Product, Services and Branding Strategies New Product development and Product Life cycle strategies

CHAPTER 8 + 9

Product, Services and Branding Strategies       

New Product development and Product Life cycle strategies

þ   Product:

A product is anything that you can offer to a market for attention, acquisition, use, or consumption. The category "products" includes not just tangible goods, but also intangibles like services (air travel), persons (politicians or movie stars), places (vacation destinations), ideas (capitalism or human rights), or some combination of these. It could be:

• Physical Objects: Soap, Salt, Tooth Brush etc.
• Services: Transport, Tourism, Banking etc.
• Events: ICC cricket match, Olympics.
• Persons: Nelson Mandela, Amitabh Bachhan or Tom Cruise.
• Places: Saint-martin Island, Switzerland. 
• Organizations: Red Cross, Body Shop etc.
• Ideas: Human rights, Tree plantation, Family Planning, HIV awareness etc.
• Combinations of the above: Restaurant, Air Lines etc.

þ   Levels of product:

In addition to the horizontal product-service continuum, marketers also conceive of products through a system of concentric levels. Consider the following illustration:

a)      Core product: the basic good or service the consumer wants. In practice, however, the core is not what the consumer actually perceives and buys. What is the buyer really buying?

b)     Actual product: the core plus the characteristics marketers add to it to make it more attractive. It includes features, design, quality, packaging etc.

c)      Augmented Product: are the extra benefits around the core benefit and actual product by offering additional customer service and benefits etc.

þ   Product Classifications:

Marketers further classify actual and augmented products. The two most basic classifications are consumer and industrial products.

1.      Consumer products:

Products purchased by consumers for their personal consumption are called consumer products. See table 8.1 (page: 235)

a)      Convenience Product:

Consumer products are those products that the customer usually buys frequently, immediately and with a minimum of comparison and buying effort.

·         Customer Buying Behavior: Buy frequently & immediately

·         Price: Low priced

·         Promotion: Mass advertising

·         Distribution: Wide spread distribution. Many purchase locations

·         Examples: i.e. Candy, newspapers

b)     Shopping Product:

Consumer product that the customer in process of selection and purchase characteristically compares on such bases as suitability, quality, price and style.

·         Customer Buying Behavior: Less frequent & much planning.

·         Price: Relatively higher price.

·         Promotion: Advertising and personal selling by both producer and distributor.

·         Distribution: Selective distribution in fewer outlets.

·         Examples: i.e. Television, furniture etc.

c)      Specialty Product:

Consumer product with unique characteristics or brand identification for which significant group of buyers is willing to make a special purchase effort.

·         Customer Buying Behavior: Strong brand preference and loyalty, special purchase effort.

·         Price: High price.

·         Promotion: More targeted Advertising and personal selling by both producer and distributor.

·         Distribution: Excusive distribution in only one or very few outlets.

·         Examples: i.e. Luxurious goods like Rolex watch, Mercedes car, crystal clear diamond etc.

d)     Unsought Product:

Consumer product that the consumer either does not know about or knows about but does not normally think of buying.

·         Customer Buying Behavior: Little product knowledge.

·         Price: Varies.

·         Promotion: Aggressive Advertising and personal selling by both producer and distributor.

·         Distribution: Varies.

·         Examples: i.e. Life insurance policy, Red Cross blood donations.

2. Industrial products:

If a consumer buys a stereo to play music in her home, she’s purchased the stereo as a consumer product. If, however, she buys the stereo to provide music for patrons of her restaurant, she has bought the stereo as an industrial product.

Industrial products include materials and parts, which, in turn, include raw materials (wheat and cotton), manufactured materials (steel and cable), and parts (computer chips and tires). Industrial products also include capital items (buildings, large factory equipment, tools, and office furnishings) and supplies and services (lubricants, paper, and cleaning supplies).

þ   Individual Product Decisions:

In an effort to create successful products, marketers consider carefully the characteristics they assign to each product.

 1. Product attributes:

Consumers will not buy a product unless they understand the benefits the product will afford them. Accordingly, marketers must work hard to define the attributes of the product, including quality, features, and design.

1.1 Product quality:

Product quality is an important factor. Product quality involves the dimensions of performance level and consistency. Performance: will work properly. Consistency: Defect free product.

1.2 Product features:

Just as important as product quality are product features. A product can appear with any number of features. Company can create higher level models by adding more features.

1.3 Product style and design:

Marketers also give much thought to product design. Good design can not only make a product look attractive, it can also improve performance and cut production costs.

2. Branding:

Just as frequently, marketers position products according to their brands. Consumers respond powerfully to the symbolism of brands, their responses shaping the conclusions they reach about quality and value. A name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those competitors.

3. Packaging

Packaging may include one or all of the following: the primary container (like toothpaste tube or cereal box), the secondary package (like the box in which you buy the toothpaste), and the shipping package in which the product arrives at the stores (the large cardboard boxes that carry 100 units of the toothpaste). Increased competition has forced marketers to use packaging to communicate the benefits of the product. For example, not only does the tube of Crest toothpaste proclaim the product’s ability to fight tarter; the box and shipping package do so as well. Companies can gain advantages over their competitors through innovative packaging.

4. Labeling

Labels are just as important to marketing as packages. Labels can range from simple tags attached to the merchandise to complicated graphics emblazoned on the package. They should at least perform the function of identifying the product or brand, but marketers often use them to promote its benefits and to describe the product. (i.e. where it came from, when it was made, and what its contents)

5. Support services

Along with brands, packages, and labels, marketers use support services to promote their products. Product support services are the services that augment an actual product, adding value to the total offer. A frequent example in this series of lectures is the computer companies Micron and Dell. In addition to first-rate hardware and software, these firms offer excellent technical support. Customers with problems can consult a Web site or call an 800 number and speak with a polite, knowledgeable member of the support staff. As competition in virtually every market increases, more and more companies are using service as way to lure customers away from their rivals.

þ   New-Product Development Strategy:

In order to compete effectively in their markets, companies must regularly offer consumers new products. One way they can do so is by acquiring companies, patents, or licenses, which allow them to add pre-existing products or brands to their product lines. The other way — the way that concerns here — is new-product development (NPD), the process of researching and developing original product-ideas, improvements or modifications to current products, or new brands.

New Product Development: The development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts.

1.      Idea Generation: The systematic search for new products.

a)      Internal Sources.

b)     External Sources.

2.      Idea Screening: Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible.

3.      Concept Development and Testing: A detailed version of the new product idea stated in meaningful consumer terms.

4.      Marketing Strategy Development: Designing an initial marketing strategy for a new product based on the product concept.

5.      Business Analysis: A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

6.      Product Development: Developing the product concept into physical product in order to ensure that the product idea can be turned into a workable product.

7.      Test Marketing: The stages of new product development in which the product and marketing program are tested in more realistic market settings.

a)      Standard Test Market.

b)     Controlled Test Market.

c)      Simulated Test Market.

8.      Commercialization: Introducing a new product into market.

þ   Product Life-Cycle Strategies

PLC consists of five stages: product development i.e. introduction, growth, maturity, and decline. As the figure below suggests each of these stages yield different levels of sales and profit:

Not all products follow this cycle. Some die soon after introduction, while others enjoy maturity for years, decline slightly, then bouncing back into a new phase of growth.

SEE TABLE: 8.2 for further clarifications.

þ     Brand:

˜    Brand equity:

Brand equity is the relative power a brand possesses in its market. Brands with high equity enjoy the loyalty of consumers. Coke and Pepsi, for example, have developed astonishingly high brand equity.

˜    Brand name selection:

In order to achieve strong brand equity, companies devote considerable time and energy to selecting brand names. A successful brand typically tells the consumer something unique about the product (Rolex); is easy to pronounce, recognize, and remember (Omega watches); is distinctive (Titan); translates easily into foreign languages (Credence watches).

˜    Brand sponsor:

Once the company has selected the brand name it must decide what sort of sponsorship it will give the brand. Companies that both manufacture and sell their own products generally stamp those products with their manufacturer’s brand. Many familiar products, like General Mills cereals and Microsoft softwares, are manufacturer’s brands. To compete with manufacturers’ brands, retailers, such as Sears and Wal-Mart, often create their own private brands. Rather than create original brands, some companies license brand names developed by other businesses. A company with an established brand name might try co-branding, placing its brand with that of another firm on the same product.

˜    Brand strategy:

As a company develops a brand, it must choose the strategy with which to introduce it. The brand could be a line extension—that is, an item such as a new flavor or package size added to an established product line under the same brand name. A brand could also be a brand extension, a new or modified product launched under a successful brand name. A company may also practice multibranding, by adding a new brand to the same category of products. Each of these strategies shares a common danger like Cannibalisation.

Companies can avoid this danger by launching an entirely new brand, which they can do through their own ingenuity or by acquiring a new company.

þ   Service:

Services are a special type of product that does not involve ownership of anything. Common services include activities (travel or meeting-planning), benefits (banking or insurance), or support services (such as after-sales service for other products).

þ   Marketing strategies for service firms:

Internal Marketing:  Internal marketing — training and motivating its employees to interact with customers effectively.

Interactive Marketing: To ensure that employees achieve such interactions, service companies must pursue interactive marketing as well, managing the encounters between employees and customers.