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CENTRE (ALC )
DR.S.SHAJAHAN MBA , PhD, Marketing chair,IIMS & Head ALC, CEDNER, GOVT.OF INDIA
Copy right protected PERMISSIONS drss@iimshillong.in
OVERVIEW OF PRODUCT MANAGEMENT AND MARKETING MIX
The most popular 4 Ps' framework as suggested by McCarthy with the marketing mix variables -
Product, Place, Promotion and Price had originated from the study of the manufacturers - i.e. The
organisations engaged in production and marketing of goods - it is more oriented to deal with
goods marketing situations. However service characteristics are radically different from goods; and
so are the challenges in their marketing. It is wrong to imply that services are just like products
except for intangibility. But such wax-like logic as "apples are just like oranges, except for their
apple ness" does not stand the heat of nuts-and-bolts marketing. Product/ Service characteristics
add new dimensions to a marketing situation that is faced by the service manager. Given the
product/ service characteristics and activities in product/ service firms, Eight Ps framework for
services has been proposed. For the services . The additional prescribed Ps given below refers to
activities that are essential to meet the challenges posed by intangibility. Hence the product/ service
marketing mix can be summarised as follows:
For service additional 4 Ps were added for marketing services .They are:
People - Customer-provider relationship, training, culture, skills, attitudes.
Physical - Ambience, appearance, equipment, machines,
Evidence - buildings, physical facilities.
Process - Activity sequence, quality management, customer participation, and delivery
process.
Productivity - efficiency o f human and non-human capitals in the production process. But
our discussion limits only to the first four Ps.
3 PRODUCT MANAGEMENT
The term `product' is widely used to refer a market offering of any kind. In its broadest sense this
may be anything from the physical to the abstract - an idea or a moral issue. Generally, however,
most products are made up of a combination of physical elements and services. This is true in
services marketing, where the service offering can include tangible features, such as food in a
restaurant, or be a `pure' service, intangible in nature. A service product refers to an activity or
activities that a marketer offers to perform, which results in satisfaction of a need or want of
predetermined target customers. It is the offering of a firm in the form of activities that satisfy
needs such as hair styling done by a barber.
– Consumers will buy only what suits them. As consumers, we buy different kinds of
products and services to satisfy our various needs. We buy toothpaste, butter,
shaving cream, pen, scooter, ticket for the U.S.A and many other such items in our
daily life. As we understand, our decision to buy an item is based not only on its
tangible attributes but also on psychological attributes such as services, brand,
package, warranty, image, etc. Discussions about the marketing of goods apply
to services as well. Services have special characteristics that make them
different than products .
According to Alderson, W., "Product is a bundle of utilities consisting of various product features
and accompanying services, "According to Schwarte, D.J., "A product is something a firm markets
that will satisfy a personal want or fill a business or commercial need".
At the time of product planning, the marketer has to think about three types of benefits.
a. Core benefits : What does the product mean to the customer? For example, a car offers the
generic benefits of convenience in travelling.
b. Tangible benefits : Features, colour, design, quality, size, weight, durability, etc.
c. Augmented benefits : Company name, brand image, credit, packaging, repair / service
facilities, etc.
Most manufacturing and service businesses offer their customers a package, involving
delivery of not only the core product but a variety of service-related activities, too. Increasingly,
these services provide the differentiation that separates successful firms from the relatively
unsuccessful. Levitt described "the total product concept" This consists of a core, surrounded by
three concentric circles. The core, or generic product, is defined as the basic skills and resources
needed to play in the market. The inner band surrounding this core Levitt termed the expected
product, representing the customer's minimal expectations. It includes pricing, delivery, appearance
of facilities and personnel, personality of service people, and so forth. The next encircling band is
called the augmented product and includes further benefits, added to enhance the appeal of the
product; as the market becomes accustomed to specific augmentations, these may eventually
evolve into part of the expected product. For instance, Air India and Indian Airlines today feel
obliged to offer a frequent flyer programme and, for competitive reasons, many international
carriers have followed suit. Finally, the area included in the outermost concentric band, the
potential product, consists of everything potentially feasible to attract and hold customers, in
contrast to the "augmented product" which means everything that is already being done. One
shortcoming of Levitt's model is that it does not clearly distinguish between adding new elements
and improving performance on existing ones. In mature industries, the core product (which might
be either a physical good or a service) often becomes a commodity
5 PRODUCT CLASSIFICATIONS*
The nature of a product is found to have considerable impact on the method of product
positioning. There are two classes of products, consumer goods and industrial goods, and this
classification is useful in product positioning. The table given below shows the categories of
consumer and industrial goods. Marketers have traditionally classified products on the basis of three
characteristics : durability, tangibility and use. The following figure shows the product
classification:
Product Classification
a. Convenience goods : These are goods that the customer usually purchases frequently,
immediately and with a minimum of effort. Examples include soaps and newspapers.
Convenience goods can be further classified into three categories:
i. Staple goods : Consumer purchases on regular basis.
ii. Impulse goods : Consumer purchases without any planning or search effort.
iii. Emergency goods : Consumer purchases on urgent need.
b. Shopping goods : These are goods that the customer, in the process of selection and purchase
characteristically compares on such bases as suitability and quality. Examples : Furniture,
electrical appliances, etc.
c. Specialty goods : These are goods with unique characteristics or brand identification for
which a sufficient number of buyers are willing to make a special purchasing effort. For
example, cars.
d. Unsought goods : These are goods the consumer does not know about or does not normally
think of buying. The classic examples of known but unsought goods are life insurance.
a. Materials and parts : These are goods that enter the manufacturer's product completely. They
fall into two classes. Raw materials and manufactured materials and parts.
b. Capital items : These are long lasting goods that facilitate developing or managing the
finished product. They include two groups: installations and equipment.
c. Supplies and business services: These are short-listing goods and services that facilitate
developing or managing the finished product.
Product management in IT is radically different from the FMCG model. In India, typically
a product such as a PC is developed in the United States or elsewhere and is marketed here. Hence
only the sales of the product is emphasised upon. However with the so-called IT revolution, Indian
companies have realised the need to develop It products from scratch ideally suited for the Indian
market. The development of Indian language software has raised the consciousness that imported
or assembled IT products do not necessarily cater to the requirements of the average Indian
consumer.
Limitations on the part of the Indian consumer including the financial one have proved yet
again that companies have proved yet again that companies have to look inward in order to
successfully create a niche for themselves and that customisation is indeed the selling proposition
of he new millennium. The creation of any new product entails four basic activities - market
understanding, technology management, product planning and product development. The challenge
is to select the right product based on a company's strategy and then develop it to world-class
performance. Product development is at the heart of innovation, providing the capability to deliver
superior products or services to the market faster and more efficiently than the competition.
The technologies that form the foundation for successive projects, products and process
improvements are another issue in product planning and development. The challenge is to have the
correct and the best technology on hand or have access to it when needed. Success is based on
excellence in 5 areas - pipeline characterisation, broadened thinking, rigorous "how would I exploit
it" analyses, medium term focus and performance measurement. Leveraging IT for product
innovation to day is likely to bring significant improvements in efficiency, speed, cost and quality.
However many companies wrongly believe that if they build the IT capabilities, the benefits will
come and justify all costs.
At every step, companies need to address the design and use of the capabilities of IT
simultaneously and balance capabilities and benefits with costs and risks. A company that
understands its customers, its channels and its suppliers, and its competitors, has a superior
understanding of the market and can produce successful market-based innovations. The challenge
for a company is to build a capability that allows for the continuous creation and delivery of
"winners" to target markets. To improve market-understanding capabilities a company must build
an understanding of the market based on the customer's experience with the product. This is created
through the cycle of ownership, and creates a systematic process of inbound marketing to capture,
synthesize and disseminate market information. The company should also increase emphasis on
market-development activities including business models, pricing and channels. This can be a
complement to its existing product and technology development activities.
Imagine you as the CEO of a Software Company face the following situations in your business
a) New business is hard and slow to come by and even the existing orders are becoming
difficult to execute given the dipping (hourly rates).
b) Retaining Quality Employees has become almost a trial and challenge.
c) There is total lack of clarity on which kind of technology area will take off well.
d) Cash flow is taking a beating, and has literally dried out in recent times.
e) Visibility and hopes of an early economic and industrial recovery are rather low.
When this happens, it is possible to virtually solve most of these seemingly insurmountable
problems and troubles by focussing on Software Products. How so? Yes, you have a real
opportunity to create a sizable client base rapidly through products and in the process spawn many
allied revenue streams. A successful product-line can contribute towards making long-term success
and visibility a distinct reality. Ordinarily, if you wanted to develop a product, you must first
identify an application area with business potential and use the inputs from the domain experts. But
although you neither have the time nor the resources to take this route at this particular moment,
you need not feel despair. You can still get into product business and even quicker too, via a fast
track mechanism called Productization.
If, in the past, you had delivered a sound application that your customer liked immensely,
then you can now take that application and convert it into a product within a short time and enlarge
your installation base. Thus, by using your available code and the experience with this customer,
you can quickly create a new line of business. You now have the chance of getting new customers
whom you can tap for your development or services business as well. By addressing their other
requirements, you can build a solid domain expertise that will come very handy in developing new
products with faster development cycles and thereby generate enough of revenues. This experience
and learning will also be hugely beneficial in developing and launching new products for the
market. Most of these do not call for heavy investment but only a change in one's entrepreneurial
attitude and a solid commitment to the concept of software products.
In this context, it is relevant to mention that stabilizing the existing code is very important
and vital because supporting many customers is exponentially more expensive compared to just
one customer and the support expenses can even ultimately dwarf and shave off the revenues if not
handled properly.
Benefits of Productization
a. Getting to the market fast. You can steal the First Mover Advantage from other players who
are building products from ground up.
b. You have a Valuable Reference Site from Day One and this will help in reducing the
Product Development and Sales Cycle substantially and even sizably increase the
realization from the Sale.
c. By showcasing your development capabilities through the product, you can increase your
organization's credibility in the eyes of the new Customers and this can lead you to new
development opportunities in those companies, which in the normal course would not be
available to you.
d. You can build new Income Streams such as maintenance, integration with other existing
applications in addition to selling licenses and implementing the Product.
e. You can test the local market at a little cost and based on favourable feedback. You can
more to overseas markets faster than ever before.
f. With a leaner development team you can build a high value business almost instantly.
9 FACTORS TO BE CONSIDERED IN ORGANISING FOR PRODUCT MANAGEMENT
In assessing the product manager's performance the following checklist can be used:
What is a Product?
• what you buy, that satisfies what you want to be able to do
• it can be “good feeling” cause you bought some cosmetics and someone said you looked
pretty
• it could be a happy stomach cause you bought a meal that tasted great
• it could be easier homework cause you bought new software for your computer
• Most customers think about product in terms of the total satisfaction …”
• this can lead to statements such as “we don’t sell cars, we sell safety ! “
• we don’t sell houses, we sell homes
Product Line
• A series of related products
• a group of products that are physically similar in performance, use or features and
intended for a similar market
• “… a set of products that are closely related …”
• shoes Nike, Adidas, Reebok, Fila, new balance, British knight, brooks, converse,
vans, Asic, puma
notebooks Toshiba, NEC, TI, Compaq, IBM, DELL
• Apple, HP, Hitachi, Mitsubishi, Matsushita,
Cannibalization
• Situation involving one product taking sales from another offering in a product line
• Cannibalization occurs when sales of a new product cut into (reduce) the sales of a
firm’s existing products
Different Classes
• Convenience goods and services
• things consumer wants to buy frequently
• minimum effort, low risk
• small amount of money, not much times
three types
1. Staples
- bought routinely
2. Impulse products
- unplanned purchases
3. Emergency products
- bought immediately
• Shopping goods and services
• “stuff” people buy after they “shop & compare”
• they have the time to compare prices
• Homogenous - stuff that is the same
simply pick the lowest price
e.g. Condensed milk,
• Heterogeneous - stuff that is different, so the customer will take time to
compare features and prices
- “some retailers carry competing brands”
• Speciality goods and services
• jewellery, special clothing
• special entertainment
• “Willingness to search, not extent of searching, makes it a specialty
product”
• if people are willing to look and look at different products, before they
commit, it is a specialty item
• Unsought
• things people don’t want to buy, but have to e.g. Auto insurance, funeral
plan
• the only way to sell this is to convince people of the benefit because the
average person does not easily see the benefit.
Classifying Industrial Products
1 Installations - major assets, factories, and heavy machinery
2. Accessory Equipment - used in production
- short-lived items e.g. tools
3. Raw Materials
4. Component Parts and Materials - finished units which, when assembled, make the complete
product
5. Maintenance, Supplies (MRO Items)
- maintenance,- cleaning fluids
6. Professional Services
- accounting firms, law firms
12 Brand management
Many consumer products, besides their basic features, need attractive packaging and a `brand name'.
A brand is a symbol or a mark that helps a customer in instant recall, differentiating it thereby roam
the competing products of a similar nature
What is a brand? Too often even marketing professionals don't have an answer, and too many
have their 'own' answer. Which makes life very confusing! We've trawled through our resources
to find some of the best definitions: The Dictionary of Business and Management defines a brand
Asia name, sign or symbol used to identify items or services of the seller(s) and to differentiate
them from goods of competitors
Signs and symbols are part of what a brand is, but to us this is a very incomplete
definition.Walter Landor, one of the greats of the advertising industry, said:"simply put, a brand
is a promise. By identifying and authenticating a product or service it delivers a pledge of
satisfaction and quality. In his book, 'Building Strong Brands' David Aaker suggests the brand is
a 'mental box' and gives a definition of brand equity as:"a set of assets (or liabilities) linked to a
brand's name and symbol that adds to (or subtracts from) the value provided by a product or
service. According to the American marketing association, "A brand name is a part of a brand
consisting of a word, letter, group of words or letters to identify the goods or services of a seller or a
group of sellers and to differentiate them from those of the competitors". David Ogilvy defined a
brand as `the consumer's idea of a product'. This is an important point, brands are not necessarily
positive!Building from this idea of a 'mental box' a more poetic definition might be:These are all
great definitions, but we believe the best is this:A brand is a collection of perceptions in the mind
of the consumer.A brand is the most valuable real-estate in the world, a corner of the consumer's
mind".Why is it best? Well, first of all it is easy to remember, which is always useful! But it is
also best because it works to remind us of some key points:
1. This definition makes it absolutely clear that a brand is very different from a product or
service. A brand is intangible and exists in the mind of the consumer.
This definition helps us understand the idea of brand loyalty and the 'loyalty ladder'. Different
people have different perceptions of a product or service, which places them at different points
on the loyalty ladder. A brand mark is a symbol or a design used for the purpose of identification.
For example : Air India's MAHARAJA.The legal version of a brand mark is the `trade mark' e.g.,
Ashok Masala and Good Health Atta. A brand is given legal protection from being used by others
because it is capable of exclusive approbation. A brand distinguishes a product or service from
similar offerings on the basis of names are : LUX, LIRIL, REXONA, EVITA, PROTEX,
HAMAM, and LE SANSI in case of toilet soaps; SURF, ARIEL and NIRMA in case of detergents
and NIVEA, FEM, OIL OF OLEY, CHARMIS and VASELINE in case of vanishing creams
Brands provide a strong competitive advantage to the companies owning them and hence
they are increasingly becoming important tradable assets. In 193, coca-cola paid about Rs.175 crore
to buy Thums-up, limca, citra and gold spot brands. In 1994 Godrej soaps paid Rs.12 crore to
acquire the Rs.67 crore translectra (maker of goodknight mosquito repellent). In 1995, Smithkline
Beecham paid Rs.42 crore to acquire the Crocin brand from Duphar Interfan. In 1997, Knoll
Pharma sold Coldarin and Burnol for Rs.34 crore Ranbaxy paid Rs.80 crore to Gufic Labs for Mox,
Zole Excel and Suprimox. In 1997, Hindustan Lever paid Rs.110 crore for Lakme's basket of
brands and only Rs.29 crore for Lakme's two plants. In 1999 Marico industries bought Parachute
and Suffola brands from Bombay oil industries for Rs.30 crore. The Gramophone company of India
acquired Sangeetha, a leading audio producer of classical and devotional songs in the South.
Acquiring a brand is a better, superior option over purchasing the entire operations of the company
owning them for 3 reasons. The buyer buys only the brand name. The brand name could be used
to sell anything which comes under the established brand personality. For example, the Burnol
brand name could be used to sell an antiseptic like Dettol. Buying a brand provides a ready-made
market, Apparently, Ranbaxy bought Mox because its own brand in the same family, Amoxycillin
was not doing too well. Buying a brand saves a lot of brand building time and cost. Drug
companies are known to recoup the cost of acquiring a brand in less than four years.
13 Packaging
Earlier, packaging was considered a major expense in marketing. For some toiletries,
packaging costs actually exceeded the costs of contents. Today, it is however, fully recognised that
packaging helps in branding and promoting brand loyalty. It also enables the buyers to handle and
carry their products with case. Moreover, packaging may cut marketing costs thus adding to profit.
b. Colour
Colour is an important factor for determining customer acceptance or rejection of a product.
The use of right colours in packaging may help marketers reap huge advantage. Packaging
colour should be attractive so that it may help promote sales.
14. REFERENCE
1 RAMANUJ MAJUMDAR, "Product Management in India", Prentice Hall of India (P) Ltd. New Delhi - 1.
2. EDGAR. A. PESSEMIER, "Product Management Strategy and Organization", John Wiley and Sons, Hamilton
Publication.
3. KOTLER,PHILIP,Marketing management,11 th edition,Prentice Hall of India(p) ltd,New
Delhi 2002
4 S.SHAJAHAN, New Product Strategy and Management -Text and Cases, , Himalaya
Publishing House(P) ltd, Mumbai, 2002
5. S.SHAJAHAN, Relationship marketing -Text and Cases, Mc Graw- Hill, New Delhi,
6. WILLIAM L. MOORE AND EDGAR A Pessemier, "Product Planning, Planning and Management", McGraw Hill,
INC, Publication.
7 PHILIP MARVIN, "Product Planning Simplified", American Management Association INC New York.
8. CADY, JOHN F.L, BUZZELL AND RICHARD D., "Strategic Marketing", Boston, MA: Little, Brown &
Company, 1986
9. S.SHAJAHAN, Services Marketing - Text & Cases, 2nd Edition, Himalaya Publishing
House(P) LTD, Mumbai