into lipstick, eyeliner, powder and so on. Each line and sub line has many individual items.
Avon's product mix includes 1300 items. Kmart Stocks 15000 items, 3M markets more than 60,000 products and general electric manufactures as many as 2,50,000 items.
A company product mix has four important dimensions (i) width (ii) length (iii) depth and (iv) consistency.
(i) Product mix width refers to the no. of different product lines the co. Carries.
e.g. Procter & Gamble consisting of may product lines, paper, food, household, cleaning, medicinal, cosmetics and personal care products.
(ii) Product mix length refers to the total no. of items the Co. carries within its products lines. Procter & Gamble typically carries many bands with in each lines, for example, it sells eleven laundry detergent, eight hand soap, six shampoo and four dishwashing detergent.
(iii) Product mix depth refer to the no. of versions/variants, offered of each product in the line. Thus Procter & gamble's Crest Tooth Paste comes in three size and two formulation (paste & Gel)
(iv) Consistency of product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.
Packaging is an activity of designing and producing the container or wrapper for a product. The container or wrapper is called the package. The package might include upto three levels of material. i.e primary, secondary and teritiary packaging
Functions of Packaging:
It must protect the contents of the product
It must perform the tasks for which it was designed
Communicate product information/company
Offer convenience to customers
Benefits of packaging:
Helps in identifying the product
Works as a Silent sales man
Increase sales and profits.
Provides information regarding product/company, usage, and instructions to handle.
Definition: Brand is a process of giving name, term, sign, symbol or special design or a combination of these which is used to identify the products/services of a seller/marketer. Branding helps to differentiate its product from the competing product.
Branding gives several advantages to the seller. First, seller's brand name and trademark provide legal protection to unique product features, which would otherwise be copied by competitors.
Second, branding gives the seller the opportunity to attract a loyal and profitable set of customers. Brand loyalty given sellers some protection from competition and greater control in planning their marketing mix.
Third, good brands help build corporate image. By carrying the company's name, the help advertise the quality and size of the company.
Line stretching: it is one of the branding strategies in which an existing brand name is been extended to another product variants in the same product line:
Eg: Extending Rexona (75gm) brand name to another variant ie 40gm soap
Brand Extension: In this strategy, an already existing brand in one product line is extended to another product or new product which may falls into different product category.
Eg: Extending Rexona bath soap brand to deodorants
Multiple Brands/New Brand: In this strategy, marketer gives entirely new brand name to new product which falls into the same product line.
Eg: P&G offers 9 different brands of detergent bars.
NEW PRODUCT DEVELOPMENT PROCESS:
NEW PRODUCT DEVELOPMENT PROCESS:. New products can be developed through many ie product modifications, product improvements, and entirely new products. The new product development process involves following stages
Idea generation: The new product development process starts with searching for innovative ideas. New product ideas can be obtained from customers, competitors, scientists,company sales force, dealers/retailers and top management. Ideas can also be generated from techniques like brainstorming, forced relationship, synectics, attribute listing and problem analysis.
Idea screening: involves reducing the number of ideas by screening. In this stage, poor ideas eliminated and only those ideas which are good allowed to move into the next stage of product development. Before this, all good ideas are rated on factors like target market, competion, market size, product price, costs and rate of return.
Concept development and selection: A 'product idea' is a possible product/ mere thought, but product concept is an elaborated version of product which can be explained in meaningful consumer terms. That means a product concept answers questions like who is to buy, what benefits it offers, what occasions it has to be taken. A product concept can be translated in to many concepts. Later these concepts are tested with target consumers to select the concept which has got strongest potential and appeal.
Business Analysis: The next step after concept development and selection is to evaluate the attractiveness of the new product proposal. Generally evaluation is done based on estimates of sales, costs, profits, and rate of return to determine whether it meets company objectives.
Product development & Test marketing: In this stage a physical products or prototype are developed with help of R&D / engineering department. The stage answers the technical and commercial feasibility of the product. Later the product is test marketed to know the consumers reactions about the new product. In this manufacturer selects some potential customers in a location and are agreed to use the product and gives feedback which helps them in modifying the product accordingly.
Product Launch/Commercialization: Test marketing gives significant information to top management to take decision on product launch. Product launch has to answer question like when to launch (timing) where to launch (location, region, national), whom (target market) and How to launch (marketing plan)
PRODUCT LIFE CYCLE (PLC)
The Product Life Cycle (PLC) is an important concept in marketing that provides insights into a product competitive dynamics.
The product life cycle portrays distinct stages in the sales history of a product. PLC portrays four things
- Product have a limited life.
- Product sales pass through distinct stages, each posing different challenges to the seller.
- Profits rise and fall at different stages of the product life cycle.
- Product requires different marketing, financial, manufacturing, purchasing and personnel strategies in each stage of their product life cycle.
A typical PLC follows an S-Shaped curve. This curve is typically divided into four stages, known as introduction, growth, maturity and decline.
Introduction:- A period of slow sales growth as the product is introduced in the market. Profits are non-existent in this stage because of heavy expenses of product introduction.
Growth:- a period of rapid market acceptance and substantial profit movement.
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 marketing out lays to defend the product against competition.
Decline:- The period when sales show a downward drift and profit erode.
Price is the only element in the marketing mix that produce revenue; the other elements produce cost. Price is the amount of money that customers have to pay for the product. There are six step procedure for price setting.
1. Selecting the pricing objectives b) determining demand c) estimating costs d) analyzing competitors price and offers e) selecting a pricing method f) selecting the final price
A) Selecting the pricing Objectives: A company can pursue any six major objectives through its pricing
i) Survival- Companies pursue survival as their major objective if plagued with overcapacity, intense competition, or consumer wants. To keep the plant going and inventories turning over, they will often cut prices. Profits are less important than cut prices. Profits are less important than survival. However, survival is only a short run objectives.
ii) Maximum current Profit- Many companies try to set the price that will maximize current profits. They estimate the cost and demand associated with alternative prices and choose the price that produces maximum current profit, cash flow or rate of return on investment.
iii) maximum current Revenue- some companies will set a price to maximize sales revenue. Revenue maximization requires only estimating the demand function.Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.
iv) Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing.
v) Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down, it lowers the price to draw in the next price sensitive layer of customers.vi) Product-Quality Leadership:- A company might aim to be the product-quality leader in the market.
vii) Determining Demand: Each price that the company might charge will lead to a different level of demand and will therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the higher the price, the lower the demand.
Market Penetration Strategy: In this strategy, firm sets lowest price to gain maximum market share, that lead to lower unit cost and higher long run profits.
Market Skimming Strategy: In this it sets high prices to maximize skimming. Later over a period of time prices are slowly lowered.
A company can select any of the following pricing method:
Mark-up Pricing: is an elementary pricing method which adds a standard markup to the product's cost. It works only when it brings expected levels of sales. This pricing is fairer to both buyers and sellers.
Target-return Pricing: It is the price that would yield its target rate of return on investment (ROI).
Target return rice: Unit cost + desired return+ investment capitalunit sales
Perceived value pricing: it is the pricing based on the customer perceived value. Perceived value is made up of several elements such as buyers image of product performance, channel deliverables, the warranty, quality, customer support, supplier repuration, trust worthiness and esteem. Firm must deliver the promised, and firm used marketing mix elements to communicate and enhance perceived value in the minds of buyer's .Going rate Pricing: Firms bases its price on the competitors pricing . the firm charges the same, more or less than major competitor.
Eg: steel, fertilizer, paper.
The pricing is popular when costs are difficult to measure or competitive response is uncertain.
Select-bid Pricing: goods are sold in auction. Most of the agri output or produce like spices, coffee, teas, crops, minerals and exotic art materials, and antiques are sold in auction.
A channel of distribution is a set of independent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. (Philip kotler)
Importance of channels
Distribution channel plays important role in marketing as they move the products from factory to customer in right time, right quantity and at right place. A company with effective and well managed channel gives competitive edge to companies.
FUNCTIONS OF CHANNELS:
Provide market information: about customer likes, dislikes, and their expectations
Physical distributions: transportation, warehousing, processing bills
Promotion: communicate about product/services, window & POP displays, offers
Breaking bulk: purchases in bulk and distribute in small quantities to their customers
Supply in assortments: offers variety of products/assortments eg: not only soaps, other products also
Price negotiation: on behalf of manufacturer, negotiate about price and makes agreements
Risk taking: taking risks such as product failure, low or no sales
Financing: gives credit to their customers for a specific time period. Eg; wholesaler to retailers, retailer to customer
Selling: another task is selling
Title: the actual transfer of ownership from one organization or person to Another.
I. DISTRIBUTION CHANNELS IN CONSUMER PRODUCTS:
1.zero level channel or direct selling: Mfr---------------consumer
2. One level channel: Mfr----------------- Retailer ----------------- consumer
3. Two level channel: Mfr---------- wholesaler--------- Retailer ---------- consumer
4. Three level channel: Mfr-------- wholesaler---- Jobber ----- Retailer ------- consumer
II. DISTRIBUTION CHANNELS IN INDUSTRIAL PRODUCTS:
1.zero level channel: Mfr----------- Industrial customer
2. One level channel: Mfr------------ Industrial distributor ---------- Industrial customer
3. Two level channel: Mfr-------- Mfr's sales office-------- Industrial distributor --------- ------- Industrial customer
Channels Based On Number Of Intermediaries:
Selective distribution: It involves appointing few dealers but not many dealers. This type of channel is preferred by appliance manufacturers.
Eg: dealers of televisions, washing machines, pressure cookers
Exclusive distribution: limited number of dealers granted exclusive rights of distributions and selling in a territory.
Eg: dealers of Hynduai, or Maruthi cars
Intensive distribution: appointing more number of intermediaries or stocking products in as many outlets as possible. This strategy is preferred in convenience goods or FMCG's
Eg: toothpaste, soap, shampoos
CHANNEL DESIGN PROCESS:
- Analysing customer needs
- Establish channel objectives
- Identifying major channel alternatives
- Evaluating the major channel alternatives
1. Analysing Customer Needs: Designing channel starts with finding what target customers want from channel like wether they want to buy in single unit or bulk, buy from nearby location or willing to travel different locations, wether they want to buy in person or through internet. Wether they value breadth of product assortment or prefer specialization, or wether they like add on services like delivery, repairs, installation etc. or will they obtain elsewhere. However, providing fastest delivery, great assosrtment, may not be possible or practical. More over providing these higher levels of services result in higher prices for consumer and higher costs for the channel. Hence company must balance consumer desired services against feasibility and cost of meeting these needs but also against customer price preference.
2. Establish Channel Objectives
channel objectives should be stated in terms of desired service level of target consumers. Usually a company can identify several segments wanting different levels of channel service. Then company should decide which segments to sere and the best channels to use in each case. In each segment, the company wants to minimize the total channel's cost by meeting customer service requirements.
The company channel objectives are mainly influenced by the nature of company, type of products offered, marketing intermediaries, competitors and environment. For example the company's size and financial situation determine which marketing functions it can handle itself and which it must give to intermediaries. Companies selling perishable goods require direct marketing to avoid delays and too much handling. In some company want to compete with competitors product. In some cases companies avoid channels preferred by competitors.
3. Identifying major channel alternatives:
After a company has defined its target market and desired positioning it should identify its channel by three elements:-
1. The type of business intermediaries
2. The number of intermediaries and
3. Terms and responsibilities of each channel participants.
1. Types of intermediaries:-
The firm has following channel alternatives-
Company Sales force:- Expend the company's direct sales force. Assign to contact all prospects in the area. Or develop separate sales force for different products.
Manufacture's Agency:- Hire agencies in different regions sell the equipment.
Industrial Distributors:- Find distributors in the different regions who will buy and carry device. Give them exclusive distribution adequate margins and promotional support.
2. The number of intermediaries:-
Company has to decide on the number of middlemen to use at each channel level. Three strategies are available.
- Intensive Distribution:- Producers of convenience goods etc. typically seek intensive distribution that is stocking their product in numerous outlets. These goods must have place utility.
- Exclusive Distribution:- Some producers limit the number of intermediaries handling their products. Through exclusive distribution the manufacturer hopes to obtain more aggressive and knowledgeable selling and more control over intermediaries polices on prices, promotion, credit and various activities.
3. Terms and responsibilities of channel members:- The producer must determine the conditions and responsibilities of the participating channel members. The main elements in the trade relation mix are price policies, conditions of sale, territorial rights and specific service to be performed by each party.
Each channel alternative needs to be evaluated against economic, control and adaptive criteria.
Economic criteria:- Each channel alternative will produce a different level of sales and cost. Company sales representatives concentrate entirely on the company's products; they are better trained to sell the company's products, they are more aggressive because their future depends on the company's success on the other hand, sales agency could economically sell more than a company sales force. The sales agency has more number of sales representatives and secondly, sales agency has better knowledge of the geographical area in which he is operating
Control criteria:- Channel evolution has to include control issues. Using a sales agency poses a control problem. A sales agency is an independent business firm seeking to maximize its profits. The agents may concentrate on the customers who buy the most, not necessarily of the manufactures goods. Further, the agent might not master the technical details of the company's product or handle its promotion materials effectively.
Adaptive Criteria:- Each channel involves some duration of commitment and loss of flexibility. A manufactures seeking a sales agency might have to offer a five year contact. During this period, other means of selling such as direct mail might become more effective, but the manufactures is not free to drop the sales agency. A channel required a long commitment needs to be greatly superior on economic or control grounds to be considered.
CHANNEL MANAGEMENT DECISIONS:
After a company has chosen a channel alternative, individual middlemen must be selected, trained, motivated and evaluated.
Selecting channel members: while selecting the channel members, the company must consider their experience in business, product lines carried or handled, growth and profit record, financial strength, their cooperation and business reputation.
Training channel members: After selecting the channel members, the company must plan and organize adequate training program for the members i.e distributors or dealers.
Company training includes: on the job field training, class room training, special meeting for launch of new product, training on submission and maintaining records.
Motivating channel members: channel motivation is done in order to improve their performance and behaviour. Company's elicits cooperation from the channel members through coercive power, rewards, legitimate and referent power.
Evaluating channel members: The next step is to evaluate channel members performance against predetermined standards. This is very important related to decisions like retention, training, motivation. Evaluation gives information wether a channel member is to be retained or to drop.
The general evaluation criteria includes sales volume and value, profitability, selling and marketing capabilities, quality of service provided to customers, willingness to keep commitments, attitude, and personal capability.
PROMOTION MIX OR MARKETING COMMUNICATION MIX
- Sales promotion
- Publicity and public relation
- Personal selling
- Direct marketing
Advertising: Any paid form of nonpersonal presentation and promotion of ideas , goods, or services by an identified sponsor.
Sales promotion: A variety of short term incentives offered to encourage trial or purchase of product or service.
Publicity and public relation: a variety of programs designed to promote or protect a company's image or its individual product.
Personal selling: It involves face to face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions and procuring orders.
Direct marketing: Use of mail, telephone, fax, e-mail, or internet to communicate directly with or solicit response or dialogue from specific customers and prospects.