MANAGING

PRODUCT

BA 133 PRODUCT MANAGEMENT

Topi
cs Managing Product
 Product line decisions
 Product life cycle
 Product portfolio
 Product pricing
Learnin
g  Define what is a ‘Product Line‘ and its relevance in

Objecti Product Management 

 Analyze how product line can be managed

ves  differentiate product mix and product line

 Identify Product Life Cycle (PLC) and the various
types of PLC 
 Identify how different stages of PLC affect strategy. 
 identify the difference between Industry PLC and
individual product PLC
 explain Product Portfolio and its need 
 identify who is responsible for product portfolio
decisions 
 Identify the tools used in evaluating products
 Understand the concept of Pricing and its objectives
 Identify the Steps to undertake Product Pricing 
 analyze types of pricing and its benefits
1
Product
Decision
BA 133 PRODUCT MANAGEMENT
 Product Decisions
Decisions regarding the product, price, promotion and
distribution channels are decisions on the elements of
theFor
"marketing mix". may be totally unsuitable for rural areas where
example computers
electricity is not available and where incomes are low; and the attempt
to sell products to customers without considering their cultural values
and needs both can have negative consequences on sales and
achievement of business objectives.

Product modification decisions are based on how much

an organization has to stay close to a standardized
product (just by extending it) or how much it has to
move towards innovation (by making something new).
2
Product Mix
BA 133 PRODUCT MANAGEMENT
 Product Mix
The product mix of a company is defined as the total set
of products offered by it. The product mix consists of
product lines and individual products.

Product decisions at these three levels (product mix,

product line and product) are generally of two types:
i. Decisions that involve width and depth of the
product line
ii. Decisions that involve changes in the product mix
occur over time – adding, removing products or enhancing the
range (width).
POLITICAL SCIENCE HUMAN RESOURCES MATHEMATICS MATHEMATICS PHYSICS

POLITICAL THEORY BASICS OF HR CALCULUS I Geometric Concepts Intermediate Physics

INDIAN HRM AND BUSINESS CALCULUS I Analytic Geometry Advanced

GOVERNMENT Physics
INTERNATIONAL RECRUITMENT AND TRIGONOMETRY
Calculus I Quantum Mechanics
RELATIONS SELECTION

STATE RELATIONS INTERNSHIP MATH THEORY Calculus II Physics and

Astronomy
ENGLISH INDIAN EMPLOYEE CALCULUS II
Calculus III Thermodynamics
CULTURE RELATIONS
CULTURE AND TRAINING STATISTICS HISTORY Numerical analysis Condensed Matter
COMMITMENT TECHNIQUES Physics III
INDIAN CULTURE ORGANIZATIONAL DIFFERENTIATION Differential Equations Electromagnetic
HRM Theory
INTERNATIONAL MANAGING ALGEBRA Matrix Theory Quantum mechanics II
CULTURE DIVERSITY
GLOBALIZATION PERFORMANCE QUANTUM Table 2: Narrow width, large depth
MANAGEMENT MECHANICS

GAME THEORY AND DEVELOPING GEOMETRIC

POLITICAL THEORY PEOPLE CONCEPTS

Table 1: Wide Width and Average Depth

 Product Mix

Trading up or
Family
Line extension Brand
branding
leveraging
-If a line of products add new product to When we add a line
is sold with the same a line extension that is of
brand name, this is better quality than
referred to as family the other products in
branding. the line
Trading down
When we add a line
For example Nescafe has several products extension that is of
under its main brand Nescafe – classic, gold,
espresso, cappuccino, taster‘s choice, etc.
lower quality than
the other products of
 Product Mix

Image anchors Line Filling Price lining

are highly promoted When we add a new is the use of a limited
number of prices for all
products within a product within the
your product offerings.
line that define the current range of an Its underlying rationale is
image of the whole incomplete line that these amounts are
line. seen as suitable price
points for a whole range
of products by
prospective customers.
 Product-mix
management
and
responsibilities
 Product-mix management
and responsibilities
 Reviewing the mix of  Determining the appropriate
emphasis on internal
existing product lines;
development versus external
 Adding new lines to and
acquisition in the product
deleting existing lines mix;
from the product mix;  Gauging the effects of
 Determining the relative adding or deleting a product
emphasis on new versus line in relationship to other
lines in the product mix; and
existing product lines in  Forecasting the effects of
the mix; future external change on
the company's product mix.
3
Product Line
BA 133 PRODUCT MANAGEMENT
 Product Line
Product Line is defined as a group of products that are
closely related to each other.
They function in the same manner and are sold to the
same customer groups.
These products are marketed from the same types of
outlets and fall within a specified price range.

Line depth Line consistency Line vulnerability

refers to the number refers to how closely refers to the percentage of sales
of product variants related the products or profits that are derived from
in a line. that make up the only a few products in the line.
line are.
4
Product Line
Decisions
BA 133 PRODUCT MANAGEMENT
 Product Line Decisions
Since products are in some way fulfilling the customer‘s
aspirations and needs any change in any one or both of these will
lead to changes in the product specifications. This change is what
leads to the introduction and withdrawal of products from the
market.

Hence Product line decisions can be broadly classified under

three categories: 
 Product Withdrawal/ Demise 
 Increase in Products 

 Product Line Decisions
Product withdrawal is as much a planned activity as

WITHDRAWAL
introduction of a new product. Companies in-build the time of

PRODUCT
withdrawal of a product in their business strategy and link it with
the introduction of a new product.

Decisions on when to withdraw the product depend on several

factors:
i. Business objectives Profit/ sales
ii. Strategic objectives – new prod ready, competitive
product launched
 Product Line Decisions
Product withdrawal even in a planned manner has its own risks

WITHDRAWAL
because an existing product already has an acceptance in the

PRODUCT
market and is established.

It is giving the company some sales and profits. By this time it is

likely that the product development costs have been recovered
and the amount of money needed for supporting the product is
not so much as the customers are already aware of the product.
 Product Line Decisions
 If the company plans to withdraw a product in a planned manned it must
evaluate the following:
i. Has the product met its business objectives in terms of sales and

WITHDRAWAL
profits?
ii. Can the product continue to do so in the face of competition and

PRODUCT
changing market environment?
iii. Can the product support the marketing expenditure being done in
order to promote it.
iv. Does the presence of the product help in selling other products of
the company even if it is not making any money (Loss leader chapter 7)
v. Does the company have a product that can fill the space vacated by
this product?
vi. Can/ should the company reposition this product? Is it economical for
the company to do so?
vii. Is the business strategy dictating the withdrawal of the product?
 Product Line Decisions

WITHDRAWAL
New product introduction is the logical
extension of a product withdrawal.

PRODUCT
A company with finite resources can support
only a limited number of products in the
market. Thus as newer products are
introduced older products must be
withdrawn to make place for them.
 Product Line Decisions
INCREASING PRODUCT
An example will be the Honda Accord, Honda Civic, Honda City
New products can be introduced and Honda Jazz starting from the highest price to the lowest
price. However in this range the ultra high and very low segment
in a product line in several are not covered.

ways:
1 Stretching the product line: There are three ways to
stretch the product line:
Stretching is a product  Stretching Down
lengthening beyond the current price
range A company‘s product line may  Stretching Upwards
cover a certain range of the products  Two Way Stretching
offered within the industry as a
whole. This may cover the range of
price from the low to medium to high
price.
 Product Line Decisions
An example will be the Honda Accord, Honda
Civic, Honda City and Honda Jazz starting from
the highest price to the lowest price. However in
this range the ultra high and very low segment
are not covered. Stretching Down:
There are three ways to If the company adds a product, at a
stretch the product line: price point, below the Honda Jazz
 Stretching Down model it will mean a downwards
 Stretching Upwards stretching of the product line.
 Two Way Stretching
 Product Line Decisions
Many companies launch their products at the
upper price spectrum of the market and stretch
their product lines downwards.

They do this because: The problems associated with a downwards stretch are:

a. They try to respond to attacks to in their current a. The competition may counteract by entering the
upper price segment by launching a lower end upper price segment in which the company is.
product.
b. The company‘s sales channel – sales force and
b. They try and fill an empty price point before dealers may not be able to handle a low prices
competitors can do so. segment.

c. To increase the number of products for expanding c. The low end price products may eat into the sales of
their market share. products from the upper segment thus lowering the
sales of this segment.
d. To counter the attack from lower priced copies
being made by other manufacturers.
 Product Line Decisions
An example will be the Honda Accord, Honda
Civic, Honda City and Honda Jazz starting from
the highest price to the lowest price. However in
this range the ultra high and very low segment
are not covered. Stretching Upwards:
There are three ways to If the company adds a product above
stretch the product line: the Honda Accord then it would mean
 Stretching Down stretching upwards the product line.
 Stretching Upwards
 Two Way Stretching
 Product Line Decisions
The reasons for entering this are:

a. They are attracted to the higher The limitations of this strategy are that:
margins in the upper price segments.
a. The competition may respond by entering the
middle price category.
b. They want to create an image of
classiness for their company by this b. Company‘s existing customers may not believe
upper price product. that it is capable of creating upper price end products.

c. The company‘s sales force and distribution channel

c. They want to complete the range of may not be trained to handle the new product.
products offered by the company so as
d. Other companies may also be entering the upper
to tap all segments in the market. price segment.
 Product Line Decisions
An example will be the Honda Accord, Honda
Civic, Honda City and Honda Jazz starting from
the highest price to the lowest price. However in
this range the ultra high and very low segment
are not covered. Two-Way Stretch:
There are three ways to Sometimes companies that introduce
stretch the product line: products in the middle price ranges
 Stretching Down decide to stretch their products
 Stretching Upwards simultaneously in the lower and upper
 Two Way Stretching ranges. This is a two way stretch.
 Product Line Decisions
Some of the reasons for a two way
stretch of the product line are:

a. To target different markets at the The limitations of this strategy are that:
same time.
a. Some of the company‘s existing customers prefer
to buy company‘s cheaper products. Hence there is
b. To keep competition away from the a loss of sales to the existing product.
segments in which the company is.
b. Because now customers begin to look at new
products of the company they may compare them
c. To test how each market is at the with competitor‘s products and switch to new
same time. brands and thus be a loss of customers.

c. The sale of higher category products shifts to the

lower priced products.
 Marriott Hotel’s
Case
The Marriott Hotel group performed a two-way stretch of its hotel product line.
Along with the regular Marriott Hotel it added the Marriott Marquise line to serve
the upper end of the market, the Courtyard, Residence Inn and Fairfield to serve
the low-end of market.

Decision was to establish particular set of services in each segment of hotels to

mold the loyalty of customers in such a way that they would continue to stay with
the group no matter what price point of hotel they want to stay in.

Here the possible after effects are that price conscious customers may
soon discover the reasonably-priced rooms of the lower chain and tend
to move there.
Reasoning used for justification of the stretch: ―Marriott would rather capture its own customers
who move downward than passing them to competitor.
 Product Line Decisions
INCREASING PRODUCT
So if Honda has Honda City a base
New products can be introducedmodel and to this it adds an LX
in a product line in several model having more features than
ways:
2
Filling the product line:
the base model with a slightly
higher price and a DX model having
more features than the LX model
Unlike the Line stretching
with a price higher than the LX
where the new product is
model yet the price range remaining
introduced at another price
within the category pricing.
range category in product line
filling new products are added
This price of the DX model will be
to the existing product line
much lower than the price of the
 Product Line Decisions
INCREASING PRODUCT
Product line filling is done by companies
to:
Product line
filling is done It also helps the It also helps
Try to get It allows the
many times to
company to sell
company to in keeping
higher profits satisfy the give the
more products out
from a company‘s customer an
thus making a
dealers who
competitors
particular better utilisation
impression that
are constantly its range of from
product of the
asking for products is different
category. company‘s
newer
manufacturing
complete and segments.
products. comprehensive
resources.
.
 Product Line Decisions
INCREASING PRODUCT
New products can be introduced in a product line in
Product
severalline 3
modernization
ways:
Product Line Modernization involves a complete overhaul of the
product lines. Here the company undertakes the complete overhaul
of the product line and not by either product stretching or by
product filling.

This type of overhaul allows the company to take a comprehensive

view of the customers‘, markets, competitor‘s perspectives before
undertaking this change. This type of overhaul is not usual and is
 Product Line Decisions
PRODUCT CONTRIBUTION
Every product in a Product Line
makes a contribution to its sale
and profit. Some make a greater
contribution to the sales and
some to the profit.

For a company to modify, add or

This analysis is done by evaluating the contribution margin of a
delete a product in the product product – higher the contribution margin is (the lower variable costs
line they must analyze how the are as a percentage of total costs), faster the profits increase with
sales.
product is performing in terms
of sales and profit.
 Product Line Decisions
PRODUCT CONTRIBUTION
The Contribution margin analysis
Contribution margin is calculated as
allows an analysis of how growth in the product's price minus its total
sales will translate into growth in variable costs.
profits. This allows a manager to evaluate
what will be the breakeven point in
terms of sales for a particular
product.
This is also called an operating
leverage and measures how risky
(volatile) a company's operating
income is to changes in market
conditions.
Product Life
Cycle
 Product Life INTRODUC
TION
Cycle
This life cycle commences
from the time the product DECLINE GROWTH
is launched in the market
till the time it is ultimately
MATURITY
withdrawn from it.
 Product Life Cycle
Basics of the Product Life Cycle
(PLC)
INTRODUCTIO
N
In this phase the product is introduced in the INTRODUCTIO
market. N

The PRODUCT MANAGER HAS TO DECIDE

WHEN HE WANTS TO INTRODUCE THE DECLINE GROWTH
PRODUCT TO THE MARKET.

The timing of introduction is a critical decision MATURITY

 Product Life Cycle
Basics of the Product Life Cycle
(PLC)
INTRODUCTIO
N
Some of the key features of this stage are:
 Product category has recently been introduced into INTRODUCTIO
N
the market - consumers are unaware of the product.
 Proper capitalization is important.
 Industry sales are low, but growing.
 Industry profits are negative. DECLINE GROWTH
 Advertising usually tries to develop the primary
demand.
 Creating awareness and trial are common marketing
MATURITY
objectives.
 Sales promotion is used to trigger product trial.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

GROWTH MATURITY

In this stage the product is advertised

vigorously by the company and grows
This phase also witnesses the
rapidly in sales with more and more
customers coming to know about it and
introduction of competitor’s
beginning to try it. (followers) products who
have either developed a
This is an important stage where the similar product or find it
product is either accepted or rejected by the simple to copy the market
customer. leaders product make some
In this phase the company who is an
innovator or a market leader should changes and introduce it as their
expect to recover its costs of own product.
development by keeping margins
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

GROWTH MATURITY

Some of the key features of this stage are:

 Sales are rising rapidly.
 Profits appear, peak, and begin to decline just before the
end of the period.
 Profit possibilities attract competitors, but many competitors
will be ―shaken out‖ during this phase as well.
 Promotion shifts from primary to selective demand.
 Building market share is a common marketing objective.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY MATURITY

During this phase those Several strategies may need to be

customers from the total adopted. These may take several
target segment who are the forms like:
early majority begin to use  Reducing prices
the product.  Enhancing the value proposition of
their product
 Launching consumer schemes
In this phase the company  Enhancing Advertising
needs to put in a lot of  Increasing channel benefits
effort in order to maintain
growth in sales.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY Reducing prices MATURITY

Several strategies may need to be A reduced price means

adopted. These may take several
forms like: that the company’s
 Reducing prices margins come down
 Enhancing the value proposition of and so its ability to
their product
 Launching consumer schemes undertake other
 Enhancing Advertising activities in the market
 Increasing channel benefits
needed to promote the
product gets limited.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY Enhancing the value MATURITY

proposition of their
Several strategies may need to be product
adopted. These may take several
forms like: Thus the other way of
 Reducing prices benefiting a customer is to
 Enhancing the value proposition of provide him some features
their product that he may value and be
 Launching consumer schemes
 Enhancing Advertising willing to pay the additional
 Increasing channel benefits premium over the
competitor‘s product.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY Launching consumer schemes

MATURITY

Several strategies may need to be In order to stay ahead of

adopted. These may take several competition the company may
forms like: launch consumer schemes which
 Reducing prices gives a consumer the feeling of
 Enhancing the value proposition of getting a benefit without actually
their product reducing price for example in a
 Launching consumer schemes
 Enhancing Advertising shampoo a company brings in a
 Increasing channel benefits product that says ―additional
20% free.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY Enhancing Advertising MATURITY

Several strategies may need to be With the increased sales

adopted. These may take several
forms like: volumes the company begins
 Reducing prices to get enhanced revenues.
 Enhancing the value proposition of Increased advertising is used
their product
 Launching consumer schemes to increase reach within the
 Enhancing Advertising target segment and support
 Increasing channel benefits
the dropping rate of growth
in sales.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY Increasing channel MATURITY

benefits
Several strategies may need to be
adopted. These may take several
forms like: Several times the distribution
channel is in a position to push
 Reducing prices
 Enhancing the value proposition of
sales. The distributor has limited
their product resources and he would like to
 Launching consumer schemes maximize his returns. Thus he
 Enhancing Advertising
 Increasing channel benefits
will tend to push those products
that will fetch him the maximum
returns. In order to motivate the
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

MATURITY MATURITY

Some of the key features of this

 stage are:
Sales rise to their peak, then level off.  Diversify brand and models.
 Industry profits are in a slow decline.  Can be difficult to enter the market in
 Competition increases. this phase (capturing vs. retaining
 Promotional costs increase (selective demand), and share). It is easier to retain share than
sales promotion to trigger switching is more to capture share because for capturing
common (companies motivate customers to come a competitors share the company has
and change their old products with new ones) to spend some money, but in this
 Products become more homogenous, triggering phase profits margins are very tight.
price competition. Need to differentiate brand.  Efficiency is a key factor for staying
alive in this phase.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

DECLINE MATURITY

In this phase the late majority

and the stragglers of the total These people are not likely to experiment with
target segment are the likely a new technology and so they will wait for the
technology to stabilize and prices to come
consumers of the product.
down.

They will also not change their products or

brands easily and so in a way are a loyal part of
the company’s products and efforts should be
made to retain them.
 Product Life Cycle INTRODUCTIO
N

Basics of the Product Life Cycle

(PLC) DECLINE GROWTH

DECLINE MATURITY

Some of the key features of this stage are:

 Sales decrease.
 Profits decrease and eventually disappear.
 Declining numbers of competitors.
 Spend enough on promotion to retain hard core brand
loyal customers.
 Eliminate unprofitable outlets.
 Marketing objective: reduce costs and milk the brand, or
drop it.
 Product Life Cycle
Types of customers at different
stages
The product life cycle is closely linked to the type of
buyer. We will see that depending on the stage in
the products life cycle a certain type of buyer within
the total target segment of a company will be
predominant and will have a certain type of
mindset.

This influences the purchasing behavior and also

the product life cycle of the product.
 Product Life Cycle
Types of customers at different
stages
EARLY EARLY LATE
INNOVATO LAGGAR
RS
ADOPTER MAJORI MAJORI DS
S TY TY
 Product Life Cycle
Types of customers at different
stages
 Innovators are a very small part of the total
target audience but they are a very important
part.
 They the first individuals to adopt an
INNOVAT innovation or product and in a way prompt
the others to begin to use the product.
ORS  Innovators are willing to take risks in trying They are
out new products. a. Usually the youngest in age
 These types of buyers are predominant b. Belong to the highest social class
during the introduction of the product. c. Financially they are sound and have
significant surplus.
d. Are very social and keep abreast
with the latest products and
innovations.
 Product Life Cycle
Types of customers at different
 This category stages
of individuals is second
fastest to adopt an innovation and follow
the Innovators.
EARLY  They have a greatest influence on the
ADOPTER opinion amongst the others in the target
Like the innovators the Early adopters
segment.
S  Others look at them for their opinion of are
the product for adopting or not it. a. Typically younger in age,
b. Have a high social status,
c. Advanced education,
d. Are also financially sound and have
surplus
e. They are more socially forward than
late adopters
 Product Life Cycle
Types of customers at different
stages
 Individuals in this category adopt an
innovation after a varying degree of time.
EARLY  This time of adoption is significantly
longer than the innovators and early
MAJORI adopters.
 Early Majority tend to be slower in the The Early Majority have

TY adoption process.  Above average social status,

 They are influenced by the Early
adopters and are usually in contact
with them.
 This category also influences the
opinion of other categories of
adopters though to a lesser extent.
 Product Life Cycle
Types of customers at different
stages
 The Late Majority customers will enter
the market during the maturity phase of
the product life cycle.
LATE  Individuals in this category will adopt an
innovation after a large part of the
The Late Majority are
a. Generally suspicious of an
innovation or new product
MAJORI adopters have already adopted the
product.
b. Belong to a below average
social status,
TY  These individuals look at an innovation
or a new product with a high degree of
c. They do not have very much
financial surplus
suspicion about its effectiveness and d. They are in contact with
begin to use the product only after the others in late majority and
early majority,
majority of society has adopted the
e. They have very little opinion
innovation or product. leadership.
 Product Life Cycle
Types of customers at different
stages
 The Laggards enter the market near the
end of the maturity phase of during the
These individuals typically
a. Have an dislike for change of
decline phase of the PLC. any type and tend to resist
 They will wait for the product to be change.
LAGGAR absolutely tried and tested and for the
prices to have come down to the
b. They tend to be older in age.
c. These individuals in general
DS minimum.
 Individuals in this category are the last to
tend to be focused on
traditions
d. And they are at the lowest
adopt an innovation. Individuals in this social status and lowest
category show little to no opinion financial surplus
leadership. e. They are usually in contact
with only family and close
friends and exert very little to
no opinion leadership.
 PRELIM ACTIVITY #2 PRODUCT
LIFE CYCLE
INSTRUCTIONS: Create a product life
CRITERIA POINT VALUE
cycle of a chosen brand. Present your
work in class.
• Each student will look for a product
Content 20 points
they prefer. *phone/ newspaper/ radio
• Create a timeline/ cycle of this
product. (from its development, Completeness and
20 points
organization of ideas
introduction phase, growth phase,
maturity phase, and decline phase)
• Describe each phases. *ex. Creativity 10 points
production, promotion, marketing
strategies, pricing, customer type, Delivery and
20 points
presentation
profits, costing