Marketing Management

UNIT I
PRODUCT
 What is Marketing?
• Marketing is the process of discovering and translating consumer
wants into products and services and then in turn making it possible
for them to enjoy the products and services.
What is Marketing?
Discovering Consumer wants

Translating into products and services

Customer Satisfaction
 What is Marketing?
Marketing involves finding out what your
customers want and supplying it to them at a
profit
 What is Marketing Mix?
• It is the combination of four inputs which constitute the core of a
company’s marketing system:

• Product,
• Price structure,
• Promotional activities
• Distribution system (Place)
 Marketing Mix
• The term "marketing mix" is a foundation model for businesses,
historically centered around product, price, place, and promotion.
The marketing mix has been defined as,
the "set of marketing
tools that the firm uses to pursue
its marketing objectives in the target
market“.
 Purpose of Marketing Mix
The purpose of marketing mix is
to satisfy the needs and wants of
the customers in most effective
and economical manner.
 Elements of Marketing Mix

Variety List Price Channels Advertising

Quality Discounts Coverage Promotions
Design Allowances Assortments Personal Selling
Features Payment Locations Publicity
Brand Period Inventory
Name Credit Terms Transport
Packaging
Services
Warranties

Target Market
What is product?
 Delivering Value
• So long as a product is not bought & consumed, it remains a
raw material or at best an intermediate.
- Peter Drucker
• A product is anything that can be offered to a market to
satisfy a want or need including physical goods, services,
experiences, events, persons, places, properties,
organizations, information and ideas.
Delivering Value

Go pro is not just a tiny,

wearable sports-action
video camera, but it
helps people capture,
share and celebrate with
others the most
meaningful experiences
in their lives.
 What is product?
• Anything that can be offered to a market for attention, acquisition,
use or consumption that might satisfy a want or need.
 Product
• Product refers to the goods and services offered by the organisation.
• A pair of shoes, a plate of dahi-vada, a lipstick, all are products. All these
are purchased because they satisfy one or more of our needs. We are
paying not for the tangible product but for the benefit it will provide. So,
in simple words, product can be described as a bundle of benefits which a
marketer offers to the consumer for a price.
• While buying a pair of shoes, we are actually buying comfort for our feet,
while buying a lipstick we are actually paying for beauty because lipstick is
likely to make us look good. Product can also take the form of a service like
an air travel, telecommunication, etc. Thus, the term product refers to
goods and services offered by the organisation for sale.
 Role of a Product as a Market offering
• Consumer’s needs and wants are fulfilled through Market offerings.
• The offerings are some combination of products, services,
information, or experiences offered to a market to satisfy a need or a
want.
• These offerings are not limited to physical products. They also include
services activities or benefits offered for sale that are essentially
intangible and do not result in the ownership of anything.
 Role of a Product as a Market offering
What is it? Example
Product Laptop Classification
Service Airlines, Telecom
Experience Amusement Park, Resort Primary: Meets the primary
Event IPL, Music Concert need such as food, shelter
Information Email Database
Secondary: satisfies
Idea Blockchain, Space Tourism convenience, leisure, and other
Person SRK, Obama secondary needs
Place Incredible India
Complementary: Combination
Property Real Estate, Shares of primary & secondary
Organization PETA
What is Service?
 What is Service?
• An activity, benefit or satisfaction offered for sale that is essentially
intangible and does not result in the ownership of anything.
 Products, Services & Experience

Market Offerings
Pure Pure
Tangible Services
Goods

Soap Consulting
Toothpaste Advisory
Salt Financial
 Products, Services & Experience

• Today, when products & services are becoming more commoditized,

is it possible to create value for your customers by just offering any
extreme of pure tangible good or a pure service?
 Products, Services & Experience

• Companies are moving to a new level in creating value for their

customers.

• So to differentiate their offers, beyond simply making products &

delivering services, they are creating & managing customer
experiences with their brands or companies.
Products, Services & Experience
 Products, Services & Experience
• Disney has long manufactured dreams and memories through its
movies and theme parks—it wants theme park cast members to
deliver a thousand “small wows” to every customer. The same model
has been tried by Imagica in India.
 Products, Services & Experience
• Apple’s highly successful retail stores don’t just sell the company’s
products. They create an engaging Apple brand experience.
Levels of Products & Services

At the most basic level, the

company asks, “What is the
customer really buying?”
Ex. People who buy an
Apple iPad are buying more
than just a tablet computer.
They are buying
entertainment, self-
expression, productivity &
connectivity.
 Levels of Products & Services
• [Link]
 Goods-Service Continuum
• It enables marketers to see total products’ relative goods/services
composition. A product position on the continuum, in turn, allows
marketers to spot opportunities. At the pure goods ends of the
continuum, goods with no related services are positioned. At the pure
services, there are services that are not associated with physical
products. Products that are a combination of goods and services fall
between the two ends.
• In the goods-services continuum, services can be classified under the
range or degree of tangibility - highly tangible to highly intangible.
 Goods-Service Continuum
1. Highly Tangible Services: They have a high degree of tangibility because
services are rendered on certain goods, e.g. car rentals. It is a service-
based entirely on cars. If a place had no vehicles, such a service would
cease to exist. For the marketer, it is both a boon and a curse.
2. Service Linked to Tangible Goods: In this, the service is linked to goods
independently as a part of the marketer’s offer. The service becomes a
part of the total product concept if it is the latter. This occurs when LG,
the home appliance company, includes repair as part of its marketing.
3. Highly Intangible Services: In this classification under the continuum
model, service is high intangible. The services cannot be touched, felt or
seen—for example, counselling, psychotherapy, physiotherapy, etc.
 Goods-Service Continuum
• Most business theorists see a continuum with pure service on one
terminal point and pure commodity goods on the other terminal
point. Like economists, marketers also view goods and services as two
ends of a continuum.
 Product Classifications
• The product can be classified based on use as:
(a) Consumer Products; and
(b) Industrial (Business) Products
 Consumer Products
• Consumer Products: are products & services bought by final
consumers for personal consumption. This includes items like
toiletries, groceries, clothes etc. Based on consumers’ buying
behaviour the consumer goods can be further classified as:
(i) Convenience Goods;
(ii) Shopping Goods;
(iii) Specialty Goods; and
(iv) Unsought Goods
 Consumer Products
(i) Convenience Goods: are consumer products & services that customers
usually buy frequently, immediately and with minimal comparison and
buying effort.
- Ex. Laundry detergent, candy, magazines, fast food, soap, toothpaste, milk,
biscuits etc.
- Consumers typically make a choice once on their brand preference for
these products and repeat that choice over many purchases.
- Products purchased at convenient locations, with least efforts and time.
- These are products that appeal to a very large market segment. They are
generally consumed regularly and purchased frequently.
 Consumer Products
(i) Convenience Goods:
- DEMAND - Regular and continuous, as the products are essential
products.
- PRICING - Price per item tends to be relatively: Low- Because of the
high purchase volume by consumers.
- Standardized - As most of the consumer products are branded.
- Usually low priced & marketers place them in many locations to make
them readily available when customers need or want them. As the
profit per unit sold is very low, marketers must sell in large volume.
 Consumer Products
(ii) Shopping Goods:
- Shopping goods are less frequently purchased consumer products
and services that customers compare carefully on suitability, quality,
price, and style.
- When buying shopping products and services, consumers spend
much time and effort in gathering information and making
comparisons.
- Ex. Furniture, clothing, major appliances, and hotel services.
 Consumer Products
(ii) Shopping Goods:
Shopping product marketers usually distribute their products through fewer
outlets but provide deeper sales support to help customers in their
comparison efforts.
- Products are durable in nature & profit margin is high.
- Because of high unit price, consumers compare the products of different
companies before making selection.
- Purchases are generally pre-planned & there is little chances of impulse
buying.
- Retailers play an important role in sales as lot of persuasive effort is needed
to convince the buyers to purchase them.
 Consumer Products
(iii) Specialty Goods:
Specialty goods are consumer products and services with unique characteristics or
brand identifications for which a significant group of buyers is willing to make a
special purchase effort.
- Ex. specific brands of cars, high-priced photography equipment, designer clothes,
gourmet foods, and the services of medical or legal specialists.
- A Lamborghini, Ferrari, Gucci etc. are specialty product because buyers are
usually willing to take great efforts to buy one.
- Buyers normally do not compare specialty products.
- They invest only the time needed to reach dealers carrying the wanted brands.
- Tend to promote very strong brand identities, often resulting in strong brand
loyalty among consumers.
 Consumer Products
(iii) Specialty Goods:
DEMAND - Limited as relatively small number of people buy. It is relatively
inelastic demand i.e., even if the price is increased, the demand does not
come down.
PRICE - Products are generally costly.
- These products are available for sale at few places as the number of
customers is small to take extra efforts in the purchase of these products.
- An aggressive promotion is required.
- After sales services are very important for many of the specialty products.
 Consumer Products
(iv) Unsought Goods: are consumer products that a consumer either does
not know about or knows about but does not normally consider buying.
- Most major new innovations are unsought until consumers become aware
of them through marketing.
- Ex. Life insurance, pre-planned funeral services, and blood donations to the
Red Cross, helmets, fire extinguisher.
- By their very nature, unsought products require a lot of promoting,
personal selling, and other marketing efforts.
- The products classified as unsought goods are those that consumers don’t
put much thought into and generally don’t have compelling impulse to buy.
 Consumer Products
(iv) Unsought Goods:
• These kinds of products can be ranking from old, outdated goods to the
new innovative prototype.
• Consumers don’t remember these products at the top of their heads, and
they are very infrequently bought from the market.
• The unique property of these goods is that the benefits are not instantly
derived from the product.
• Consumers essentially buy unsought goods when they have to, almost as
an inconvenience rather than the newest, latest, greatest product they
can’t wait to purchase.
• Marketing unsought goods will likely be most effective with lots of
advertising and salespeople promoting the idea of unresolved needs.
 Consumer Products
Convenience Shopping Speciality Unsought
Customer Frequent purchase, Less frequent Strong brand Little product
Buying little planning, little purchase, much preference & loyalty, awareness,
Behaviour comparison or planning & shopping special purchase knowledge (or, if
shopping efforts, low effort, comparison of effort, little aware, little or even
customer brands on price, quality comparison of brands, negative interest)
involvement & style low price sensitivity
Price Low price Higher price High price Varies
Distribution Widespread Selective distribution in Exclusive distribution Varies
distribution, selective outlets in only one or few
convenient locations outlets per market
area
Promotion Mass promotion by Advertising & personal Carefully targeted Aggressive
producer selling by producers & promotion by advertising &
resellers producer & resellers personal selling by
producers & resellers
Examples Toothpaste, Appliances, Furniture, Luxury goods like Rolex Life Insurance, Blood
magazines, detergent clothing watches Donations
 Industrial Products
• Industrial (Business) Goods: are those products purchased for
further processing or for use in conducting a business.
- Thus, the distinction between a consumer product and an
industrial product is based on the purpose for which the product
is purchased.
- If a consumer buys a lawn mower for use around home, the lawn
mower is a consumer product. If the same consumer buys the
same lawn mower for use in a landscaping business, the lawn
mower is an industrial product.
- The three groups of industrial products and services are
materials and parts, capital items, and supplies and services.
Industrial Products
 Industrial Products
Materials & Parts
• It include raw materials as well as manufactured materials and
parts.
1. Raw materials: Raw materials are those business products that
organizations buy for the purpose of manufacturing other
goods. In other word, raw materials are those industrial goods
that will be used in the making of other products. It consist of
(i) farm products (wheat, cotton, livestock, fruits, vegetables) and
(ii) natural products (fish, lumber, crude petroleum, iron ore).
 Industrial Products
Materials & Parts

2. Manufactured materials and parts: Manufactured materials are the

parts of those business goods, which are complete in all respect and
might have gone through all the manufacturing process but ultimate
consumer cannot use them until when they are combined with another
finished product.
• They become the part of finished goods.
 Industrial Products
Materials & Parts

2. Manufactured materials and parts:

• These are sold directly to industrial users and consist of
(i) component materials (glass, iron, yarn, cement, wires). These usually are
processed further. E.g. the pulp is made into paper and
(ii) component parts (small electric bulbs, steering, small motors, tires,
casting, battery). Component parts enter into the finished product
wholly. Unlike raw materials, parts usually have been processed before
being used in the finished product. Although they may not be visible,
parts are left intact and assembled into the total product. E.g. amplifiers
are fixed in sound & music systems.
 Industrial Products
Capital Items

• Capital items generally fall under the Assets column of the balance
sheet.
• These are items necessary for the functioning of the organization,
and very useful to be invested in for the long term.
• These are industrial products that aid in the buyer’s production or
operations, including installations and accessory equipment.
 Industrial Products
Capital Items

1. Installations: An organization’s major expensive, long-lived

equipments (fixed Assets) is called installation. It consist of major
purchases such as
(i) buildings (factories, offices, warehouses) and
(ii) fixed equipment (generators, drill presses, large computer systems,
elevators).
 Industrial Products
Capital Items

2. Accessory equipment: The equipments are those industrial

products, which are bought by the organization or individual to support
the real business operations, they may be revenue nature, or capital
nature. They have a short span of life when compared to installations,
but a longer life span as compared to the life span of normal operating
supplies (paper, pen).
 Industrial Products
Capital Items

2. Accessory equipment: This equipment includes industrial products

used to facilitate the production process or middleman sales. It does
not become part of the finished product but aids in the overall
production or selling effort.
It includes
(i) portable factory equipment and tools (hand tools, lift trucks) and
(ii) office equipment (computers, fax machines, desks).
 Industrial Products
Supplies & Services

1. Supplies: Any short term goods or material which is necessary for

the day to day operations or a company or businesses is termed as
supplies.
• Supplies are the convenience products of the industrial field because
they are usually purchased with a minimum of effort or comparison.
• They never become part of the finished goods but they are used to
facilitate the business operation.
 Industrial Products
Supplies & Services

1. Supplies: Supplies include

(i) operating supplies (lubricants, coal, paper, pencils, stapler &
stapler pins) and
(ii) repair and maintenance items (paint, nails, brooms).
 Industrial Products
Supplies & Services

2. Business services: Business services are generally third party services

given to businesses and they are in form right now because businesses
do not want to spend the time or the energy on getting regular things
running. Hence they either use Business advisory services or business
maintenance services.
These services are generally provided through contracts by small
producers and manufacturers of the original equipment.
 Industrial Products
Supplies & Services

2. Business services: include

(i) maintenance and repair services- There is a difference between
repair goods and repair services. Where paint is a repair good, a
repair service is window cleaning or computer, printer and copier
repairing, something which is best left to the professionals, and
(ii) business advisory services (legal, management consulting,
advertising), Which are usually supplied under contract. Any
business out there requires a Chartered accountant.
 Product & Service Classifications
• [Link]
 Difference in Marketing Mix for Consumer &
Industrial Goods
The marketing mix for industrial products is quite different from that
for consumer products due to the features of selling "business to
business":
• Specialist buyers and sellers: buyers are businesses – will have
specialist requirements and more experience. Often dealing with
professional “buyers”
• Buyer-seller relationship: strong emphasis on customer relationship
management and repeat business.
 Difference in Marketing Mix for Consumer &
Industrial Goods
• Transaction value: purchase value often substantial in a
single transaction (e.g. bulk purchase contract)
• Quality and Price: greater emphasis on product quality and
price (where there are acceptable alternative products).
Price is often negotiated by the buyer.
• Support: greater requirement for after-sales support
 Difference between industrial & Consumer Products

Basis Industrial Products Consumer Products

Meaning These products are used for These products are used for final
further production of other consumption by the direct
goods consumers
Number of The buyers of industrial goods The buyers of consumer goods are
buyer are limited many in number
Buying Decisions of buyers are Decisions of buyers are influenced
Decision influenced by technical by advertising and various sales
specification & goodwill promotional schemes
Nature of These products have derived These products have direct
Demand demand demand
Product Hierarchy
 Product Hierarchy
• It is the classification of a product into its essential components. It is
inevitable that a product is related or connected with another.
• The hierarchy of the products stretches from basic fundamental
needs to specific items that satiate the particular needs.
• Product hierarchy is better understood by viewing the business as a
whole as opposed to looking at a specific product.
• Product hierarchy is usually mentioned in the same sentence with
product classification and therefore can be viewed as a way of
product classification.
Product Hierarchy
 Product Hierarchy
1. PRODUCT NEED
 Firstly, the product hierarchy example is product need which
symbolizes the reason for which a product exists.
 Example: People need products for their health care. Now here is the
basic product need that Colgate satisfies.
 Product Hierarchy
2. PRODUCT FAMILY:
 Secondly, the product family is from the point of view of the business
market and is company-specific. So this level refers to the basic need
that the company’s product satisfies. All the product family that can
satisfy a core need with reasonable effectiveness.
 Example: In oral hygiene of Colgate there can be a variety of options
like toothpaste, toothbrushes, floss, and mouthwash.
 Product Hierarchy
3. PRODUCT CLASS:
 A group of products within the product family recognized as having a
certain functional coherence. It describes the group under the
specific product family having a unique function also called the
product subcategory.
 Example: Colgate with its whitening category or sensitivity factor
(Sensodyne) is called product class.
 Product Hierarchy
4. PRODUCT LINE:
 This area deals with various products that fall under the umbrella of
one product class that are closely associated due to the same
function performed by them marketed to the same channels, sold to
the same customers, or have similar price ranges.
 Example: Colgate Sensodyne has three varieties which are termed as
product line as they perform the same function of dealing with
sensitive areas in our teeth. So the product line here is 3.
 Product Hierarchy
5. PRODUCT TYPE:
 This level now describes the items which are present in a specific
product line that shares one specific function.
 Example: Colgate Sensodyne has three flavours namely normal
whitening, mint, and Ayurveda. So the individual products are
referred to as product types.
 Product Hierarchy
6. ITEM / PRODUCT VARIANT / STOCK KEEPING UNIT:
 Finally or the last destination in the product hierarchy example is an
item or commonly known as SKU. This category differentiates the
product type with a specific price, appearance, size, or other
attributes.
 Example: Colgate Sensodyne mint variant is available in 30 grams, 60
grams, and 100 grams as well with different cost structures. So a 100-
gram product is termed as ITEM.
 What Is Product Mix?
• Product mix, also known as product assortment, refers to the total
number of product lines that a company offers to its customers. The
product lines may range from one to many and the company may have
many products under the same product line as well. All of these product
lines when grouped together form the product mix of the company.
• The product mix is a subset of the marketing mix and is an important part
of the business model of a company. The product mix has the following
dimensions or components:
1. Width
2. Length
3. Depth
4. Consistency
What Is Product Mix?
What Is Product Mix?
 Dimensions of a Product Mix
• Width: The width of the mix refers to the number of product lines
the company has to offer.
Ex. – If a company produces only soft drinks and juices, this means its
mix is two products wide. Coca-Cola deals in juices, soft drinks, and
mineral water, and hence the product mix of Coca-Cola is three
products wide.
• Length: The length of the product mix refers to the total number of
products in the mix. That is if a company has 5 product lines and 10
products each under those product lines, the length of the mix will be
50 [5 x 10].
 Dimensions of a Product Mix
• Depth: The depth of the product mix refers to the total number of
products within a product line. There can be variations in the
products of the same product line. For example – Colgate has
different variants under the same product line like Colgate advanced,
Colgate active salt, etc. Moreover, if it sells in various sizes, that will
also count as depth. Suppose Colgate sells toothpaste in three sizes
and two flavors; it would mean a depth of six.
• Consistency: Product mix consistency refers to how closely products
are linked to each other. Less the variation among products, more
the consistency. For example, a company dealing in just dairy
products has more consistency than a company dealing in all types of
electronics.
Dimensions of a Product Mix
Product Mix
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
• Every product has five different product levels associated with it.
Each level adds more customer value, and together the five constitute
Customer Value Hierarchy.
• Each product is related to certain other products. The product
hierarchy stretches from basic needs to particular items that satisfy
those needs.
• In planning market offering, the marketer needs to think through five
levels of the product.
CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
1. Core Benefit:
 The first and the basic level is the core product/benefit the
customers look at. It is the basic good or service purchased, aside
from its packaging or accompanying services. We buy a product first
because of its core or fundamental benefit – the problem it solves or
the need it satisfies.
 From a bar soap, for example, the core benefit we look at is: it cleans
our skin. While the purchaser of a cosmetic item buys beauty, the
purchaser of a lottery ticket buys hope, and so on. A core product’s
benefits range from tangible to intangible.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
2. Generic Product or Basic Product:
 The benefits that customers look at must be turned into a basic product
by the marketer. A calculator, for example, includes plastic, metal,
electronic circuits, and a liquid display crystal.
 The most fundamental level is the basic product, which seeks an answer to
the question: What is the buyer really buying? The basic product forms the
nucleus of the total product. It constitutes the problem-solving features or
basic benefits that consumers seek when they acquire a product.
 A person buying a car acquires mobility, which enables him to move from
one place to another. Theodore Levitt has pointed out that buyers “do not
buy quarter-inch drills; they buy quarter-inch holes.”
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
3. Expected Product:
 The next level is the expected level. It includes a set of attributes and
conditions that the buyer expects which marketer should provide for
purchase to take place. In the case of a calculator, the buyers expect
it to be handy, easy to operate, and so on. Hotel guests minimally
expect a clean bed, fresh towels, working lamps, and a relative degree
of quiet.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
4. Augmented Product:
 The Fourth Level of a Product is the Augmented Level or the
augmented product. The augmented product is what the customer is
really buying. It is a good, service, or an idea enhanced by its
accompanying benefits.
 It is a combination of what the seller intends, and the buyer
perceives. An augmented product gives customers more than they
expect. People do not buy products; they buy the expectations of
benefits. The marketing view demands the active recognition of this
and acts accordingly.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
4. Augmented Product:
 Modern-day marketers compete with each other through the
augmented product. A marketer deciding to augment his product
should be well aware of the total consumption system of buyers.
 Understanding the total consumption system means identifying the
tasks customers perform through the use of the product. Identifying
this will give him leads on which he can augment his product.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
4. Augmented Product:
 In formulating the product augmentation policy, the marketer should
take note of a number of things. Since augmentation requires the
company substantial costs, it should know whether customers will be
willing to take this load.
 After getting the augmented benefits for sometimes, customers start
thinking those as rights, i.e., they consider those benefits as expected,
not augmented. The company should, therefore, look for additional
benefits to offer.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
4. Augmented Product:
 The company should also note that soon after it offers augmented
products at a premium price, some competitors may start offering the
basic or expected product at a much lower price.
 This will obviously pull a significant number of customers, thus
causing the firm a fall in sales. The company should therefore remain
ever alert so that augmentation yields the desired result.
 CUSTOMER VALUE HIERARCHY: PRODUCT LEVELS
5. Potential Product:
 The last level of a product is the potential product. It encompasses all
the augmentations and transformations that the product might
ultimately undergo in the future.
 Here is where companies search for new ways to satisfy customers
and distinguish their offering.
 New Product Development
• New products are a lifeblood of a company.
• As old products mature & fade away, companies must develop new
ones to take their place.
 New Product Development
• A firm can obtain new products in two ways:
1. Acquisition: buying a whole company, a patent, or a license
to produce someone else’s product.
2. Firm’s own new product development efforts
 New Product Development
What is New Product Development?
• The goods and services that vary considerably in terms of their
attributes or intended usage in contrast with the goods
manufactured previously by the same firm are termed as "new
products".
• The concept of a new product is highly multi dimensional, which has
capabilities of satisfying the wants of desirous and interested
stakeholders.
• It also provides strategic competitive advantage to significant
number of interested consumers. This also leads to significant
opportunity for a firm to create value in the competitive market.
 New Product Development
What is New Product Development?
The development of original products, product
improvements, product modifications, and new brands
through the firm’s own product development efforts.
 New Product Development
Definition of New Product Development
Musselman and Jackson:
“A product is said to be a new product when it serves an entirely new
function or makes a major improvement in a present function”.
 New Product Development
Philip Kotler:
New product mean original products, improved products, modified
products and new brands which are developed by the firm through its
own research and development efforts and includes those products
which the consumers see as new.
A new product is thus perceived differently by different people. It is a
need satisfying concept with benefit for buyers; bundle of need
satisfying features for marketers, a way to add value for intermediaries,
an opportunity to design for R&D and to assemble and process for
production department.
 New Product Development
• After product planning, the next step is product development.
• The process of identifying the probability of producing a product is
called product development.
• Under this process, the feasibility and profitability of producing a
new product is assessed before making a final decision.
 Need for New Product Development
• New products are important to,
1. Customers: by bringing new solutions & variety to
customers’ lives, improving their standard of living and
2. Marketers: being a key source of growth for companies. In
fact many companies rely on new products for the majority
of their growth
Ex. New products have almost completely transformed Apple
in recent years.
 Need for New Product Development
Need for New Product
Development

Making new profits

Meeting changes in
consumer demand

Handling the
environmental threats
Other necessities
 Need for New Product Development
1) Meeting Changes in Consumer Demand:
• Change is a universal phenomenon in today's time of science and
technology. For example, a quick change in the food habits, comfort
preferences, tastes, customs and traditions, needs and expectations, etc.
can be seen. The organisations need to keep an eye on these changes
taking place in their surroundings.
• Customers always give preference to the products which are better in
terms of quality, fashion, price, etc. An organisation has to proactively
respond to such vibrant demands, which in turn results in innovations in
products and services. By doing this, the organisations can keep themselves
updated and can strengthen their relationship with the customers.
 Need for New Product Development
2) Making New Profits:
• Manufacturing new products is important for earning profits; since existing
products have less scope for enhancing profit levels, while new products
have vast scope for it. On reaching the maturity stage of PLC, the gains
acquired from the existing products start decreasing and diminishes
gradually till the product reaches the decline stage.
• Hence, it becomes quite necessary for the organisations to come up with
the new and innovative products that can replace the old product which is
on the verge of declining.
• Such new products play an important role in growth of the organisation
and sometimes they are the only source for the organisation to find new
prospects of profit.
 Need for New Product Development
3) Handling the Environmental Threats:
• There are various environmental threats faced by a business organisation.
One way to handle these threats is to find out a new product which is
capable enough to combat against it. These threats spring from various
environmental factors, like socio-economic, technological, political, and
demand and supply, etc. Moreover, the biggest threat that is always
present in such environment is competition in the market and products.
• Hence, it becomes vital to fight these risk factors by introducing new
products. More prospects of growth and development are opened through
it, which further ensures endurance and feasibility for the organisation. It
also distributes the risk factor among the old and new products.
 Need for New Product Development
4) Other Necessities:
The other strategic needs for new product development are as follows:
• New products can provide the organisation a source for gaining
competitive edge.
• They can ensure long-term financial return on the investments made. They
also help in optimum utilization of the available resources.
• New products make best use of research and development.
• They can provide new opportunities for making changes in the strategic
plans of the company.
• New products can bring most out of the marketing practices and brand
equity.
• It enhances the corporate image of the organisation/brand.
 Why innovation can be very expensive & risky?

• 60 percent of all new consumer packaged products

introduced by established companies fail.

• Two-thirds of new product concepts are never even

launched.
Reasons for Failure of New Products
 Reasons for Failure of New Products
1) Over-estimation of Market Size:
• A product will not be able to perform in the market, if the market size
is over-estimated. This may lead to less revenue generation than the
desired level, even if the quality of the product is good.
2) Inadequate Market Research:
• If a marketer is unable to study the market and makes erroneous
predictions about the customers needs and wants, then this may fail
to satisfy the potential customers.
 Reasons for Failure of New Products
3) Poor Product Design:
• A poorly designed product may cause inconvenience to customers in
using the product. This is one of the major reasons of customers to
dislike about a product.
4) Incorrect STP Approach:
• A product may fail to capture the market, when a marketer incorrectly
segments the market, targets the target audience and positions the
new product
 Reasons for Failure of New Products
5) High Production Costs:
• When the price of a product is high compared to the other products
in the market, then this may lead to product failure. This occurs,
when the actual production cost exceeds the expected production
cost.
6) Lack of Uniqueness:
• If a product is incompetent in comparison with the competitor's
product, then customers have no reason to purchase a new product.
 Reasons for Failure of New Products
7) Lack of Superiority:
• It is essential for a product to prove itself superior in contrast to other
similar products available in the market. Sale of new products cannot
be made on the basis of superfluous claims made by the marketers.
Hence, leading to the failure of new products.
8) Technical Issues:
• While using a new product, if a customer faces any technical issues,
then he may discontinue purchasing the same product again.
 Reasons for Failure of New Products
9) Wrong Entry Timing:
• If a new product enters the market at the wrong time by making
hasty decisions or by entering late in the market, then also the
product may fail to establish its position in the market.
10) Ineffective Promotion:
• Ineffective utilization of promotional tools lead to new product
failure. The customers remain unaware of the product's
attributes and functions, due to which customers do not
purchase the product.
 Reasons for Failure of New Products
11) Underestimation of Market competition:
• When a marketer fails to estimate the actual competition
level and competitors' strengths, then the product may have
to deal with severe competition in the market. This often
leads to failure of new products.
Booz, Allen, and Hamilton Classification Scheme for New
Products
• New Products are classified into two categories based upon its origin.
a) New Products emerging due to technological innovation.
b) New Products emerging due to market modifications.

• Booz, Allen and Hamilton have identified six categories of new

product in the terms of their newness to the company and to the
market place.
Booz, Allen, and Hamilton Classification Scheme for New
Products
i. New to the world – New products that create an entirely new product.
ii. New product lines – New Product that allows a company to enter an
established market for the first time.
iii. Additions to the existing product lines – New products that supplement
a company’s established product line.
iv. Improvements in revision to existing product – New products that
provide improved performance or greater perceived value and replace
existing product.
v. Repositioning – Existing products that are targeted to new markets or
market segmentation.
vi. Costs reductions – New product that provides similar performance at
lower costs.
Booz, Allen, and Hamilton Classification Scheme for New
Products
1) New-to-the-World:
• As the name suggests, it is that category of product which is launched
in the market for the first time. They may also be called as really new
products. Since these products are new, their prospective customers
are needed to be provided with appropriate knowledge about its
working and the benefits it can provide.
• Once the product reaches the hands of customer, it starts attracting
buyers. Thus, it can be said that the firms involved in its production
will get the first mover advantage as no such product was present in
market before its launch.
• Ex. Catit Cat Self groomer, Lazy gardner, Neuralink
Booz, Allen, and Hamilton Classification Scheme for New
Products
2) New-to-the-Firm:
• This category involves such products which are new to the company
but not for the market, i.e., they are already present in the market
under the name of some other companies.
• This means that if the firm wants to produce such product, it actually
wants to introduce a new product line. Hence, new-to-the-firm
products can also be known as new product-lines for the firms.
• Ex. Blue Star & Eureka Forbes in Water purifiers, Ola Electric Scooter
Booz, Allen, and Hamilton Classification Scheme for New
Products
3) Addition to Existing Product-Lines:
• This category can involve both new-to-the-firm and new-to-the-
world products. Usually, big firms keep on adding new products to
the previous product-lines.
• This is done for several reasons, the absolute one being ‘earning
profits'.
• Ex. Colgate, Coca Cola, Lux
Booz, Allen, and Hamilton Classification Scheme for New
Products
4) Improved and Revised:
• Those firms which believe in delivering 'nothing but the best'; keeps
on revising their products for delivering flawless services to the
consumers. These products are known as ‘improved and revised’.
Generally.
• This category is found in organisations producing beauty products
and electronic goods.
• Ex. Samsung Galaxy S24 Ultra, Apple iPhone 15 Pro
Booz, Allen, and Hamilton Classification Scheme for New
Products
5) Re-Positioning:
• It has been found that the products which are already being used
can serve some other purposes as well.
• After realizing this fact, the organisation may want to offer their
products to the customers with new added features or usage value
which is known as repositioning the product in the market.
• Ex. BATA, Mountain Dew, Maggie, SBI, Axis Bank, LIC
Booz, Allen, and Hamilton Classification Scheme for New
Products
6) Reduction in Cost:
• Manufacturing an entirely new product can prove to be an expensive
affair. Yet, on close scrutiny the organizations can discover that
similar product can be produced with lower expense, which would
also help in bringing down the prices.
• Briefly, the cheaper version of an expensive product can be called
cost reduction or reduction in cost.
• Ex. Mankind Pharma, Reliance Jio
 New Product Development Process
New product development starts
with lots of good new product
ideas. Ex. Cisco’s I-Prize
crowdsourcing challenge attracted
824 ideas from 2,900 innovators
representing more than 156
countries.

The remaining steps reduce the no. of ideas & develop only the best ones into
profitable products.
Of the 824 ideas from Cisco’s I-Prize challenge, only a handful are being developed.
 Idea Generation
• Internal Idea Sources:
 R&D
 Executives, Salespeople, Scientists, Engineers &
Manufacturing Staff
Ex. Ford – Innovation & mobility center
AT&T – The Innovation Pipeline (TIP)
Facebook & Twitter – Hackathons
LinkedIn - Hackdays & InCubator Program
 Idea Generation
• External Idea Sources:
 Distributors & Suppliers
 Competitors
 Trade magazines, shows, websites & seminars
 Govt. agencies
 Advertising agencies
 Marketing research firms
 Universities & Commercial laboratories
 Inventors
 Customers – Ex. Lego ideas (12 new products like Doctor Who, Birds,
Ghostbusters etc.)
Idea Generation
 Idea Generation
• Crowdsourcing:
 Inviting broad communities of people - customers, employees,
independent scientists, researchers, and even the public at large, into
the innovation process.
 Companies, across all industries, are crowdsourcing product
innovation ideas rather than relying only on their own R&D labs.

Ex. Sports Apparel maker Under Armour sponsors an annual

crowdsourcing competition called the Future Show Innovation
Challenge
 Idea Screening
• The purpose of idea generation is to create a large number
of ideas.
• The purpose of the succeeding stages is to reduce that
number.
• The first idea-reducing stage is idea screening, which helps
spot good ideas and drop poor ones as soon as possible.
• Product development costs rise greatly in later stages, so the
company wants to go ahead only with those product ideas
that will turn into profitable products.
 Idea Screening
R-W-W (“real, win, worth doing”)
• Is it real? Is there a real need & desire for the product, and will customers
buy it? Is there a clear product concept, and will such a product satisfy the
market?
• Can we win? Does the product offer a sustainable competitive
advantage? Does the company have the resources to make such a product
a success?
• Is it worth doing? Does the product fit the company’s overall growth
strategy? Does it offer sufficient profit potential?
• The company should be able to answer yes to all three R-W-W questions
before developing the new product idea further.
 Concept Development & Testing
• An attractive idea must then be developed into a product concept.
• It is important to distinguish between a product idea, a product
concept, and a product image.
• A product idea is an idea for a possible product that the company can
see itself offering to the market.
• A product concept is a detailed version of the idea stated in
meaningful consumer terms.
• A product image is the way consumers perceive an actual or
potential product.
 Concept Development & Testing
Concept Development:
Ex. Tesla’s All Electric Car –
• Concept 1. An affordably priced compact car designed as a second family
car to be used around town for running errands & visiting friends.
• Concept 2. A mid-priced sporty compact appealing to young singles and
couples.
• Concept 3. A “green” everyday car appealing to environmentally
conscious people who want practical, no-polluting transportation.
• Concept 4. A compact crossover SUV appealing to those who love the
space SUVs provide but lament the poor gas mileage.
 Concept Development & Testing
Concept testing: calls for testing new product concepts with groups of target
consumers.
• The concepts may be presented to consumers symbolically or physically.
• Many firms routinely test new product concepts with consumers before
attempting to turn them into actual new products.
• For some concept tests, a word or picture description might be sufficient.
However, a more concrete and physical presentation of the concept will
increase the reliability of the concept test.
• After being exposed to the concept, consumers then may be asked to react
to it by answering certain questions.
 Concept Development & Testing
• Questions for the All-Electric Car Concept Test
1. Do you understand the concept of a battery-powered electric car?
2. Do you believe the claims about the car’s performance?
3. What are the major benefits of an all-electric car compared with a
conventional car?
4. What are its advantages compared with a hybrid gas-electric car?
5. What improvements in the car’s features would you suggest?
6. For what uses would you prefer an all-electric car to a conventional car?
7. What would be a reasonable price to charge for the car?
8. Who would be involved in your decision to buy such a car? Who would drive
it?
9. Would you buy such a car (definitely, probably, probably not, definitely not)?
 Marketing Strategy Development
• Marketing strategy development: designing an initial marketing
strategy for introducing this car to the market.
• The marketing strategy statement consists of three parts:
1. describes the target market; the planned value proposition; and
the sales, market-share, and profit goals for the first few years.
2. outlines the product’s planned price, distribution, and marketing
budget for the first year.
3. describes the planned long-run sales, profit goals, and marketing
mix strategy.
 Business Analysis
• Business analysis involves a review of the sales, costs, and
profit projections for a new product to find out whether
they satisfy the company’s objectives.
• If they do, the product can move to the product
development stage.
• To estimate sales, the company might look at the sales
history of similar products and conduct market surveys.
 Business Analysis
• It can then estimate minimum and maximum sales to assess
the range of risk.
• After preparing the sales forecast, management can estimate
the expected costs and profits for the product, including
marketing, R&D, operations, accounting, and finance costs.
• The company then uses the sales and cost figures to analyze
the new product’s financial attractiveness.
 Product Development
• Product development: Developing the product
concept into a physical product to ensure that the
product idea can be turned into a workable market
offering.
 Test Marketing
• Test marketing: the stage at which the product and its proposed
marketing program are tested in realistic market settings.
• Test marketing gives the marketer experience with marketing a
product before going to the great expense of full introduction.
• It lets the company test the product and its entire marketing
program— targeting and positioning strategy, advertising,
distribution, pricing, branding and packaging, and budget
levels.
 Test Marketing
• Sales-wave Research:
This test is conducted to determine the potential of the
product to be consumed/accepted every time it is offered to
the customer.
The samples are often distributed for free to analyze the
willingness of consumers to accept the product.
Ex. free trial of new lipsticks, perfumes, samples of food
packets, shampoo etc. offered to the existing customers for
usage and feedback.
 Test Marketing
• Simulated Market test:
This test is conducted to ascertain the preference of the customer and their
product selection. A group of people are invited to the stores and are given
some discount offers to motivate them to shop in the store. The New
Product is placed with the old ones or the competitors and customers are
observed closely, to know if the new product was picked up over other
alternatives.
The products are also distributed for free to acquire more customers for the
test and they are inquired about the product later on. The example is in
departmental stores where new products are placed and consumers’
behavior is tracked.
 Test Marketing
• Controlled Market test:
In this test new products are introduced to the chain stores and the
presentation of the product is controlled by the brand- their
presentation, sales, pitch, introduction, etc.
It is not distributed for free to make people try the product for the
price they will get in the future.
In cafes, you are pitched by the waiter for their new recipes and they
even ask you to share the feedback multiple times.
 Test Marketing
• Test Markets:
Every brand has its market, they know the demographics and
geographics of their customers. A test market is a set of particularly
selected areas or segments of the audience used for a launch (product
launch on a small scale), this small test market is representative of the
entire market size of the company.
For example, many tech companies launch their new features in
particularly selected areas on the basis of sales, customer loyalty, etc.
 Test Marketing
• Major Steps of Test Marketing
1. Right Market: The target market should represent the entire market of your
industry
2. Duration: According to the repurchase period and state of competition select
the time duration of the campaign
3. Cost: The cost of the campaign is directly proportional to the duration of the
test
4. Collect Data: Create a process to collect data, nature of the customer, buyer’s
behaviour, demand size, pricing, channels of distribution
5. Analyze Data: After you have collected your valuable data, its time to analyze
it.
 Commercialization
• Commercialization: Introducing a new product into the
market.
• A company launching a new product must first decide on
introduction timing.
• The company must decide where to launch the new
product— in a single location, a region, the national market,
or the international market.
 Commercialization
Other factors the company will have to take under consideration in
commercialization are:
• target market prospects & introductory market strategy i.e. within
the rollout markets, the company must target its distribution and
promotion to the best prospect groups.
 New Product Development Process
STAGES ACTIVITIES
Idea generation The systematic search for new ideas
Idea Screening Screening new product ideas in order to spot good ideas and drop poor ones
Concept Development A product idea, product concept, and product image are developed and then tested
&Testing

Marketing strategy Designing initial marketing strategy for A new product based on the product concept
Business analysis a review of the sales, costs, and profits projections for a new product to find out
(whether these factors satisfy the company’s objectives.

Product development A strategy for company growth by offering modified or new products to current
market segments

Test marketing the product and marketing program are tested in more realistic market settings
Commercialisation introducing a new product into the market
 New Product Development Process
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 Branding
• What is Branding?
 Branding
• Branding is the process of creating a strong, positive
perception of your company, and its products in your
customer’s mind.

• “Branding is endowing products and services with the

power of a brand.” – Kotler & Keller
 Branding
• Branding is a type of marketing practice where a company
creates a name or a symbol or even a design that can be easily
identifiable, about the belonging of the company.

• The brand acts as a true representation of the individuality of

the business, and the way the business wants to flourish, this can
be perceived from the brand of that particular company.
 Branding
Features of Branding

• Competitiveness:
For a brand to truly be successful the needs are required to be focused
as being competitive in today’s world is very important. A company has
an entire team which is working behind a brand, to make that a hit. A
successful brand goes beyond consumer expectations to give a
competitive cutting edge to the industry.
 Branding
Features of Branding

• Distinctiveness:
To create an identity of the brand, the creation needs to be highly
distinctive from the other. The world’s most popular brands, like
Apple, Starbucks, or the BMW cars have successfully created this
impact in the minds of the customers. Take for instance the Apple
product which is renowned for its technical approach to design and
technology gets appreciation for the innovation in its products.
Starbucks promises services across the globe. Hence, we see that
brands have a distinctive approach always.
 Branding
Features of Branding

• Consistency:
Being consistent is always the catch. It is highly important for the
company to remain consistent with the devotion it does to create the
brand. They should maintain the flow of efforts. Consistency will help
the customers be familiar with the brand.
 Branding
Features of Branding

• Leadership:
The greatest brands in the world are always supported by the leaders
who have the power to inspire and continually aspire for their
greatness. This works the same for a sports team, and hence also for a
large corporation or a small business, the most successful business
ought to have an influential leader backing them.
 Branding
Functions of Branding

• The functions of Branding are achieved by a consistent effort. There

is a whole team backing up the process of Branding and making
efforts to keep a continued effect on the minds of the customers.
• Branding is totally a mind’s game hence, it is the mind that will help
the branding to achieve its function effectively. The features of
branding are the actual function of branding as well, as the concept of
branding is only dedicated as an overall process.
 Branding
Functions of Branding

• The functions performed by branding are as follows:

 Differentiation.
 Authenticity.
 Value Setting and Centering.
 Unification.
 Brand
• “A brand is a name, term, sign, design, symbol, or a
combination of them intended to identify the goods or
services of one seller or group of sellers and to differentiate
them from those of competition. (American Marketing
Association).
• A brand is a product with unique character, for instance in
design or image. It is consistent and well recognized.
Product Vs. Brand
 Product Vs. Brand
Product Brand
A composition of tangible & intangible attributes, A name, term, sign, symbol, or design or a combination of
including packaging, colour, price, prestige, and them intended to identify the goods & services of one
services that satisfy needs & wants of people seller or group of sellers and to differentiate them from
those of the competitor
Is an item which is ready for sale in the market Distinguishes a product from other products in the market
Is the need of consumers Is the want of consumers
Can be easily copied by other companies Has a distinguished identity that can not be copied
Is a bundle of functional attributes Is a personality
Is created by company Is created by consumer
Offers solutions Offers value
Can be replaced Cannot be replaced
Can be outdated after some time Remains forever
 Product Vs. Brand
Product Brand
Is an objective concept Is a subjective concept
May be tangible or intangible in nature Is intangible
Selling in the market to generate profits Create public image of the company in the market
Is an offer of the company Is a face of the company
Is physical Is emotional
Is associated with brand Is associated with mind
Is a commodity Is composed of a name, trademark, logo and other
visual elements such as images, colours, and icons
Has life cycle Can be timeless and possesses infinite life
Means to fulfill promise & expectations made by the An experience that comes with the promises made by
company the company & consumers’ expectations
Are instantly meaningful Become meaningful over time
 Product Vs. Brand
Product (Examples) Brand (Examples)
Search Engine Google
Beverage Coca Cola
Bike Hero Motors
Smart Phone Samsung
Burger McDonalds
Car Toyota
Watch Rolex
Petroleum Jelly Vaseline
Sportswear Nike
Lipstick Lakme
Coffee Starbucks
Chocolate Dairy Milk
 Brand Equity
• Brand equity is a phrase which describes the value of having a well
known brand name
Brand Equity = value of the brand
• Brand Equity is the value and strength of the Brand that decides its
worth.
• It can also be defined as the differential impact of brand knowledge
on consumers response to the Brand Marketing.
• Brand Equity exists as a function of consumer choice in the market
place.
 Brand Equity
• The concept of Brand Equity comes into existence when consumer
makes a choice of a product or a service.
• It occurs when the consumer is familiar with the brand and holds
some favorable positive strong and distinctive brand associations in
the memory.
• This is the impact a brand can impose over the purchasing decision
of a customer.
• It is a set of brand assets and liabilities which can either add or
subtract from the brand value.
 Power of Branding
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ng
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