Product Management

PRODUCT
AGEMENT
s. A.
CHUNAWALLA
B.Com. (Hons.), D.Pharma, M.B.A.

Communication Consultant,
Benzer, Borivali (W), Mumbai - 400 103.
chunawalla@yahoo.com
Revised Edition: 2009
Hal
Gflimalaya GpublishingGfIouse
MUMBAI NEW DELHI NAGPUR BANGALORE HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM
AUTHOR, 2009
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CONTENTS
1 - 17
I.
Product: Basic Concepts
2.
Marketing Environment for Product and Brand Management
18 - 29
3.
Product Planning
30 - 51
4.
Product Market Strategies for Leaders, Challengers, Followers
52 - 60
5.
Product Life Cycle and Market Evolution
61- 88
6.
New Products: Planning and Development
7.
The Creative Spark
125 - 140
8.
Designing the Offer
141- 156
9.
Pricing the Offer
157 - 167
10.
Concept and Product Testing
168 -178
1I.
Test Marketing
179 - 189
12.
Budgeting for Products
190 - 193
13.
Branding Decisions
194 - 200
14.
The Anatomy of a Brand
201- 204
15.
Brand Culture and Brand Retuals
205 - 208
16.
Leveraging Brands
209 - 211
17.
Brand Equity
212 - 229
18.
Brand Building
230 - 242
19.
Product and Brand Failures
243 - 250
20.
Marketing Organisation
251- 258
2l.
Packaging
259 - 265
22.
Consumer Protection
266 - 267
23.
Case Studies
268 - 338
Bibliography
339
89 - 124
"This page is Intentionally Left Blank"
PRODUCT: BASIC CONCEPTS

What is a Product?
A product is any want-satisfying attribute a consumer receives in exchange. The product benefits could
be physical as weI! as psychological. Formerly, products were whatthe factories made. These days products
are what the consumer wants. The definition of product is constantly expanding. It includes more than a mere
bundle of benefits.
Let us consider one simple example. A consumer buys a CD player. Does he buy justa plastic box with
an electronic circuitry? The answer is an emphatic 'no.' He is, in fact, buying a means to his recreation. Just
a want satisfying attribute! There are other benefits our buyer is seeking from the CD player.
Special functions like access from any point on CD, auto-start, auto-stop, an FM radio, karaoke,
etc.
Brand name like Philips or Sony, and a retail outlet like Rhythm House or Akbqrallys.
Guaranteeandlorwarranty.
Salesman's explanation, installation service, acceptance of credit cards or tie-up with a financial
institution for easy credit, say with Countrywide.
Image of the manufacturer and brand, reputation of the retailer..
After-sale-service back-up.
The amount of importance attached to the above aspects make a consumer view each product offering
differently. Though the same product may be offered by an ordinary retailer and a reputed store like
Akbarallys, the attributes of a product changes critically for the consumer. The following figure illustrates what
a product is made up of:
Product Management
PHYSICAL ATTRIBUTES
ff
~
SPECIAL FEATURES
BRAND IMAGE
-----:
INTANGIBLE OR
/
PSYCHOLOGICAL BENEFITS
BRAND
GUARANTEElWARRANTY
tI ~
PRODUCT SERVICES AND AFTER-SALES-SERVICE

SAFETY
Fig. 1.1 Components of a Product
The concept of the product becomes very simple to understand in terms of what the buyers buy. Perhaps
there is a difference between what the marketers sell and what the buyers buy. The marketers are engineeringoriented and neglect the psychological benefits the product offers.
One thing more. Products can both be goods and services, or any combination of the two. Services
are intangible, and have no physical attributes, e.g., hair-dressing, solicitor's counselling, medical assistance.
Need Satisfaction
There lived a king once who preferred carpets to walk on. Several employees just rolled and unrolled
carpets wherever the king went walking. This was tedious as well as expensive. One day, a young gentleman
walked into the palace with just two pieces of carpet, each measuring 10 x 4 inches. He requested the king
to extend his leg. He tied one piece of carpetto each leg foot. Now the king had a carpet under his feet wherever
he went. This bypassed the tedious and costly carpet laying activity followed earlier. This man was creative.
He identified a need, and satisfied it by a suitable product. He thus invented shoes. Creative traits can be
learnt by suitable training.
Product Classification
Products are classified on the basis of consumer buying behaviour and their attitudes. Products are
classified just like markets. Product marketing is facilitated when products are kept in homogeneous groups.
One way to classify products is to group them based on ultimate users. We thus have consumer products
purchased for use by households and the ultimate users. On the other hand, we have industrial products
which help in producing other products or in rendering services. Office chair is a consumer product when you
buy it for using at home. It is an industrial product when used in a cinema hall. Product classification help
us in developing suitable marketing programmes. Each category is further classified, e.g., fast moving
consumer goods (FMCG) and consumer durables.
Classification of Consumer Products
Logically, classification of consumer products should be based upon their behaviour. However, all
consumers do not behave the same way. For instance, one consumer needs instant lights to be used in
emergencies of power failure. He immediately rushes to Akbarallys and gets one for him. There is another
consumer who takes a long time to take this decision. He visits Crawford Market, Heera Panna, Asiatic, In
Orbit mall and such other shopping areas to select the right product. He evaluates the available set of
products, and then buys one which gives him the greatest value. Thus it is obvious that a product can be slotted'
so easily on the basis of buyer behaviour. This makes it necessary to develop suitable marketing programmes
for different segments of the market.
Traditionally, consumer products are put into three categories - convenience products, s{lopping
products and speciality products. Convenience products are bought with ease, and without consuming any
time. A person purchasing instant lights immediately from Akbarallys is an example of convenience goods.
Milk and vegetables are examples of convenience goods. Food products and newspapers also belong to this
class. We put Coke and Pepsi and ice-creams in this category. The point is that we spend just a pittance to
have these products. Therefore, no extensive shopping is needed. Besides, most of the consumers have high
knowledge aboutthese products. Therefore, hunting for them is not necessary. Convenience goods are just
commodities for the consumer, and he does not show a very high amount of brand loyalty. He substitutes
one product for another, if the former is not available. Distribution is, therefore, the critical element in the
marketing of convenience products. The product must be available locally whenever it is needed. Otherwise,
the sale is lost. This means thatthese product need intensive distribution. We know Pepsi is available in India
at paan shops. grocery shops, general stores, departmental stores, super-bazars, petrol pumps,.restaurants,
hotels, stadium of sports, vending machines andjust at an unimaginable number of outlets everywhere. The
onus of promoting convenience products lies on the manufacturer. The retailer carries so many competitive
brands, and is not interested in pushing just a particular product. He is, in fact, indifferent to the brand the
consumer buys.
Shoppingproducts are purchased only when the consumer considers factors like price, quality and style
and visits several outlets before deciding to buy. The consumer seeks information because he does not know
much about the product. These products are not purchased regularly. They are priced higher than the
convenience products. Though visibility is high, there is minimum brand loyalty. Clothing, furniture,
household appliances, motor-cars, home repair items are familiar examples of shopping goods. A consumer
who moves around searching for instant lights is buying a shopping good.
It is not necessary to have intensive distribution for shopping products. Here the consumer is prepared
to move around. The only point is that the product'inust be available at one outlet out of several to be visited
by the consumer.
Promotion plays a vital role since the consumer seeks extensive information about the product. Price
is critical specially for close competitive products. The consumer may substitute a higher-priced product with
a lower-priced one if other things remain equal.
Speciality products are those products for which there are no reasonable substitutes. These have unique.
characteristics or strong brand identification. Consumers take lot of pain to buy these products. Expensive
music systems, expensive cameras, designer clothes, fashionable restaurants, prestigious cars are examples
of speciality products. The brand loyalty is high. The consumers are willing to pay a high price.
As consumers demand a product by brand name, distribution is less important than itis for convenience
and shopping goods. The product is available ata few select outlets. Advertising informs the consumer about
the availability of the product. The promotional budget is shared by the manufacturer and the retailer.
Product Management: Meaning and Definition
Product, place, promotion and price are the four 'P's of marketing. Product management encompasses
the whole range of activities pertaining to product planning and management. In product planning. we include
the basic corporate plan and marketing plan from which the product plan emerges. In the product plan, we
consider product strategies like product line length, product line depth, line stretching, both upwards and
downwards. Product plan not only considers the existing products, but also considers the introduction of new
products right from concept to commissioning. Product management also considers product life cycle, and
strategies followed at each stage of the life cycle. Product plan is implemented through a marketing or product
organisation, and is supported by a suitable budget. Product planning's new product management covers
the entire spectrum of marketing management like pricing, promotion, distribution of new products. Slowly
products are raised from the commodity status to brand status, which are then built over a period of time
so as estabiish a bond with the consumer.
Product Management
Product management is thus that part ofmarketing management which concerns with product planning
and development and is now extended to brand building and management.
Objectives of Product Management
Products are the bed -rock of any organisation. Sales are realised through sales of the products. Thus
the overall success of the organisation is dependent upon the planning and development of products. Product
management thus tries to achieve the following objectives:
PRODUCT
LIFE CYCLE
Fig. 1.2 Scope of Product Management
(i) To design product strategies with respect to customer, industry and competition analysis.
(ii) To spot marketing opportunities, and to see whether they are exploitable.
(iii) To seek growth through new product development.
(iv) To plan strategies for each stage of product life cycle.
(v) To generate new product ideas, and develop them further.
(vi) To consolidate existing product profile. To do portfolio analysis. To improve and modify existing
products. To introduce brand extensions and line extensions.
(vii) To identify the brand identity, build a brand image, position a brand, build a brand, to develop
brand equity and measure it.

All the above objectives are made consistent with the overall marketing and corporate objectives of the
organisation.
Product Line and Product Mix
We use the term product line andproduct mix while describing the product offerings of an organisation.
A product line is a group of closely related products offered by an organisation. Thus washing machines is
a product line of Videocon. TVs form another product line for Videocon. Product mix consists of all the
individual products available through the organisation. Product mix may have several product lines, and each
product line several product models, styles, sizes.
Breadth ofproduct mix is given by a number of product lines it markets. Some companies market just
one or two product lines, and hence their product mix is narrow. A company like General Electric operates
in diverse fields, and has broad product mix. Each product mix has a depth, which is given by models, colours,
sizes available in each individual product lines. A pharmaceutical company has a product line of antibiotics.
It has several dosage forms - capsules, dispersible tablets for children, vaginal suppositories, injections, ear
drops, eye drops and syrups under the dosage form. It has several package sizes. The company has several
brands of antibiotics, and each brand has several dosage forms and sizes. We can say that its product mix
has depth. On the contrary, a few products, in one size only as one brand is an example of a shallow product
depth.
The product lines offered are related to company's strategic plan and marketing plan. It considers the
segmentation of the market and targeting. If an organisation wishes to target young children, it can add a
whole new product line for it. New product lines are either a matter of internal development or can be acquired.
Each product line also can be expanded. This has been discussed in the text thatfollows. The important idea
is that the product line of a company reflects the objectives of the organisation, the targeting decided upon
and the buyer behaviour in a given market.
Modifying Existing Product Lines
We have a number of reasons to alter either an existing product or a product line. The reasons could
be to support the marketing strategy, to improve sales, to improve profits, to expand market share. We can
also consider what the product as such contributes to the product portfolio. We can modify a product line
by altering either one or more than one of the following attributes:
(1) Composition of the product line
(2) Expansion or contraction of product line
(3) Value addition process
(4) Brand
(5) Packaging
(6) Physical characteristics
(7) Positioning
The first two attributes are relevant to a set of products in the product line. The rest are relevantto either
individual products or product lines.
Composition of the Product Line
We can change the composition by altering individual products in a product line. Individual products
can be offered in different styles. The characteristics of the individual products can be changed. The
accessories or options can be changed. The price may be revised. A garment manufacturer can change the
composition of its product line by switching emphasis from the ethnic wear to western outfits. A car
manufacturer can make certain features like auto operation of doors and AC optional instead of a
standardised product for all. A trouser shop might alter the composition of its product line by emphasising
Rs. 400 and Rs. 300 trousers, instead of Rs. 200 and Rs. 100 trousers.
Expanding and Reducing the Product Line
There are many models of TV available. There is a large variety of radio sets from Philips. Lovable bras
are available in a number of styles. Syrups and crushes are available in many flavours, e.g., Rasna
concentrates and Mala's crushes. There are technical products with higher and lesser sophistication.
We find many product categories where consumers prefer to have a great variety for their satisfaction.
Product Management
Marketers adopt here a strategy of adding new versions with new specifications , while retaining the old versions
for the less sophisticated consumers. Sometimes this addition of new products to existing line is done to
include complementary products, e.g., a tooth-paste marketer may add toothbrushes to the product line.
Camel may introduce paint-brushes which go well with its water-colours.
Sometimes, there are occasions to delete a product/products from the line. A product which shows
decline in terms of sales may be abandoned. Non-contributing products may be eliminated. While doing so,
it should be seen that other products in the product line are not affected.
Value Addition
An organisation converts raw materials into finished products, and this conversion process is a process
of adding value to the products. A food processor who sells simply flour may start selling a ready-mix of idlis
and dhoklas. It is an instance of value addition. Bombay Dyeing starts ready-to-wear shirts instead of plain
textiles. Many companies make their products more convenient to use. They thus add value forme consumer.
A phone manufacturer starts with corded phone, adds cordless phones to its line, and finally puts cellular
phones in the market.
Mere sales promotion is not helpful in retaining customers. What is needed is the addition of value on
a continuous basis. Subroto Sengupta, lIM, Calcutta recognises four routes to value addition. The first is to
add functional value, for example, photo cards, picture cards, and global cards have added functional value
to StanChart's credit card business. Secondly, we have to reward the frequent users. Thus Amex has
membership rewards programme and Shoppers' Stop gives FCC points to its regular customers. Even gifts
of buckets to regular Surf users is a reward. The third route to value addition is personalised marketing through
database information. Lastly, service can be added to the brand. Itpersonalises the brand for the customer.
Human touch is an important element of any service.
Brand
A company puts its products under a specific brand name, say Bata. While putting the same products
through retail network not owned by it, it puts another brand name BSC. Similarly, we have Carona shoes
and CSC shoes.
Packaging
Package can be changed functionally, e.g., Pepsi is now available in cans and PET bottles. Packaging
communication can be changed. Red Hit and Black Hit packages are meant for different insects, are for
cockroaches and for flies and other insects. Sachets have revolutionized shampoo marketing. They are
convenient single-dose products available at low prices. Detergents are now available in sachets.
Physical Characteristics
Hair oils which are greasy generally can be made non-greasy like Hair & Care. Surf has moved forward
by introduCing Surf Ultra with enzymes and Surf Excel. Fashion designers introduce their fall (autumm)
collection and summer collection.
Positioning
This is an important way to change a product line. Here the positioning of one or more products forming
that product line is changed. Marlboro cigarettes is a classic example. It was an effeminate product but was
converted into a macho product. Baby shampoo can be positioned for adults too. Copper deo-spray from
Baccarose is positioned for men. Cadbury chocolates are not just for kids. They have been positioned for
grown-ups too. A change in positioning is brought about mostly by a change in communication strategy.
Sometimes distribution too is changed, but real positioning means change in the product and its packaging
too.
Product Line Length
What should be the optimum length of a product line? A line is too long if after eliminating a product,
it results into increased profits. A line is too' short when any addition to it results into increased profits.
Company's overall objectives do affect the length ofits product line. For instance, a company may have
the objective of expanding its market share. It will then have a longer product line. Contribution of individual
products to profits may be ignored. However, a company whose objective is to have larger profits will have
a shorter product line consisting of those items which contribute to profits substantially.
Product lines have a tendency to lengthen over a period of time. Many a time, a firm may have extra
capacity which is used for developing new items. Sales people and trade put pressure on management to keep
on <l.dding items to a product line so as to satisfy their customers.
Lengthening of the line shoot up costs. At some point, this must come to halt. Loss making items are
then eliminated. The contribution of items to profits is studied. Thus in the life of an organisation, there is
a cycle of longer product line followed by a pruned product line. This cycle is repeated again and again.
Line Stretching
Each company has a range of products in its existing product line, e.g., Videocon has a range ofTVs
in its product line, right from budget TVs to premium TVs. Une stretching occurs when this range is
lengthened. The stretching could be upward, downward or both ways.
Upward Stretch
Here a company operates in the lower end of the market. By upward stretch, it proposes to enter the
higher end. Perhaps, itis motivated by higher margin of profits, higher growth rate or a position of a full-range
marketer. This decision has its own risks. A well-established high end marketer might assault the stretcher
by stretching downwards. Besides, it is a question of credibility of a lower-end marketer- whether he will
be able to produce high-quality products. There is one more risk. The existing infrastructure of a low-end
marketer may not be competent to deal with the high-end market.
Downward Stretch
Many companies start with high-end products, but later stretch downwards by adding low-priced
products. The down-end products are advertised heavily so as to pull customers to the whole line on the basis
of price. Videocon advertises its budget line 14" inches TV at Rs. 8,000. Once the customer is pulled, he may
decide to buy a higher priced model- he trades up. This strategy needs careful handling. The budget brand
being promoted should not dilute the overall brand image. Besides, the budget brand must be available.
Consumers should not get a feeling that they were hooked to a bait, for switching later.
Downward stretch is practised in the following situations:
(i) A competitor stretches upward and challenges the marketer. He counter-attacks him by stretching
downwards.
(ii) Most companies start at the upper end, and then roll downwards.
(iii) The high-end market has a slow growth rate.
(iu) By filling the gap at the low-end, new competition is avoided.
Downward stretch has its own risks. The down-end item might cannibalize the high-end items. Besides,
our downward stretch might provoke a competitor to move upward. Down-end product may not be managed
properly as the company may not have that capacity. It may dilute the brand image of the company's
- products. It is, however, needs careful consideration - a product line should not have a gap at the lowerend. It exposes the company to competition, e.g., American car companies faced the competition from smallsized, Japanese cars at the lower-end of the market.
Product Management
Two-Way Stretch
Several companies serve the middle-end market. They can stretch their product line in both the
directions. A hotel company operating hotels in the comfort category where each room has a tariff of Rs.
2000-3000 a day might decide to have elite upper-end hotels with' tariffs ofRs. 5000-7000 a day and lowerend budget hotels with tariffs of Rs. 600-1500 a day. Ashoka group of ITC has thus elite 5-Star hotels, at
the upper-end comfort hotels atthe middle-end and budget hotels like Ashoka Yatri Niwas atthe lower-end.
Caselet
Till the eighties, marketing specialists believed that it was easier for a brand to forge at top end first.
P & G did so when it introduced Ariel detergent at twice the price of HLL's Surf. Once the brand name was
established, economical products like green Ariel and the washing bar were introduced in the market.
But in the nineties, a new theory challenged the downward stretch in brand building. After several
decades of being low-priced brand Lifebuoy soap moved upwards by becoming Lifebuoy Gold and
Lifebuoy liquid soap.
Managing New Product Opportunities
We classify the opportunities to develop new products in terms of product categories and brand names.
What matters is whether the product falls within an existing category or in a new category. Similarly, it is
important to know whether its brand name is old or new. The following matrix shows four possible
alternatives.
PRODUCT CATEGORY
NEW
EXISTING
NEW
NEW
PRODUCT
FLANKER
BRAND
EXISTING
FRANCHISE
LINE
EXTENSION
EXTENSION
~
z
Cl
gj
Fig. 1.3 Classification of Opportunities
When both the product category and the brand name are new, it is treated as a new product. Children's
disposable diapers came as new category. The brand name chosen by P & G was Pampers. Thus it became
a new product. Sometimes, the product assumes a new brand name but falls within an existing product
category. It is called a flanker brand. Line extensions use an existing brand name and a product that is
changed for the better, say, flavour, or size or model. Titan watches are a good example of line extensions.
The product line of Titan is continuously expanded by introducing new models. Franchise 'extension is
introduction of an existing brand name in a new product category. Thus IBM associated with computer enters
the photocopierfield. The use of a familiar brand name reduces the amount of investment in the new category
for promotion and marketing. However, the new item must be perceived just like the perception of the existing
brand.
A marketing plan determines how the organisation and its product-mix can advance from its present
position to a desired position in future, and describes the strategies to facilitate this journey and spells out
the deployment of resources for the desired results. Diagrammatically, a marketing plan is:
Present Situation,
Brand, Competitiveness 1-_ _ _S_t_ra_t_e_g_ie_s_ _ _ _~.1 Future Position
Trends, Opportunities,
Resource Allocation
Brand Objectives
Threats
Fig. 1.4 Marketing Plan
A market plan influences product offer which creates value and marketing support needed to deliver
the created value.
Value Creation
While buying a product, a consumer wants value for his money (VFM). The concept of value is
fundamental to the product and brand management. Value is the worth of the product in the mind of the
consumer. The consumer considers the net value which is the excess of total customer value given by a product
over the total customer cost. The consumer compares the net values of different competitive products.
Value is created by combining several elements. To illustrate, product value is given by its performance,
reliability, longevity and special characteristics. Service value represents a beauty treatment unavailable
elsewhere, lower interest rates, express sanctioning of loans for credit card-holders. Personal values like the
speed with which a response is given also count. The image value associates a product with symbols and
facilitators that surround a product. A Yamaha mobike is a powerful, glamourous machine for the stylish
youngman.
Value is what the buyers are willing to pay for. The price paid by the buyer, the time cost, the energy
cost which may result into economy in use and the psychic cost constitute the total customer cost. Philip Kotler
calls the value over cost a derived customer value.
I Product value:
I Service Value I
Total Customer Value
I Personal value:
I Image Value
! Customer Derived value!
l Monetary Price I
Time Cost
I Energy Cost
Total Customer Cost
PsychiC Cost!
Fig. 1.5 Customer Derived Value
If the products or brands offer a bundle of benefits from which customers derive far greater value than
the total cost they incur to receive those benefits, we say products or brands have created value for the
customer. Benefits can be tangible or non-tangible, emotional or rational. Brands or products which have
derived customer value.create value for the company too.
Moore and Pessemier consider value creation as a four-step process where (1) The value opportunity
is identified. (2) The value opportunity is developed by engineering, technical, R&D, marketing and
Product Management
10
managerial personnel. (3) The value is produced and (4) The value is added by marketing support. The first
two steps are conceptual and managerial and the last two are executional. The efficiency with which these
steps are carried out will determine the value retention to the stakeholders.
Fig. 1.6 Value Creation
Bruce D. Henderson, the founder of BeG feels that strategy in essence means a big idea that allows
a company to differentiate its offering from those of the competitors so as to deliver superior value to the
customer.
Core Values
It is difficult to identify core values of a brand out of several values it possesses. This is so because a
brand does not remain static, but evolves over a period of time. Is it correct to view a brand as if it has frozen
in time? To identify the core values, we have to consider the several different dimensions of the brand. To
illustrate, we can consider brand associations- what comes to our mind when we think of the brand. Further
we can consider brand's performance, the occasions and situations when it is used, and its logical extensions
etc. What runs as a common thread through all these dimensions is the core value of that brand. It is an area
of data intersection. If we identify these values correctly, they travel with the brand even if it is placed in a
different product category. Nirma cleans and is strong enough detergent. These values are, however, not core
values. Nirma's core value is reasonable quality at affordable price.
Brand Values
We have to define our brand values accurately. Candies are sold on fun value, but they should
precisely know what kind of fun they espouse. It could be cerebral fun (Polo) or slapstick variety of humour
(Googly) or blunt humour (Mint-O) or active humour of a sports person (Centre Fresh). Enduring brand
values are unique to the brand. Thus all food products hover around taste. Then it is a matter of
communication. Ufe-style brands find it difficult to define their brand values. Between smoothness and
strength, with price variable intervening, there are several cigarette brands. Premium cigarettes are further
sold on various degrees of sophistication. A brand may intersect several values. Nestle now wants to make
Nescafe more than mere coffee; to make it a life-style product that creates "social openness, tolerance and
receptivity to new kinds of experiences."
Value of a Brand
An authentic brand, according to Kotler, marries a value proposition to a value delivery system. This
is in essence brand value. Nestle in Europe runs Nes Stops on highways. Here one can give a baby a nappy
change, a wash and a feed. It is Nestle's way of delivering value. Its message is we want to help you use
what you buy from us.
Core Value
Core value is a brand's way of telling us 'why buy me.' In other words, it amounts to stating t:1e brand
proposition - the key benefit the brand delivers to the customer. This brings clarity and focus to the brand.
Core value is the driving force of the brand. We can call it the value driver. Biotique's driver is rejuvenation.
After articulating this value driver, Biotique can go beyond skin care, and can diversify into weight reduction,
health ... every area that benefits from rejuvenation. Value driver is an over-riding value that will extend to
every product a company makes, every action of that company and its every communication. But it does
not mean that just because a value driver suggests its extendability, a company should diversify necessarily.
According to Rama Bijapurkar, it is like climbing a mountain because it is there. We have to consider while
diversifying factors such as market attractiveness and our ability to compete. Britannia has not articulated
its value driver, but has unwittingly chosen health as its value driver. They are delivering health through
their biscuits - though it is an unspoken commitment. But people sense it. They, therefore, accept its cheese,
t:)
11
butter and milk. Value drivers make us think beyond the woolly descriptions of the brand. Subroto Sengupta
calls us to distinguish between 'the fluff and functionality of brands.' Brand personality is just the wrapping
it has around it, but its core value driver is the benefit inside the wrapping.
Universal Terminal Values
Milton Rokeach, a psyhologist, has identified 18 terminal values or desired end-states that determine
how people like to live their lives. These include leading an exciting life, a sense of accomplishment, freedom,
happiness, inner harmony and social recognition. Brands use these values to further consumer's life-goals.
Brands shift focus from being product-centric to goal - or value-centric. Though consumers change over
a period of time, the goals endure. It is, therefore, smarter to appropriate these universal terminal values.
Industrialisation of Personalized Service
Booze, Allen and Hamiton's journal carries an article by Kolesar, Ryzin and Cutler where they suggest
seven principles of creating customer value:
Principle 1: Know your customer. Tailor your service. Foresee his needs. Simplify the processes.
PrinCiple 2: Eliminate or minimise the number of hands required to complete a transaction.
Principle 3: Promote value enhancing self-servicing.
Principle 4: Offer a service package.
Principle 5: Let the customers design the product.
Principle 6: Deliver the service competently.
Principle 7: Build long-term customer relationship.
A brand may have a hierarchy of attributes, benefits and values. Thus what a brand stands for is stated
by the attribute (I ama floor cleaner). It then attempts rationalisation by giving rational benefits - I kill germs
in nooks, and corners. It can evolve further and provide emotional benefit - With me, your family is safe
from diseases. Ultimately, a brand puts itself on a high pedestal- I care and protect you. Thus from concrete
attributes and benefits, the brand has evolved into an abstraction - it has become exalted. We have to
understand at what stage the core value of the brand in question right now is to work for a sustainable value
forthe consumer.
Competitive advantage grows out of product value created for buyers which is above the organisation's
cost to create it. Core values do give competitive advantage but does it contribute to hold in the face of
changed marketing environment? Similarly, as markets develop and consumers evolve, what was considered
unique till yesterday may become commonplace today. Even cultural shifts do change the core values.
Which items offer superior value? They offer the same value as competitive items at lower prices. Or
they provide unique benefits that more than offset a higher price or premium. Sometimes these premiums
go beyond their intrinsic worth, say consumers pay a higher price for a Van Heusen shirt than any other ready
made shirt. We can also consider the premium products of Johnson and Johnson.
Once brand values are created, we can save on marketing expenditure. Though advertising support to
products like Aspro and Anacin is practically zero, the brands still survive.
Brand becomes a cash generating asset when endowed with values. It wards off competition by creating
brand loyalty based on strong emotions. A switch-over then leaves scars on the consumer psyche, which he
wants to avoid. Is it easy to snatch a bottle-feeding mother away from Amul formula milk? Orfor that matter,
a new mother from the Johnson's product range?
Core values of the brand and the relationship it builds with the consumer are easy to defend.
Competition finds it difficult to reach this level, it takes a long time. The more unique a brand is in terms of
its soul, the better it is protected from the onslaught of competition.
12
Product Management
Products and brands have core values and other values and both must complement and supplement
each other. Moreover, value creation must be delivered to the customer by a suitable business system.
Distinctive Competence
How a firm can provide superior value on a continuous basis? It is because of the firm's unique
capability which is difficult to copy - such a capability is called distinctive competence. A firm has to set
a strategic goal that it will develop a capability that enables itto provide superior value on a continuous basis.
Why do values of productlbrands differ? Different organisations have different manpower profile in
terms of skills. Besides, the resources of different firms also are not the same. As we have observed, the values
created must be delivered to the customers by a business system. Such business systems and their
management create a crucial difference. The overall marketing orientation of the firm and its technological
capability may also differ.
What makes a business system? The system groups all those activities which are carried out to produce,
sell and service what it makes. The activities are converted into meaningful tasks like R&D, human resource
management, marketing, finance etc. The follOWing diagram gives a typical business system.
Suppliers
Operations I - - -........~
EJ.
Sales, Distribution
and Promotion
---.
ervlces
Fig. 1.7 A Typical Business System
Suppliers
Are our sources of raw materials. We must have a plan of vendor selection,
vendor development and vendor evaluation. It is also an important decision
what we shall make and what we shall buy from outside.
Operations
Process the raw materials into finished products. The facilities, location,
planning, scale differfrom firm to firm. Operations are integrated to quality.
They can be automated.
New Product Development
Here there is interface of technical, marketing and finance people with a

view to developing new products. The interaction amongst the team, the
degree of innovativeness and the emphasis on pure or applied research differ
from firm to firm.
Distribution
Takes the products and services through a channel to the final consumers.
The channel may have several intermediaries.
Sales and Promotion
Facilitate the whole process. There are differences in the promotion mix and
the promotion budget amongst firms.
Service
Covers applications, installation and maintenance. Some services are

offered prior to sale and some post sale. The availability and the level and
the efficiency to services differ from firm to firm.
The business system can be represented as a value chain: The traditional physical process sequence
follows the following stages:
13
Sales, Use
and Services
Sell the Product
Design
Fig. 1.B Business System as a Value Chain
At any stage in the business system we can create value. McKinsey and Co. has developed the Total
Value Proposition. In the Value Delivery Sequence, the marketers first identify the value they can deliver, and
then proceed to provide that value through product and service development, sourcing and manufacturing,
distribution and servicing and by pricing the products/services rightly. Lastly, the total value is communicated
by the sales force, sales promotions and advertising. The following diagram illustrates this value chain:
Customer
Segmentalion
Focus
Marke
Selection
COMMUNICATE THE VALUE
PROVIDE THE VALUE
CHOOSE THE VALUE
Value
Proposition
Product
Development
Service
Development
Pricing
Sourcing
and
Manufacturing
Distribution Sales
and
tFOrce
Servicing
Sales
Promolion
Advert lising
The Pysical Process Sequence is thus modified to the Value Delivery Sequence to ensure maximum
value addition. This approach is vastly different from positioning and USP which are just one dimension of
the total value, especially at communication stage. The above value chain is the traditional design-to-enduser chain. It may break up in future. Each link may grow into a self-contained value chain. These chains
will grow new industries around themselves. In computer industry, we have two distinct chains -the software
chain and the hardware chain. These are two distinct industries. The critical element in the software chain
is the operating system module, dominated by Microsoft, the corresponding critical element in the hardware
chain is the IC, dominated by Intel (I, Celeron, II, III and IV). These two busi-nesses have little in common,
apart from perhaps a common customer in the form of a computer manufacturer. In future, both Microsoft
and Intel may find their own activities becoming a complete value chain, rather than just a link of their
respective industries. Industry must try to identify the most profitable part of the value chain so as to pioneer
it into a new sub-value chain.
Videocon washing machines add value to their products by providing prompt and efficient after-sales
repair service. Value creation can happen at any stage. Bajaj Electrical gets its products manufactured at
other plants, but still it is one of the most reliable marketers of electrical products. Computer firms like
Microsoft ofthe legendary Bill Gates provide value that lies in computing power by bridging the gap between
its software and the available hardware. We have to study our business system to identify those sections which
can add most value and those that incur heaviest costs. It is wrong to believe that most value is added by
manufacturing operations.
Right Value Proposition
Value proposition has three dimensions - product leadership, operational excellence and customer
intimacy. According to Philip Kotler, these three lead to different customer advantages - best product, best
total cost and best total solutions, respectively. The focus on anyone dimension out of these three depends
on the customer category. GE's aerospace engineering division focuses on product leadership, large
appliances division on operational excellence and plastics division on customer intimacy. Though a company
chooses to be the best on one dimension, it has to be adequate in the rest and keep improving on the best,
and be more adequate at the rest.
Pursuing these dimensions may not lead to contradications. The future is for prod ucts that will resolve
these contradictions. Product offering should not be this or that, but this and that. Gortex is a fabric that
has the comfort and breatheability of cotton, but is waterproof.
Product Management
14
Classical marketing advocated brand building, with a USP added, and fortifying this by having a good
marketing mix. Kotler feels this is now under attack. A brand has now an extended identity that goes beyond
its core identity. It should capture a value proposition, and be a basis of relationship. A brand must be
supported by a value delivery system.
Value-oriented marketing is all about your brands delivering what they promise, nothing short, whatever
they promise.
A brand is not just a name. It is a bundle of values, which it has to deliver. Merely an image of a slogan
may not capture the whole brand. What remained central to the brand is its value management for the
customer. A brand is a promise built around some capabilities an organisation has. The values we offershould
be stronger and superior to those by the competitors.
Brands are not built only by advertising, though advertising goes a long way in communicating what
the brand stands for. It makes no sense to over-depend on advertising to build a brand.
Instead of one single benefit which the USP captures, the tendency today is to work out a value
proposition encompassing a set of benefits.
Value in the ultimate analysis is a ratio between what the consumer receives and what he gives up. It
is in a nut-shell a cost-benefit analysis for a product.
Positioning today is reduced to mere sloganising or inventing words to describe our brand. We tend to
forget the large value proposition. This proposition is to be delivered. It needs sl!itable organisational
architecture.
According to Kotler, value propositions a.re built on three value disciplines for the company - product
leadership, operational excellence and customer intimacy. Product leadership leads to best product value
proposition. Here performance or experience with the product matters a lot. Operational excellence leads to
the best total cost proposition. Perhaps our services, prices and product reliability are unsurpassable.
Customer intimacy discipline leads to the total best solution. Here the specific problem of the customers is
identified and its best solution is offered, which then can be implemented. GEshows product leadership in
aerospace engineering, operational excellence in large appliances and customer intimacy in plastics.
A brand is so builtthat it commands a premium, which could be between 30-70 per cent, but can come
down to 15-20 per cent in a highly competitive environment. A brand that commands no premium is likely
to fall into the commodity trap.
These days some brands are just owned, and marketed, but are not manufactured. They are
manufactured by the organisations who have the spare capacity. In future, such separation between owning
the brands and manufacturing facilities is likely to increase.
Traditional Manufacturing-Selling Sequence
Manufacture
Product
Design
-+
Procure---.. Produce ~ Price - . Sell

it
Raw
the
Materials
Produce
Selling
-.
Promote --.- Distribute----+- Provide

it
it
Services
In the above model, a product is produced on the basis of its design by procuring raw materials, which
are processed using labour, machines so as to produce an output. The output so produced is sold by pricing,
selling, promoting, distributing and offering post-sale services. The value delivery model replaces this
traditional model.
15
Identify the Value

Segment
Customers
Target a
Selected
Segment
Value
Position
the Product
Create the Value

Product
and Service
Development
Pricing
Distribution
Including
Make or Buy
Decisions
Communicate the Value

Personal
Selling
Advertising
Sales
Promotion
In the value-delivery model, values are chosen, created and communicated.

Entertainment as Customer Value
We are aware that the functional benefits alone are not adequate to differentiate the products, and
so companies go beyond them and provide differentiation in terms of efficient business processes,
convenience, higher interactivity, custom-made offerings, creation of imagery and so on. Thus a brand's core
values are woven around both the tangible and intangible features. This is done in a way better than our
competitors. But even here the same set of tangible and intangible features get duplicated over a period of
time by all the competitors. Most of the offerings then provide 'nothing special'. They are banal.
We have to excite our customers by creating unique brand experience, in the absence of which there would
be just price competition.
A customer today wants recreation, amusement, surprise, indulgence and entertainment.
An offering with the existing bundle of features is OK; but over and above that a customers wants
entertainment as an additional value.
There is a realisation that the process of acquisition of the product has the potential to create value,
and hence his shopping experience matters as much as the consumption experience. Retail stores are
therefore, designed as theme parks. More product categories would take this route. An academcian will have
to mind his theoretical rigour, but at the same time this does not obviate the need to put his students in a
right frame of mind while doing so. Entertainment content is becoming a key differentiatorfor many sectors
such as banking, fast food, media, books, supermarkets, travel and so on. Entertainment must be accounted
for at the product design stage itself. We have to consider the points of customer interface such as service
centres, helplines, communications, distribution outlets, websites and so on. Our attempt should be to invest
the communication with entertainment and extend itto the process of acquisition. Agreed, a lot of research
will be necessary to decide the course to be taken. We can learn from entertainment industry itself quite a
few lessons.
Innovativeness: To What Degree?
If we construct a scale of innovativeness, at one end we can put an existing product which we just
emulate, making it a me-too product and atthe other end a complete technological breakthrough which did
not exist so far, e.g., a transistor, nylon, teflon, TV etc. In between these two extremes, there are a number
of innovations consisting of incremental changes in product or service or in the way it is produced. It means
these are either product innovations or process innovations. Large number of innovations are incremental,
and the overall impact of them put together is much more than a technological breakthrough. However, such
incremental innovations on a continuous basis are punctuated by occasional revolutionary products or major
innovations. A major innovation creates an altogether new industry or a new market. They also change the
way the things are done so far. Manual composing in days prior to DTP took a long time but book publishing
took a quantum jump as soon as computer composing came on the scene. It is, however, necessary to
continue minor improvements even on a major innovation to ensure continued success.
Product Management
16
Bell Labs
When, in 1947, Bell Labs invented the transistor, they started a revolution that would completly
transform the information and communication world. Their other innovations are the Laser, the
Communications Satellite, Touch-tone dialling and Lightwave Communication Systems. They have now put
Inferno, a new network operating system; Elemedia software delivering high quality speech, music and video
via Internet and Truewave, a high quality fibre. They are currently working on Digital Signal Processing,
Lightwave Photonics, Next Generation Silicon chips and Wireless Communications. These revolutionary
products of Bell Labs are brought to the world by Lucent Technologies, earlier known as AT & T.
US, National Science Foundation (NSF) study on technological growth of Asian nations infers that
India is technologically uncompetitive. Asian high-tech nations are grouped in three classes(1) Industrially advanced Japan.
(2) Newly Industralised Economies (NIEs) like Hong Kong, Singapore, South Korea and Taiwan.
(3) Emerging Asian Economies (EAEs) like China, India, Indonesia and Malaysia.
An indicator of nation's innovativeness is patenting. Domestic inventors patent, and this shows
productivity in science and technology. Patenting by outsiders show attractiveness of nation's market for
innovations. Patenting activity is lowest in India. As compared to 2500 patents awarded in Taiwan in 1990
India awarded about 2000 patents only. It has now increased to about 4000 patents. NIEs showed a healthy
patent growth. Amongst EAEs, China is the leader in patents.
Managerial Challenge
To introduce new products on a continuous basis is a challenging task. There is an inherent resistance
to change, and organisations tend to maintain status quo, and are indifferent to fresh ideas. The more
successful amongst them are more reluctant to pay attention to new ideas. A shock that shakes a person or
a sense of dissatisfaction with what exists makes a person sensitive to new ideas. The environmental change
that threatens might make us open to new ways of doing things. Minor changes, however, do not wake us
from our slumber. Well-placed individuals with stable jobs, and insulated nature of jobs also make us pay
less attention to new ideas. When a person faces problem customers and problem situations he is compelled
to shake off his stupor, and pay attention. Of course, he needs time to do so. In the absence of time, he Just
develops stress.
Viable new ideas must be put into circulation. This is facilitated by properfunding and a team. Team
members must be responsible for the whole innovation, rather than their own specialised task. The team
should have good awareness of the environment. It is necessary not only to innovate but also to convert that
innovation into a competitive advantage. Business history is replete with examples of organisations which
innovated but failed to convert these innovations into a sustainable competitive advantage. This is valid
especially with reference to European business history. EMI (UK) pioneered advances in TV and computers,
but remained restricted to music business only. Philips pioneered so many innovations in consumer
electronics, say the audio cassette, the CD and VCRs. But it lagged behind. Perhaps, innovations by their
very nature are costly and uncertain. They may not be profitable despite being technically feasible. It is difficult
to manage the process of innovation. Lastly, the rewards of innnovation are difficult to appropriate. It requires
managerial strategy to convert an innovation into a competitive advantage.
Dr. Hamel who is considered to be the most influential business thinker according to Wall StreetJoumal
contends in his latest book that long term success for the companies stems more from the way they are
managed than from their strategy or products.
3M's axiom is 'products belong to the division, but technologies belong to the company.'
17
Internal Marketing
We promise so many things to our consumers through marketing communications. But do our
employees understand what we are communicating? Are they supporting these? Or are they working at crosspurposes? Our employees should connect emotionally to the products and services. They should understand
the power of the brand. HR may not be best equipped to communicate internally. Marketing might be involved
once in a while. Butthe emphasis is on what we are doing. They should be sold ideas. Principles of advertising
are equally applicable to internal communications. Employees should better understand the brand vision.
When a company seizes opportunity to market internally in the context of challenges it is facing, it channelizes
people in the desired direction. A petroleum company can reposition it as energy company. It has to do
internal branding first. Change in leadership also provides an opportunity for internal re-branding. But this
should not be overdone, or else the employees feel they are flooded with communications unrelated to their
departments. There should be a consistency between messages sent across externally and messages directed
inwards. Mostly these are unmatched. It becomes so confusing. Sometimes, advertising is created to cater
to both the external and internal audiences. Yes, the external message can be a step ahead of the internal
reality. It acts as an incentive for the employees.
+++
MARKETINGENWRONMENTFOR
PRODUCT AND BRAND MANAGEMENT
India is on the threshold of a new millennium. India chose to integrate her to global economy exposing
herselfto winds of change in the marketplace, which has expanded vastly and become fiercely competitive.
In the changed environment, decision makers view the marketing concept as the key to success. Marketing
in practice has to manage products, pricing, promotion and distribution. Product management covers the
whole gamut of product planning and product development by itself covers new product development, right
from concept to commissioning. These products are branded to raise them from commodity status to a
distinct identity. The brands are positioned along key attributes. Brands have an image and a personality.
Managers must build these brands over a period of time to develop brand equity. Brand equity can be
evaluated.
Thus the entire area of product management is a fascinating one in the overall marketing management
function. In the basic marketing paper in the foundation courses, we study how marketing decisions are taken
in marketing environment consisting of several factors like demographic, technological, economic, legal,
social and cultural. We shall not discuss these in the present text, but would like to make you familiar with
some aspects of the overall environment that have bearing on product management.
India is a part of the Asian consumer market. Let us, therefore, first discuss the broad profile of this
market.
Asia Pacific - a Region in Transition
The 19th century belonged to the U.K., and the 20th century to the US. But this century is unlikely to
be ruled by a single dominant power. Britain owed its dominant position to the Industrial Revolution.
In the last century , the first half had three major players - the US, West Germany and the UK. In the second
19
half, the US had the economic field all to herself because of the destruction caused by World War II.
In this century, we have three contenders for leadership - Japan, Europe and the US.
After the World War, Asian countries have received greater importance -Japan, South Korea, Hong
Kong, Singapore, Taiwan followed by Malaysia, Thailand and Indonesia. They are allleading exporters. The
Republic of China has also taken a quantum jump after introducing economic reforms.
The Pacific has thus become the world's leading trading zone. Asia is the mega-market of this century.
There is a sweeping transformation of the economic environment. There is no longer any Iron Curtain.
The Western Europe has integrated. NAFfA is in place between the US, Canada and Mexico. All this has
brought two continental economies closer. There is borderless movement of goods, persons, services and
capital. China and India - two large markets- have begun their march towards liberalization. They are
expected to achieve the status of superpowers in the near future.
India started her reform process in 1991. This covers industrial, trade and financial sectors. Indian
business hos been mostly delicensed. Directforeign investment is encouraged up to 51 per cent. State sector
has started shrinking. The process of disinvestment has begun. Trade is market-oriented. Currency is partially
convertible. Several items have been decanalised. Financial sectorreforms have allowed private banks and
insurance companies. Price control has been lifted from sugar and petroleum products. Interest rates are being
slashed. Private capital is welcome even in infrastructure sector. Far-reaching changes are taking place in
China too. IT has become a system of worldw.ide network. Technological changes are fast occurring. But
social changes must keep pace with these. A radical change in work ethos and management culture is called
for. Companies must profeSSionalize. Organisations must change to adapt to the changing environment.
A unified Asia Pacific region can be fashioned out of all Asian countries. It is just a matter of time.
Asian Consumer Market
When we use the word Asian consumer, we use it as a shorthand. The fact is that Asia is too diverse
a collection of countries where commonalities are very little. Geographically, the positioning is the Chinese
countries and the South-east Asian countries. The demographic and psychographic characteristics of the
population are very different. In this part of the world, on one hand we have giant countries like China and
small city states like Singapore. When we compare and contrast these countries, we get a better understanding
of them. The Chinese-dominated countries such as Singapore, Taiwan, Thailand have many commonalities.
There are some striking contradictions. The size does not indicate the consumer power in Asia. The mosaic
of composite culture is crucial to understand Asia.
China is the most populous, over a billion, and India is close to a billion mark. Singapore's population
is just 30 lacs, and Hong Kong's 60 lacs. Malaysia is predominantly Muslim, and Philippines Roman Catholic.
Thailand is Buddhist. China has a variety of religions, some very old, and some modem.
Its socialist ethos has given it an atheist bias.
Urbanisation in China is less than 30 per cent whereas in Vietnam it is 70 per cent rural. Singapore,
Hong Kong and Taiwan are urban societies. Thailand is 80 per cent rural, and Philippines 69 per cent. Rural
countries are poorer, and some like Malaysia are relatively rich with 51 per cent rural population.
China is a communist economy, which is opening up its market. Taiwan and Singapore are
democracies. Vietnam is also communist. Indonesia is in turmoil and shows a pro-democracy movement.
South Korea is in turmoil, and is going liberal. Hong Kong was handed over to China in 1997. Macao will
be freed at the end of this century, thus ending European colonisation in Asia.
Hong Kong and Singapore, income wise compare favourably with the western nations. An average
Singaporean earns US $ 24000 and an average American US $ 26000. South Korea has per capita average
income of US $ 11000. China is, however, poor and the average earnings are US $ 530.
20
Product Management
In countries like China, Indonesia, the Philippines and Vietnam, a large population survives on just US $ 2
per day.
All these countries have a middle-class which shows healthy growth. But what constitutes a middle class
depends upon the nation. Besides, sometimes it is difficult to draw lines constituting middle-class. There is
no common middle class. Their characteristics are unique for each country.
The economic bases are also diverse. Hong Kong and Singapore are financial and services-based
economies. Indonesia is rich in minerals. The engine of growth in many countries is the industrial sector, but
this sector differs in each country. Malaysia has good IT industry, whereas South Korea is in steel population
and shipping.
China has attracted the highest investment of multi-nationals. Specialised industries are penetrating
different countries, e.g., Scotch whisky has entered Taiwan.
Asia can be studied in components, and each of these components requires a specific marketing
programme.
China is following one economy, two systems principle. She has to cope with pro-democracy
movement. The Tibet issue also surfaces time and again. China has travelled from the Mao's Revolutionary
days to the dignity Deng accorded to richness. China has to resolve the rift between the rural poor and the
urban rich. Indonesia has seen ethnic violence recently. Burma is a dictatorship. There are several border
disputes in Indo-China. Narcotics trade and rampant plagiarism affect the bilateral and multi-lateral
agreements.
Consumer market has begun to emerge. Economies are opening up. Trade wars are hotting up.
Consumer markets are becoming increasingly competitive. Credit facilities have catalysed the consumer
market. There is greater access to goods and services. Credit cards have given a boost to consumerspending.
It is essential to understand the characteristics of these markets before venturing out here for marketing.
We shall now consider the tremendous potential of the Asian market.

Tremendous Potential of the Asian Market
Growth rates across South Asia average 6 per cent per annum, way ahead of the West. China in fact
continues to grow at 9 per cent per year.
This growth has spawned a huge middle class with high disposable incomes ready to be spent on almost
every category of consumer goods.
Hong Kong, Taiwan, Singapore, Thailand and Indonesia have become large markets for every kind
of product - from Mercedes cars to Rolex watches and from Channel suits to Louis Vuition luggage.
There are many more millions who follow these in China, Korea and India. The number of households
earning over $ 18000 per annum will double between now and 2000 ($ 18000 is the average European
income). These numbers exclude Japan.
This represents a tremendous marketing opportunity for strong brands to emerge winners. Brands will
have to be built regionally.
If you consider the Asia Pacific Market excluding Japan, the total ad spend is around
$ 34 billion, of which India contributes $ 1.5 billion according to figures from 2,000. By 2020, the industry
will be valued at $ 204 billion. The main growth markets will be India and China.
21
Media Scheme
Satellite TV and domestic TV have proliferated. Cross-regional advertising is a natural consequence.

Satellite is unlikely to exceed 1 per cent of media expenditure in Europe, but it may make up as much as
10 per cent in Asia. Its effectiveness and sheer ability to reach the vast audiences make it a potent tool.
Agencies have to adapt to local regional needs, but while doing so, they have to keep the international
perspectives.
Leap-Froggig
Asia has been able to leap frog the West in many areas, e.g., telecom where Asia has built digital systems
right from the beginning.
Chinese Market
It is a stable market. To have an ad budget of $1 million just a couple of years ago was considered
huge. Today $ 10 million is not considered unusual. 0 & M Beijing doubled its billing through new business.
Greater China includes Hong Kong and Taiwan. It can be treated as a unified region. Product development,
branding and promotion can be considered for this entire region.
Sub-Regions
(i) Indo-China: Bangkok as its heart.
(ii) Malaysia-Singapore: Media sharing now. Management structures common.
Creative Work
Western advertising discipline has merged in Thailand with the local cultural insight to create a
fascinating advertising market. Ad standards are improving across the region. The ad industry is grooming
at the rate of 20 per cent or more per year. There is, therefore, shortage of manpower - finding, retaining
and developing the local talents. Importing the manpower is not the solution. We may import the
professionals, but they may lack the sensitivity to culture and language and willingness to learn and lead in
different ways.
AgenCies with Strong Presence in Asia
(i) 0 & M.
(ii) J W T.
(iii) Backer Spielvogel Bates.
(iv) Leo Burnett.
(v) Mc Cann-Erickson.
(vi) Lintas.
Moral
Asia is the biggest potential market of the next 50 years.

After discussing the potential of Asian market, we shall.e xamine the importance of Innovation Skill in
such competitive environment.
Innovation Skill in Competitive Environment
Pradip N. Khandwalla, lIMA says , "following liberalisation and globalisation, we are entering a phase
of hyper competition. This competition will be particularly severe during recessions." In such situations, "me
22
Product Management
too' responses do not give a competitive edge. Innovation solutions alone make or mar corporate success.
Innovations are to be mastered through creativity. Creative organisations keep inventing new options in
strategies, systems, structures, products and processes. As compared to conventional organisations, creative
organisations perform better. Pradip Khandwalla feels that creativity is not God-given as popularly believed.
It can be developed to a considerable extent. Creativity is a mind-set of exploration end looking for novel
but useful options. It is an optimistic, resourceful mind-set that greatly strengthens the 'can-do' attitude.
Creativity is an extremely important strategic resource of an organisation. It is liberated when the policies,
strategies, practices, structures and systems in the organisation are conducive. Once liberated, it leads to a
succ;essful stream of innovations.
Fig. 2.1 A Thrlvlg Taiwan Market
In the international markets, we shall have to consider first the image of India. A positive image of the
country of origin of the products and brands makes a world of difference in the marketing of the individual
brands of different corporate organisations. We will, therefore, first consider India as the Brand.
India, the Brand
India conjures up strange feelings elsewhere. She has her own mystique. She has a spiritual heritage.
She is poor, and belongs to the so-called 'third-world. 'O&M India recently conducted India Brand Audit.
It assesses what other consumers elsewhere think about India. The perceptions about India are different in
the East and the West. In the East, countries like China and Hong Kong are cautious about India. The West
is more positive.
In the UK, India is considered a synthesis of the real and harsh world. There is sublimation in the form
.. of spirituality. It is a unique world. There is the rich-poor contrast. However, India's ethos touches you.
Fig. 2 .2 Hong Kong: Potential Centre for Global Advertising in the 21st Century
23
24
Product Management
In the US , India is respected for her humanitarian values. India is an exploration, a bold one at that.
While exploring India , our soul is elevated. India's infrastructure and hygiene leave much to be desired. In
India, we travel back to our childhood, and wonder standing in front of a toy stc!"e.
Sri Lanka thinks India accommodates extremities. Hong Kong thinks India illogical. China thinks India
lazes around, and is a bundle of contradictions.
This Brand Audit will be a great help in projecting the right image of India abroad. India as a brand
has the potential. We should build on our strengths. India is to be explored. The journey never ends. The
individual brands can get a boost ifIndia as a brand is built up rightly. India as a brand needs country-specific
handling. India's image needs correction. When individual brands and country as a brand synergize, it
facilitates global marketing. For instance, India as a lazy country would not be conducive to Indian companies
marketing their brands. India's passion for human values and intellect makes her suitable for marketing
software and handicraft.
A1yaque Padamsee recommends Image India campaign. This campaign should build on impressive
facts and figures covered in emotional equity. India's brain-power is formidable . People in the USA know
about it. We can talk about our democracy, ancient culture and civilization, millions of consumers,
.
the English comprehensive ability, films and software expertise.
Case: The India Brand Equity Fund (IBEF)
This fund has been set up in 1996. The GOI is its founder trustee. It has put in a seed money of Rs.
1 crore. The total corpus of the fund is expected to be Rs. 500 crore. However, it has now been limited to
Rs . 50 crore to be contributed by Indian trade and industry.
F1CCI recommends a two-pronged approach - build up Indian goods as generically good and then
build up a productlbrand or company. The brand-specific equity could be built up using soft loans from
a venture capital fund to be to set up later. 'Made in India' first must have equity. Then there should be
product promotion. There is a provision for the promotion of individual brand provided that:
(i) it offers a comparative advantage and is of strategic interest.
(ii) meets international quality levels, e.g., ISO 9000 certification.

We generally associate several traits to geographical areas, which are rubbed off to the brands
originating from those areas. Thus Coke, Levi's and McDonald have American heritage. 'Made in India
should be associated with positive traits. Though Indian rum is an excellent product, it is not acceptable in
the US. It is, however, possible to create brand equity for India as a whole. Some companies may adopt
a strategy of creating brand equity for their own brands, which takes precedence over the country-specific
equity, e.g., Titan. Brand equity of a country depends to a large extent on the product quality. India lost
on this count because of the protected market so far. India was not open to MNCs, and so did not face
international competition. Indian goods have a low quality image even domestically. Even foreign brands
made in India lose out to those made abroad. However, in the globalised economy, the purchase decision
is not affected much by the country of origin. Over a period of time, some foreign brands are considered
home-grown, e.g. , Sony is considered a home brand in Korea and Malaysia. Thus IBEF should promote
the 'India' label in the beginning, but has to trade off between India-label and brand-promotion later. We
can also think of specific places like Darjeeling for Darjeeling tea, instead of the entire country.
Consumers are now fed up with the usual youth brands from the US, technology brands from Japan,
sexy brands from Italy, chic brands from France, heritage brands from Britain, engineering brands from
Germany and so on. All this is predictable, and repetitive. Consumers search for newer options and hence
the rise of world music, world theatre, alternative medicine, fusion cuisine, ethnic fashion and so on. India
can capitalise on this new trend by powerfully highlighting her own brand essence. A piecemeal approach
would not work. It has to be a major nation-wide initiative. The whole machinery must be geared to sell Brand
India. The government can set up, ideally, a Brand India department. All communication must be consistent
Marketing Enuironment for Product and Brand Management
25
and based on some common themes. It should be simple, compelling and creative. Though brands make
the reputation of a country, the country also helps the image of a brand.
Branding strategy can be used to position nations. Anholt in his book Brand New Justice writes
'a national brand strategy determines the most realistic, most competitive and most compelling strategic
vision for the country and ensures that this vision is supported, reinforced and enriched by every act of
communication between the country and the rest of the world.'
Brand India
Suhel Seth posed the question whether we have failed in building Brand India in Business Today
Crossfire (2003) at Delhi. A1yque Padamsee felt it is so. According to Padamsee, France is globally known
for 'love', Italy for 'design', America for 'Hollywood', Great Britain for 'royal family' and Brazil for 'football.'
Brand India is associated with IT and cricket but the association is not strong. Our brand image is not worth
talking about. According to Padamsee, at least Nehruvian India was strongly associated with Non-Aligned
Movement (NAM). Our original image was Gandhian % tolerance and non-violence. But recent events have
shattered this image. India has to project an image, an for this ideas should be discussed.
According to N.K.Singh of the Planning Commission, we should not be led by fantasies. Uril girl under
waterfall is no good without water supply and Kamsutra's pleasure principle is useless without bed-room
privacy. India has positioned itself every decade since 1947 % in terms of values, systems and the national
psyche. From a poor starving nation, India has become a nuclear power. It is emerging as an IT hub, and
a centre for knowledge economy. Branding of coutnries is complex. Brand India is an amalgam of a
kaleidoscopic images. India exists at several different planes. Just one dimension cannot fully caputre Brand
India. It conveys a multiplicity of images. According to brand guru, Bernd H. Schmitt, India has three
advantages - acceptance of English as a universal language, democracy and its strong legal system.
According to Ami1ava Chattopadhyay, Professor of Marketing, INSEAD, brand India has taken off, but
it hasn't arrived as yet. It wtll take some time. Korean brands Samsung and LG started in 70s and have
become big in this millennium. India is considered to have the potential of a superpower. So, Indian brands
will take less time to establish than the Korean and Japanese brands. India and China are spoken of
collectively. Though China is much ahead, the association rubs off the positive qualities on India; though
it also affects adversely, e.g., when Chinese milk affects the health of kids.
According to brand guru, Bernd H. Schmitt, India has three advantages - acceptance of English as
a universal language, democracy and its strong legal system.
Brand India
A rising rupee, a pounding sensex, a sustaining GDP and ashining India Inc. - thatis the brand India
for you! The government has launched two brand Indiacampaigns-IndiaNow and India at60 campaigns.
The government is marketing Brand India like never before with investments growing from Rs. 20 crore to
Rs. 150 crore.
Narayan Murthy ofInfosys quotes Professor Michael Porter who says that it is the individual firms that
compete, not nations. But his contextis the developed world. For developing countries, according to Murthy,
there is a need for branding the country in addition to the individual firms competing or indiviudal firms
branding.
Brand India has to be worked out. A brand is a trust mark. It is something that raises your confidence.
A person visiting India must have positive experiences right from the time he arrives here to the time of his
departure. Such experiences should make them commit to India. They should express their satisfaction when
asked about India. There are minor irritants here and there, and they should be fixed up. The foreigners must
have a positive emotional stake in India and Indians. Airports are the first impressions. They should be worldclass.
Product Management
26
According to Murthy, branding is about doing unusual things. It makes people take notice of you. A
brand is created first by doing unusual things. It is then sustained by advertising. India as a brand must be
built on trustworthiness and courtesy.
Infosys was founded with an objective that it would be the most respected company. Each branding
exercise has to start with some clear objective. This goal is to be put into action. The leaders should set the
exmaple. The mindset must be changed. There are constraints, but a leader sees them as opportunities.
Economic reforms brought revolutionary changes since 1991 butthese were thought about in just a week by
a handful of people including Narsimha Rao, Manmohan Singh, P. Chidambaram, Montek Singh Ahluwalia,
N.K. Singh and Jairam Ramesh.
According to Murthy, if you want to create trust, make trustworthy, respected people say good things
about your product.
Strategic place marketing enhances the country's position in the global market place. We have to
understand the environmental forces such as the strengths and weaknesses ofIndia to compete with others,
the education of the population, tax incentives, skilled labour and its cost. Environment must be monitored
to assess the opportunities and threats.
A country must manage its image strategically among its audiences. It must segment its audiences. It
has to position itself. It must communicate this position to its target audience. It requires special efforts to
confront a negative image, at times due to factors beyond its control. It is easier to create new positive
associations than to ward off the old ones. A country should attract tourists and industry. Philip Kotler
recommends that countries must embark on conscious country branding.
Though a country may not deliberately create a country brand, people still carry images that get
triggered just by pronouncing the country's name. Country image is the sum total of beliefs and impressions
people hold about places. Images simplify a complex of large number of associations and pieces of
information. A country acquires image due to its culture, heritage, geography, history and other features.
Media plays an important role in shaping these images. Certain products are associated with certain places.
There are negative as well as positive associations. Some images over a period of time become stereotyped;
but these may not be accurate. Country images are a short-cutto information processing. These images can
be managed and influenced.
Country of origin (COO) has become an important cue in product evaluation. This can be further
divided into country-of-design, country-of-assembly etc. COO may not be as important when other indicators
of quality exist. COO may affect consumers negatively if they are hostile to the country. e.g., Jewish
consumers avoid German products. It is to be researched how consumers choose between own country's
product and foreign products. Country's reputation is an important asset to be managed.
What makes a country competitive?
Let us now concentrate on this.
Why some nations are competitive and others are not? Some assumptions we make and explanations
we tender are not true.
India could also build its brand through its strong lineage of culture, e.g. yoga, wellness and spiritualism.
Marketing India
To market our products abroad, we must first market India. Japan has marketed her successfully,
though there is little they have contributed to space technology, nuclear science or medical science. Theirfone
is a few cars and consumer electronics. Even then Japan's image is of a technologically superior country.
27
India has so much to be proud of; and it should be projected. India is the fifth largest economy in the
world. It is a huge consumer goods market. It is the second largest milk producer after the US. Our products
like Lifebouy and Fair and Lovely command the highest sales in the world, our technical manpower is the
third largest in the world, after America and Japan. Our software specialists constitute 10% of Silicon Valley
scientists. India is the largest producer of films (1000 films a year as against Hollywood's 300). We produce
second largest number of music cassettes after the US. Most important of all-India is the second largest
English-speaking nation in the world.
Indian authors, novelists, musicians, sportsmen have left an indeliable imprint on international canvas.
India has world's best marketing brains. Padamsee has built up mega-brands like Dalda, Liril, Wheel,
Surf and Fair and Lovely. Onida as a brand has gone international. Indian advertisers have added value to
many Indian brands.
Padamsee advocates a team of the creative, research, presentation talents to project India outside. We
should think in terms of a trading bloc, say economic community of South Asia. We should build bridges
with ourneighbours.
Global brands have national identities, e.g., Coke has an American identity; BMW has a German
identity. India can build a global brand by giving it an Indian identity identity consistent with the image of
India around the world. India can develop global brands in textiles, crafts, jewellery, computer software etc.
Explanation for Competitiveness
Macro-economic phenomenon driven by

rates, interest rates, and govt. deficits.
Why not Sustainable?
exchange- Rising standard of living despite budget deficits (Japan,

Italy, Korea).
Function of cheap and abundant labour.
Appreciating currencies and yet rise in standard of living

(Germany, Switzerland).
High interest rates and yet rising standard of living (Italy,
Korea).
Despite high wages and prolonged labour shortages,
Germany, Switzerland and Sweden have prospered.
Automation of labour content in Japan and their firms
have succeeded internationally.
Beautiful natural resources
Influenced by govt. policy.

Targeting certain industries for development, protec
tion, export promotion and subsidies.
Examples: high visible industries such as automobiles,
shipping, steel and semi conductors.
Differences in management practices including IR, e.g.,
American management of 1950s and 1960s and
Japanese management of 1980s.
The most successful trading nations have limited natural

resources. They import the raw materials. Examples:
Germany, Japan, Switzerland, Italy, Korea.
Resource poor regions within Korea, England, and
Germany are prospering.
Italy's govt. policies have been ineffectual but she has
seen a rise in world export share, second only to Japan.
Also a rising standard of living.
Different industries require different approaches to

management. What is celebrated as good management
practice in one industry would be disastrous in another.
Product Management
28
What Holds India Back?
Indian brands must get adequate investmentsupport abroad. The investment must be commensurate
with the business plans of the company. Distribution is one area that requires utmost attention. The company
has to establish a distribution network and provide advertising support to it, and point-of-sales material. We
require finance for warehousing, rentals and salaries. Brand promotions are expensive.
Indian Brands Abroad
Infosys, Wipro and TCS are well-known brands abroad. Indian cuisine is beginning to become
accepted. Kingfisher beer is making investments to compete with mainstream brands. Indian garment
manufacturers are the suppliers to the world's leading Western brands. They should now make an attempt
to market their own brands. In industries like bicycles, we have a cost advantage. Atlas cycles have been sold
in many countries. Titan penetrated markets abroad by targeting NRI or India-friendly population. Later, it
set a foot in Europe. Each market must be studied in detail before marketing an Indian brand.
Last, we shall now come to the important concept of value migration. Organisations represent certain
values and so do products. These values are to be created and then maintained.
Value Migration
Value provides sustenance to an organisation. Values, however, do not stay permanently with an
organisation. Like migrating birds, values do tend to seek shelter in the most conducive climate. Values tend
to favour pro-active and productive organisations, with strategic vision. The flow of values ultimately is a
function of customer choices. A company that has a business design which best satisfies customer priorities
attracts value inflow. This inflow is maintained either because there is no better alternative or the business
design remains powerful over a period of time. Value outflow results if the business design is not capable to
meetthe customerpriorities.lt, therefore, is imperative for the organisation to assess and anticipate the everchanging customer priorities. Value migration concept has been pioneered by Adrain J. Slywotzky in 1996.
Value is retained by the company's ability to earn more profits. This ability to retain value is called strategic
architecture. Those organisations which lack this architecture tend to send away the values which migrate
to ones with such an architecture.
In the Slywotzky model, the ratio of market value to sales indicates how powerful the organisation's
strategic architecture is. An upward trend is a positive indication, whereas a downward trend calls for
reworking of strategies. In today's environment, a value flow is seen from traditional sectors to sun-rise
industries like information technology and pharmaceuticals. The whole complexion of value chain is
changing. The highest values are retained by consumer goods industries. The intermediaries are rated poorly
on value scale. Service industry's value share has increased. Values are migrating from mature markets to
sunrise markets. Focused companies have more inflow of values, as compared to diversified companies.
Professionally managed companies attract values more than the family-owned businesses. Values tend to
migrate towards customer-friendly businesses.
THE TOP SIX GROWTH FIELDS'
In the coming century, the following six fields have the potential of maximum growth.
Computer Graphics
Computer Aided Design (CAD) and Computer Aided Imagery (CAl). This will revolutionize
operations management, electronic media and movies.
In/ormation Technology (IT)

Maximum growth area due to technologies in telecom, fibre optics, mergers of communication companies
and Internet.
29
Robotics
Robots in future will be able to see, hear, feel and obey. This field will have scope for technicians,
engineers, installers and maintenance engineers.
Health Care
New breakthroughs in medicine and surgery, and consequently new opportunitities.
Biotechnology
This technology will solve many medical problems.
Lasers
Laser application will extend to many areas of medicine, communication and manufacturing.
* Adapted
after Carol Kleiman, The 100 Best Jobs for the 19905 and Beyond and A. David Silver, Quantum Companies
and the US Bureau of Labour and Statistics.
APPENDIX
Korean Brands
Korean Brands have emerged on Indian scene in the 90s in a big way. Korea has powerful brands in
consumer durables e.g., LG and Samsung. In the hand-set markets, Korean players have more than 80 per
cent market share in the CDMA segment. Indian companies have tied up with the Koreans e.g., Videocon
and Anchor. Koreans have made buying a delightful experience. LG spends big money on advertising i.e.,
5-6 percent of sales. Koreans have instiutionalisedconsumerpromotions throughout the year. Theirproduct
range is wide. Their dealers also stock a wide range of products. That brings footfalls and business. Koreans
play on their own terms. They shortened the credit cycles of 45-90 days. They offer low margins. Koreans
emphasised on rural markets also, and these contribute a great deal towards their total sales. They also roped
in smaller dealers. They realised the importance of being price competitive. They also started the trend of
mega promotions around sports properties and celebrities e.g., Shah Rukh Khan became the introducer of
Hyundai Car. LG Cup became popular. Samsung pushed Team Samsung. Though they are tough with the
trade, they do not fall short in supporting the trade by their sales and marketing efforts. They think Indian
market has a great potential and is still unsaturated.
Koreans also have failures like DaewoodMotors. Though Cielo and Matiz were received well, their price
discounts proved to be their nemesis. Hyundai has yet to prove itself in higher-end products.
BRIC Nations
For Accenture, the high growth markets are the BRIC nations (Brazil, Russia, India, and China) as well
as Mexico, Korea and the Latin American nations. These are emerging and growing markets, and recording
double and triple-digit growth.
PRODUCT PLANNING
In product management, we have to study basically how to design products with value and how to
deliver that value to the customers. While designing the products with value, we have to find desirable product
opportunities which are consistent with a firm's marketing objectives and planning.
The successful product can be developed by exploiting these opportunities. This should be available
at prices which are value-based. We consider the positioning of the product and communicate its value to
the target customers.
While delivering the value to the consumer we make use of marketing support. This support is based
on the knowledge of consumers and distribution. Marketing support both atthe introduction of products and
maturing is considered.
Product management begins with product planning. Product planning provides us the strategies to
realise our marketing objectives set in the marketing plan. A business analyses its environment and sets
organisational objectives. The functional areas derive their departmental objectives from the overall
organisational objectives. Thus we have our marketing objectives and to realise these objectives we have a
marketing plan. Marketing objectives have four sub-sets of objectives - pricing objectives, promotional
objectives, distribution objectives and product objectives. To realise these objectives, we have pricing
strategies, promotional strategies, distribution strategies and product strategies.
Planning is necessary to cope with the changing environment. If a firm changes faster than the
environment, it may not need corporate plans and strategies. This is, however, very difficult in practice
considering the pace of technology change, industry overlapping, short product-life-cycles, liberalization,
globalization and changes in the economic environment. A firm, therefore, has to sense change and adapt
itself to the changing environment, ahead of other companies orfirms.1t calls for responsiveness. Corporate
plans and strategies are an attempt at adaptation. However, considering the turbulent nature of today's
environment, plans need constant adaptation by updating them.
31
Product Planning
ENVIRONMENT
SCANNING
~
ORGANISATIONAL
OBJECTIVES
+
ORGANISATIONAL
STRATEGIES
(CORPORATE STRATEGIES)
,!
~
PRODUCTION
OBJECTIVES
OTHER DEPARTMENTAL
OBJECTIVES
MARKETING
OBJECTIVES
PRODUCTION
STRATEGIES
MARKETING
STRATEGIES
DEPARTMENTAL
STRATEGIES
~
PRICING
OBJECTIVES
PRICING
STRATEGIES
PROMOTIONAL
OBJECTIVES
PROMOTIONAL
STRATEGIES
DISTRIBUTION
OBJECTIVES
DISTRIBUTION
STRATEGIES
PRODUCT
OBJECTIVES
PRODUCT
STRATEGIES
Fig. 3.1
Plans generate strategy that helps a firm to travel from where it is to where it desires to be. Such strategies
yestthe firm with an advantage over competitors and is therefore, called deli berate strategy. But most of the
times, strategies do not flow naturally from plans. Many experiments are conducted and past strategies are
modified. It is seen what works and what does not. The unworkable component is modified. When a strategy
emerges by trial and error out of this unplanned pattern it is called emergent strategy. Plans may be used
to implement these emergent strategies. Both deliberate and emergent strategies are not enough. Plans must
be there to keep decision-making process running against uncertainties of future. What must be remembered
is that plans are just an aid to decision-making process.
Marketing plans are vital for product management and take care of both the new and existing products.
While developing a new product, a new product development plan is made. Strategic marketing plans
consider justification for budget allocation to various product categories and to both existing and new
products. Most new products are just improvements of the existing products. Marketing plans, thus, facilitate
the spotting of opportunities for new products.
The integrated marketing plan has the following six elements:
Product Management
32
1. Market Analysis
Market Behaviour
Scope and Structure

Customers, Uses
Competitors
Trade
Where these are?
What do they Want?
I
Consumer
Behaviour
OrganiJational
Behaviour
MarketinJ Objectives
2. Segmentation and Targeting
Value
!
I
Creation Opportunities
Opportunities
Evolve
Offer Design
Creating Value
Market
Evolution
3. Concept and
Product
Test
Message
Product
Service
What it
Stands for
Product
Evolution
Winners
Losers
Product
Development
Price to
Capture
Value
Support to Add Value
4. Marketing
Promotional
Tools
Distribution
5. Budget
6. Implementation
Fig. 3.2 Integrated Marketing Play
Marketing support and implementation methods are notwell-developed. Value creation opportunities
and design methods have been developed recently. As we move upwards, market analysis methods are very
well-developed.
What is a Marketing Plan?

Product planning process gets its start in the marketing plan. It is a document that contains four key
blocks of information:
33
Product Planning
a situational analysis - it is a review of past and present data which summarizes the major trends
in the industry, problems and opportunities, market conditions like competitive forces and current
states of the brand.
the marketing objectives - these indicate our direction, short-term as well as long-term. It spells
out objectives for the brand/product.
the marketing strategy spells out how we can realise the objectives set. We also examine marketing
actions to implement these strategies.
the action plan not only considers the marketing actions, but also the budget to put them into
practice. The expected results are put down.
In short, a marketing plan is an intellectual exercise that spells out marketing or in turn product
objectives and the means to realise objectives. All concerned with marketing like, the marketing managers,
sales managers, advertising managers, product managers, market research managers, distribution managers
are provided gUidance and direction by marketing plan. A marketing plan touches the creation of value as
given by a product, its price and its message. It also touches how the marketing support like promotion and
distribution will be available to deliver the created value. Ultimately, the value is created for targeted segments
of customers and is delivered to them, of course at a cost.
The levels of the marketing planning process are illustrated below:
Corporate Plan
Marketing Plan
..
Feedback
Product/Market Plan
Feedback
The corporate plan spells out the overall corporate objectives. It considers the financial aspects. It also
provides analysis for setting strategic business units (SBUs). The marketing plan considers among other things
the product portfolio and marketing budget. The product plan spells out the product strategy and budget to
implement the strategy.
Though marketing plan has the sequence of situation analysis, marketing objectives, marketing
strategies and action-plan, the stages like situation analysis will have to be repeated in practice when new
alternatives are evaluated or when strategies are re-formulated. The planning process is valid for both the
existing and new products.
Situation Analysis
This stage informs us about where we stand today. It generates ultimately the problems and possibilities
encountered by the existing productlbrand and innovations planned.
Mission AnalYSis
This is the most rewarding aspect of the situational analysis. Our mission is where we start. It tells us
the broad purpose of our exi&tence. It provides the frame-work forfurther planning. The logical sequence is
that we begin with basic purpose (mission), determine specific goals (objectives), work out what we ought
to do to achieve these (marketing strategies) and finally how we are going to do it in the market place
(marketing programmes).
There are two components of mission analysis and the resulting mission statements:
Product Management
34
Customer Missions- these emphasise customer needs, e.g., we do not sell computers butwe sell
problem solutions.
Key Value Missions - these state what is important within the business, or how things will be run
by us, or what we expect people to see as important, e.g., IBM is services, Tata is quality etc.
The above two aspects are the two sides of the same coin but in practice it is rather ticklish.
Customer mission was pioneered by Theodore Levitt who authored the classic paper Marketing Myopia
in 1960. Products made cannot form a business mission. Even technologies cannot describe our business
adequately, e.g., a chemical company. Raw materials used also fail to describe our mission, e.g., an oil
company. The basic questions we are urged to ask are:
What business are we in?
What business should we be in?
What business can we be in?
We have to answer the above questions in terms of customer needs. Product or technology based
definitions are too narrow. They make us blind to new opportunities. They do not highlight the threats to our
existing business. Railways are in transportation business, oil companies are in energy business, computers
are in information processing and photocopier companies are in office productivity. Such d~finitions decide
our real competition. They are valuable because they tell us what really matters to the customer. When the
railways consider themselves in transportation, they realise the competition they face from trucks and lorries.
However, too broad a definition also may lead the company into unrelated areas in which it has no distinctive
competence. It is therefore, necessary to have a composite definition based on customer needs, technology
employed and customer segments catered to. We can create a customer-technology grid to identify our
segments.
Nigel Piercy in Marketing-led StrategiC Change (Thorson: Harper Collins) puts forward mission
statements of a gardening firm ranging from concrete plants to abstract dream fulfillment.
Gardening Company
Business Mission
Statement
Horticulture
Grow plants and sell them.
Gardening Services
Counselling on plants while selling them. Services like garden design,

landscaping, estate management.
Leisure/Entertainment
Fill people's leisure time. Children's play parks

Day-out services -
Camping.
Do-it -yourself.
Dream Fulfilment
Perfect home with a garden is a dream to be fulfilled for a particular

life-style.
Monginis described it as the 'cake shop', broadened its mission to become 'the treat shop' and again
narrowed down to 'the cake shop' description, conSidering 80 per cent of its sales from selling the cakes.
Our key value mission identifies key values, goals and constraints. We want people to share while
running our business. Coca-Cola's (UK) mission is 3 As of acceptability, availability and affordability. Our
customer mission and key value mission must be compatible.
Mission analysis changes the way we look at our markets. It can be valuable as well as destructive. We
have to get it right. Many people get it wrong. When rightly framed, we become customer-focused. We
consider several product alternatives to satisfy the same needs. We know our competition and taking peio
35
Product Planning
mission statement on bench mark, can reframe ours. Mission statement provides the contours to analyze the
customers, competitors, technologies and distribution systems.
ACE Toys' mission statement is interesting. To provide children with an opportunity to celebrate the
experience of growing up, and to make products that stimulate a child's sense of curiosity and imagination.
Industry Analysis
Our investment decisions are based on how attractive an industry is. In General-Electric approach, each
business is measured along two dimensions - market attractiveness and business strength. Market
attractiveness factors are overall market size , annual market growth rate, historical profit margin, competitive
intensity, technological requirements, infiationaryvulnerability, energy requirements, environmental impact
andsocio-politico-legal factors. Each factor can be assigned a weight and industry attractiveness can be rated
on a scale of 1-5~Business strength is considered on the basis of market share, product quality, brand
reputation, distribution, promotion, productive efficiency, costs, R& D, supplies and managerial manpower.
Each factor can be assigned weight. Business strength can be rated on 1-5 scale. A matrix of market
attractiveness and business strength can be developed.
High
1/1
1/1
GI
I:
GI
>
CJ
f!
=::
<I:
..
ea
:ii:
Low
Strong
Medium'
Weak
Business Strength
Fig. 3.3
The nine-cells of the matrix fall into three zones. The upper three cells suggest strong business units in
which we should invest/grow. The diagonal cells have medium overall attractiveness suggesting a strategy of
selectivity/earnings. The three cells at the lower right indicate low attractiveness, needing harvest/divest
strategy.
Historical analysis from which trends emerge is helpful. Industry attractiveness, according to Porter
depends upon five competitive forces - intensity of rivalry, threat of new entrants, existence of substitute
products, bargaining power of buyers and suppliers. The follOWing table illustrates Significance of these
factors.
We have to consider the present and future impact of the above factors. Industry may become
unattractive when profits decline on account of slow growth. The existing units then show intense competition
orthe power of bargaing of the buyers rise up. Industry becomes attractive when barriers are raised on entry
or when there are no potential substitutes. Absence of technical know-how may become an entry barrier.
Sometimes thereafter, economies of scale may act as barrier.
Competition Analysis
In the industry analysis, we considered all the companies making the same product. Competition as
we have observed in our mission analysis, is decided by the customer needs we serve.
36
Product Management
Factor
Description
Rivalry amongst
Competitors
Fierce competition in high

growth industry.
Example
Pharmaceutical industry.
Large number of firms of the

same size and resources leads to
greater rivalry.
No product differentiation.
High exit barriers
Firms remain in unattractive
industry.
Greater rivalry.
Dwindling profits.
Threat of New Entrants
Price competition.
Textile industry.
Vigorous competitive activity.
Shorter product life cycles at least for individual owners or products.
Economies of scale demand a

large-size of a firm to enter.
Acts as entry barrier, e.g., pharmaceuticals.
Lack of access to Distribution

network.
Acts as entry barrier in packaged brands.
Brand image.
Acts as entry barrier.

Heavy promotional expenses.
Patents, tariffs, access to raw

material supply.
Act as entry barrier. Slow down introduction of competitive products. The product
life cycle will be lengthened.
Govt. controls.
Act as entry barrier.

Many industries are reserved for small
sector.
Retaliation history of existing

firms.
Acts as entry barrier, e.g., soft drink industry.
Existence of Substitute
Products
Put ceiling on the prices.
Bargaining
Power of Buyers
and Seliers
Mirror-images.
Buyer's power high when he
buys in bulk, and constitutes a
small part of seller's output.
Product represents large part of
seller's output.
Cable TV, India Today and Outlook.
Product differentiation. More

power to supplier.
Media buying concentrated in one ad

agency.
Seller tied to purchaser Co-operation.
Intel chip.
37
Product Planning
A computer firm may view another computer firm as competitor. But if the computer printer is used
to write our documents, we can see how a typewriter, a pen and a pencil also happen to compete with the
computer firm. The product-market grid can be created to identify our competition. Our closest competitors
are those that compete for the same target group with the same strategy. We have to develop competitor's
profile by making assumptions about their market beliefs and by assessing their capabilities and weaknesses.
We have to identify what strategies the competitors are following at present, and what they will in future.
A company tries to achieve what is known as competitive differentiation and distinctive positioning in
the customer's mind. Porter talks about two sources of competitive advantage - low cost and differentiation.
The following diagam shows Porter's generic strategies:
Porter's Generic Strategies
Source of Competitive Advantage
Low Cost
Broad
Cost/Price
Leadership
Differentiation
Differentiation
Competitive Scope
Narrow
Focus
Fig. 3.4
We can compete on a broad or narrow scope and could be either a price leader or a differentiator. We
can put our competitors into the following groups. Let as take an example of writing pen market. Throw-away
ball-point pens are broad-scope price leaders. Parker is broad-scope differentiator.
Own-label pens are narrow-scope price leaders. Cross and Mont Blanc are narrow-scope differentiators.
Competitive differentiation comes from three sources of product - itself, value-added services, and
marketing intangibles.
Though price and product specifications matter in most markets, anything and everything can be
differentiated.
Japanese are technology -, quality - and production -focused. Western companies are invention - and
market-driven.
Certain markets are saturated with competitors and offerings. According to Kotler, the candy market
is an example. Even in this market one can distinguish between different age groups, income groups, taste
preference groups, groups with concerns about weight or tooth decay and so on. One can create a niche
offering for a very special group but this would not lead to a large sales and profit response. On the other
hand, if you aim for the mass market, it gets difficult to define a superior offering. In such markets, there is
a lot of variety seeking. The challenge is to develop a strong well-known brand, so that many people will go
in and out of the market as circumstances and competition change.
Five Forces
Porter's framework of five forces (HBR, 1979) helps one analyse the industry attractiveness. The
premise is that the intensity of competition is based on five forces, namely, rivalry amongst existing
competitors, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and threat
of substitute products and services. A change in anyone of these forces means the company will have to reexamine its situation in the market. The Five Forces framework in many ways formed the foundations of
business strategy as we know it today.
Product~anagernent
38
INTANGIBLES
BRAND
IMAGE
BRAND
IDENTITY
SERVICES
DELIVERY
FINANCE
FEATURES
PACKAGING
PERFORMANCE
DESIGN
I--------PRODUCT-------;
QUALITY
AFTER-SALES
PRICE
MAINTENANCE
QUALITY AND
VALUE
PERCEPTIONS
CORPORATE
IMAGE
Fig. 3.5 Competitive Differentiation
Customer Analysis
We must offer greater value to our customers than the competitors. We must first assess what the needs,
goals and aspirations of two customers are. We must identify who takes the buying decision - the household,
a member of the household, an individual, someone on behalf of the family and individual. The buying
decision may be influenced by a number of parties. Later, the behaviour of the decision-making units is
studied - the benefits they desire, the problem they want to be solved, their brand preference, their brand
rating, their profile both demographic and psychographic, their method of buying, the decision-maker, nature
of purchases and so on. In a nutshell, we study what the customers value and how much.
A fuzzy logic washing machine is a great product idea, but the housewife prefers to be involved with
the washing process, and somehow doesn't want the machine to think for her.
We have to target this market by selecting segments of homogenous customers who respond similarly
to our marketing programmes. A strategic segment is one which is served by a specific marketing mix. We
have to compare segments to see whether they need a different marketing strategy . If some segments respond
similarly to a given offer, they are treated as one.
Before planning a market entry approach, the new comer would be smart to investigate what current
customers in that market think of the strong brands. Try to identify any systematic weaknesses, e.g., research
might indicate poor service quality.
Marketing Objectives
This is the second step in marketing pianning. They spell out what exactly is to be achieved, the
quantitative level to be achieved and the time frame within which it is to be achieved.
It is possible to have multiple objectives. But the different objectives must be consistent amongst
themselves. We have to rank the objectives in terms of their importance.
Overall business objectives must be in harmony with the departmental objectives. Within marketing,
each component of marketing mix will be assigned specific objectives, e.g., product objective could be to
introduce at least two new products by 2007.
39
Product Planning
The objectives at each level form a set of objectives called hierarchy of objectives.
Some common marketing objectives are:
to grow an existing business (but growth will have to sacrifice current profits).
to maintain the current position.
to support new products.
to improve market share.
A business may have market share increase as its objective. At the same time, it also wants a positive
cash flow. Both these cannot be attained at the same time.
Business objectives are based on our analysis of business opportunities and threats. Business is driven
to those areas where it can provide superior value. We gather information about this decision while dOing
situational analysis. Generally growth industries are considered attractive. It is easierto obtain a higher market
share in a high growth industry. Growth generates more profits also.
We have to proVide higher value either at a lower cost or at the same cost. We have to consider how
markets and competition are placed. Againstthis, we have to determine our competence. Proven track record
in an area is considered a business strength. Market share is also considered a strength. The more the share,
the higher the profits. Other business strengths are market share in growth segments, leadership in quality,
image and technology. In addition our ability to deliver greater value than competition shows our competitive
strength.
There are different objectives for a product as it passes through different stages of its life-cycle.
There are two approaches in setting objectives -the top-down approach for better resource allocation
and setting performance standards and the bottom-up approach to make people participate in objective
setting process, and thereby motivate them to run the business.
Strategic Alternative for Growth
We have to reach our objectives by opting for any strategic alternative for growth.
Our ROI is given by the following formula.
ROI=
(UnitSales) x (Margins)
Investment
ROI can be improved by improving productivity - keep unit sales constant but raise margins or lower
investment. ROI can also be improved by improving our sales of number of units. Both can be combined
to improve ROI.
Growth stems from increasing the consumption level of existing customers, attracting new customers,
attracting customers using other brands, and by geographically expanding the market. We may have to add
new segments while attracting customers of other brands. The product-market relationship matrix gives us
four choices:
Present
Present
Market
New
New
Market
Penetration
Product
Development
Market
Development
Diversification
Product
Fig. 3.6 Product-Marketing Relationship Matrix
40
Product Management
1. Market Penetration: We gain more sales by improving our market share in existing markets,
perhaps bymore effective advertising. There can be line extensions and new applications or new
usage occasions.
2. Market Development: We gain more sales by introducing our current products into new markets
-either new segments or new geographical areas. Japanese cars have entered into European and
American markets.
3. Product Development: We gain more sales by developing new products and introducing them
in our existing markets.
4. Diversification: We gain more sales by introducing new products in new markets. For example,
Videocon company moved into oil drilling business.
Diversification is vertical when a company moves forward to own or control the channel of distribution,
e.g., Bombay Dyeing opening retail show rooms. It is horizontal when new items are added to a product line
directed towards the same markets. These may be related or unrelated technologically. Concentric
diversification takes related technology to these customer groups which are similar to current customers.
Alternatively, in concentric diversification, related technology is taken to new customer groups. There is one
more possibility. Unrelated technology can be taken to customer groups similar to current customers.
Conglomerate diversification takes new products which are technologically unrelated to new classes of
customers, e.g., a telecom company can enter into hotel business.
Profitability is improved by improving margins or lowering investment. Margins are improved by cost
control and reduction or by altering prices, or by providing additional benefits. We can manipulate product
mix to improve the margins. Margin can also be improved by introducing improved and new products.
Investments can be lowered by inventory management.
All these alterative growth options are not equally attractive and their relative attractiveness is different
over a period of time.
Marketing Strategy
Marketing is totally customer-focussed. We achieve our business results through customersatisfaction.

In marketing, we always try to match the customer needs and wants and the products and services in a better
way. Marketing strategy must help the process of marketing. It is a general plan to reach the objectives. To
illustrate, we can design strategy to target a particular segment or to revise prices upwards.
Marketing strategy leads us to suitable marketing programmes consisting of product policies, pricing
policies, marketing communications and distribution and service policies.
The major issues which are associated with product policies are recapitulated here:
(i) First define the product itself and the services that go with the product. Decide the purpose of the
product. Decide the positioning of the product.
(ii) Choose an appropriate product mix to target certain segments. Decide the prodw.ct lines. Decide
the length, breadth and depth of the product lines.
(iii) Formulate a branding policy to create meaningful and relevant brands for the customers. Decide
the competitive strategy and provide management focus - brand/product management and
planning.
(iv) Develop new products and launch them to satisfy growing needs of the customers or to fill the gaps
in proqucts. Product deletions also need careful consideration.
A strategy tells us how we can achieve our objectives, whereas the objectives tell as what we have to
achieve and in what time-frame. A strategy thus helps us to reach our desired objectives. Maybe, we have
Product Planning
41
to add a new segment to our market. How to do it? Perhaps, we have to revise the prices? How to go about
it? A marketing strategy also decides our positioning stance for either an existing product or a new product.
This positioning is to be integrated to our action plan. We have to do marketing budgeting and allocate funds
to the different elements of our marketing mix.
There is a distinction between pursuing practices that are good for every company and pursuing a
position that is unique to a particular organisation. Strategy is about creating a unique position in terms of
overall cost or differentiation. Strategy is about competitive advantage, about how a company serves
customers differently from competitors. There are many different ways to deliver value to customers, and
many different customer needs. Strategy is fundamentally about deciding what you are going to be as an
organisation while also adopting best practices.
POSitioning
It is the way we are placed in the mind of the consumers with respect to the competition. Though
marketing texts generally deal with positioning of individual brands, the company as a whole can also position
itself. Hindustan Lever in India positions its individual brands. However, some companies just put model nos.
and emphasise their own corporate identity. Intel and IBM are the examples of such companies. A book on
brand management restricts itself to brand positioning. However, whenever corporate positioning is relevant,
It should be considered prior to brand positioning.
High tech products are positioned along intangible dimensions such as reliability, quality, service and
performance. We should avoid positioning of high tech products on myopic considerations like price and
performance specifications since such positioning is easy to copy. Mostly such products are considered on
the perceptions of quality and performance.
Though positioning is a long-term strategy and should not change, the change in market conditions may
necessitate a change in positioning. Though the core positioning of quality and service stands as it is, the way
these two are delivered must be improved on a continuous basis. The communication package also needs
a change.
As we have defined positioning as a place in the mind of the customers in relation to competitors, it
is very necessary to understand competitive efforts and the market conditions. We have to choose our target
audience carefully. We have to consider which competitors are worth competing with, say the weakest are
chosen. We then work out how to attract their customers.
Last but not the least, each business must have a core strategy and an offer. It pieces together the
different parts. It justifies the purchase decision of the customers by providing the basis for their purchases
of our products as against the competitive products. Core strategy decides our competitive behaviour, and
thus resembles USP of Ted Bates. However, its scope is broader, it is both outward and inward-oriented.
Different segments require different core strategies.
After deciding the positioning stance, it is advisable to develop the remaining part of the offer before
considering the elements of marketing support.
Positioning is a popular term in marketing, first coined by two advertising executives AI Ries and Jack
Trout in 1972. Their work on positioning was started in the late 60s. Their book captioned Positioning the
Battle for Your Mind has been published in 1980.
According to AI Ries and Jack Trout, positioning is a creative exercise that starts with a product or an
individual brand. POSitioning exercise is essentially an exercise of creating and maintaining an image for the
prod uct or brand in the mind of the target audience relative to other brands. In this process the offer is designed
in such a way that it occupies a distinct and valued place in the mind of the target customers. Thus positioning
is not what we do to a product but is what we do to the mind of the prospect.
Product Management
42
Positioning can be done for the products as well as for the corporate organisations as a whole. Modi
xerox positions itself as the document company offering total solutions for efficient documentation
management. High tech products tend to be positioned on the basis of intangible attributes, rather than on
performance specifications.
Positioning of customer, however, follows. Market positioning consists of opportunity identification,
segmentation and targeting and competitive strategy. Positioning in the mind is called rational positioning.
However, consumer is driven by emotions. Coffee, for instance, is about intimacy, romance and togetherness.
Titan is a gift of appreciation. Lakme and Vareli touch a streak of narcissism in a woman. Brand positioning
is not just occupying a slot in the mind of the consumers. It is also about ruling the heart. Psychological
positioning is thus a communication exercise that follows AIDA: Attention, Interest, Desire and Action model.
Psychological positioning grows out of market positioning.
Though positioning is not changed every now and then, the market evolution may make it necessary
to change the positioning. The turbulent environment that changes fast calls for frequent changes in
positioning. A company loses position due to change in technology, consumer attitudes, competitive activity
both in the economy and amongst creative executives. A company should remain in touch with the market
place, and reposition itself before it suffers in terms of products, image and revenue. Though sometimes
positioning is based on the same product benefit, service, performance or quality, the product must be
changed while delivering these bundles of benefits.
Positioning itself depends upon the study of the market and competition. The market is segmented,
and the targets are chosen. The competitive efforts ar~ considered. POSitioning a product to specific segments
is the next logical step. Thus positioning involves sacrifice - we have to sacrifice a few segments of the market.
We cannot afford to give 'all things to all people.'
Olay Total Effects has been positioned by P&G as an anti-ageing cream after considering the results
of intense consumer research almostfouryears before the launch. It is an example of the consumer-driven
innovation model. A customer buying a moisturizer is actually seeking a product to address her ageing. But,
a moisturizer cannot arrest ageing. Vita Niacin can help with anti-ageing and meet the hidden needs of the
consumer.
In positioning, we have to decide our competitors. There is a need to develop a core strategy that runs
as a common thread through all pieces of planning. Core strategy tells us why customers buy our product
and how we shall compete with others. Viewed in this fashion, core strategy borders on Unique Selling
Proposition (USP) devised by Ted Bates. Different segments need different core strategies. Core siTategy is
broader than USP because it considers both external and internal factors.
Most common core strategies are:
(i) lowest price and acceptable quality.
Oi) highest quality or most differentiated product. Quality is measured in terms of attributes,
performance, innovation and variety.
In mature industries, both the core strategies are in vogue, and add to their performance. Both these
positions may not be practicable but when a firm starts on one, it ends up on the other. Product quality
contributes a great deal to profitability of the firm. The most profitable combination is one with a premium
position.
Conventionally, marketing is studied in terms of marketing mix - the four 'P's of product, price, place
and promotion. Though satisfactory, it fails to recognise the planning and decision-making activities of
marketing separately. In the planning activity, we consider the offer which consists of product, services, price
and the way it is represented to the customer through a communication message. An organisation creates
value through this offer.
Product Planning
43
The total budget of marketing spent on advertising, sales promotion, sales management and
distribution acts to enhance the value created by the offer, and then delivers the same value to the customer.
These are in fact marketing support activities. Their aim is to make the offer attractive to marketing
intermediaries and customers.
To make the offer appealing the product manager has to consider product opportunities, product
design, product price and product positioning.
All products have attributes and features. These must be related to perceived benefits preferences and
selection. Important attributes for a camera of day-to-day use are ease of operation, picture clarity, automatic
forwarding and rewinding, and date time insert. For a moped for teenagers the important attributes are
reasonable price, a sleek style, easy start, easy pick up, fuel economy, and maintenance services.
Apart from attributes, customers' aspirations and perceptions and the availability of competing offers
present infinite alternatives of value creation. The challenge is to identify what value would appeal to the
customer convincingly.
It is necessary to tune the positioning to the target audience. A credit card like AmEx adopts exclusivity
as its positioning strategy for the customers. But it positions itself as a business expander that will add volumes
to a retailer's business. We should know whom we want to serve. Customer segments can be based on core
competence, strategies and revenue potential. We must be fairly intimate with the behavioural dynamics of
the target audience and their need pattern.
Pricing is based not only upon costs but is related to the product quality, service and message. Price
is used as tool to change perceptions about the P' oduct. It has been treated separately in this book.
A premium-priced Mercedes Benz manufactured in India costs Rs. 32,00,000 and conveys a sense ofsuperior
value to the customers.
Communication builds up image ofthe product. Image build up is influenced more by the effectiveness
of the communication than by the communication budget. Pierre Cardin shirt when worn loses its brand
identity. In such a case, communicators create an image of a premium shirt to create value forthe customer.
Marketing Support to Enhance and Deliver Value
All those activities which make customers favourably inclined towards the offer are support activities,
e.g., advertising, sales force, sales promotions, public relations. It is to be decided how much will be spent
in all and then how the money will be allocated amongst the different support activities. While doing so, we
have to consider the push and pull effects. Initially support activities have to pull buyers. Because of the pull
the buyers will demand the product at an outlet. Then support activities must be directed to make it available
through channels chosen. The channel then pushes a product. The budgeting aspects of support activities
should be carefully considered.
A marketing manager has to co-ordinate between product offer and marketing support. The outcome
is an integrated marketing plan.
In the cement industry, all major players concentrate on 43 grade cement. Rajashree positioned its
cement in slot for super grade 53 which results in savings due to less consumption. Advertising support and
channel support enhanced the value of the cement to Rajashree's customers. Rajashree also developed
engineer-backed outlets with clean environment.
The offer part tells the manager what is to be achieved and the support part deploys resources for this
desired achievement. These should not contradict each other. A high quality product cannot be made
available at a road-side stall. The strategy should be a unified whole, e.g., package and ad are used to
complement each other. Similarly, advertising makes the selling task of the sales force easier.
Product Management
44
In other words, an integrated marketing plan and integrated marketing strategy has elements of
marketing mix which support each other. The conflicts must be avoided, e.g., a premium perfume like Fire
and Ice (Revlon) is available at a paan shop - an inferior outlet or we can have Sony 1V with no service
back-up ata11. These indicate dysfunctional conflicts. Marketing strategy elements must have efficiency. Any
additional expense on any of the four 'P's must generate the same return. That means the sales will not
increase just by budget re-allocation. Marketing strategy should be built around a common theme - a core
strategy. The other elements are subservient to this core strategy. The core strategy is expressed through
product positioning.
A multi-product firm must consider how strategy implementation should be co-ordinated with the
different product lines. A similar decision is necessary with respect to different business divisions. In a
consumer company, one product line may be sold through exclusive outlets. The other is mass distributed.
Marketing activities are so co-ordinated that the overall reputation of the firm is not affected.
Implementation
Marketing action must be consistent with the strategy chosen. To illustrate, if we wantto increase the
sale of premium cars to new buyers we can advertise in prestigious media. Similarly, we can ask a door-todoor salesman to pass on a coupon to increase re-purchase of a given product, say a soap cake.
Strategies are general. Marketing actions are detailed spell outs of the same. Perhaps, quality can be
improved by R&D. But R&D may be in the jurisdiction of production. But marketing must provide the
necessary inputs to these technical departments.
Promotion budgets for the product include marketing support actions like advertising and personal
selling. Most strategies can be implemented by a number of ways. We have to consider, therefore, marketing
actions and their budgets carefully.
Budgets
Marketing budgets are quantitative expression of marketing actions dictated by a marketing plan.
Budgets are tools to implement strategies through planning and control. Budgets relate both to the nature
of the product and the kind of marketing support required. A single marketing strategy can be implemented
by a variety of marketing actions. Budgets relate costs to actions, and they allow us to evaluate the cost of
alternative strategies.
Budget has two dimensions - the total size and the allocation of money to different expense heads.
The per cent expense on each head changes at different budget levels.
Budgets are set on the basis of market response expected. Objective and task method is an ideal budget
method. For instance, we may aim at inducing trials of a new product by advertising. A budget is then chosen
which can make this happen. Judgment and experience are used to establish this relationship.
Budgets may be set to maximise short-term profits. Profitis here supposed to be a function of one or
more elements of marketing mix. We have to decide then what level of spending will help us achieve this aim.
There are two more related approaches to budgeting - marginal or break-even approach.
Budgets can be matched to the competition. Here the assumption is that a given level of budget
generates a given level of response. It is assumed that all competitors will have the same response function.
Budgets can be set as a particular percentage of sales.
Strategy Evaluation
Strategies are evaluated on the following basis:
Competitiveness: Our strategy should offer what competition does not.

Consistency: It creates a common theme.
Product Planning
45
Financial desirability: Every strategy has some risks. The gains from the strategy should be more
than the risks associated with it.
Feasibility: The business must have capability and infrastructure to implement the strategy.
Validity: Assumptions behind changes and their relationship to sales and profits must be
questioned.
While assessing the success of a product, we must analyze the sales pattern. We should know what is
the trial rate, and what is the repurchase rate. There can be variations in the trial and repeat purchase rates
between two products, and hence our corrective action will be different in each case, though the sales are
the same in both the cases. Though intially these two rates are important, at a later stage most of the
purchases are repeat purchases and the distribution becomes less relevant.
It is necessary to develop awareness of the product, create an interest in it so that consumer starts
preferring it. On demand, the product must be available. Thus these intervening stages affect the final sale
of the product a great deal. These variables thus help us formulate the marketing goals. Repeat or replacement
purchases are made on the basis of satisfaction with the performance of the product. Satisfaction is also an
intervening variable.
While considering the intervening variables, we have to consider the motives that lead us to product
purchase and use. Functional products like lubricants for automobiles are non-ego intensive. Their value is
arrived directly from their use. Personally ego-intensive products affect the consumer individually, but not the
society at large, e.g., health care products. Socially ego-intensive products affect at individual and societal
level, e.g., jewellery, designer outfits. In case oflow ego intensity we have to concentrate on distribution rather
than on creating awareness and preference. In case of high ego intensity, the psychological benefits must be
conveyed. Personally ego intensive products are sold at the instance of experts like a make-up artist for
cosmetics. Satisfaction with the product leads to its consumption in future. Socially ego-intensive products
are sold on the basis of the opinions of peers and superiors. EgO-intensity affects the distribution as much
as it adds to the image of the product.
It is necessary to analyze the market and put it into homogeneous segments and sub-segments. In
planning and budgeting, we should consider the cost and benefit of each marketing objective carefully.
Product Planning: An Overview
Product planning starts by recognising the need to deliver superior value , and planning our strategies
accordingly. It takes into account the product and market evolution, and the product life cycle. It puts into
motion a new product development process. Value is to be found by searching for new product ideas, and
is created by designing the offer, and suitably pricing it. The value is tested by concept and product testing
methods. The value is then delivered by multi-period marketing plans and budgets.
PORTFOLIO ANALYSIS
Today, we have multi-product business organisations. Many companies have business divisions in a
diversified business activity. When business itself has been so divisionalised into separate product groups, it
is necessary to do financial planning for each of these product groups. Each such product grouping is called
strategic business unit. Each SBU has distinct set of customers, competitors. It has its own costing. Each
SBU follows a different busines strategy. One division can correspond to one SBU or it may have several SBUs
each with a distinct product line or even single product. SBUs are planned using two approaches - portfolio
analysis and market attractiveness - business strength analysis.
Product Management
46
Portfolio Analysis
This approach was first developed in 1960 by Boston Consulting Group (BCG). In this approach, SBUs
are placed in a two dimensional grid called a portfolio matrix.
HIGH
QUESTION
MARKS
STARS
U
W
f-
<t~
a:w
I(/)
MODEST + OR - CASH
FLOW
f-::J
~I
O(/)
a:<t
l'J~
DOGS
o
SURPLUS + CASH FLOW
MODEST + OR - CASH FLOW
LOW L-______________~~~~~~~~~~----~
HIGH
MARKET SHAHE (CASH GENERATION)
LOW
Source: BC(;
1~70.
Fig. 3.7
In this matrix, the market growth rate is taken on the vertical axis. It denotes the annual growth rate
ofthe market in which the corporation operates. It could be within the range of 0-20 per cent, though a larger
range could be shown. Any rate above half the annual growth rate is considered to be high.
The horizontal axis gives the market share relative to the industry's largest competitor. It shows how
strong the company relatively is. A relative market share of 0.1 means that the strategic unit of the product
has only a 10 per cent ofthe leader's share. We have high and low relative market shares, using the market
share of 1.00 as bench mark. Log scale is used to mark the relative market share.
BCG observed that the cash flow generated by an SBU was affected by its position on this growth-share
matrix. This growth share marix has four cells. The SBUs are placed in these cells. The size of the circle drawn
represents the sales level of the SBU. BCG gives names to these four positions in the
portfolio; cash cows, dogs, question marks and stars.
Cash cows are the lower-left quadrant. They are high"'5hare-low-growth SBUs. The company has the
experience of producing and marketing these brands. Therefore, they have a lower cost position in relation
to the competitors. The experience is on account of the large market share. As the market is growing slowly,
no major investment is needed either in capital assets or working capital. The cash generated by cash cows
supports innovation and new product development taking place within stars or question marks described
below.
Product Planning
47
These SBUs, therefore, generate cash beyond what they need. This surplus cash is available for being
utilised to r<Irture the other SBUs. Cash cows are available for milking, though while doing so we may dilute
their brand equity.
Stars are in the upper-left quadrant. They are in the high-growth markets. They generate enough cash
for their needs. When the market growth rate slows down, they will become cash cows in future. Sometimes,
because of the high growth rate, they may needmore cash than they generate. Stars are, however, profitable.
Question Marks are in the upper-right quadrant. They are sometimes called problem children. They
have a low share in a high growth market. Their cash generation is not enough to maintain their current market
share or to gain market share. Market growth itself is an opportunity. But to maintain their market share or
to expand it, we will have to utilise large cash. Question marks will then become stars. The cash needed by
question marks may be supplied by cash cows. Question marks which fail to fulfill their expectations tend
to become dogs.
Dogs are in the lower-right quadrant. They neither generate cash, nor do they need it. They show poor
profitability. Dogs are in the decline stage of product life cycle.
Portfolio cannot be left to fend on its own. In that case, cash cows will over-spend to gain market share,
and question marks will be starved of cash. Brand managers thus divert surplus cash flow from cash cows
to support question marks so that they become stars tomorrow. The success sequence is geting a question
mark to move to star, and ultimately to cash cow. Conversely, disaster sequence is to make a star a question
mark and then a dog or to make a cash cow a dog.
Market growth is not totally within the control of the marketers, though they try to accelerate market
growth. However, it is necessary to appreciate that a mature market grows at a very high cost, and the effort
is net worth. BCG expects marketers to develop strategies based on market share.
Build the market share strategy works for question marks because in future they will be on their own.
This strategy also works for stars. The aim is to develop and improve market position. The resources are
allocated from different sources, and especially from cash cows.
Hold the market share works for mature market with cows and stars, so that their cash flow is prolonged
as long as possible. Here the market position is preserved.
Harvest the market share is suitable for dogs and selected question marks with no further potential
against competitors. It is also suitable for weak cash cows close to the end of its life cycle. The aim is to get
maximum short-term cash flow.
Withdraw ofdivest works for dogs, as the amount withdrawn can be utilised somewhere else. Even in
case of some question marks, this strategy may be employed.
It is for the company to have a healthy business portfolio. When a company has too many dogs and
too many question marks, and too few stars and ioo few cash cows, the portfolio is considered unbalanced.
Each business in the portfolio is assigned a budget, has to achieve certain objectives and formulates strategies
to achieve them. The basic objectives are to increase the market share (or building the business), to maintain
the marketshare (or holding the business), orto increase the short-term cash flow (or harvesting the business)
and to withdraw from the business by taking resources away from it (divesting the business).
With advancing times, SBUs undergo a metamorphosis. What started as a question mark becomes
a star. A star of today may become a cash cow tomorrow. Finally, the SBU fades out by becoming a dog.
The travelling route of SBUs must be taken into account while planning for them. Even a healthy portfolio
is no guarantee of success. Each SBU must have the right objectives and strategies to succeed. SBUs cannot
be treated uniformly for planning purposes. The very idea behind SBU analysis is to exploit their differing
potential to realise profits. Cash cows must be supported by funds, or else they get enfeebled. It is not correct
48
Product Management
to have too many question marks, each underinvested. It is also not correct to commit to dogs hoping to turn
them around.
David Aaker's latest book Brand Portfolio Studies spells out the strategy to manage a brand portfolio
through relevance, differentiation, energy, leverage and clarity.
Maintaining relevance after a brand matures is a great challenge. As consumers change, there are shifts
in preferences of product categories, where new categories replace the old, obsolete ones. It is necessary to
assess constantly the shifting trends; and their impact on brand portfolio. Concern for health has affected
the junk food industry which has to respond by introducing products on health platform; or adapting the
existing products accordingly.
We have to find ways to make our competitors less relevant. It is not just a question of comforting
ourselves that our mini-car is the best, but a question of knowing why people buy SUVs.
Brand managers must bring focus and clarity. They must simplify the choices available to consumers.
It leads to the developments of a healthy portfolio.
Organis3tional structure must support brand portfolio management. Sometimes, decentralis(>d units
come in the way. We have to devise new tools for portfolio management such as branded energiser, branded
differentiator.
In order to have clarity, it is necessary to have fewer brands so that we can focus on brand building.
Sometimes, we have to add brands. But most of the time, it is a question of having too many of them.
Though in theory, 'staying relevant' sounds simple; it is the most challenging task. It is not ~o ea!>y to
read the trends. Organisations tend to 'stick to their own knitting' but forget to make it better by not adapting.
Besides, it is not easy to innovate, and enter new space.
Brand being a long-term asset need long-term strategy, rather than short-term tactic based on
advertising and SP.
Market Attractiveness - Business Strengths Analysis
BCG approach emphasised cash flow for managing a portfolio. In reality, it is necessary to consider
return on investment in future, rather than cash flow alone.
Corporate Planning: The GE Model
General Electric Company pioneered the corporate planning model much before it came into vogue
in the USA. In 1970, GE divided its 200-odd departments into strategic business units (SBUs).
A unique feature of GE's planning process in the sixties was the development of the concept of business
differentiation. In the mid-sixties when GE's top management had to make some tough decisions about which
lines of business to persist with and which of them to divest; a clear perception that each business was different
in nature and needed to be viewed quite differently from the rest emerged, and the concept of differentiation
then came to the forefront and continues to be an underlying feature of GE's planning.
Since then the basic feature of GE's corporate strategic planning is that the management recognises
that each of its business is unique and its operations need to be reviewed separately . Nevertheless, atthe same
time the company is fully aware that since each business unit forms a part of the whole and the SBUs cannot
be isolated from the rest of the company and that at a certain level the strategies of the SBUs need to be
integrated with the remaining business of the company. In June every year, each SBU submits a detailed
strategic plan to the corporate policy committee. Some SBUs are basically composed of only one line of
business while others may include several related lines of business.
49
Product Planning
The General Electric Company and the consultancy organisation, McKinsey & Company have put
forward the market attractiveness - business strengths matrix. The matrix is shown in the diagram given
below:
Industry Attractiveness
Medium
High
-a
:c
(1 )
(2)
(4)
Premium
Invest/Grow
Selective
Invest/Grow
Protective
Selectivity!
Earnings
.c
0,
c:
rJ)
>.
c:
Low
E
:::l
::2:
CIS
0.
(3)
(5)
(7)
Challenge
Invest/Grow
Prime
Selectivity!
Earnings
Restructure
Harvest/Divest
3:
0
..J
(6)
(8)
(9)
Opportunistic
Selectivity!
Earnings
Opportunistic
Harvest/
Divest
Harvest/
Divest
Fig. 3.B GE Matrix
Each business is rated against two indices - industry attractiveness and company's business strengths.
The marketing attractiveness is a combination of the following factors:
Overall size of the market
Growth rate of the market
Cyclicality and seasonality of the market
Competitors and their behaviour
Technological developments
Environmental impact -socio-economic, legal, governmental.
The business is rated on these factors. Each of the factor is assigned a weight. The products of rating
and weight are combined to form an index.
The business strength combines several factors such as:
Company's market share
Growth rate of sales
Consumer loyalty
Marketing skills relevant to business
Compatibility with distribution structure
Technological capabilities
Financial resources
Product differentiation
Cost position relative to competitors
The above two indices are taken as two axes of a matrix.The emphasis for the ratings on both
dimensions is on the potential HOI in the business. The success of a business depends to the extent it enters
Product Management
50
the attractive industries and has the requisite amalgam of business strengths to succeed. The two axes, when
combined form a nine-cell matrix as shown in Fig. 3.8. The cells indicate the role busines will have in the
organisation and the amount of resources that will be available for marketing. The first 3 cells at the upperleft show that the busines falling in this zone will receive resources to grow. These are called green-light
businesses. The diagona\cells 4,5,6 are medium in overall attractiveness. The businesses placed here receive
selective investment. This is the yellow zone where caution is necessary. Cells 7,8,9 at the lower right indicate
the businesses here lack opportunity in terms of market and company capabilities. These are so-called redlight businesses where the strategy is to either harvest or divest the resources.
HLL Brand Portfolio
HLL is rationalising its brand portfolio which consists of 110 brands. It proposes to keep only 30
brands. The rest will be dropped, migrated or continue as regional brands. In short, HLL is defocussing as
much as 73 per cent of its brand portfolio. The question that is being asked is which 30 brands HLL has
chosen to focus on HLL wants to improve its financials by doing so. The ad spend will be concentrated
on these 30 brands. The total ad spend can be curtailed also. HLL is following Unilever which brought down
its brand portfolio from 1600 brands to about 900 in the past three years. Some casualities are likely to
be toothpaste variants such as Close-up Renew, Close-up Oxyfresh. the rural paste Aim, and washing
powder Revel. The criteria for selection of the 30 brands are its cutTent scale, its differentiation and future
potential. Of the 30 brands chosen, 18 are international Unilever brands and the rest are indigenous. Brands
hke Lux and Lifebuoy are easy picks. Surf, Rin, Wheel, Suns ilk, Clinic, Vim and Close-up are all
unquestionably chosen. Pears has great future potential. Deo sprays of Rexona also have great potential.
HLL has selected brands across all categories and consumer segments. Brands not chosen fall into three
categories - regional jewels are those brands that are very strong in certain geographical areas. Hamam
is strong for instance, in Tamil Nadu and almost 60 per cent sales are accounted for here. These brands
will be nurtured as regional brands with emphasis on local advertising. Another category of brands not
chosen have positions and price points that overlap one of the chosen brands, e.g., tea busmess with brands
like Brooke Bond and Tiger. Some customers from such brands are made to migrate to chosen brands, e.g.,
Moti Soap customers to Breeze. Some brands become old. e.g., Rin Shakti and Super 501.
Areas of Excellence
Each company has a major strength which becomes its driving force. Some companies use a technology
which no one else does. For this company, technology is the driving force. Another company concentrates
on fulfilling the entire needs of a certain type of customer. Then customer is its driving force. According to
Michael Robert (Strategy Pure and Simple II, McGraw Hill), each company should write a short business
concept that states how it is going to use its driving force to beat its competitors. To illustrate, if technology
is the driving force, which products would be made exploiting this technology? And which geographical
markets will be suited forthis technology? This becomes strategy which is implemented by identifying the areas
of excellence. These areas of excellence are adopted keeping in mind the strategy and the driving forces. The
key success factor for a product-driven company is the quality of its products. It must excel at product
development. Excellent sales and service skills are also important. Understanding the areas of excellence
linked to the driving force is crucial in resources allocation. The following list gives some areas of excellence.
Product Planning
Product Concept
Product Development
Sales and Service
UserlMarket Class
MarketinglUser Research
Consumer Loyalty
Technology
Technology Research
Application Marketing
Production
Manufacturing Efficiency
Substitute Marketing
SaleslMarketing
Sales Recruitment
Selling Effectiveness
Distribution Method
System Effectiveness
Systems Organisation
Natural Resources
Explorations
Conservation
Size/Growth
Volume Maximisation
Asset Management
Returns/Profit
Portfolio Management
Information Systems .
51
PRODUCT MARKET STRATEGIES

FOR LEADERS,
CHALLENGERS, FOLLOWERS
Business environment is undergoing rapid fire changes, mostly inspired by rapid development in
technology. Allover the world, people are demanding more amenities, thus, turning the whole world into a
potential marketforevery business. The world is becoming competitive. Therefore, marketing strategies are
designed, keeping in mind the changing business environment in a competitive world. In this competitive
world, the firm can play any of these roles:
(i) it can be a market leader;
(ii) it can be a market challenger;
(iii) it can be a market follower;
(iv) it can be a market nicher.
A "market leader" is a firm with the largest market share. Next to it stands the "market challenger",
in terms of the marketshare. A "marketfollower" shows a little less marketshare than the "market challenger" ,
and tries to maintain its share. "Market nichers" are firms selling to small but specialised market segments,
e. g., a publisher publishing computer books only. These segments are currently not being served by the larger
firms.
We shall study the marketing strategies followed by market leaders, challengers, followers and nichers
in this chapter.
53
Marketing Strategies of a Leader
A firm having the largest market share in a given market is a market leader, say Citibank is a market
leader in credit card business with a share of 60 per cent. A leader influences the competitors in the market.
A leader may be liked or despised, but cannot be ignored. Some of the best known market leaders in India
are: Colgate (tooth paste), Videocon (washing machines), Reliance's Vimal (textiles), Blow Plast's VIP
(moulded luggage).
Only when a dominant firm is a legal monopoly, it lives a secure life. All other firms have to be extra
vigilant. Their strengths are constantly under attack by the other firms. Their weaknesses are likely to be
exploited. An innovation might threaten a leader's position.
Paracetamol (Crocin) may overtake aspirin (Anacin). The leader is conservative in spending as it
anticipates hard times ahead. On the contrary, the challengers are free spenders. Good Knight mosquito
heaters are constantly challenged by Jet, Samurai, Odomos and others who spend heavily on promotion and
distribution. The leader may look too traditional against a modem rival, e.g., Woman 'sEra is an old fashioned
magazine, facing a challenge from the modem Savvy. The dominant firm may be a high cost firm, whereas
a market challenger can be economical.
A leader wants to continue its leadership by acting on three fronts -expanding the market, protecting
the existing market share and improving the market share further.
Market Expansion
When the total market expands, large benefits accrue to the market leader. If more people buy washing
machines, Videocon stands to gain, as it sells over 60 per cent of the country's washing machines. If Eagle,
the thermos flask market leader, can convince people to buy more flasks by pointing out more situations when
flasks can be used, Eagle will benefit considerably. If Odopik can convince people to use more cleansing
powder on each occasion it stands to gain tremendously. In general, a market leader has to concentrate on
new users and new applications. It should also concentrate on increasing the present usage.
New users are roped in by inducing non-users to use a product. This is called market penetration. Those
who do not fly can be persuaded to use Indian Airlines flight. We can rope in new users in the new market
segments, e.g., a baby shampoo can be promoted for adults. We can expand our market geographically to
get new users.
New applications can be spotted for the product. A thermos flask was formerly used only to carry
beverages for in-patient in a hospital. It is now recommended as a product that is useful for picnics, carrying
to office and carrying it during travels. Baking soda has been used in fried products, but its use as a fridge
deodorant is now being advertised.
More consumption of the products on each occasion will expand the market. The firm may suggest
that we should use 2 tablets of Aspro whenever there is headache. Clinic shampoo advises us to use it twice.
Defending the Market Share
Rivals attack a leader who has to hold on. Marketing wars are fought between a leader and a challenger,
e.g., Coke and Pepsi, Kodak and Fuji, BPL TV and Videocon TV, HTA and Untas. Sometimes, the attack
is very severe; Amul was challenged by the combined might of multinationals like Glaxo and Nestle. The
battlelines in such situations must be sharply drawn.
While holding on against competition, we must keep on innovating constantly so as to remain
unassailable. Aleader has to show considerable initiative in leading others in terms of product features. prices,
quality, distribution etc. A leader remains always competitive, and offers value to its customers.
To use the military parlance, offence is the bestform of defence. A leader has to exploit a rival's weaknesses,
and set the agenda for the war. He must guard all the fronts, and should not leave vulnerable flanks exposed
54
Product Management
to rival attack. All weak spots are taken care of to avoid giving an advantage to the rival. A consumer firm
introducing a 14" TV, 16" TV, 21" TV, 29" TV atlow, moderate, and high prices is just trying this strategy.
This puts an effective barrier to the entry of the competitor. Some terrains are defended even at a loss and
some are abandoned with some risk.
"Position defence" means fortifying the current product so that it can resist any rival attack.
All resources are put into fortifying the current product. Even very strong products like Colgate are vulnerable
to attack, and so some diversification is necessary. Colgate, in fact, entered late into the gel toothpaste
market.
Flanking defence suggests that not only the presentterritory but also the weak spots must be guarded.
Indian car manufacturers never thought of having a fuel efficient car like Maruti.
Pre-emptive defence is launching our offensive against the enemy before it strikes. Lakme may think
of introducing a premium range of cosmetics before a foreign firm gets a foothold in this market.
Mobile Defence
Mobile defence makes the leader move to new territories by broadening the market and by diversifying.
He makes the innovation work in both these directions. A need-oriented definition broadens the market, e.g.,
an oil company can consider itself to be an energy company, thereby broadening its market to cover coal
energy, solar energy, electric energy etc. However, a focus which is too broad is likely to make the company
lose focus. Broadening should always be reasonable, e.g., a furniture firm can become an interior decorater
firm. Diversification into related industries is O.K. However, diversification in unrelated fields should be
carefully thought out. Unrelated diversification, say from cigarettes to hotels, gives strategic depth to a
company. The new areas of business become centres for future offence and defence.
"Counter offensive defence" is the defence offered as an answer to competitor's attacks. The attack
can be taken frontally. A leader can also manoeuvre against the flank of the attacker. Attackers' base can
be subjected to pincer movement. Frontal attack is necessary when there is a rapid decline in the marketshare.
However, if we have strategic depth, we can withstand the initial attack. The counter-attack can be postponed
then to an opportune time. An attacker's weakness must be noticed so that a counter-offensive can be
launched.
When a leader is attacked, he may base his counter-attack in the attacker's territory. The attacker has
to deploy resources to this territory for defence.
"Contraction defence" involves a strategical withdrawal from too large a territory since the whole
terri tory cannot be protected effectively. The resources realised after such withdrawal are deployed to stronger
territories. Planned contraction consolidates our competitive strength in the market.
Market Share Expansion

Expansion of market share serves as a good strategy for market leaders. Each percentage point of
mark2t share may be worth lakhs of rupees. Any gain in percentage points makes a significant gain. Market
share greatly affects company's profits. Profits, however, do not go up automatically when the market share
rises. The method to gain increased market share is equally important. The economic cost is always to be
considered. Any rise in market share beyond an optimal point may cause profits to fall. The leader is advised
to increase the market size, rather than market share at this point. It might be economical for some dominant
marketers to reduce their market share sdectively in some weaker markets. A wrong marketing mix adopted
to gain higher market share may also adversely affect profitability. Higher market shares tend to produce
higher profits if unit costs fall with the rise in marketing share or if the premiumness of the product is supported
by a premium price which covers the rising cost of premiumness.
55
In short, market leaders have to expand the total market, defend their turf, and expand their market
share at a profit.
Product Platforms
Meyer and Lehnerd has written a book, The Power of Product Platforms (Building Value and Cost
Leadership). According to them, a company can acquire leadership by having a product platform which is
a single product (an absolute winner of course) on which the rest of the product portfolio can be built. These
should all be family members, in the sense thatthey share common resources. The platform preferably should
stand the test of time, while the dependent products should be capable of being adaptable quickly to changing
trends in the market. On the successful platform the company can bring out value-rich products that share
a common core technology. Product platforms go a long way in reducing manufacturing costs by centralizing
processes and functions. Introducing innovations becomes easier. The company can create organisation
structure to operate strong products which will serve as future product platforms.
Rule of Three: Jagdish Sheth
Jagdish Sheth, Emory University, Atlanta coauthored The Rule of Three based on research of several
industries and markets. It has a simple proposition: every industry tends to be dominated by just three
companies, who collectively command a marker share of 70-80 per cent. The rest remain bit players orfocus
on super niche segments. Indian aviation industry seems to follow this pattern - Kingfisher - Air Deccan, AI
and Indian and Jet-Sahara.
Market Challenger Strategies
The runner-up firms who trail a leader can either attack the leader and other competitors taking an
aggressive posture (market challengers) or they can play the game placidly by being marketfollowers. There
are instances when market challengers have overtaken the market leader, e.g., Toyota, today produces more
cars than General Motors. The battle becomes fierce in high cost and stagnant demand industries. We shall
examine some strategies available to a market challenger.
What is going to be the strategic objective of a challenger? Mostly, it is more mar1<et share which leads
to higher profits. The competitor can be subdued or its share can be reduced. Much depends upon the nature
of the competitor.
Market leader could be a false leader who ignores the market it serves. The extent and the type of
dissatisfaction with the leader provide opportunity to a market challenger to attack him. The leader could
be rendered outdated by an innovation. A dry copier may displace a leader who produces wet copiers.
Firms who are weak financially and have limited resources, and are not performing to satisfy consumers
fully can be attacked frontally. Smaller firms can be swallowed by stealing their business.
The competitor and the strategic objective thus decide the strategy formulated.
CHOICE OF AN ArrACK STRATEGY
Frontal Attack
Head-on attack or a frontal attack is an attack where an opponent is attacked with our full might. Here
the strong points of an opponent are the target rather than its weak points. The winner in this attack is one
who is stronger and has more endurance. The opponent's entire set up is matched by the attacker - product,
price and so on. To succeed in frontal attack, we must have advantage over the competitor. Instead of a
pure frontal attack, sometimes a modified frontal attack is practised - match the competitor in its offer in
every respect but cut the price of the product. The Japanese have used this technique widely.
56
Product Management
Flank Attack
At a point where attack is expected, the opponent is the strongest. The result is that the flanks and the
rear remain the weak spots, which could be chosen for attack. The opponent is engaged at the strong point,
but the real attack is at the sides or at the back. This strategy is useful when we cannot match the opponent
in terms of strength.
There are two aspects of flanking - geographical and segmental. In a geographical strategy, the area
of attack is a market where the opponent is underperforming. In a segmental strategy, a market niche which
is not being served by the leader is chosen, e.g., a niche of fuel-efficient economic cars or lighter beers. A
flanking strategy is just another name to cover the gaps in the market which are left by the leader's portfolio
of products. Flanking is not so violent as the frontal attack, and is based on the basic marketing philosophy
of need-satisfaction. It has, therefore, a better chance to succeed.
By-Pass Attack
This is not a direct attack strategy at all. In this strategy, we by-pass our opponent completely. We rather
concentrate on diversification into unrelated products, or entering into new geographical markets or taking
a quantum jump into new technologies to replace the existing products. The challenger may concentrate on
R&D and develop the next technology to launch an attack. The battle ground is thus shifted to a territory
where the challenger is at an advantage.
Encirclement Attack
It is a comprehensive attack on the enemy wherein the enemy is confronted on all fronts, and remains
engaged in defending his territory everywhere. An all-out offer is made which is hard to resist. The offer covers
everything that is offered by the opponent and goes even beyond that. It is a full show of might of a powerful
aggressor to bring the opponent to his knees.
Guerilla Attack
Smaller undercapitalised firms may resort to guerrilla tactics where small and off-and-on raids are
carried out against the opponent to harass him. The ultimate aim is to get a permanent foothold. Both the
conventional and non-conventional means are used, e.g., price reductions, promotional blitz, legal
action etc.
All the above strategies are broad-outlines. The total strategy is worked out by combining the
characteristics of several specific strategies. Some of the specific strategies could be a price discount on a
comparable product or offering a cheap product or premium product. A large variety of products can be
introduced. Products are innovated or services are improved. A new distribution channel can be tried. An
overall cost reduction strategy can be adopted. An intensive ad campaign can be undertaken. Any
combination of these alternatives is used by the challenger to improve its market share.
CHALENGING A LEADER STRATEGIES

Significant Product Difference
It is not the technical difference that always matters. The most important thing is the consumer
perception. Great Shake, a tetra-pack soft drink from Godrej and Savlon, a better antiseptic were technically
different but in the consumer's perception the difference was not useful.
Quality-wise the consumers should perceive the product as superior to competitor's products.
Sometimes, the product is physically different with new product attributes, e.g. liqUid soap in convenient
dispenser. Sometimes, at given price, we may offer better quality or at lower price, the quality on par with
the market. It gives more value to consumer's money. At times, when it is not possible to vary quality, the
57
quantity can be increased at the same price, e.g., TImms Up from 250 ml to 300 m!. The product brand
name may get equated with product category, e.g., Cadbury is known for product category of chocolates
and Amul Milk Powder for product category of milk powder. When consumers need a chocolate, they ask
for Cadbury. Housewives talk of Amul to mean milk powder. Such products are likely to last a long time.
Competitor's Response
Change in marketing mix may create a difference that competitors find difficult to duplicate, e.g.,
Nirma's marketing mix of lowest price, distribution through small retailers, and heavy advertising.
Set up yourself in a small but significant segment, which is unlikely to attract the attention of a
competitor.
Sometimes, the market share gain can come from taking a little share from each of the many brands
existing in the market, e.g., Velvette shampoo; Nivea. Sometimes, competitors do not attack a product with
some difference. Thus positioning will help in minimising competitor's threat.
Advantage in Distribution
Think of direct distribution, e.g., Cease Fire.

Think of broad product line since it makes competitor's entry very difficult.
Market Follower Strategies
Many runner up companies copy a product developed by a leader or improve the same product and
then launch it. It is sometimes self-defeating to challenge a leader. In the process, some customers of the
leader are taken away from him. While reacting to these efforts, the leader may reduce its prices, improve
its services and offer additional benefits.
In the ensuing fight, both the leader and the runner up firm might lose. The challenger must, therefore,
carefully plan its strike. Otherwise, a me-too product strategy works better. In the homogeneous products
industry like bulk drugs and chemicals, steel and fertilizers, the opportunity to find a product differentiation
is low; and hence this strategy of me-too product works. Each marketfollower offers a distinctive advantage
to its target group in terms of location, credit extended, services etc. A follower is vulnerable to attack by a
challenger. Therefore, a follower has to maintain a good quality and offer better services, while keeping the
manufacturing costs less. It should take the initiative to enter new emerging markets. Followership is not all
about xeroxing the leader. It only attempts to ward off competitive retaliation.
A follower can be cloner of the leader in terms of products, advertising and distribution. He may
graduate to become imitator by differentiating the offer in terms of packaging, pricing, promotion etc.
At best, he is an adapter who adapts a leader's products by improving upon them. He may, thus, grow into
a challenger in future. Many consumer electronics firms of Japan are clever adapters.
It must, however, be noted that marketfollowers may not earn as high as the leader and the challenger,
though they do not have to bear the expenses of innovation.
Strategies Adapted by Market Followers
Industries do have No. 1 called a market leader. It is challenged by No. 2 firm called a market
challenger. After this comes No. 3 firm. The distance between No. 3 also called a market follower and
No. 1 is so great that the No.3 has to work harder to come close to No. 1. We shall take a few examples
by way of illustrations to learn about the strategies that No. 3 can adopt to beat No. 1.
Product Management
58
No.3 Brand
Strategy Adopted
Remarks
Cadbury
Schweppes
Guerilla
Build a non-cola niche
Nucleus of bottlers created
Painted hoardings for advertising
Sport Cola priced at Rs. 6 in
Mumbai and Rs. 5 in Chennai
Pepsi and Coke are the first two brands.
Amul Ice-Cream
Control over raw materiaal supply is

the competitive advantage.
Upstart and guerilla tactic
Real milk, real ice-cream. 25 per cent
cheaper.
Local manufactring facilities.
30 per cent retail margin as against
18-20 per cent of Kwality Walls.
Vadilal and Havmor are the leading

brands in Gujarat. Kwality-Walls and
Mother-Dairy are leading in Delhi, Punjab
and Haryana. Kwality-Walls and Joy are
leading in Karnataka.
Price discounts.
Direct marketing to corporates.
Product innovation, e.g., ceiling
mounted AC Quadra and Nidra home
Voltas and Carrier are the leading brands.
Market Nicher Strategies
Instead of being a small fish in a large pond as the market follower is, the firm can decide to be a big
fish in a small pond by being a nicher. The small niches of the markets are oflittle or no interest to the market
leader. Niching can be highly profitable, unlike followership. Profitability while niching is attributed to better
need satisfaction, by choosing the small target market well. A nicher can charge a higher price than a casual
seller. A nicher secures better profits, whereas a mass marketer secures better volumes.
A niche should be of sufficient size, with a growth potential. A nicher has got to be specialist. A niche
marketer has to create a niche, expand it, and protect it. An existing niche may weaken, and so new niches
must be created. The specialisation of a nicher is based upon customer type, size, end use, vertical integration,
geography, products and theirfeatures, quality-price combination, services and channels.
New firms may decide to be nichers rather than mass marketers.
Broader Perspective
The above analysis emphasises the market share as the criterion to deal with competition. However,
we should not be blind to the strategic intents of the competitors. Hamel and Prahalad recommend
assessment of competitors at three levels (i) ability to generate new ideas by intellectual leadership.
(ij) ability to translate these ideas into commercial reality, with minimum cost and time.
(iii) ability to build market share.
59
Competitors are of four types. Direct competitors Who offer the same type of product mix and service
mix. Product competitors who sell the same product/service mix to the same industry. Implicit competitors
have totally unrelated product/service mix but compete for the same disposable income. Such broad-based
analysis of competition make us understand market dynamics better. Conventionally, competition is not
studied in larger context - a constantly changing environment. Market leaders should learn how to evolve
a chain of suppliers, customers and others who mutually benefit from the association. The paradigm shift
leads to alliances, negotiations and complex relationship management. James Moore, author of Death of
Competition calls this co-evolution - a process that involves co-operation as well as conflict.
McKinsey Global Survey on Competitive Response (2008)
On the whole, as companies determine how to respond to a competitor's move, they generally assess
three or fewer options and don't look forward more than two years. About half don't examine more than
one round of countermoves by any competitor. Asignificant number rely on intuition to determine a response.
Companies most frequently respond with whatever is most obvious in the moment, e.g., a price cut is
answered by a price cut.
Competitive Options
Ries and Trout have drawn from military science to identify the possible options available to an
organisation to tackle the competition.
Competitive OptloJns
I
Offensive
Strategy
The market
followers and
challengers
often follow
this strategy
The weak
areas of
the leaders
leadursure
attacked.
Defenisve
Strategy
The market
leader follows this
strategy. The
emphasis is on
sustaining the
competitive
advantage and
blocking the moves
of other
organisations
who are attacking
the leader.
Flanking
Strategy
It is directed
at uncontested
segments. It
has an element
of surprise.
Niche Strategy
Concentraction
on specialised
small segments,
which is are
easy to defend
and are
unatlrachive to
the big players.
Blue Ocean Strategy
W. Chan Kim and Renee Mauborgne wrote the book Blue Ocean Strategy (2005). Blue Ocean Strategy
is about creating a blue ocean so as to capture the uncontested market space, thus making competition
irrelevant. Specifically, this strategy is a question of the whole system alignment. Value proposition (utility
minus price) creates an offer than dramatically raises buyer utility at the right price for the mass of market.
Profit proposition (price minus cost) creates a leap value for the company itself by making a tidy profit. People
proposition overcomes key organisational hurdles and builds execution into strategy formulation.
60
Product Management
Blue Ocean Strategy has three key components- it's focused, diverges from the competitor's strategic,
profile and has a compelling tagline that speaks to the market.
Value innovation comes from simultaneous pursuit of differentiation and low cost. The following
questions are raised to achieve value innovation.
Is there any scope of elimination of some factors which are taken for granted?
Is there any scope to reduce some factors against the industry standards?
Is there any scope to raise some factors above the industry standards?
Is there any scope to introduce those factors which have not been introduced so far by the industry?
A blue ocean does not last forever. Competition eventually catches up. The market place becomes
highly competitive, and the blue ocean is converted into red ocean.
Red Ocean Strategy
This strategy assumes that industry's structural conditions are given, and an organisation has to
compete these. Here, sustainenance is a result of building advantages over competition. Bigger share of
market here is a zero sum game, as it is achieved through the loss of some other player. The defining variable
of the strategy is here competition or the supply side of equation. The red ocean is divided.
Over-design ing
Technology firms tend to add continuously a host of small features to their products so as to differentiate
themselves from the competition. It is a continuous process of incremental innovation. Cell phone companies
make their handsets feature-rich. But many of them are difficult to use. It is an innovation that is not valuedriven but technology-driven. It goes beyond what the buyers are ready to accept and pay for.
Value innovation should create a blue ocean and a break from competition. Value innovation defies
the value-cost trade off - a widely accepted dogma of competition-based strategy .
PRODUCT LIFE CYCLE AND

MARKET EVOLUTION
What is a product life cycle? It is a series of successive stages a product class or product goes through
from the time it is put on the market till it is withdrawn from the market. It is usually divided into four stages
- introduction, growth. maturity, and decline. A typical product life cycle is illustrated here.
RS.
INTRODUCTION
STAGE
GROWTH
STAGE
MATURITY
STAGE
DECLINE
STAGE
TIME
Fig. 5.1 Product Life Cycle
We employ different marketing strategies for different stages of the product life cycle.
62
Product Management
Introductory Stage
Here we put the product into the market. Perha!Js it has taken a long period of development. First the
sales are zero. Even when the introductory stage ends, the sales remain low. The basic reason for this is
unawareness in the consumers about the product. Marketers use advertising and promotion to create this
awareness. They try to induce the innovators to use this product. As the product is new, there is still no
competition. Promotion thus remains confined to one organisation. As advertisement costs are high and
distribution has been set up at a high cost, the product sales do not yield any profits. Maybe the profits are
negative during this stage.
Growth Stage
More and more consumers are attracted to the product after an awareness is created. They adopt the
product and sales rise up. Though sales increase, profits do not keep pace, and tend to fall.
This happens because competitors now enter the market, and the prices are thus lowered. Competitive
advertising starts and consumers are persuaded to buy our product.
Maturity Stage
Sales continue to rise in the early part of the maturity stage. But they rise at a decreasing rate. At the
end of this stage, sales start falling. Consumer durables have reached a maturity stage in many developed
countries. Profits begin to decline. Marketing is done with restraint. Competition is fierce, and is based on
price. As most brands have similar attributes, differentiation becomes difficult. Sales promotion is
increasingly used to encourage brand switching. Sales promotion is also used to induce the retailers to stock
the brand and give it the necessary shelf-space.
Decline Stage
Finally, sales start declining, sometimes too fast. Maybe, there is market saturation - all have electric
irons. Maybe there is new technology that overtakes the existing one, say colourTVs replace the B & W sets.
Social values may change, say women do not like skirt hemlines to go up. Once there are no volumes the
costs rise up. These must be controlled. Sometimes dealers who sell a marginal quantity are eliminated. Ad
costs are cut. Sales costs are reduced. At times, the whole product is eliminated if it is unviable. All this aims
at improving the profits. The product is 'milked' without adequate marketing support. Brand loyalty
decelerates the rate of decline. Some products have a built in element of mortality, especially if it is a fashion
product or a product created around techno-values.
Comments
It is believed that a product goes through various stages in its life just like a human being. It indicates
that many products encounter similar opportunities, problems and challenges. PLC is a graph of sales against
time. The ideal pattern was shown in Fig. 5.1. It is possible to revive a product at the maturity stage before
it enters the decline stage. The graph then looks like Fig. 5.2.
Product Life Cycle Span
The life of a product varies from segment to segment. In health-care, for instance a product can last
for 15 years. In other segments, products may have afourorfive-year lifespan. Industrial products, generally
have a longer life span than consumer products. One example of a long lifespan: sandpapers; which have
been around for the past 60 years. Although the manufacturing process has changed, their usage has not.
As product life cycles get shortened, it becomes necessary to cut down product-development cycles. In
electronics operations, the product-development cycles are spread over a couple of months.
63
Are brand life-cycles shrinking? Perhaps, yes and no. Stephen King considers the brands to be ageless.
Brands like Surf, Colgate and lodex are as popular today as they were a decade ago. Companies, however.
have to work harder to keep them that way. One way to keep brands from ageing is to introduce variants.
Another way is to modify their packaging. Still another way is to change their formation. Surf is a good
example. In the last two years, it has morphed from Surf Ultra, to Surf Excel, the Surf Excel with Active
Oxygen. Like people, brands live on their progeny. Jean-Noel Kapferer quotes the case of Aspro introduced
atthe time of World War II. It preferred to remain OTC and did not accept the ethical route of being prescribed
by doctors, and getting respectability. It failed to introduce the soluble version, whereas a rival came out with
soluble aspirin. It did not incorporate the new and safe molecule of paracetamol, thinking that Aspro is
Aspirin. Thus though the environment kept changing, the brand remained what it was forty years back.
Kapferer calls this ageing of the brand because of mismanagement. A brand survives if it adapts. Though
we must have a brand identity, we have to keep the right balance between this identity and change.
(/)
UJ
....J
<x:
(/)
TIME
------'l.~
Fig. 5.2 Revival of PLC
As we have observed already, a product is a very broad concept having severallevels. Similarly, there
will be several PLCs corresponding to the different levels of the product. Product class or industry or product
category is the highest level. Thus a PLC will correspond to product class level, say PLC for cleaning agents.
Often next level is that of the product category. Thus there will be a PLC for detergents. Several brands will
compete within this category. There will be several product forms or sub-categories leading a different PLC.
Thus we will have a PLC for enzyme-based detergents. Last, there will be a product life cycle for an individual
brand. Fashion brands have a typical brand life cycle. Levi's is showing declining sales in the US. Young
people do not like to wear the brand their parents used to wear. This is fashion life cycle. Inliquors, first whisky
was popular, then gin, then Vodka and now Tequila. A new brand should be introduced to appeal to the
younger generation.
A brand manager or product manager is concerned with the PLC of a brand. We however, treat PLC
of product class and categories as it becomes easy to generalize. Besides, PLCs of a higher level are influenced
by environment rather than by individual actions of the brand managers. Product life cycle (PLC) in marketing
and product management texts refer to the aggregate product life cycle.
PLC's ideal pattern was shown in the diagram. But there are variations. Some life cycles have very short
maturity stage or have no maturity stage at all. There can be several points of recycling during the growth
and maturity stages ofPLC. The revival orrecyclingmay due to repositioning, say Johnson's baby shampoo
is promoted for use for adults or Cad bury chocolates are promoted for adults. New technology may create
new uses.
Product Management
64
Some PLCs show growth-decline-plateau stages. This happens for goods which are not purchased so
frequently. The market is quickly saturated by new purchases. Thus there is growth. After saturation, the sales
decline because then the market will depend upon the replacement demand, and new customers. It is to be
noted that there are no standard definitions of product class and product form. Thus whether micro and mini
computers are just product forms or they are new classes is difficult to decide. At first, it seemed they are
separate classes. Later micros started performing the functions of minis. The distinction thus blurred.
It is also difficult to be precise about the end of a particular stage and the start of another stage. It is
also not possible to project the previous stages to the next stages.
PLC is too simplistic. There are three factors involved - market evolution, technological evolution and
competitive evolution. These have been discussed below.
We want to point out that the discussion here wants the reader to appreciate the significance of a
detailed discussion so that the PLC can be used as a strategic tool by the management. It provides a
framework for analysis.
Market Evolution
Market for a product evolves over the four stages of product life cycle. We shall first consider the
evolution of market at the introductory stage.
Market Evolution: Introductory Stage
Here a new product is introduced. The sales are still low. This stage continues till sales begin to rise
rapidly. Some products can have a very long introductory stage. Some products do not cross this stage at
all. We call them product flops. Technological breakthroughs start an altogethernew product life cycle, e.g.,
transistors, photocopiers, radial tires, new antibiotics. Being new, there are obvious difficulties in assessing
the market reaction. There may not be precedent to fall back upon. Perhaps, the product has not fulfilled
the expe::tations of the buyers. Since consumers have no experience with the product, they cannot vouch
for its benefits. Consumers would like to know more about the product. Even marketers do not know how
best to market the products. In this introductory stage, a market evolves on the basis of the rate of diffusion
and adoption of the new products. These concepts are treated here.
New Product Adoption Process
The new product's acceptance by the consumers is called its "adoption." It is a six-step process in which
the consumer passes through the awareness, information, evaluation, trial, adoption and confirmation.
(i)
(ii)
Stages
Awareness
Information
(iv)
Evaluation
Trial
(v)
Adoption
(iii)
(Post -adoption)
Activities Involved
Person is exposed to the new product. He becomes a prospect.
He solicits information about the new product by becoming
interested in it.
He studies the merits of the new product mentally.
He tries the new product in a limited manner. He prefers a small
quantity for trial.
Here he decides whether to accept the new product in a fullfled new product is adopted. He needs a constant reassurance
about his
choice.
The stage of information is also called 'interest' stage. The above progressive stages suggest that the
marketer of a new product should facilitate the movement of the prospect through these stages. In India,
65
many prospects are interested in a dish washer, say, a Maharaja Whiteline Dishwasher, but there is an
uncertainty about its functioning. They may be given a demonstration of a dishwasher. A mail order
Evaluation
Interest
Awareness
or Information
H
Purchase
Rejection
I ,
Trial
Direct Product
Experience
Product Evaluation
Rejection
Adoption
Post-adoption
Confirmation
Fig. 5.3 New Product Adoption Process
company selling garments might induce the prospects to place a trial order, and may ask the consumers
to return the goods if not satisfied within a specified time. A product may be offered on a trial basis with an
option to buy if the results are satisfactory. It may be noted that the ultimate adoption or acceptance is a
result of the adoption process.
Between the stages (4) trial and (5) adoption or rejection we can add direct product experience; and
product evaluation. The above diagram illustrates the adoption process.
Awareness starts the adoption process, leading to interest in the product, and its evaluation. The
product then can be either tried or rejected before or after the purchase.
If tried, we get direct product experience resulting in confirming the product evaluation, leading to either
rejection or adoption. The post adoption confirmation is a reassurance about our choice.
Some adoptions affect as minimally, whereas some drastically. Thus cars, fridges and TV have a major
impact on society.
66
Product Management
Adopter Categories
Some people accept a new product quickly while others take time. There are some who never adopt
a new product. Research studies put adopters into five categories depending upon the time taken to adopt
a new product. The following diagram illustrates this:
The adoption process is represented as a normal distribution over time. First, there is a slow start.
Increasing numbers adopt it later. The adoption reaches a peak. If then diminishes, leaving very few
non-adopters.
Early
majority
34%
x - 2a
X-a
Late
majority
34%
X+a
Increasing time adoption of innovations _ _
Fig. 5.4 Distribution of Adopters of a New Product
Innovators: They are the first who venture to adopt a new product. They are likely to be younger. They
may have a high social status. Their outlook is broad and cosmopolitan. They are venturesome to try out
new ideas, taking some risk.
Early Adopters: This group consists more of opinion leaders. They are greatly respected in society.
They adopt new ideas early but are careful. They are "change agents."
Early Majority: It is a deliberate group who accepts an innovation before the average person does so.
It is a notch above average group. They themselves are not the leaders.
Late Majority: It is a skeptical group who adopts a new product out of necessity or social pressure.
They adopt when so many others have done so before them.
Laggards: They are a tradition bound group. They are the last to adopt a new product. They are
suspicious of new products. When they finally accept a new product, it may so happen that the innovation
might already have been discarded by the innovators. These people are comparatively older. They are at the
lower end of social and economic scale.
These slots help the marketers to study the media habits of each slot differently. There is no overall
innovative trait in an individual. He may be an innovator in certain areas and may be a laggard in others.
A person may be conservative in dress habits, but may accept exotic dishes. Each marketer has to study the
characteristics of likely early adopters in a given product category.
New Products
Between each new technology and man, there is a period of courtship. There is an inherent resistance
to change symbolised by new technology and there is a desire to enjoy the novelty and excitement.
Telephone took 50 years gestation period before its wider acceptance. We have to see how fast Internet gets
accepted. Some inventions are awaited. As soon as they happen, they find acceptance, e.g., 'lV. Some
inventions are resisted, e.g., electricity. It took quite some time to accept this deadly invisible power. Some
innovations are accepted with warmth but the initial enthusiasm then wears off, e.g., the airships which were
welcomed but the fervour waned when there was an air-crash. Some inventions like car and washing
machine were initially viewed with suspicion and hostility. There was a red flag law for the cars. A man with
67
a red flag ran ahead of the cars to warn the public of the coming monster. The washing machine was saddled
as a lUxury item. It is only now that these have become a way of life. The public remains indifferent to any
concept of electric cars, whereas a potential traffic hazard like Walkman (1979) has been successful. It is to
be seen how cellular phone will be accepted, considering the antipathy to the public display of private
function of telephoning. We have to see how on-line shopping will be accepted in future. There can be shortcuts in technology adoption. The cellular telephony is the classic examle of leapfrogging the costly land line
stage of telecom infrastructure. In less than 25 years, well within a human generation, half of humanity more than three billion people - adopted that technology. The same cannot be said about the PC and the
Internet. It is both the matter of cost as well as the capacity to use. Leapfrogging technology is possible but
there is no way of leapfrogging human capacity.
Characteristics of Innovation Affecting Adoption Role
There are five characteristics of an innovation which affect its adoption rate.
Relative Advantage: This is the degree to which a new product scores over the old ideas. It may be
the benefit of a lower cost or some other advantage. The greater the advantage, the faster the adoption. Fax
machines have a great relative advantage as they transmit a document at low cost and great speed. They
score over the traditional methods like mailing and couriering.
Compatability: This is the degree to which the new product lives up to the cultural values and
experiences of the prospects. A music system may be highly consistent with the life style of an upper middle
class home. It is difficult to shift men from the ritualistic wet-shave to dry shave of Philips and Braun.
Complexity: The degree or level of difficulty in using a new product or in understanding and mastering
it. A professional camera may take a longer time for adoption since it is difficult to master its various functions.
The technological fear acts as a barrier.
Divisibility or Trialability: This is the degree to which a new product may be tried in a limited manner.
The hire purchase scheme increases the rate of adoption of an air-conditioner. Central air-conditioningsystem
is having a lower trialability than a new variety of seed which can be tried on a small plot of land.
Communicability or Observubility: This is the degree to which the results of the use of a new product
can be observed or described. An innovation whose use can be demonstrated to others diffuses faster in the
social system. Products with high degree of social visibility like fashion items diffuse better than the private
products like a tooth-brush.
Apart from the above, personal influences, initial pricing, scientific credibility and social approval also
affect the rate of adoption. All these factors must be carefully studied by the marketer, and are used as in puts
while designing a new product. Kawasaki mentions five types of barriers which prevent adoption. These are
ignorance, inertia, complexity, channel and price.
Diffusion
Rogers has defined a diffusion. It is the spread of an innovation in the mass of ultimate users or adopters.
Diffusion starts from the source of invention or creation and ends with the users or adopters. Diffusion is the
process by which the innovation is communicated within the social system over time.
Market Evolution at Growth Stage
Here sales rise rapidly on account of a number of factors. The standardisation of the product brings
down the uncertainty in the market. IBM-PC is thus a standard product. Other products are IBM compatible.
MS-DOS is a standard operating system. As the market grows, the costs come down, thus bringing many
new customers. The value of the product is enhanced by improving it and by offering accompanying service.
The relative advantage of adopting the product thus becomes relevant. As the product attracts more and more
users, the word of mouth experience with the product spreads. Sometimes consumers see other satisfied users,
and arrive at their own judgments.
68
Product Management
It is in the interest of marketers to lengthen the growth period. New models are introduced to induce
replacement demand, repeat demand and new trials. Videocon is promoting a 14" model as the private TV
for a buyer who has already got the 21" or 29" main TV.
The greatest contribution to sales in the growth stage comes from new users. Growth stage contributes
till the whole market for the product has been penetratec,l. Later, the sales are from replacements or repeat
purchases. New users then are cancelled out by those who opt out of buying the product.
The knowledge of both the buyers and sellers increase dUring the growth stage.
Market Evolution at Maturity Stage
The demand here rises in proportion to the growth rate of the population of the target audience. Most
sales are generated through replacement, repeat and additional purchases. There are entry level purchasers
- those who own a two-wheeler buy Maruti 800 car as the first entry levelfourwheeler. Similarly, those who
buy a flat buy a 18S-litre fridge. The stable sales show some rise when tastes undergo a change or product
offers new applications. We find sales of skiing and skating equipment rising as more young people are
interested in these sports. This is nothing but an extension ofthe growth stage, and the revival of the old PLC.
In the maturity stage, the buyer has greater knowledge about the product. As there are competitive products,
only good products survive in the market. As similar products are available and the buyer is more
knowledgeable, there tends to be competition based on price. In the maturity stage, preferences may change.
A smoker feels increasingly threatened by malignancy. Thus per capita consumption of cigarettes may go
down. People these days move about bare-headed, and thus the sales of hats and caps decline. Besides, the
products are substituted by better alternatives. Valve radios were replaced by transistors. Demographic
changes may also lead to sales decline. When birth rates fall, there will be lesser demand for paediatric
medicines. Economic factors may set in a decline. A higher income takes us away from inferior products.
Thus today's executive prefers worsted suitings rather than coarse cloth. The decline in sales leads to the last
stage, If the market conditions do not change, a product will continues to remain in the maturity stage for
an indefinite period of time. Tooth-pastes and TVs are expected to remain in this stage for a long time. In
mature markets, where technology is flat, it is not worth-while to build a competitive advantage in the basic
functions. Instead, the product can be made more user-friendly. And this is the job of a product designer.
In the maturity stage, it is observed that brands are purchased as commodities based on price. It is a
period of stable sales.
Market Evolution: Decline Stage
We have studied already what leads to decline in sales. The decline in sales differs from product category
to product category. Thus sales of cigarettes may decline very slowly. However, sales of video games may
decline very fast. The decline ultimately leads to a volume that is miniscule, orreasonably high. This volume
may show some rise. The variations in volume lead to different levels of profitability. A firm can always tap
a specialised niche in the declining market. Slow decline is attractive. Decline when products can be
differentiated is also attractive. Competition is not much if firms can withdraw from the market with ease.
In short, markets evolve in terms of knowledge with the progress ofPLC. Product performance improves
over the PLC. Products become capable as the PLC advances. There is larger competition then. Sales are
generated from different categories of buyers at different stages of PLC.
Pseudo-mature Market(Kiran Khalap)
For the product category of dentrifice, the natural market evolution in terms of maturity is as follows:

Datun
(Neem Sticks)
Toothpaste
Toothpowder
Toothpowder
69
(Charcoal)
Mouthwash
(Chalk-based)
Specialised
Mouthwash
Each product version leads to increased maturity. However, in India, all of these co-exist cheek by jowl.
Hence ours is a pseudo-mature market. Advertising in such market must follow unique rules, and must,
therefore, be unique.
India has an ancient culture. It is now imprinted with new influences. Our complex culture leads to a
wide variety of consumer categories. Communication in India is, therefore, not simple, especially with 21
official languages, 14 official scripts and lOOO-odd dialects. India is not a market -in-transition but a pseudomature market because the product categories exist side by side, and no marketer can ignore them. Besides,
as one progresses to move to the next category, for instance, from datun to toothpowder, there are many
others who return to less evolved category for instance from toothpowder to datun, perhaps as an attempt
to go back to nature. In such a pseudo-mature market, ad agencies have to cater to clients who are as
professional as Unilever and those who are having their first brush with advertising.
The opportunity to Indian advertising lies in the unique quality of Indian culture. Exploited properly,
it will lead to some great advertising. Just as Indian cinema has succeeded despite the complexity of our
culture, Indian advertising has to succeed.
Indian advertising, till the advent of TV, was elitist English advertising. By being so, it has lost an
opportunity to create advertising steeped in Indian ethos. Kamlesh Pandey and Arun Kale of Rediffusion
created advertising that is contemporary in presentation, but ancient in its appeal. They pulled out symbols
from day-to-day Indian life and invested them with unforeseen powers.
Technological Evolution
Over a period of time, there are changes in the technology. Between these changes, there are
technological discontinuities. These cause a turmoil till a dominant design comes out by combining several
known concepts. Each discontinuity has its effect on existing industry -either it enhances their competence
or destroys it. A major technological breakthrough produces a new product class. If we consider the PLC of
a product class, we may come across a number of such technological discontinuities. Such discontinuities
are, however, not so common, and their effects get reduced over successive discontinuities. In Industry, there
are a few revolutionary innovations and a series of evolutionary innovations. Abernathy and Utterback
consider three patterns of innovations. These are described below.
Fluid Pattern
This relates to product innovation which can be radical. It leads to a new PLC of a new product class,
e.g., victoriCls driven by horses were replaced by automobiles. Such innovations are made either by small
entrepreneurfirms or large firms. Edison invented an incandescent bulb. It is an example of an innovation
by an individual entrepreneur. Disposable diapers were developed by P & G. It is an example of a major
product innovation by a large firm. Such innovations are result of the recognition of an unmet need. The
product caters to a niche to begin with. Later there is widespread diffusion. To begin with, computers were
thoughtto be just calculating machines which can be used for scientific computations. The innovation shows
wide diversity. Product improvements are common in terms of feedback from the market. As the product
is still being evolved, competition is based on product features and product performance.
The production output of these innovations is limited. Fluid pattern calls for flexible manufacturing.
The job-shop with general purpose tools is used. The labour is expected to be highly skilled.
70
Product Management
In case of those industries where there are less uncertainties of market and technology, the fluid pattern
is restricted to product prototype development and product and market testing stages only.
Dominant Design
In the previous stage, there were a number of improvements which were introduced to bring the product
to an acceptable level. This type of experimentation results into a dominant design that needs no major
change for sometime to come. A dominant design is the culmination of an evolutionary process. The previous
designs would have some of the features of the dominant design, but the dominant design combines all these
in one model. Dominant design is the launching pad for future technoiogical developments with respect to
a particular industry. The early start, the cost advantage and the volume of business secured initially boost
a dominant design. Sometimes two alternative technologies compete for market dominance, e.g., VHS and
betacam video cassettes. Superior technology may also give birth to a dominant design. Market acceptance
and positive feedback are conducive to emergence of a dominant design.
At this stage, marketers come to know more about the usage requirements. This leads to the
development of new products catering to specialised segments or niches. Thus these new products are just
extensions of the existing dominant design, e.g., lap-top computers. As the technology matures, there are
variations in the performance of different products, but the physical product as such shows no large variation.
Transition Pattern
The emphasis now shifts from product improvements to process improvements. Process improvement
results from the use of specialised production equipment and longer production runs. Process innovation calls
for different type of skills in the labour. As specialised equipment is installed in process innovation, the scope
for product modification is reduced to that extent. There is product-process interdependence. There are, as
a result, more marginal changes in the product. Process innovation renders manufacturing process more
capital intensive. Thus small-lot production becomes uneconomical. This can result into a shake-out
To begin with some firms emphasise process innovation while some others emphasise product
innovation. It is only later on one will learn which approach will lead to a dominant design.
Standardisation due to product innovation leads to smaller differences in performances and features.
The competition then becomes price-competition; and is also based on intangible factors. Atthis stage, cost
reduction and conformance while manufacturing becomes more important, and the capability to innovate
product further by introducing new models is relegated to the background. Thus it is a phase of process
innovation which continues till further innovation in process is not possible. This is the beginning of a specific
pattern.
Specific Pattern
It is the pattern of incremental product and process innovation as a result of the interdependence where
the product volume is large enough to sustain a production system. Specific pattern is distinguished by high
degree of product standardization with high volumes of production by employing efficient techniques. As you
have appreciated, at this stage both product and process innovations are incremental. However, the
production system is highly efficient In automobile industry, assembly line production produced large
volumes of cars. However, this assembly line could not handle new models which were unrelated to the
existing models. It is thus difficult to change according to the changing tastes of the consumers.
The competition is based on price, durability, reliability and image.
The Impact of Product Innovation on Process Innovation
There is a strong link between the product deSign and the process which turns it out. There are instances
where the process generates new product designs. Just as a product undergoes different stages in its life cycle,
a process also passes through these stages. The following graph shows process life cycle.
71
To begin with, as you can see from the Fig. 5.2, innovative ness in products is need-based. We try to
maximise product's performance. The process is not at all co-ordinated here. We improve the process to
generate more output.
In due course, there are lesser product innovations. Exactly here, process innovation gets more
emphasis.
The second stage is marked by both product and process innovation which are technology-based. Our
attention is directed towards a product system that minimises cost. This is necessary in view of the growing
competition. Process innovations now dominate over product innovations. Again this is to gain cost
advantage.
In the third stage, the product reaches maturity. If there are innovations, they are all cost-based. The
process of production becomes highly integrated. There are plants of large capacities and product-based
operations. It helps achieve economies of scale.
No integration in process
Full Integration in process
Maximisation of performance
Minimisation of cost
PROCESS
tlNNOVATIONS
Fig. 5.5 Process Life Cycle Graph (After Modern Production/Operations Management, Buffa, 1983)
Caselet: Turning Ideas into Reality

It is often said that Japan is not as strong in basic research as it is in applied research. It takes original
ideas either from Europe or the US. While this is true on the face of it, nevertheless the country has seven
Nobel prizes. Of course, the number of Nobel laureates in Physics is higher in the UK and the number
of Nobel laureates in all subjects is highest in the US. But there is also a steady increase in the number of
Japanese papers cited as references in prestigeous publications. From 3 per cent in 1960 references to
Japanese research papers have gone up to 30 per cent today. Japan's unique skill in turning ideas into
reality on the production line swiftly, which has helped her so far to be in the forefront of technology, may
receive a boost with the country becoming more and more involved in basic research.
We invite readers to think how the Eastern tiger nations like Singapore, Hong KonrJ have taken rapid
strides in technology on borrowed concepts. We also would like you to ponder over the changing role of
Japan which so far adapted research to one which does basic research itself. What lessons do you see for
India in all this?
72
Product Management
Lean Production
The craftsman type of production was replaced by more efficient mass production on the eve of the
Industrial Revolution. Soon after the World War II, the Japanese introduced a new approach to
manufacturing created 'Lean Production.' It transfers the maximum number of tasks to those workers who
actually created value on the line. It also has a fault finding system that traces the cause of fault. Lean
production requires multi-skilled workers. And this places premium on training and development. In lean
production, non-value adding functions are identified and discontinued. In lean production approach, there
is focus on core competencies, flexibility, speed, integration of design and operations and the right people.
Different Patterns
The patterns differ from industry to industry in terms of both importance and relevance. The above
patterns are seen in those industries where we can measure the physical units. Products like gases and liquids
are manufactured by continuous process. There may not be any transition phase. Some liquids like liquors
are made in batches. In such industries, we concentrate on process innovations though at times product
innovations do matter, e.g., mineral water.
There is no specific phase when there are no sufficient volumes. Printing is a typical batch or job shop
industry. It does not reach a specific phase. However, computer-aided manufacturing may enable even
industries like printing to reap the benefits of the specific phase.
Sequential Dominant Designs
Product innovations and process innovations continue. Then another technological discontinuity
occurs. It leads to a new product class life cycle. In calculating, we relied on log tables first. Then came the
slide rules. Then the calculator. Each started a new PLC. Such introductions could lead to a shake-out also.
It happens when valve radios are replaced by transistor radios.
There are four generations of computers; first generation computers had valves. Second generation
computers used transistors. Third generation computers use Integrated Circuits (ICs). The latest computers
use Large-scale Integrated Circuits (LICs). Each generation had specific design requirements. Each
generation started a revolution. Each generation had a period of consolidation marked by product
improvement changes. Thus there was a combination of revolutionary and evolutionary changes. Computer
industry follows Moore's Law. Gorder Moore (1965) proposed that the computer power of silicon chips would
double every 18-24 months. Intel thinks that this law is driving the fast growth and economic value of the
computer industry.
~-- LIMIT
CUMULATIVE RESEARCH EFFORT
Fig. 5.6 Foster's S-curve
73
Technological advances are not always erratic. They sometimes follow a systematic pattern. We can
plot this pattern by taking the performance on y-axis and the cumulative research effort on x-axis. The
resulting S-shaped curve is called Foster's curve. As knowledge is being built, the initial progress is slow. After
the spade-work the progress is very fast. Then the constraints of physical limits start operating, slowing down
the growth again. We learn from this curve that atthe best available rate of progress, we have tapped atleast
half the potential. Then there is a slow down.
CDS
t
~
_ _-
__ AUDIO
CASSETTES
MODERN
RECORDS
LAC
RECORDS~-----------------------------------------
INTRODUCTION
R&D EXPENDITURE
Fig. 5.7
The slow start makes people operating the older technology dismiss the new technology as something
useless and unworkable. At the top-end of the curve, the new technology appears as if out of thin air and
surpasses the old one quickly. The above graph illustrates three dominant deSigns ofthe music industry, viz.,
records, audio cassettes and CDs. The compact disc has re-invented music. It has moved our music from
vulnerable vinyl records and shoddy cassettes to digitally clear, durable discs. The initial performance of the
cassettes was much lower than the records but it progressed very rapidly. Additional R&D expenditure in
records had little effect on audio cassettes market.
Gramophone records, the first invention, created an industry. Further innovation prompt the
companies to ramp up production quickly. When records are replaced by cassettes, it has the destroying effect
on competence. When plastic records are made utilising the elements of existing competence of making lac
records, it has an enhancing effect on competence. However, these discontinuities whether enhancing
competence or destroying it are most likely to travel us back from specific to transition pattern. In automobile
industry, we observe this trend.
Model Changes
We have considered changes in the dominant design. Model changes are in comparison smaller changes
in series introduced in a design. Models can carry a new name or the same name but with a slight change.
How much value is placed on a new model? It generally decreases over the PLC. This is valid in those
industries where products tend to be the same over a long period of time, e.g., automobile industry in India
prior to liberalisation. However, a series of changes lead to a cumulative improvement, and this helps in
maintaining or building a market share. This becomes all the more important when competitors are lethargic
in introducing model changes.
Product Management
74
Model cycles of shorter duration (concept to commissioning) give a competitive advantage to the
organisation. In the washing machine market in India, Videocon has introduced semi-automatic, automatic,
and neuro-fuzzy logic models.
The three stages of both product and process innovations as the product class matures are plotted in
the graph below.
PRODUCT INNOVATIONS
6z
Z
.........
LL
~
DIVERSITY IN
PRODUCTS,
INEFFICIENT
BUT FLEXIBLE
PROCESS
DOMINANT DESIGN
AND RIGID AND
EFFICIENT
PROCESS
......... -------'INCREMENTAL
INNOVATIONSPRODUCT AND
PROCESS
UNDI FFERENTIATED
DESIGN, EFFICiENT
CAPITAL INTENSIVE
PROCESS
DEVELOPMENT
-.------'*~----.-. .-------'*~----..
-
PRODUCT INNOVATION
PROCESINNOVATION
Fig. 5.8
A revolutionary change brings about a product class. In this product class, there are innovations of
products. Various product forms then compete with each other, till a dominant design emerges. Now the
technological change shifts from product innovation to process innovation. There are several process
innovations. Then the technology is governed by incremental changes. These cumulatively affect product
performance and costs. In short, the changes are
RADICAL
INNOVATION
DOMINANT
DESIGN
INCREMENTAL
CHANGES
In some industries, there may be several radical innovations, each of which is consolidated by
evolutionary changes.
Competitive Evolution
An organisation entering the market considers the type of competition it is going to face. To begin with,
there is very little competition. An organisation has to decide which segments it wants to serve.
An organisation may choose to serve a large number of segments and thus become a generalist or a number
of small specialised segments and become a specialist. As the environment keeps on changing, many new
segments emerge - some organisations enter the market late to top these new segments.
Initially, the market is characterised by the presence of specialists. Later, with the growth of market,
generalists enter the market. The competition becomes more and more, and the market gets fragmented. This
75
is the time for a shake-out. The maturity phase sees the decline in the number of new entrants. Atthese stages,
the new entrants try to explore specialised niches. Some organisations have a competitive advantage, e.g.,
low costs of manufacturing.
Emerging
. Market I----~..
L..-....:-----Specialists
Few in
Number
I.
Growth
Stage
Generalists
(Late Entrants)
Many in Number
Shake-out
Late Entrants
Generalists
Least in Number
Fig. 5.9 Competitive Evaolution
Though the above model is generally seen, adaptation makes it possible for organisations to cater to
the chosen segments. At any time, research has shown that there are more specialist firms. Aggressive
marketers gain in the long run. Lack of aggressiveness affects the generalist organisations a great deal in an
adverse manner.
Pioneering Advantages
It is risky to enter the marketfirst. Atthe same time ifthe pioneer survives, he can reap sufficient rewards.
He is likely to command a greater market share. Followers and late entrants will have to take special efforts
like more marketing efforts and superior positioning to cancel this advantage. A pioneer succeeds not only
because of his early entry. He must in addition have marketing skill and technical skill for success on a
continuous basis. If this happens, the pioneer's success is assured for a long time. Early start gives not only
product superiority but distribution strength and leadership. Most of the organisations, however, enter the
industry at growth stage. It takes almost a little iess than a decade to become profitable. If we extrapolate
this to the maturity stage, it is believed that it will take almost a decade or a dozen years to reach profitability
in the maturity stage. Aggressiveness pays but there are losses to begin with.
Coco Cola is the first cola, and is still the market leader. Hertz is the first car rental company and is
a leader. Heinz was the first ketchup in the US. McDonald was the first hamburger chain. Pizza Hut was
the first pizza chain. They are still the leaders. In many product categories, products are the same, but the
pioneering brand continues to dominate. The reason is that it got into the mind first.
Though marketing literature is full of examples of pioneer advantage, the fact remains that pioneer is
not always the winner {Golder and Tellis}. It is difficult to identify a pioneer. Besides, sometimes a technical
pioneer may not be a market pioneer. Many successful brands have entered almost a dozen years later than
the pioneer. Pioneer advantage cannot be taken for granted.
Barriers of Entry and Exit
Ease of Entry: Firms tend to enter attractive industries. The ease with which they can enter into an
industry detelmme the industry's structure. Free entry leads to increased supply and a fall in prices. The returns
become normal. Some industries have created entry barriers. Maybe they are too capital-intensive. Maybe,
they require too large a volume of production to seek economies of scale. Perhaps, the marketing muscle and
savvy required is not so easy to acquire. There are certain intrinsic barriers and there are certain barriers created
by the actions of the individual firms or their collective cartels. In certain industries, we cannot exit once we
enter, even when the bottom-line is notso healthy. Maybe, there are legal, moral, technological restrictions.
There may be sentimental barriers too.
Product Management
76
To begin with, a large number of small organisations are seen in an industry. Thus economies of scale
are not an issue. In the introductory stage, entry is restricted because technology is not owned by the
organisation, and it may no be able to access it easily. The returns may not be attractive. Other constraints
could be capital needed, skills necessary or raw materials required. Papain is an enzyme that helps the
digestion of protein. It is obtained from the latex of papaya fruits. The latex is spray-dried and converted into
papain powder. Though papain had a high demand in pharma and beer industry in India and abroad, for
many years only a handful of organisations remained in this field. That is because there was no guarantee
of an assured supply of papaya latex, for which extensive field work is necessary to motivate farmers to use
their cultivable land for growing a papaya crop.
Entry barriers ease when the industry prospers. New organisations plunge into the fray by borrowing
technology or hiring skilled people or doing reverse engineering. Rewards also attract more and more
organisations.
The structure of the industry then changes. The dominant design leads to process innovation. The
economies of scale start operating. Industry concentrates on consolidating its position. Capital needed, and
scale of operation both work as entry barriers. Marketing expenditure needed also acts as an entry barrier.
Products get branded, and branding itself becomes an effective barrier. There may not be access to
distribution channels. The existing trade channels may not push an unproven product. Later in PLC,
distributors prefer to carry a leading brand or a few brands.
In the decline stage, the exit barriers come in operation. Exit has legal hurdles, rehabilitation oflabour
costs hurdle, and sentimental hurdle.
Managerial Responses to Product and Market Evolution
First we shall study managerial response at the introductory stage of the PLC.
Marketing Strategies
While launching a new product, marketing mix for each variable can be set at a high or a low level.
If we examine price and promotion variable of the marketing mix, there are four strategies available.
PROMOTION
H
H
RAPID
SLOW
SKIMMING
SKIMMING
RAPID
SLOW
PENETRATION
PENETRATION
PRICE
Fig. 5.10 Marketing Strategies
Rapid Skimming Strategy: The product is launched at a high price. Even the promotional effort is
very heavy. The firm is inclined to charge higher prices to recover high costs and still get some profit - as
much as possible. Heavy promotion is needed to allow offtake of the product even at higher prices, considering
the merits of the product. The product penetrates the market due to high promotion. This strategy is successful
if there are people who are unaware of the product, become aware of it, and buy it at a price demanded.
There is a risk of competition and so the firm has to build up brand preference.
Slow Skimming Strategy: Here the product is launched at a high price. But surprisingly the
promotional effort is kept low. The higher price yields better profit per unitsold. The lower promotional cost
keeps the marketing expenses in check. It gives an additional boostto profits. The limited market size in which
77
there is awareness abuut the product, and an unwillingness to offer price demanded makes sense for adoption
of this strategy. It is perceived that potential competition will not be around right now.
Rapid Penetration Strategy: The product is offered at the lowest possible price. At the same time,
promotion is kept at a high level. The objective is to bring about a very fast market penetration. The end result
is a larger market share. This strategy is suitable for large markets which are highly competitive. The market
is price-sensitive. The company has enough production experience and production costs will show a
downward trend as th~ production rises.
Slow Penetration Strategy: Both the price and the promotion are kept low at the time of launch.
Lower prices lead to fast market acceptance of the product. The lower promotional costs keep up healthy
profits. Though it is a price-elastic market, it is not promotion elastic. In a large market with high awareness
level and price sensitiveness, this strategy makes sense. There is some potential of competition.
An inventor develops the product for the first time. He patents it. A product pioneer develops its working
model. A market pioneer is the firstto sell the new product category. A pioneer chooses a strategy that goes
well with the proposed product's positioning. Market pioneers will be marketleaders ifthey play their cards
well. He shouldselect the best markets to enter, by rating each market carefully . He has to decide how different
products should be introduced in different markets. He can swap the products later in different segments.
First, he is the sole supplier of the product - say, photo credit card of Standard Chartered Bank introduced
in India in 1995. The competitors will take some time to build up the infrastructure to introduce a competitive
product. It is a stage of competitive penetration. Standard Chartered believed that it had at least a lead time
of 10 months at its disposal. In other words, competition would enter the fray after 10 months. Competition
may charge lower prices, compelling a reduction in the price of the leader's product. The market growth stages
sees over-capacity. preventing the entry of further competition and stabilising the share of all the players. At
last, the commodification may begin, when the product is viewed as a commodity, with no differentiating
features. Throughout the competitive cycle, we have to design new strategies of marketing and pricing.
Pioneer Advantage
Pioneers of new products do have an advantage over the followers. The consumers' first-brush was with
the pioneer's brand. On being satisfied, they patronise it later. The pioneering brand sets parameters of a
product class. Mostly the brand is placed in the middle of the market, and has more users. As a result, there
are certain technical advantages to a pioneer- economies of scale, leadership of the brand, ownership of
assets. All these are entry barriers. However, pioneer advantage can be assailed by late entrants. The late
entrants can take advantage of the pioneer's flawed marketing. A pioneer should always be alert to the new
market entrants.
Why Late Entrants sometimes Dislodge a Pioneer?
(i) The late entrant may be cost effective. The cost effectiveness could be due to a better technology.
(ii) The late entrant may access the market innovatively.
(iii) The pioneer may not be offering superior customer service.
(iv) The late entrant does good targeting by selecting a few segments. He prices the productaggresively.
When Pioneer Advantage Remains Muted?
(i) In case of some products, specially the technical ones, the consumer learning is limited.
(ii) The market is cluttered.

Strategies Adopted by Late Entrants
(i) Differentiate adequately. Position the product differently by changing the product or its promotion.
(ii) Discover creative ways to induce product trials.
78
Product Management
(iii) Segment the market selectively.
(iv) Enhance variety, rather than be substitutes or replacements.
(v) Attack high growth markets.
(vi) Cater to the segment that is ready to pay for the superior value.
(vii) Enter the market with a significantly better technology.
(viii) Late starters run faster to catch up.
How Pioneers Protect Their Turf?

(i) Learn fast innovation so that late entrants cannot overtake.
(ii) Concentrate on building an organisation that responds to the needs of the market.
(iii) Increase entry barriers.
(iv) Lock up the distribution channels.
(v) Announce and introduce next generation products.
Kim and Mauborgne's Pioneer-Migrator-Settler Map
This is a new way to assess the portfolio. Instead of industry attractiveness and market share, chief
executives should use innovation and value as important parameters for managing their portfolio of
businesses. Pioneers represent the value innovations such as Sony's Walkman and Swatch. They prepare
the company for the future. Migrators are businesses with value improvements over competitors. Settlers are
businesses offering me-too-value. The present portfolio must be plotted. The company has to shift
continuously its portfolio out of settlers.
We shall now study the managerial response at the growth stage of the PLC.
Marketing Strategies
The overall objective is to sustain the growth rate. The strategies have the follOWing elements:
(i) Product quality is improved. New features are incorporated. The style is improved.
(ii) New models are introduced. Flanker products are introduced.
(iii) New market segments are tapped.
(iv) Brand building promotion is resorted to.
(v) Prices may be lowered to lure the next layer of price-conscious buyers.
At the growth stage, the firm has to trade off between the high market share and high current profit.
By strengthening promotion and products, it can secure its dominant position. It foregoes the maximum
profits it can get right now to secure greater profits further ahead.
We shall now study the managerial response at the maturity stage of the PLC.
Marketing Strategies at the Maturity Stage
Several companies think of giving up the product once it turns weaker, committing resources in this way
to either more profitable products or new products. Still what is needed is to explore the untapped potential
of the old product. Industries like automobiles, TVs, cameras and watches were considered to be mature
elsewhere, butthe Japanese gave them a new lease of life. They added value to these products, and created
new customers. Ovaltine has been revived in terms of sales several times over. There are strategies of market
modification, product modification and marketing mix modification available to the marketers.
79
Market Modification
The sales volume is contributed by the number of users and by the consumption per user. A market
can be expanded by increasing either or both of these contributory factors. The users can be increased by
converting non-users to users, or by entering new market segments or by attracting the customers of the
competitors. The consumption can be increased by getting customers to use the product more frequently,
or by getting customers to use more quantity of the product on each use occasion or by discovering new
applications for a product.
Product Modification
A product can be modified to stimulate sales at the maturity stage.
Quality Improvement: Tries to increase a product's functional performance - its speed, taste,
durability, reliability etc. New and improved version of a soap, TV, car etc. are introduced to give new life
to the product. The ads speak of a bigger, or better or stronger product. The buyers have to accept the claim
of improved quality. Then, they will pay for this value addition.
Feature Improvement: Here new features are added to the product, e.g., additives, new ingredients,
additional weight, accessories, size etc. The aim is to make a more versatile product or a more convenient
product. Sometimes, new features improve the safety factor. Introduction of new features is taken as asign
of an innovative company. These features are added and if necessary can be dropped later. They can be made
optional to the buyer. A major drawback is the ease with which new features can be copied by others. We
should try to be pioneers in introducing new features to get permanent gain.
Style Improvement: Here the product is improved aesthetically, e.g., new car models, colour and
texture variations of household products, package re-styling. This gives a unique identity to the product. It
is, however, difficult to predict which style variation will appeal to the people. People may still want the old
style, e.g., the curvy bottle of Coke and so its discontinuation may result in loss of sales.
Marketing Mix Modification
Sales can be stimulated by manipulating one or more elements of the marketing mix. The following
checklist gives an idea of how each element is questioned for modification:
Advertising:
Should we increase the ad budget? Should we change the theme? Should we

modify the copy? What changes can be made in media mix? Is it necessary
to change media planning?
Sale Promotion (SP):
Should it be increased? At what level? (At the level of consumers, dealers or

sales people).
Personal Selling:
Should we strengthen the sales force? Should we change its orientation? Are
any changes needed in territory allocation? What changes can be made in sales
incentives? Can we improve planning of sales calls?
Price:
Should prices be cut? How? Should prices be raised?
Distribution:
How can we improve the display? How can we get more shelf space? Should
there be more penetration in our distribution? Can the product be put into new
channels?
Services:
How can we improve delivery? What after sales and technical services can be
given to the customers? Can credit be extended?
It is debatable which element needs modification at the maturity stage -advertiSing or sales promotion
(SP). According to some, SP will be more effective as consumers have already reached an equilibrium, and
Product Management
80
need financial incentives given by SP rather than psychological persuasion of advertising. SP budget is
improved for mature products. However, each brand is an asset, and SP needs advertising support. Ad
expenses are capital investments, and yield long-term benefits. Marketers tend to use SP as its effects are quick
in the short-term. Excessive SP, however, affects brand's long-term profit potential.
Marketing mix modification strategy is also amenable to copying by the competitors. As firms battle
it out in the market place, there may be profit erosion for each firm.
Finally, we shall examine the marketing strategies at the decline stage of the PLC.
DECLINE STAGE
Marketing Strategies During the Decline Stage
In order to deal with the ageing products, a company has to take a number of decisions. First and
foremost, weak products must be identified systematically. The declining markets are given up on the basis
of exit barriers. The lower exit barriers make it easier to leave the industry. The survivors tend to remain so
as to lure the customers of the abandoning firms. The firm in a declining market can adopt investment strategy
in which it either increases investment or maintains it. Alternatively the firm dis invests on a selective basis,
firstfrom smaller market segments. Simultaneously, investment in market niches is increased. In a harvesting
strategy, investment is recovered as quickly as possible. There can be a total disinvestment by disposing of
the assets. In India, in the electronic typewriter market, the portable electronic typewriter segment has shown
sales growth, though elsewhere the PC has overtaken the electronic typewriter. Firms like Godrej have,
therefore, strengthened their presence in portable ET market. Proctor and Gamble try to re-stage their brands,
rather than abandoning them. While dropping a product, it should be seen whether the product can be sold
to a smallerfirm to take advantage of the goodwill and the distribution network set up. If there are no buyers,
it should be decided whether the product is to be dropped quickly or in a phased manner. Some stocks of
spares must be maintained or else past customers will be stranded.
Synopsis of the PLC Concept
The following table gives a quick recap of what we have already learnt about the PLC.
Product Life Cycle Stage
Characteristics
Introduction
Growth
Maturity
Decline
Costs
High
Average
Low
Low
Sales
Low
Rising
Peak Level
Declining
Profits
Negative or
Low
Rising
High
Declining
Competitors
Few
Increase
Stabilisation
Decline
The following table summarises the marketing strategies followed at each stage of the PLC.
Marketing Mix
Product Life Cycle Stage
Element
Introduction
Product
Basic product
Growth
Improvements
Maturity
Decline
Diversity
of models,
brands
Withdrawal of
weak products.
in a phased
manner
81
Price
Skimming or
penetrating
policy
Penetrating
policy.
Lower prices
Competitive
parity
Prices are cut
Distribution
Selective
Few and
Exclusive
Channels
Intensive
More
intensive or
broad-based
Selective
Unprofitable
segments
are left out
Promotion
Awareness
buildup.
Promotion
is reduced.
Differentiating
promotion.
Minimum
Promotion
Heavy
promotion to
induce trials.
Interest
building
promotion.
BrandNalue
features
Budget
increased.
Specialist
selling
Emphasis or
features.
Emphasis on
price.
Emphasis on
prestige.
BrandNalue
features
Emphasis on
special
applications.
Let us now consider the changes encountered in product and its manufacturing process over the PLC.
Product design is not fixed during the introductory stage. It has some basic features. In the light of
feedback and experience, it is improved and elaborated in the growth stage. In the maturity stage, the product
is adapted to different segments of the market. It is an overall superior product. In the declining stage, all
frills are removed, and a basic product is sold, product quality improves progressively over the PLC stages.
It however declines in the decline stage. Product research which was quite high when the product was being
developed becomes moderate at the introductory stage. Research is restlicted to low levels during growth and
maturity stages, whereas it becomes moderate at the declining stage. At the maturity stage, an attempt is
made to revive the product by finding out new functions and by tapping new technology . Product engineering
tries to redeSign the product at the introductory stage, and in the growth stage, a second generation design
overtakes. At the maturity stage, there is again an attempt to redesign the product. When the sales start
declining, cost saving measures and new designs are tried. Product is used to help basic applications, whereas
it is used fornew applications atthe growth stage. In the next two stages, customer service becomes the motto.
We have to appreciate that initially product strategy is aggressive. Somewhere in the growth stage we
start to maintain the product, and continue to do so for a large part of maturity stage. It is called holding
strategy. We start harvesting, i.e., disinvestment during the decline stage. Operations are flexib.le to begin with.
They become sequential, integrated and intermittent later. Initially, we try to improve the performance of the
product. We try to maximise sales then during the growth and maturity stages. Lastly, we have to cut costs.
The introduction and initial growth takes an average of 1 V2 years to 4years. Most ofthe growth and maturity
stage takes 2/3rd of product life. The decline sets in 2 years time after useful product life.
Technological Forecasting
Market planning is based upon sales objectives set according to sales forecasts for either the product
class or product form. Market share of a brand is related to its overall appeal and the marketing effort taken.
There are several methods of product class forecasts. Economists and engineers have developed
substitution curve models like Fisher and Pry and Hansfield. Sociologists have developed the diffusion of
innovations models.
Technological forecasting can be divided into two broad types. They are exploratory and normative.
Exploratory forec,ts are those based on existing technology and these provide predictions concerning future
82
Product Management
developments. Normative forecasting assumes the existence of future technological innovation (predicted
with exploratory forecasting) and provides models or methods of achieving these goals. As you are aware,
trend extrapolation is often used to make technological forecasts. This technique is based on a historic time
series for a selected technolo9'J parameter. It is assumed that the factors influencing the historical data are
likely to remain more or less constant in the future. Usually a single parameter such as speed horsepower or
weight is extrapolated. A good trend extrapolation depends on selection and prediction of key parameters
of performance. The two important techniques of technological forecasting are substitution curve and
envelope curves.
The basic instrument behind the development of man's material progress since pre-historic times is the
phenomenon of "substitution" Table 1 presents some illustrations on substitution phenomenon. The dynamics
of penetration of one technology (or product) over the other usually proceed according to a generalised scenario
characterised by the time and the penetration level. When a new technology is first introduced, it is usually less
advanced, both operationally and economically, compared with older product, against which itis competing.
The new technology will therefore be developed to increase its efficiency and reduce its cost. In addition, once
the new technology has been introduced and it has gained a nominal share, say about 10% so that the
commercial feasibility has been proven, itis likely to gain an advantage over the older one and the substitution
process continues. The extent of this substitution process will depend on the parameters of the market, the
parameters of the competing technologies and any other externalities that may occur.
Table 1
Examples of Substitution Phenomena
Old Technology
New Technology
Petroleum lamps
Electric lamps
Horse drawn carriages
Automobiles
Steam locomotive
Diesel locomotive
Cotton
Synthetic fibre
Leather
Vinyl
Soap
Detergents
Hardwood flooring
Plastic flooring
Reciprocating engines
Turbojet engines
Extensive empirical evidence has shown thatthe basic substitution begins exponentially. As the process
continues, competition intensifies and the fractional rate of substitution of older product tends to diminish.
This is because the new product is more efficient than the existing and established one and competition grows
more intense. Eventually as the basic process moves toward complete substitution, a saturation of the market
takes place and the fractional rate of substitution of older product declines to zero. This fundamental dynamic
substitution proceeds according to a logistic or "S" shaped curve, which is characterised by a slow initial rise,
followed by a period of a more rapid growth and eventually tapering off towards a fixed saturation value,
the final level of adoption of new product technology. For two competing products , the fraction always adds
up to unity, both being logistic as a function of time. The three important models describing the penetration
of one product over the other are:
Fischer-Pry Modefl
log
(l~J = C
+ C 2t
... (1)
1. Fischer J.e. and Pry J.H. -
Technological Forecasting and Social Change (1971), pp. 75-88.
83
Blackman ModeF
log
(F~f)
= Cl
... (2)
+ C2t
Floyd ModeP
log
(F~f) + (F~f)
... (3)
= C l + C 2t
Where f = market share of new product at time "t" , F = upper limit market share; C l , C2 = constants.
Fischer-Pry model assumes that the fractional rate of substitution of "old" by "new" is proportional to the
remaining amount of "old" left to be substituted, i.e.,
1
f
df
x (1-f)
dt
- =-
... (4)
Blackman model assumes an upper limit "F" for the substitution of "old" by new. Fischer-Pry model
is a very special case of the substitution model presented by Blackman. All the three models can be simulated
by one equation as given below:
... (5)
where a is constant, termed as delay coefficient.

Substitution a = 0 results in Blackman model and a
a = 1 results in Floyd Model.
0, F = 1 yields. Fischer-Pry model and
Multilevel Substitution
The models presented above are applicable only to the situations, where two products are competing.
However, they can be easily adapted to situations where more than two products are involved. Assume a
market containing "n2" products designated as Xl Xz ... xn in which the product xn is the newest and Xl is the
oldest. The principle of substitution involves the following assumption:
(1) The new product xnbeing technologically more advanced will substitute over a period oftime than
all other products (Xl' Xz, .xa _1)
(2) The older product Xl being technologically least advanced will lose its market share to all other
products (Xz, x3 ,x)
(3) Any intermediate product will substitute older products and will be substituted by newer products
over a period of time.
ubstitution and Diffusion

When new technologies appear on the scene, the older ones are replaced. Sail was replaced by steam
and steam itself by Internal Combustion (lC) Engine Coal as a fuel was substituted by oil, and that by natural
gas and nuclear energy. There are so many generations of successive electronic products; and the time lag
between each succession is getting shorter. It makes it necessary for us to understand the impact of the recent
technologies on the earlier ones. Inspite of their advantages, 100 per cent people do not adopt newer
technologies. Rather a diffusion process is set into motion. As it is, the newer technology expands the market,
by exploiting applicationsnot tapped earlier.1t also provides an opportunity for buyers of earlier technologies
2.Blackman A.W. - Technological Forecasting and Social Change (1972), pp. 448-452.
3.F1oyd A. - Trend Forecasting, Prentice Hall, Englewood Cliffs, N.J. (1968).
84
Product Management
to substitute the more recent technology for earlier ones. The substitution effects gradually diminish the
potential of earlier technologies (if not the actual sales). Some customers directly leap frog to the more recent
technology instead of adopting earlier devices. Some customer using earlier technologies may switch over
to the late. ones (a process of disadoption of earlier technology). When the time interval between
technologies is short, the process of diffusion of earlier technology may continue through a population of
potential buyers, even when the substitution process is in progress. In other words, there is an increase in
demand for earlier technology, while simultaneously facing a substitution effect.
Envelope Curves
These are based on the inventive process. Asuccession of differenttechnologies emerges over a period
of time to satisfy the demand for improvement of a given capability. The candle, the kerosene lamp and
incandescent bulb and the fluorescent bulb all represent the gradual replacement of the preceding sources
oflight. In transport the horse, the train, the aircraft, have gradually replaced each predecessor, as man sought
for more speed. Because anyone technique seems to evolve along these "5" shaped curve of capability
improvement over time, from an over-all perspective, one sees a succession of these "5" shaped performance
curves when evolving technologies are plotted againsttime. By drawing a curve roughly tangentto the peaks
of these "5" shaped curves, which are plotted on the same performance versus time graph, a rough
approximation of an exponential curve is described of the over all technological progress in the selected
capability. Envelope curves like substitution curves utilize, time series data to make forecasts. Substitution
curves forecast the amount of substitution of one technology for another atsome future time while envelope
curves forecast future performance on the basis of past experience with several different technologies. Both
envelope and substitution curves are extended models of trend extrapolation. Trend extrapolation makes the
implicit assumption that the future is a logical extension of the past. Envelope curves would be useful in those
industries experiencing rapid innovation. They are used to predict the rate of technological innovation in a
specific field. Upon estimating the rate of technological innovation, it is possible to determine the effects of
alternative systems being considered on performance characteristics believed to be important to the
acceptance/feasibility of the technology.
Growth Curves
Forecasting by "precursor events" uses the correlation of performance trends between two innovation
technologies. Because technological advance usually follows a pattern of continuous increase, situations
frequently occur in which one indicator of technical progress lags another by a given period of time. In this
situation, the leading indicator is called the precursive indicator. It is then possible to utilize the leading
technology to predict the status of the lagging technology over a period of time equal to the lag time.
Growth curves play an important role in technological forecasting. There are three important growth
curves, namely, logistic, log normal and Gompertz, which are widely used in estimating the penetration of
one technology over the other over a period of time.
85
10
u.i 09
G
Iz
w
08
IT:
O.p
()
W
0...
:::)
I-
, ,,~
[f)
0.7
0.5
0.4
0.3
en 0.2
:::)
[f)
01
0
-3.0
-2.0
-1 0
10
FISHER AND PRY -
2.0
30
SUBSTITUTION CURVE
Fig. 5.11.
Note: The rate of substitution is governed by the rate of diffusion of an innovation. Increased switching costs will slow down this
rate.
All the three were used by economists to analyse the growth of new processes. These functions specify
an ultimate equilibrium and an "S" shaped curve which asymptomatically approaches a saturation value
from time zero and presents the trend of adjustments towards the equilibrium. While it is possible to estimate
statistically any of the three types of growth curves to analyse the growth rate of diffusion, Gompertz curve
is widely used because of its simplicity, and the fact that this curve permits a simultaneous estimation of both
the growth rate of diffusion and the adjustments of actual level of acceptance of the process towards the
ultimate equilibrium level by linear estimation.
We invite the attention of the readers to a recently published book Lean Thinking authored by James
P. Womack and Daniel T. Jones. It describes how the Showa manufacturing, a maker of radiators and boilers
changed from batch mode production to lean production under the guidance ofTaiichi Ohno (expired in
1990). Ohno started small-lot production, and produced only what was requested by the next production
step. He converted batch processing to a single-piece flow by creating a cell. Every activity was rethought and
improved. To accommodate the lean production, a new organisation structure was created. Horizontal
product teams were created. Each product team had its own marketing, product design/engineering and
production system. The objective of each product team was to introduce single-piece flow in product design,
order-taking and production. The rate of production was synchronised to the rate of sale to customers. In
many countries of the world, lean techniques are spreading.
Diffusion Model
In substitution models, we consider two or more products. In diffusion models, the process of spread
of the product in question is considered absolutely without considering the existing products. Bass model
(1969) is very popular. Here the probability ofthe first trial by a person is computed.
PI
= P + (;) TTl
where p is the coefficient of innovation, q is the coefficient ofimitation, m is the total number of adopters
and TTl is the number of adoption purchases. Mansfield has developed a similar model (1968).
Product Management
86
Diffusion of Industrial Innovations

Industrial diffusion has two dimensions - diffusion of products, and diffusion of processes. The rate
of diffusion varies depending upon the industry and the particular innovation. Some innovations take more
than two decades, e.g., sail-road and petroleum. Old and new products co-existfor many years. Mansfield
cites the following four factors which affect the speed of adoption:
1. Economic advantage: The higher it is, the faster the adoption.

2. Commitment: The higher the capital commitment, the lesser the speed of adoption.
3. Uncertainty: The extent to which things can go wrong when an innovation is introduced.
4. Risk Reduction: It decides the diminishing initial uncertainty with respect to an innovations
performance.
Shortening Product Life Cycles

Rosenau rightly describes today's product life cycles as short as blink-of-an-eye. The market-place for
new products is like a competitive pressure cooker. Companies take proactive steps like omitting test
marketing to save time. Companies are eagerto take lab research to the market more quickly. Every industry
we look at seems to be undergoing shorter cycles. Research data also substantiates this proposal.
Some of the reasons for shorter cycles are a fast pace of technological change which means opening
and closing of opportunities at a faster rate, willingness to adopt new products on the part of the consumers
and the easy availability of credit and better communications.
Information about the new product reaches the target audience faster, and it encourages an earlier
switch over. Such information reaches competitors faster and they are quick to respond. Some companies
stick to the old technology to milk the cash cow, but competitors are likely to exploit new technology to make
the cash cow obsolete. Some companies are the first to embrace new technology so as to make their own
product obsolete. The following diagram illustrates this.
r'\'~Y
;/
I'----'k'----
Obsolete your own product

Stick with existing technology and let others obsolete you.
Technology
Milk Cash Cow

Fig. 5.12 Mature Product Trap
Rapid new product development leads to increased profits and reduced costs. A company doing
development faster builds up credibility and obtains financing easily.
Manifield. Edwin, Industrial Research and Technological Innovation NY: W.W. Norton, 1968)
87
APPENDIX IX
BASS (1969) MODEL OF DIFFUSION
It is a popular and widely used model of first purchase demand. It is a model of timing of adoption
of an innovation.
Thus if
f(t)
probability of adoption at time t

(or the fraction of the ultimate potential that adopts innovation at time t)
F(t)
fraction of the ultimate potential that has been adopted by time t
then the likelihood of adoption at time t given that one has not yet occurred is
f(t)/[1 - F(t)] =
where
qF(t)
coefficient of innovation
coefficient of imitation
(1)
Innovative effect is greater to begin with but declines over a period of time monotonically while imitative
effect increases over a period of time. Equation (1) leads to the differential equation
f(t)
ifF (0)
F(t)
(q - p) F(t) - q [F(t)]2
0, the solution to equation

[1 - exp (- bt)]/[1
+ a exp (-bt)]
(2)
(3)
and the density function of time to adoption will be

f(t)
(b2/p) exp (-bt) 1 [1
+ a exp (-bt)]
(4)
where a = q/p
b = p
+q
It is easy to differentiate f to find the peak time in f or the inflection point of F to be t
= (lib) In (a).
88
Product Management
FISHER AND PRY SUBSTITUTION MODEL (1971)
Fisher and Pry proposed a substitution model based on three assumptions:

(i) "many technological advances can be construed as competitive substitutions of one method of
satisfying a need for another".
(ii) new technologies often completely supplant the older ones.
(iii) market share can be expressed in terms of Pearl's Law which states that the fractional rate of
fractional substitution of new for old is proportional to the remaining amount of the old left to be
substituted.
They contend that the rate constant of a substitution, once started, does not change. Rather,
technological pace in society is best reflected by the number and magnitude of such substitution.
Their model is
dldt [s(t)]
where
s(t)
k
(1)
ks (t) [1 - s(t)]
the fractional market share of the innovation of time t
a constant of proportionality
The time scale t may be chosen such that s(O) = %. After this, it is possible to solve equation (1) to
give the following expression for fractional market share of the latest innovation.
5
(t) = 11[1
+ exp (- kt)]
(2)
The above equation is a form of logistic function. By assuming that there are hvo competing
technologies, Fisher and Pry derive a more convenient form for estimation purposes. As a consequence, the
log of the ratio of the market share of the succeeding technology to that of the first is a linearfunction of time.
In [5/(1 - S)] = kt
(3)
In their notation
k
= 2a and t = t - to
The Fisher and Pry model has been shown to fit the data well for a number of successive innovations.
PETERKA (1977) MODEL
Fisher and Pry model was extended by Peterka to apply to several generations. His formulation was
In (sis,) = kt
(4)
where i and j are technologies, j newer than i.
Few studies have been made about a series of technological substitutions. There may be an intense
competition beween wo newest technologies. There are examples of simultaneous competition of more than
wo generations. When we study each innovation intensively, it becomes obvious that the process is
evolutionary, not revolutionary.
BLACKMAN MODEL (1974)
Blackman modified the Mansfield (1961) model and suggested the model
In [s/(S - s)]= a + bt
where S = the upper limit on market share obtainable by the new technology
s = the market share of the new technology at time t
a = constant
b = linear function of investment and probability.
There are variations of Fisher and Pry Model e.g., Floyd (1968), Sharif and Kabir (1976).
All these models deal in share or number of adopting firms as opposed to sales. They do not address
the level of sales of each generation.
NEW PRODUCTS: PLANNING

AND DEVELOPMENT
In any marketing programme, the company has to segment the market, select some segments it will
cater to, and then determine the positioning of the products it will adopt. The company is now all ready to
plan, develop and launch new products. Marketing management has to playa crucial role in this process,
though the actual development takes place within the R&D department. In ea~h stage of product
development, marketing management has to participate along with other departments.
What exactly is a new product? Are the new models introduced by the audio music companies new
products? If a cosmetic company adds an anti-wrinkle cream to its product mix, does it become a new
product? Or should an item be a hither-to-unknown entity to qualify for being a new product?
There are some categories of new products which have been accepted all over:
(1) Technological breakthroughs: That give really a unique product, e.g., an anti-cancer drug, an
AIDS vaccine. These products are quite different from the existing products. Nylon or transistors
when first introduced were technological breakthroughs. These products are new-to-the world, and
will create their own market. Most new products are just incremental product innovations based
on consumer research. Breakthrough business concepts such as i-mode or Sony's Playstation or
Starbucks are imagination driven concepts that take organisation far ahead.
(2) Signiflcant Improvements: These products are significant improvements over the existing
products, e.g., instant coffee replaces the usual brew coffee. These have greater perceived value.
(3) M odifled Products: These are revisions in the existing product, e.g., addition of a new flavour
or perfume, a new package, a revised size etc.Innovation is about working on practical utilitarian
features that enhance the product experience.
90
Product Management
(4) Products New to the Company: These products are new to the company but not new to the
market. They are imitative products. These allow the company to enter an existing market with
a me-too product.
(5) Repositioning: Existing products are targeted to new markets or market segments.
(6) Cost-Reductions: The products remain functionally the same, but the prices are reduced.
Bo02, Allen and Hamilton have given the above six categories of innovative ness of the products. The
innovativeness of the pcoducts is considered with reference to the company and the market. Market perception
ofthe buyers is the ultimate test of the innovativeness. A new product becomes an existing product after some
time, e.g., cellular or mobile phones are common these days. A company has a mix of the above six
categories. Really innovative products unknown to the world constitute only 10 per cent of total innovations.
Most innovative products are restricted to product and process improvement. It is largely a process of
improving the existing product rather than creating new products. Truly innovative products involve the
greatest risk and cost. Their innovativeness is yet to be accepted by the market.
Innovations can be considered with reference to the company. They can be considered with reference
to the product. Product innovations are continuous when they disturb the existing pattern the least - they
are just modifications. Product innovations are dynamical continuous when the disrupt a continuous
innovations somewhat, but still do not change the established behaviourpaUern, e.g., Sony Handycam, CD
players, disposable diapers. Product innovation can be discontinuous when the consumer behaviourpattem
is changed, e.g., diagonostic strips for diabetes, fax machines. Innovations with reference to the market
means either it has been purchased by a small percentage of the total potential market or it has been on the
market for a relatively short period of time. Innovations are more appropriately defined with reference to
consumer perceptions.
Discontinuous
Innovation
Dynamically
Continuous
Innovations
Basic Telephony
Rotary Instrument
Push-button Phones
'.::ordless Phones
Cellular Phones
Video-Phones
Satellite Phones
Continuous
Innovations
--+-
Instruments in
different designs,
colours, and
styles
Fig. 6.1 Product Innovations
Disruptive Innovation
'A specific type of innovation called disruption almost always trips up well-managed companies' writes
Harvard Professor, Clayton Christensen. A disruptive innovation is an innovation that transforms an existing
market or creates a new one by introducing simplicity, convenience, accessibility and affordability. Prior to
its appearance, the product or service was complicated, expensive and inaccessible. Initially, it is a small
market unattractive to existing players. The best example is minicomputers of DEC and the Apple personal
computer. Apple first sold PCs to children as toys. Later, the PCs were improved to bring them on par with
the minicomputers.
In order to survive in a competitive environment, a company must innovate. Competition is driving

innovation. It is a choice between innovate or perish. Drucker recognises only two basic functions of an
enterprise - marketing and innovation. Marketing and innovations produce results; all the rest are costs.
Many companies get their substantial sales volume and profits through products that did not exist a decade
ago. Growth industries are those that are oriented to new products.
According to C K Pralhad, the question is whether innovation is only going to be episodic or
breakthrough or a continuous response to opportunities as they emerge.
91
Existing products have a life cycle. These products may be required to be phased out or repositioned
or improved. The introduction of a new product at the right time maintains the desired level of company's
profits. Shortened product life cycles do demand innovations on the part of the companies. The advances
in technology, globalisation and the changing consumer needs are the factors that support innovative ness.
Environmental factors like the conservation of energy, concern for pollution, the green movement, the
shortage of natural resources - all these make it necessary for us to innovate new products.
Instead of developing new products by itself, the company can acquire existing businesses for adding
new products, e.g., P & G acquires Richardson-Vicks. Sometimes, instead of a whole business, a patent
for a product is acquired. Still there is one more option - be a licensee orfranchisee of an existing company.
Those companies which decide to develop new products may do so in-house in their own laboratories
or they can contract outside researchers and laboratories.
Some companies adopt both the acquisition and new product development route for growth,
depending upon the perception of opportunities by the management.
According to Scott Anthony, innovation is not restricted to creative genius, and is not unmanageable.
Innovation process can be managed. Innovation is also not restricted to products and services. Even processes
and distribution channels can be subjected to innovation. Clayton Christensen's work has established that
disruptive innovation is a different product. Disrupters offer products or services that trade off pure
performance in the name of simpliCity, convenience, accessibility or affordability. Ninetendo's Wii console
is Simpler that X Box and Playstation, and targets non-garners. Innovation companies concentrate on
customer needs, but many a time they cannot articuli'\te their needs. Many a time, we have to get feedback
not from the best customers but from the worst ones to identify the innovation opportunities.
Business Innovation
Innovation is not limited to products and markets. There are other dimensions like process innovation,
strategy innovation, and structure innovation. According to Pralhad, though the centre of gravity is still the
product or technology centric view of innovation, the trend is shifting dramatically towards more experience
centric innovation. Technology is no longer a differentiator. What differentiates is the personalized experience.
No company by itself can create the total experience alone. So, it will have to access resources from a global
network.
To Innovate or Not to Innovate Dilemma
This dilemma a forms the basis of 1997 book of Clayton Christensen If companies decide not to
innovate in these competitive times, they are exposing themselves to a great risk. The existing product range
needs a change to keep pace with the changing consumer needs, changing technology, the competitive
pressures and ever-shortening product life cycles. Though innovation is necessary, it is not without its risks.
The failure rate of new products introduced is very high. Even service industry's products like insurance plans,
credit cards, loan schemes and brokerage deals also show a high failure rate. Most of the new products fail
at the time of launch. Product failures are defined in financial terms - the products fail to generate the
expected profits or do not generate profits at all.
Why do new products fail? Sentimental attachmentto an idea being developed is one important cause.
The executives find it difficult to abandon the non-viable idea. Perhaps, the idea is viable but it may not have
a market potential. Perhaps, the product has certain inherent flaws. There may be problems of marketing
mix - poor advertisement, poor pricing, incorrect positioning. New product development costs exceed the
budgeted costs several times. Competitors give a tough fight sometimes.
What are the barriers to the successful development of new products?
92
Product Management
Lack ofIdeas: In certain areas, there are few ideas to develop the products further, e.g., steelindustry.
Social and Governmental Constraints: New drugs have to be cleared by FDA. It slows down
innovation in pharma industry. Liquors cannot be advertised in press and on TV in India. It is a social
constraint.
Prohibitive Costs of Development: Many ideas are screened to select a few viable ideas. The
process of development is prohibitively costly. Even viable ideas cannot be researched adequately sometimes
due to shortage of funds. To have multiple products in advanced stage of development simultaneously puts
considerable strain on the organisation. It may affect the regular operations. We have to align the
developmental work with the market requirements. Dr. Reddy's Lab focuses resources on new products where
there is a real chance of achieving some breakthrough. Philips takes the same approach. In its most focussed
form, the development process can be narrowed down to one product, e.g., Telco concentrates on Indica
and Mahindra on Scorpio. In the absence of focus, there can be time-and
cost-over-runs. Resources include both capital and human skills.
Niche and Fragmented Marketing: Instead of mass markets, these days a company caters to
specialised segments which are smaller niches. It means lower sales and profits.
. Development Time: Many companies may be working on similar ideas. Only those which can
develop these ideas faster than the competitors have a chance to succeed.
Shortened PLC: Competitors imitate successful products thereby shortening their PLC. It becomes
difficult to recover the development costs.
Any successful attempt to innovate basically depends upon the type of organisational arrangement
made for managing the process of developing the new products.
There are fourfactors that govern growth - population, penetration of infrastructure, ability of people/
government to pay and new products. In developed markets, new products are the key to growth because
all others have been exploited. In India, even the first three are important.
Need For New Products
As we have already observed, new products are needed for organisational growth. If we consider the
product life cycle stage, we know that it is necessary to develop new products to rejuvenate the decreasing
sales and profits of existing products which are in the maturity stage or in the decline stage. Some important
new products which have been introduced in the last few years are AIDS - antibody test by Abbott, lithium
batteries by Kodak, Cholestrol-Iowering drugs by Merck, minivans by Chrysler, Lotus 1,2,3 -software. Some
companies like 3-M and Johnson and Johnson generate more than a quarter oftheir sales from new products
put on the market, in the last five years. HLL introduced several new products in Indian markets last year.
Most companies try to achieve a balanced portfolio of products by being innovative. New Products are a
strategic response to competition. A company becomes successful by using flanker brands, line extensions
and new products in competitive environment.
Just innovation by itself is not good; many companies do alright on that, but the challenge lies in
sustaining a flow of creativity (PRTM).
The distinction between the most successful companies and notso successful ones can be given in one
word - the ability to innovate. Successful companies are innovative. Innovation is not restricted to new
product development. Ba~ically, it means discovering new ways to create value. According to ICICI,
"Innovation is the ability to identify opportunity and seek new growth horizons continually using people,
processes and delivery mechanisms as the platform." A broad definition helps a company think beyond the
R&D and move to the next level of innovation - creating new processes, new business models and new
vehicles. A company must have a leader, or a team to operationalize the innovation agenda. Innovation
culture must be encouraged.
93
Business must have well-defined innovation platforms which are powerful launching pads for new
ideas, products and businesses. A platform should consist of a series of elements and a structured process
which can translate ideas into value for the company. Innovative platforms ideally should be at the strategic
level. They should integrate technological feasibility and marketing feasibility. These platforms leverage not
a single competence, but a bundle of competencies and assets. Starbuck's 'third place' platform took it
beyond coffee into wi-fi hot spot and in-store music downloads. Cemex of Mexico thought of 'owning a home'
platform to broaden its scope form cement to construction finance and retail.
Innovative firms have strategic tie-ups using other firms to lead to better value for the customer. There
should be innovation structure, process and systems. Indian organisations must have open systems allowing
employees to be creative and entrepreneurial. Organisations must reward employees for innovation-related
activities.
Caution on Innovation
Al Ries wrote in a column that companies which depend on a constant flow of products will someday
find themselves in deep trouble. Innovation is not a strategy. Innovation is useful in launching a new brand,
e.g. Bull as an energy drink. Several hundred later versions of energy drinks cannot take the market share
a way from Bull. Monster is the second most successful energy drink in the US market, but is not an innovative
drink at all. It is formulated on the sound marketing principle of 'being the opposite side'. Red Bull is on 8.3
oz can. Monster did the opposite. It is a 16 oz can. It, therefore, emerged as the number 2 brand. In the long
run, every new product category runs out of innovative ideas. The battle then becomes a battle of brands.
Faster New Product Development
In this competitive world, it has become imperative for the organisations to complete the new product
development as fast as they can. Product life cycles are shortening day by day. Shorter time to develop means
reduced costs and increased profits. It gives us an advantage over competitors who may lag behind.
Product life cycles have become shorter both due to new technology and aggressive marketing. Buyers
are also readily accepting innovations. The rate of new product development has also gone up. Technological
change makes ideas obsolete very fast.
It is necessary to appreciate, however, that an unstructured approach to new product developmentto
release creativity or reduce restrictions is risky. It may not accelerate the development process.
Buying new products from external sources who are ready to sell them to us is one quick method of
putting new products on the market. In new product development process, we can separate the feasibility
and maintenance work from the new product development process. We should avoid unnecessary delays.
There should be a multifunctional triad team to lead the development work. The key persons of this triad
are drawn from the marketing, technology and production departments.
MR should guide the development specifications. Specifications should be addressed to a real
marketing problem. They should be measurable, specific, tangible and verifiable. Product specifications
should lead to design specification. Design criteria are correct tolerances, few parts, standard modules,
fabrication and assembly and testable product. Design specification also has another dimension of
procurement of standard parts from selected vendors. Designs specifications lead to manufacturing drawings.
Product design can be low-cost by careful engineering. Operations must provide opportunity to reduce time
to market, total production time and manufacturing cost. The techniques of just-in-time is a great help. Nonmanufacturing tasks like product launch work, training of the sales staff and service staff, and distribution
of spares must be carried out simultaneously with the manufacturing task.
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Product Management
Kanter, Kao and Wiersema on Innovation
In the US, 3M, DuPont, Pfizer, parts of GE and Rubbermaid are example of the innovating companies.
Toyota Motor Corp. has been good at innovation. Wipro Ltd. Is focused on innovation.
3M's policy is to have' 15 per cent solution', by which employees are encouraged to spend 15 per cent
of their time on personal projects not even approved by the organisation. This led to breakthrough products
such as masking tape, which led to scotch tape. At 3 M, chance discoveries are a way of life.
3 M's annual R&D budget is ~.6 per cent of sales and it employs 6500 people for R&D.
Toyota Motor Corp. has been good at innovation. Wipro Ltd. Is focused on innovation.
DuPont believes in 'innovation outside the lab' Itsets 'stretch dreams' for its employees. Such dreams
convey an attitude and help in the search of for the Holy Grail."
GE believes in passing the innovative spirit to the succeeding generations. It believes in boundaryless
organisation.
Pfizer spends a whopping 17 per cent of its sales on R&D. Pfizer does not emphasis chance discoveries
but believes in managing the innovation. Research is always integrated to marketability.
Rubbermaid relies on down-toearth observations for its innovations rather than the lab work. It has
innovated on the laundry bags by this method. Its total value process' has five 'T's - trends, teams, training,
technology, and creative tension.
All these companies have serendipity.
Kanter is of the opinion that a universal characteristic of innovative companies is an open culture. Kao
emphasises relationships. Kanter advocates a team of mosttalented people to fire the imagination of others.
He also discourages the tendency to romanticize innovativeness. It is not synonymous with intuition and
inspiration. It requires sheer mental work. We have to appreciate several ideas. We have to sort our
contradictions. We have to listen to different views. Sometimes people do not realise that it is sheer luck-and
become pretentious. Innovations occur not at the core always, but at fringes. A project should be protected
from a barrage of criticism.
It is not enough to be good at invention only. What matters is how quick you are able to market the
invention. It is also necessary to sustain the manufacturing exceilence.
Innovations are not always related to product features and technology. GM's greatest innovation was
the facility of making the finance available by way of consumer credit. It supports its core mission. Some
organisations are innovative in distribution.
People working in innovative companies should be resilient and must have the capacity to withstand
the ups and down.
95
Kanter has developed an innovation pyramid.
Few Big Projects
20-30 per cent may

be successful
Portfolio of prototypes experiments that are

being developed
Incremental innovations
Fig. 6.2 Kanter's Innovation Pyramid
Innovation and Consumer Behaviour
Insights into consumer behaviour provide the source for; and the inspiration, that drives innovation.
The other way to drive innovation is the confluence of ideas. As Chinese consumers require spot reduction
of pigmentation, imaging technology available atthe UK lab was used to show the condition of the skin below
the surface. Such a confluence of ideas is possible if the company follows an open innovation model.
Innovations need not be restricted to top-end and premium products only. They can be extended to all
segments - from premium to mass markets. P&G has laid down the principle that product performance
is not to be compromised to bring affordability. P&G has collaborated with CSIR to develop betterabsorption materials for their sanitary napkins. They market Hugo Boss perfumes. They use lavenderderived
form chemical sources in perfumes which is likely to lead to skin problems. They have extracted lavender
form plant origin in H.P. which would not cause skin irritation. According to Shekhar Mitra, India and China
are the fastest growing centres of open innovation model today.
Organisation for New Products
Any programme of innovation can be successful only when it gets top management support on a
continuous basis and this support is not withheld even in the face of failure of some new product development
efforts. It is for the top management to define the overall domain of the business for new product
development. The top management may spell out the product categories it wishes to emphasise.
Top management has to set out the criteria against which new product ideas will be scrutinised. The
top management might say a new product proposal is acceptable if the product can be introduced within
three years, and has a market potential of at least Rs. 100 crore, and a growth rate of 10 per cent.
Further, it should provide a return of 25 per cent on sales and 35 per cent on investment. A very significant
decision is about the budgeting of the new product development. Some companies finance several projects
at a time, considering the possibility of having a few successful products at the end of different time periods.
Some companies allocate a percentage of sales to R&D efforts. Even competitive efforts are taken into
account. One may first decide how many successful products a company must have and then calculating
backwards the investment needed.
It is common experience for companies that out of several ideas considered for a new product, only
a handful pass the idea-screening stage. Each idea reviewed, however, costs a lot to the company. Only 50
percent ideas of the screened out ideas might survive the concepttesting stage, and only a half of these might
reach the product development stage. There has to be a budget for concept testing, and product testing
stages. Hardly one or two ideas are then launched at an enormous launch cost. They may be successful or
may not be. The total cost of developing the new product is thus the summation of the costs incurred at each
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Product Management
stage of development. The company has to improve the pass ratio and reduce the costs at each stage to make
the whole process cost effective. The average cost of an idea getting converted into a successful product can
be calculated. The products needed for a company multiplied by the average cost thus gives the total budget
for new product development.
Several organisational mechanisms are introduced to handle the development of new products. There
is no 'one-best' organisational structure to do so. Some most widely used organisational structures are briefly
explained here.
Product Planning Committee
In several companies, a committee is formed with representatives drawn from the top management
for monitoring new product development. The committee usually consists of the chief executives and
representatives from the marketing, financing, production and research departments. Once the product is
developed, the marketing responsibility is assigned to either a product manager or a new product department.
The committee is an effort to pool the combined wisdom of different people. A resulting new product thus
has the approval of the concerned administrators who were a party to its developmental decision. Incidentally
a committee type arrangement is a time consuming process, and is slow to arrive at decisions.
New Product Department
In large companies, a new product department under a senior manager vested with sufficient authority
and having access to top management is created. The manager heads a department which is compact,
consisting of 4-5 persons. This department spells out the new product programmes. It also monitors the
development process of the new product. Once developed, the new product is assigned to the concerned
operating department.
New product department in some firms is authorised to contract with outside parties to bring the new
product on par with competitive products. New product department can be authorised to farm out ideas to
outside specialistfirms who specialise in product development process. The new product department keeps
track of patents and revives old patents. The products developed may not be of immediate use to the
company. The new product department can be authorised to sell off these products or technology to others
at a price so as to cover the R&D costs.
Routinely, all new product departments co-ordinate with R&D, generate and screen new product ideas,
and test and commercialise the ideas developed.
Product Manager
He may be named as a product manager or a brand manager or a merchandise manager. He is after

all responsible for either a product or a group of related products. He mainly plans the strategies for existing
products. He may be assigned the additional responsibility of developing and marketing new products.
However, as the product manager is over-burdened with his existing load, he may not do justice to the new
product. At the most, he can do brand or line extensions and slight product improvements. Besides, he may
not have the competence to develop the new products. Being too close to the company's existing product
line, he is also blinkered to the possibility of exploring new product ideas.
New Product Manager
To overcome the drawbacks of an arrangement whereby new products are made the responsibility of
existing product managers, some firms create the post of a new product manager who has to consider only
about the development of new products. This professionalises the new product function. The new product
manager reports to the Group Product Manager.
97
New Product Venture Teams
Here the major development work of new products is assigned to a venture team which is a small, multidisciplinary group organisationally segregated from the rest of the firm. The venture group looks after the
whole new product development process right from idea generation to full-scale marketing. It consists of
representatives from the operating departments like engineering, production, finance, marketing research etc.
The team acts as an entrepreneur, within the organisation, as it is immune to organisational rules and
regulations. It reports directly to top management, and has a single-minded commitment to enter a new
market profitably. The group members are relieved of their other organisational duties. They are given a
budget and a time-frame. Once a product is developed, it is turned over to the existing organisational
arrangement or to a subsidiary company. The venture team is then disbanded.
Venture teams are organisations within organisations. They by-pass the traditional problems of
bureaucratisation and red-tapism. Besides, in existing organisations, there is an inherent resistance to
change. The existing arrangements lack the authority or the courage to see the product through all the
developmental stages.
Innovation Czar
An innovation Czar is a person in whom the company places complete faith. He is there to guide the
innovation. But this can hamper individual initiative. Still, the fact remains that an influential champion does
help the innovation process.
Network-centric Innovation
Satish Nambisan and Mohanbir Sawhney in their book The Global Brain talk about the 'Red Queen
Effect'. The product innovation departments of corporates are not delivering results inspite of heavy
spending. It is a case of declining productivity. It is true for technology as well as consumer firms. There is
lack of innovation on the one hand, and on the other there are snorter product cycles. This makes the situation
dangerous. There is pressure of global competition. These three factors -shorter PLCs, decline in internal
innovation productivity and global competition - constitute a Red Queen Effect in innovation.
Dell will have to seek alternative business models to survive. Organisations become prisoners of what
they know. They have to see beyond their limited view of the world.
Network-centric innovation is an externally focused approach to innovation. It seeks to harness the
resources and capabilities of external networks and communities to amplify or enhance innovation reach,
speed and quality. A brilliant example of this is the Open Source Software movement and its most famous
product, the Linux operating system. It started with a kernel of some 10000-odd lines of code in September
1991. By April 2006, it has close to 7 million lines of code. Several thousand programmers all overthe world
contributed to the development and release of 100-plus versions of Linux kernel in this 15 year period. Even
Merck, a pharma firm has adopted a network-centric innovation model. P & G has also jumped onto the
network innovation band wagon.
Why New Products Fail or Succeed?

It is a baffling question. Some new products fail. Some succeed. For a company, every new product
that is developed is a star. But it may fade out. Some of the reasons for this are:
Lack of Organisational Team-work
In most of the organisations, there is a tradition to rely on R&D to come out with a bright idea and
research it, which is then handed over to the design and production people. The ultimate end-product comes
to marketing department for selling. There are many problems in this segmental approach. The design people
may revert to R&D, if they find the product unviable. The production people may ask the design people
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Product Management
to redesign if the product cannot be turned out at the budgeted cost. The design people take their own time
to redesign. The marketing department ultimately gets a product that is not acceptable to the customers at
a price quoted. Perhaps, their needs are not met. Each party places the blame at the door of the other party.
The solution to this situation is to have team-approach. At each stage, there should be cross-functional
approach, e.g., marketing examining the product idea. New products should be linked to a strategic
management process, and the new product development process should be under an effective organisational
arrangement. A stage-gate process of development ensures thatthe product proceeds to the next stage only
when cleared by a cross-functional team of gate-keepers. At each stage, while the gate-keepers decide whether
to go further/no go and kill/no go and hold/recycle. The criteria are decided by the project leaderfor each stage.
This is different from the department-to-department approach; where leaders change often. Thus, if
marketing research into consumer's wants and needs does not support a product, the product does not go
ahead from the business planning stage to product development stage. Simultaneous product development
by a cross-functional team turns out products quicker. Amtrex Hitachi has Team of Accelerated Innovation
(TAl) which is spilt into 3 stages - idea-to-concept finalisation (TAl -1), prototype-to-launch (TAl -2) and
launch-to-customer satisfaction (TAI-3). It attempts concurrent engineering. It may be risky to do so. But
where product life cycles are shorter, quick development of new products offers far more benefits than the
risks associated with it. For ensuring product quality at the developmental stage, there should be benchmarking. It means we have to check our product against the competitor. M & M is benchmarking Scorpio
against Sumo for passenger comfort, against M & M vehicles for fuel economy, against Maruti Gypsy for
ease of driving and against Tata Sierra for acceleration.
Technical Problems
Too complicated a product or poor performance of a product that is not superior to any of the existing
products may fail.
Poor Timing
Philips was too slow to bring improved generations of VCRs after it put its new product in 1972.
In the meantime, Japanese companies put at least three generations of VCRs. Delay in introduction of new
products may affect the marketing chances of a company. Even rushing a product in the market too quickly
is not advisable. Hima Peas introduced by Lever several years back were not accepted by Indian consumers,
who were not ready to accept packaged branded commodities then. In this age of working women, many
fast-food items may become acceptable, though it was unthinkable to expect so a few years ago.
According to Ashok D!::sai, editor of Business Standard, the pace at which innovations occur fluctuates.
There are times when human brains are more fertile, markets are more competitive, and business
organisations more receptive to change. There are times when all these things slow down. These fluctuations
in the rate of innovation cause corresponding fluctuations in the growth of productivity, real incomes,
introduction of new products etc. The world witnessed a remarkable burst in innovations since World War
II. If this surge is coming to an end, we may well be on the threshold of a long, even if not necessarily deep,
depression. Japan grew so fast by importing innovations and then for almost two decades it was a leading
innovator itself. The early years of computers and micro-electronics were dominated by Japan. Now there
is lack of innovation, and it has taken steam out of Japan's growth engine. As Paul Krugman has argued,
the American boom of the past 15 years was never driven by innovations; it was driven by intensive use
of its labour reserves. They cannot be used any more intensively. So the US growth may also disappear.
Let us now examine why new products succeed.

(i) Any product, whether new or existing, has to satisfy a consumerneed or more than one consumer
need.
(ii) The product advantage of being superior goes a long way in making the product successful. Xerox
- a copying machine succeeded because it copied anything in seconds without any chemical!
99
special paper. Polaroid succeeded as ittook a picture, developed it, and gave a print in 60 seconds
flat.
(iii) The product must be competitive cost-wise. It must be compatible with the distinctive competence
of a company. It must be supported by top management. The environment should be conducive
to developing new products. The management must be alive to new-product opportunities.
(iv) The product must have a marketing advantage, e.g., Avon is sold door-to-door or Barbie doll can
get clothes to drape her in.
(v) The product must have a creative advertising advantage, e.g., Maggie's two minute noodles
emphasised the two-minute solution to satisfy the hunger of school going children.
Stages in the New Product Development Process
The overall guide to the new product development is the product strategy of the organisation. The
development of new product proceeds in the following eight stages. At each stage, the firm has to decide
whether to move ahead to the next stage or abandon the product or seek additional information. The eight
stages, involved are: (i) Generation of new product ideas; (ii) Screening and evaluation of ideas;
(iii) Concept development and testing; (iv) Marketing strategy; (v) Business analysis; (vi) Product development; (vii) Test Marketing; (viii) Commercialisation. The Fig. 6.3 illustrates the process.
The firstthree stages up to the concept development are the critical steps. These are the least expensive
steps. Further steps are escalating in terms of costs and commitment of scarce resources. Most product failures
are attributable to an unviable idea or faulty concept development. The stages help us to identify these
situations. Activities in the development process can be co-ordinated and controlled by mathematical models
like PERT/CPM.
It is necessary to translate the product on the drawing board into a marketable product in as short-a
time as possible, without affecting costs. There should be gateways at every stage.
Product Management
100
NEW PRODUCT STRATEGY
IDEA GENERATION
TESTING
I
I
NO
YES
NO
YES~
PRODUCT
DEVELOPMENT
NO
LI
TEST MARKETING
NO
YES
YES-----,
I
----+
LIMITED
PRODUCTION
COMMERCIALISATION
Fig. 6.3 New Product Development Process
The Act of Creation of new products is analogous to the gynaecological stages of conception,
mid -wifery, and delivery. New product development is both perspiration and inspiration, persistence and
serendipity.
Idea Generation
A product that we use today was just an idea sometime back. It is the creative idea that gets eventually
translated into the new product opportunity. Where do we find these ideas?
Sources of New Product Ideas
Ideas can come from a number of sources. Ideas can come from the R&D department. The chief
executive himself can be a good source of ideas. The marketing people including the salesmen provide certain
ideas. Outsiders like the suppliers, the dealers and the distributors, inventors and research agencies are fertile
sources of new ideas. Technical people working in the company and outside are a good source ofideas. Wipro
has tied up with a small consulting firm Erchowon to accelerate the pace of innovation. Innovative services
are increasingly being offered by niche consulting firms, e.g. Avalon, Harish Bijoor, Saint, Acquity, Sicofin,
and PRTM. PRTM is focusing on product innovation in India, and that accounts forthree-fourths of its billing.
101
Companies get ideas from the competitors. The kith and kin of people interacting with the company, e.g.,
Chairman's wife, may throw up bright ideas. To illustrate, Pan Parag was originally based on a formula
developed by M. M. Kothari's landlady in Kanpur in 1973. Customers themselves are the most important
source of new product ideas. Surveys of customers and feedback from the customers are treasure-mines for
the companies. Ideas can be found in our country; or else we can be inspired by people and products abroad.
Though there are endless number of sources for new product ideas, what matters more is how seriously
a company addresses itself to those new ideas. It is not possible to anticipate the sudden emerging idea.
Sometimes, ideas occur accidentally. These must be accommodated. It is, however, unwise to rely on such
accidental happenings. It is, therefore, desirable to have a systematic idea search programme.
People have always been innovative; it is just the ability to harness that innovation that is important.
Innovation must result in doing things faster, better and cheaper.
Idea Generation Techniques
There are a number of techniques available to generate ideas. Apart from techniques, two otheri
mportant factors in generating ideas are perspiration and inspiration.
Brain Storming Sessions
Alex Osborn is credited with this idea generating technique. It is a group exercise undertaken by six to
ten people. They study a specific problem for sometime , sayan hour. The chairman invites the participants
to throw up ideas - any ideas, even the wildest. The emphasis is on quantity. There is no qualitative
evaluation at this stage. The ideas flow - one leads to another, and then to the third and so on. Within an
hour. a few hundred ideas may emerge. To make brainstorming effective, participants are encouraged to
formulate new ideas from other participants' ideas, and build upon the ideas of others. Brainstorming sessions
traditionally used are extremely rewarding if they are well-planned and conducted properly. The group should
consist of people with different backgrounds and from different disciplines, e.g., a brainstorming session on
new financial product must have executives from the operational department of the bank, the marketing
executives, the computer specialists, the clerical staff in direct contact with the customers, the market
researcher and one or two potential customers. They should all be lively, bubbling over with ideas. They should
articulate their ideas even at the risk of appearing stupid. They should be properly briefed beforehand. It is
only at the end when all possible ideas are squeezed out of the group that it may be worthwhile to examine
them critically, see the more promising ones and develop the best ones from just a short description to more
of a concept.
SCAMPER TECHNIQUE
Scamper is really an acronym for
Substitue
Combine
Adapt
Modify
Put to other use
Eliminate
Rearrange
Synectics
Synectics is a further refinement of brainstorming. It is developed by William J. J. Gordon. Synectics
believes that creative process is not logical. It is more of an accident. Inventions come about when a person
has given much thought to a problem, though there is no solution in sight. Suddenly, a solution appears
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Product Management
accidentally. It is seemingly an unrelated situation. When Archimedes was having a bath, he found the
Archimedes' Principle - a solution to his problem. A falling apple led to the solution of Newton's problem.
A mould on agar plate led to the discovery of penicillin.
Synectics was developed at Harvard in the 60s. Many different variations have been developed over
a period of time. Whatever the synectic technique, the objective is to find an answer to a given problem through
"limbering up," by discussing seemingly unrelated subjects and then by asking the participants to come back
to the initial problem and trying to find original solutions through a "force-fit" discussions, i.e., by relating
to the original problem words and ideas from completely different word associations and thoughtprocesses.
A really expert leader and a group of six to eight suitable intelligent outgoing people will come up with
excellent results. A synectic sessions with uncreative people will, however, be useless.
For an important project, it is worth the while to hold several brainstorming sessions and synectic
sessions. A number of ideas generating sessions under different environments and with different people go
a long way in the generation of viable ideas.
Attribute Listing
All major attributes of an existing product are jotted down. Each attribute is then modified so as to
improve upon it. A pencil is round. Can it be made hexagonal for a better hold while writing or while
sharpening? A razor is manually operated. Can it be operated by battery-power? The following questions are
used to examine the attributes orthe product itself. What other uses the product can be putto? Can we adapt
the product? Can it be magnified or miniaturised? Can we substitute or rearrange it? What are the possibilities
of reversal and combination?
Forced Relationships
A relationship is sought to be established among several objects. An executive desk has several objects
- a planner, a clock, a phone, a fax machine, a PC and so on. These can be made available as one product
- an electronic desk.
Morphological Analysis
Here the structural dimensions of a problem are examined so as to arrive at relationships amongstthem.
The probiem is to have a vehicle for carrying the office-goers from the place of residence to the place of work.
The important dimension is a vehicle - what type of vehicle (four-wheeler or three-wheeler or two-wheeler
or two-wheeler with a side-car), the fuel used - whether petrol or diesel, and the characteristics ofthe vehicle.
We may think of an easy-to-start non-geared moped which is fuel efficient, and is suitable for the city roads.
The attempt is to find some novel combinations.
Need Problem Identification
Here the consumer is involved in idea generation. He is asked to specify his needs, problems and ideas.
+
AXE
Effect
Pen
Perfume
Roll-on Deo
103
A creative team was asked to attempt and combing the pen and the pefume, leading to the revolutinary
idieas of a roll-on deodarant.
Idea Screening
It is relatively easy to find a large number of opportunities in the form of initial ideas. We have to consider
now which of them are really worth the while for a follow-up. Which of these ideas are worth committing
the corporate resources to them? These are fairly difficult decisions. Some of the ideas are rejected for obvious
reasons like:
(a) lousy idea;
(b) unsuitable idea for the firm;
(c) obvious problems in production and marketing;

(d) too little potential;
(e) someone else is already exploiting it;

(f) others would be able to implement it better and quicker;
(g) no long-term potential;

(h) other reasons,
e.g., unsuitable for the main customers of the company.
It should be possible to reduce the ideas from several hundreds to thirty or forty having some prima
facie merit. Laier, further pruning is done more rigorously. While screening the ideas, the company should
not dismiss an otherwise good idea - a drop-error. Carlson's copying machine was a good idea. Xerox
exploited it while IBM could not. RCA exploited the radio while Victor Talking Machine Company could not.
Too many drop-errors may prove to be disastrous for a company. Its standards perhaps are too conservative.
On the other hand, some companies become victims of the go-error - they proceed to the next stage though
the idea was worth dismissing. An early rejection proves less costly for the company, since with the progressive
stages of development process, the costs escalate. It is wrong on management's part to allow poor ideas to
reach so far. Management should not allow ego and arrogance to blindfold itself in carrying forward
apparently poor ideas.
A numerical rating of the specific factors is often useful at this stage. A typical rating device is given
below:
Factor
Maximum Score
Idea is unique
20
Non-copiable
25
Wider appeal
20
Strong enough to induce trials and repeat purchases
25
Technically viable
25
Not price-sensitive
25
Compatible with corporate policy
25
Little need for consumer education
20
20
Likely to appeal to current customers
Suitable for development considering company's
technical expertise
25
Relevant to production resources/know-how
15
Can use company's branding
20
Suitable with the present sales/distribution resources
20
Can exploit other resources (financial, personnel, international)
10
Can be tested in the market place
20
Can be marketed in a given time frame
20
335
Adapted after Peter Krausher, Practical Business Development (1985), Holt, Rienharl and Winston.
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Product Management
The factors chosen and the scores assigned are based on judgement and experience. These are useful
in prioritising the factors at this stage. A team uses the above screen and arrives at an agreed point of view.
Richman's product-idea rating device lists the factors like company resources, location, corporate
personality and goodwill. All these factors are weighted. The company's competence level against each factor
is jotted down. The overall rating is the summation of the product of relative weight of each factor and
company's competence level. A minimum cut-off point for acceptance is indicated.
The rating devices make idea screening more systematic. However, it is just an aid to decision-making,
and cannot substitute it.
Concept Testing and Development
Even the best ideas just give an inkling of the final product. Product ideas are just an offer, say a
"disposable watch" or a "powder to add to nutritional value of milk and make it tastier" or "a new savings
scheme for kids - a kiddy-bank" or "an apple-based drink - an alternative to cola." This :nitial idea is to
be developed into a product concept or a consumer proposition. The idea becomes a concept when it is
elaborated - it covers the consumer or the consumer benefit, the target market and the intended usage.
Consumers do not buy product ideas - they actually buy product concepts.
One product idea can lead to several possible product concepts. Each variant is to be examined with
care beccuse of all the product stages, the concept stage is the most critical. Hurried and haphazard approach
might lead to a loss of an opportunity or heading for a wrong path from which it is difficult to retreat.
Let us take the idea of the disposable watch (the Swatch). First, we should ask who the possible users
of this watch could be. The watch could be targeted to children, adults, fashionable women, upper-class
people. Secondly, what benefit is to be built into this product is a question to be answered. It could be a timekeeping device, a fashion accessory, a low-cost watch, a gift watch, a disposable watch. Thirdly, one can
consider the occasion ofthe use ofthis product - birthdays, weddings, festive occasions, daily use, accessory
matching the outfits etc. By asking these questions, a company formulates several concepts.
Concept 1: The ideal gift for children - tough, plastic, really water-proof.
Concept 2: The modem woman's fashion accessory - in plastic, the material ofthe 90s. Ittells the time,
but it is bought for its looks. This is a feminine appeal.
Concept 3: The tough watch for men who want to tell the time. It should be durable and when faulty,
can be thrown off without bothering for repairs.
Concept 4: The low cost disposable watch for the whole family. Who bothers about expensive repairs these
days? It is boring too. We should be able to change it at will.
Concept 5: The latest gift for upmarket people. Though expensive, they can throw it out when out of order
or when it wears out. It should have expensive face and band.
Concept 6: The new up-marketfashion accessory thattells the time. A range of beautifully designed straps
for both men and women, made of expensive materials and with a disposable watch face
inside.
Many more concepts can be developed around a disposable watch, but the above gives you an idea
as to how slight variations can affect a concept significantly. Each concept is likely to be different in terms
of the probable product design, the target market and the pricing. Each concept has different marketing
implications and technical considerations.
The above concepts may also define a product's category - a children's gift watch will compete with
toys and games. A woman's accessory would compete with jewellery, buttons, straps, laces, flowers,
footwear, shoulder-bags etc. It is the product's category that ultimately decides its competition.
105
Suppose, out of several milk additives, we ultimately accept the concept of instant breakfast drink. It
then competes with eggs, breakfast cereals, coffee and cakes and other breakfast products. How it stands
in relation to these other products is shown in a positioning map having time and cost dimensions.
High Cost
Cold
Cereals
Eggs
Time
Slow
Cakes
Hot.
Cereals
Fast
Instant
Breakfast
Drink
Low Cost
Fig. 6.4 Concept Testing
We have positioned instant breakfast drink as quick to make breakfast product which is low cost. Cold
cereals are also quick to make but are not low cost. The product concept is then made a brand concept. Let
us take three brands of breakfast drink and position them on price and nutritional value.
High Price
Brand C
Brand A
Nutrition
High
Nutrition
Low
Brand B
Low Price
Fig. 6.5 Concept Testing
Our brand can be positioned as a moderately priced and moderately nutritive brand or low-priced and
low nutritive brand.
Concept in certain markets, however, are relatively ephemeral. Concept is based on image factors
rather than on factual service or product differentiation. This is particularly true of cosmetics, toiletries,
household chemicals, cigarettes and even alcoholic beverages. Several pedestrian cosmetic products succeed
due to image factors. The success of Dettol, Nivea, Marlboro, Brut after shave, Fa deodorants etc. is largely
due to image. The image is created by consistent and heavy advertising. However, in the absence of any
foundation on product attributes, if an image is built on advertising alone, it could prove risky, because the
sales decline as soon as ad budget tapers off.
Concept Testing
Concepts developed painstakingly are tested on target audiences. The concepts are presented
symbolically or physically. Maybe, a picture or verbal description suffices atthis stage. However, concept test
becomes more and more reliable when itis led from abstraction to concrete form. The consumer proposition
should be informative. It just can't be like an ad copy "the best ice-cream in the world." It has got to be 'a
range of high-priced, high-quality ice-cream made from real cream and only with natural flavours and
ingredients for those who like the best US or French ice-creams." The concept maybe backed up by
illustrations and product prototypes, illustrating the claims in the proposition. The nearer the concept is to
Product Management
106
the final product or service, the better. However, in the case of durables, it is most likely to be an artists'
impression. It is interesting to learn how much can be shown to consumers without spending money on
prototype development. To illustrate, products already on the market can be chosen for comparison. Many
straps and bracelets can be shown to the consumers for the watch concepts; without developing anything.
It is, however, necessary that the customer understands what is being shown to him/her. Statements on a
piece of paper may not be adequate. If the reaction is "it really depends on what the product looks like," the
concept visualisation has failed.
Consumers are asked several questions while testing the concept:
(1) Are the benefits clear and credible?
(2) Will this solve your problem or satisfy your need?
(3) Are there existing products which satisfy the same need?
(4) Is the price fair?
(5) Do you intend to buy the product?
(6) Who would use this product and on what occasions?
In the light of these answers, the concepts are polished, revised. The testing and revising continue till
the precious concept conforms to the consumer requirements. Once established finally, it is carried forward
to other stages of development, without compromising anything. We have to set up systems to ensure that
ideas keep flowing and are converted into product concepts.
Marketing Strategy Development
In order to put the product into the market, the company must develop its marketing strategy. The
strategy developed initially is subject to revision later. The size of the market, the target market, and the
financial goals sought to be achieved are specified. Thus, the target market for disposable watches will be
families who will accept a new disposable watch which shows time, but, at the same time, is a fashion
accessory. The watch will be moderately priced. The company initially intends to sell 5 lakh pieces. The profit
margin expected is 15 per cent of sales. The company plans to raise the sales to 35lakh pieces in the next
three years.
The second part of the strategy spells out product's price, distribution strategy and the promotional
budget for the first year:
The watch will be given on plastic stand and will retail at Rs. 200 a piece. To begin with, dealers will
be given one watch free for every few watches bought. To induce trials, coupons will be put in the press, giving
a discount of 10 per cent. The promotional budget will be Rs. 50 lakhs. The budget will be split between 60
per cent for TV and 40 per cent for press. The theme of advertisement will be to emphasise the watch as a
fashion accessory ata reasonable price. Duringthe first year, Rs. 10 lakhs will be spent on marketing research.
The last part of the marketing strategy is to state the long-term financial and marketing goals:
The company intends to acquire a 30 per cent market share of the total watch market and intends a rate
of return on investment of 12 per cent. There will be further improvements in the product - straps and faces
to match the current fashion trend. Price will be maintained at a low level. The promotional budget will be
increased by 25 per cent every year. Marketing research expenses will be reduced in future years.
Business Analysis
We have already developed the product concept and the marketing strategy. It is now time to examine
the proposal's business or financial worth. Here projections are made about the sales, costs and profits to
see whether these meet our objectives. If yes, the proposal proceeds to the prototype development stage.
107
Sales Estimation
It is important to know whether the product will generate sales enough to yield a satisfactory profit.
Products are classified for such an estimation into three classes, a one-shot product, a frequently purchased
product or an infrequently purchased product. The sales of a one time purchase product show a usual pattern.
They rise, reach a peak and decline. If new buyers are added, the sales stabilise. Frequently purchased
products are consumer nondurables or industrial products. First the sales rise as new buyers are attracted and
then the sales fall. If the product is good, repeat purchases stabilise the sales. Infrequently purchased products
like cars have two types of sales - first-time sales and replacement sales as the previous products become
obsolete or depreciate due to wear and tear.
Estimating First Time Sales
We can use a build-up technique in which general estimates of future demand in the segments, likely
to use the product are made. These are added to getthe total forecast. It is also called a top-down approach.
First market potential for a product is estimated. It is the estimation of total market sales. To illustrate,
a medical equipment may be sold to hospitals, laboratories and private nursing homes. The existing facilities
are accounted. They are reduced by the purchase probabilities for the new equipment. The sum gives the
market potential. This market is to be penetrated. It is the sales potential that an individual company expects
to achieve out of the market potential.
The company can make use of experience, judgement or statistical techniques to make the predictions.
Since replacement sales are difficult to predict before the product is in actual use, manufacturers base
their new product's sales estimates on first time sales.
Estimating Repeat Sales
This is necessary for frequently purchased products. A high repeat purchase rate shows satisfaction with
the performance of the product. We have to estimate repeat purchases in each class, repeat purchase once,
or twice or thrice and so on. Some products are abandoned after a few trials. It is necessary to estimate the
rise or fall of repeat purchase ratio, and the rate of such rise and fall.
We can make use of the derivation method. To illustrate, we are interested to know the replacement
demand for car tyres. First, it is estimated how many cars are candidates for the new tyres. Market research
shows, on an average, a mileage of 10,000 miles per car per year, and tyres last for 30,000 miles. In 1995,
all cars which have three-year old tyres are potential candidates for new tyres. We shall have to get the figure
of cars sold in 1992. Further, in 1995, cars becoming 6 year old will be ready for the second replacement.
The number of cars are put into age brackets. This number is multiplied by four (tyres per car). It gives market
potential of replacement demand for car i':lres in 1995. It s~ould be noted that these are averages. All cars
will not be driven for 10,000 miles a year.
Survey of Buyer Intentions
Sales are commonly estimated by undertaking a survey of potential customers. The customers are
asked whether they would buy a new product, and if yes, how much and how many times. Consumer panels
might be maintained as a sounding board for new product ideas. It is to be noted that the consumers just
intend to buy. It is open to question whether they would actually buy it. Perhaps, the survey might show
inflated results.
Buyer behaviour may be studied for new technological breakthroughs and hitherto unheard products.
What need is satisfied while the consumer may use this product? Products satisfying the same need already
existing give an idea of the sales potential. The number of occasions a consumer cleans the toilet is a pointer
to the possibility of use of a new toilet cleaner.
Product Management
108
Estimating Costs and Profits
The costs are estimated by the marketing department in consultation with the production/engineering
department and the costs/finance department. Afterwards, statements of estimated trading and P & L
accounts are prepared for a specified future period, say of three to five years.
Proforma of Estimated Trading Account as on
To
To
Cost of goods sold

(estimated)
Estimated profit
Transferred to P & L
...............
By Estimated sales
...............
...............
. ........ ... ...
To
To
To
To
Development costs
Marketing costs
Overheads allocated
Estimated Net Profit
...............
...............
By Estimated G.P.
By Estmated Other Income
...............
...............
The net profit estimated is subjected to the discounted cash flow technique (DCF), viz., the present value
of each year's net profit is discounted at an agreed rate of discount (say 15 per cent). Alternatively, the
company may use pay-back period method to know what time it will take to recover its investment. Breakeven analysis is another technique that is used to know what quantity of sales/production at which the
company breaks even - no profit or no loss. Risk analysis using optimistic, pessimistic and most likely time
estimates for a given uncertain variable are made to find out the possible outcomes. A rate-of-return
probability distribution is computed. showing the possible rate of returns and their probabilities. The students
are advised to consult a good textbook of Financial Management to master the details of these techniques.
Prototype Development
On passing the commercial tests, the product idea reaches a stage where it is
converted into a physical product by the R&D and the engineering department. So far it was just a verbal
or visual entity. Maybe, a crude mockup was made. However, its conversion into a physical product requires
commitment of resources on a much larger scale than that at the earlier stages. The technically and
commercially feasible product is developed at this stage. The firm may develop more than one prototypes.
Prototype embodies the key features or attributes spelled out in the concept statement. The prototype should
perform safely under normal conditions. It should also be made within the budgeted cost. Developing a
prototype maybe a short process, hardly taking a few days or it may be a long process, taking several months
or even years. In food products, it may take several months to develop a taste that corresponds to a taste
demanded by the consumers. Even then, the desired product may become too costly. The prototype not only
incorporates the physical attributes but also communicates the psychological aspects of the products through
physical features. Perhaps, a green colour is perceived as being cool. A green mouthwash will be considered
giving a cooling effect. To communicate that VIP is sturdy, it must be moulded out of the best ABS plastic.
Marketing people have to communicate to the laboratory scientists as to what the consumers might expect
of the product being developed.
Once the prototype is made, it is subjected to several tests - both functional testing and consumer
testing. Functional tests are carried out in the lab, and data collected. In the case of pharmaceuticals, there
are extensive tests - pharmoko-kinetic and toxicity tests. Consumer testing assumes various forms. The
consumers might be invited into a lab. Sometimes, a product is placed at home to see how it is liked by the
consumers. Consumers'preferences are solicited by techniques like ranking, paired comparisons and rating
scales.
109
Test Marketing
The prototype may come up to the expectations ofthe firm. Then it is packaged properly, given a brand
name and is tested in the market. Branding and packaging are discussed in detail in separate chapters. Test
marketing tests the product in an actual market setting. It gives an idea about the reactions of the consumers
to the product, the rate of trial and repeat purchases, the reactions of the distributors to the product and the
potential market for the product.
All companies, however, do not opt for test marketing, and launch the product directly. Most
companies, however, are convinced about the effectiveness of test marketing which enables the company
to test the effectiveness of alternative marketing strategies. To what extent test marketing is to be resorted
to we have to consider the risk involved in launching a product. The higher the risk, the greater is the need
for test marketing. However, the time factor is an overall constraint. If competitors are likely to overtake the
firm in putting a similar or better new product in the same category, it is better to dispense the testing. It is
a choice between the risk of failure of the untested product and the risk of losing the market to the competitor
who overtakes us.
Test Marketing Methods
The following methods are used in test marketing:

Consumer Goods Market Testing
Basically, we have to estimate the first trial purchase, the first repeat purchase, the adoption of the
new product, and the purchase frequency. All these variables must be preferably at a high level. If it is
observed that the consumers are buying the new product initially, but are not coming back to buy it again,
then it clearly means that they are not satisfied with the performance of the product. There are situations
when they come back for purchasing again, but the repurchasing rate later falls. Sometimes, the product
is adopted but the purchase frequency is less. Maybe, the buyers think that the product is for a special
occasion only. Though it is necessary to know about the repurchases it lengthens the test marketing period
averages for two years. However, it seems preferable to settle for quickening of the time-scale like P & G which
insists on one year's test marketing.
In durables, it may be difficult to measure repeat purchase by means of test marketing.
Sales Wave Research
First, the product is offered free for trial. Then it is offered at a reduced price with an option to accept
competitor's product. The reoffering is done three to five times (sales waves). It is noted how many times
the company's product is chosen and the level of satisfaction at each wave.
Sales wave research estimates the repeat purchase rate under conditions of freedom to spend money
either on the firm's product or the products of the competitors.
Sales wave research can be used to test the advertising effectiveness of various themes of advertising.
It can be seen how the theme affects the repeat purchases.
Sales wave research is easy to administer. It, however, is not useful to assess the trial rates, since the
consumers are preselected to try the product.
Simulated Test Marketing
The consumers' simulated shopping exercise first exposes them to the ad copies including the one that
advertises the new product. The consumers are given an amountto spend. They are invited to buy any items
from astore. The new product is given free to even those who do not buy it. The company records how many
consumers buy the new product and competing brands. This indicates the effectiveness of the copy to induce
Product Management
110
a trial. The consumers are later telephonically interviewed to know their reactions. The results can be used
as inputs in sales forecasts.
Controlled Test Marketing
A panel of stores participating in the exercise carry a stock of new product. The shelf position, the display
method, the point of purchase promotion and prices are all pre-planned by the researcher. The sales results
are analysed. This test enables us to know the impact of real-life in-store factors on buyer behaviour.
Consumers are later interviewed forfeedback. This technique, however, exposes the product to competition.
Selection of Test Markets
Test market ought to be a replica of the national market or full-scale market. Some cities are selected
for test marketing-mostly 2-6 cities. No city can be an exact replica of the national market. Each company
has to develop its own criteria for test-city selection. The city should have enough diversity, media availability,
necessary retailing outlets, average competition and should not have been overtested.
Time of the Test Marketing
Test marketing ranges from a few months to several years. The test period corresponds to the average
repurchasing period. The competitive activity calls for a shorter test marketing period.
Data Collected in Test Marketing
The data to be collected must be decided. Its cost and value trade off should be studied. Inventory levels
will indicate weekly retail sales. Stores audits indicate retail sales of both the test -marketed product and the
competitive product. Consumer panels are used to know the buying habits. Consumer surveys are carried
out to collect data regarding attitudes, usage and satisfaction. Trade research is also carried out. Studies to
assess effectiveness of promotional campaigns and retail distribution are also carried out.
Action Taken
"Success test marketing" means a high trial rate and repurchase rate. We can move further for a fullmarket launch. If there is high trial rate and low repurchase rate, it shows the dissatisfaction of the consumers
with the product. The product needs modifications/redesigning. If there is low trial rate but high repurchase
rate, it shows satisfaction with the performance of the product. But we should motivate more people to buy
it by making promotion effective. If there is both low trial rate and repurchase rate, the product should be
dropped.
Benefits of Test Marketing
(i) It is a value input to a sales forecast. Lower than the targeted sales in the test market indicates
the dropping of the product or its modification. Even marketing programme will have to be
reconsidered.
(ii) Test marketing enables us to compare alternative marketing plans. In each test market, a different
marketing mix is used. The data are collected. The most beneficial marketing mix is chosen.
(iii) Test marketing may point out defects in a product, distribution problems and the different
behaviour of buyers in various segments of the market.

Test Marketing Questioned
Though test marketing is a useful tool it alerts the competitors about a new product. Competitive activity
may spoil test marketing itself. Several companies by-pass the test marketing route and resort to other
methods of market testing like a launch in 25% of market or a launch in some countries.
111
Commercialisation
Test marketing feedback enables managementto take a decision regarding the launching of a product.
A product launch is the costliest stage of new product development. The company either sets up the
manufacturing facilities for production itself and hires the same. As a precautionary measure, the company
may set up a plant smaller than the one demanded by the sales forecast. Apart from production costs, the
company has to bear heavy marketing costs- packaging, promotion, advertising, distribution etc. Marketing
expenditures are the highest in the year of the launch, reaching in some cases almost 60 p.c. of sales.
Time-Cost Trade Offs

The earlier the development process gets completed, the better it is for the company. It is a good
competitive and cost-control strategy. However, while speeding up the development process, the product
performance could be compromised. If the development process slows down, the product-cost will shoot
upwards. It is necessary to strike a balance amongst time, cost and performance. The following six tradeoffs are possible:
(1) Development speed and product-performance
(2) Development speed and development expenses
(3) Development speed and product-cost
(4) Product-performance and development expenses
(5) Product-performance and product-costs
(6) Product-cost and development expenses.
It is better to have cross-functional teams for product development. Some designs are aesthetically
superior. But they are not viable technically or from marketing-viewpoint. Designers therefore need inputs
from otherfunctionaries. It is necessary to carry out some activities concurrently and some in sequence. To
illustrate, procurement of components and deSigning can move hand-in-hand. Together with this, production
department can start working on the necessary tools and machines required; processes to be employed and
manpower to be deployed. All these activities are integrated to capital planning by the finance department.
In Bajaj Auto, product development activities follow this type of pattern. It is necessary to formulate
outsourcing strategy and technology buying strategy.
Phased Launches
Many companies launch their product in a limited market before putting it in the national market. CocaCola, Motorola, Kellogs, Colgate, LG Electronics, Cadbury Scheweppes are some companies which have
phase-launched their brands. A phased launch provides the company an opportunity to learn, a1!d to form
a strategy. It helps the companies to redefine parameters and correct mistakes. Companies learn mid-course
in the market.
Timing of the Launch
It is critical to time the entry of the new product correctly. When a competitor is also on the point of
launching a rival product the company can decide to have the first entry and establish leadership or to enter
the market simultaneously with the competitor or to have a late entry to have the benefit of hindsight. Soft
drinks are generally launched in pre-summer months. The textboo1{s are launched at the beginning of the
academic section. The most likely question books are launched just before the exams. A product launch may
be all delayed to clear first the previous stock.
Timing the Product Launch
The product is rightly launched when the need for the product benefit is just surfacing. It should be
a marketing reality, rather than a mere imagination. There should be necessary support system for the
product, e.g., FM broadcast must be available to sell FM radios. If the product is launched before the
112
Product Management
infrastructure is set, it is a premature product. If the product comes too late, it is outdated. Timing is significant
to make the product relevant to the target audience. Maggi two minutes noodles launched in mid-eighties
were rightly timed. The Indian women felt the need for easy, ready-to-cook foods that took away the burden
to prepare time-consuming traditional snacks. Frooti was rightly timed, because there was a need for an easy
to carry, take away drink. Pagers are launched simultaneously with the cellular phones in India. Had they
been launched earlier, they perhaps would have remained prestigeous products like the cellular phones
today. Pagers, with cellular phones around, are considered down-market products for field staff.
Coverage
The product may be launched locally or in a region, or in several regions or nationally or internationally.
Few companies have the marketing muscle and capability to undertake a national launch or a global launch.
There is mostly a planned roll-out. They first do the local or regional launch and then expand gradually. Those
companies which have national distribution network might launch their products nationally. In roll-out
marketing, markets can be rated. In any roll-out marketing, the competitive scene is taken into account.
Brand Relaunches
To begin with, brand relaunches were conventional exercises to make brand contemporary, keeping
the product more or less the same. This generates a new excitement. These days brand relaunches have
become as important as brand launches because of the multi-brand market scenario and fierce competition.
HLL conducts between 15-20 relaunches every year for its 30 brands. Brand relaunches have been
attempted as a pre-emptive move to face future competition, e.g., Vicks Vaporub has been relaunched as
New Vicks Vaporub, and its position has been restated as stronger formulation for faster relief. Similarly,
though undisputed leader in Chyavanprash market, Dabur relaunched its Chyavanprash in 1993 to gain
a dominant market share of 68.5 per cent. Companies give a radical new image while relaunching a product,
e.g., the stodgy Palmolive Shaving Cream was relaunched for the young consumers of 90s in a new package
and with a new ingredient. Relaunch is not a mere cosmetic superficial change in brand. It offers the
consumers a better product. The weak spots of brands must be strengthened when they are launched again.
Le Sancy unique shape and packaging proved its undoing; thanks to India's transportation system
which damaged the cake and made it dented. While relaunching, new :_)ackaging of cartons was used, and
variants like lilac were introduced. Margo is another example of relaunching where the soap has been made
trendier.
Sometimes, relaunches are resorted to when a brand suffers from image problerri. Sometimes
relaunches make the product relevant again. Horlicks was formerly a milk substitute and Boumvita a milk
additive. New Horlicks is a health care brand and Boumvita has been made a nutritive product.
In a fast changing environment, it is difficult to find a product that is in the same shape today as it
was some five years back. Products are being relaunched. Every product occupies some space in the
consumer's mind. A top-of-themind awareness slot (TOMA) is reserved for the successful product.
Advertising seeks to create space for the product in the mind of the consumer, and also a level of awareness.
When we relaunch a product, we actually shift the product to a different space in the mind of the consumer.
It is repositioning the product. Videocon so far was considered an economical brand of TV, but has now
been put in thp premium slot too. It is not always that re-positioning succeeds. Illustrated Weekly became
a broad-sheet when re-positioned, but still couldn't hold its own against onslaught of India Today and
Sunday-like magazines. Though re-launches are risky, marketers have of late become fond of them. The
reason for frequent re-launches can be traced to the compression of time period for an initial launch, and
the consequent mistakes likely to be made in such a hasty launch. Boumvita was traditionally an additive
to milk for taste, but now it is re-launched as a health drink with emphasis on nutrition. In re-launching,
target audience may be expanded. Parke Davis successfully repositioned its Chiclets chewing gum from
children to teenagers. Another reason for re-launching is to align the Indian brand with its global stance.
Export-oriented Indian companies used to put inferior versions in the Indian market but now all these
products are being relaunched by upgrading them with an export quality tag. Iodex stagnated as it was
restricted to sprains symbolised by the ooh, aah and ouch theme. It expanded its usage to back-ache
113
situations by changing the visual where a woman was shown bending, and thus getting back-ache. National
rice cooker has been relaunched as a more broad-based general cooker. New packages are a strong reason
for relaunches. Sachets have made shampoos so very common whereas formerly they were considered a
bathing luxury. Sometimes, both the product and the package are changed during a relaunch, e.g., CloseUp Gel. Branding plays an important role in relaunching. Dabur's Kshudha-vardhak-bati was christened
as Hajmola before it became successful. Kiss-N-Tell or Whisper were not successful brand names for lipstick,
but Tips and Toes certainly was.
Relaunches fall into two categories - relaunches of successful brand and those of flop brands.
Excepting a few disasters, relaunches of successful brands work. But relaunches of flop brands are more
difficult to manage. It is necessary to understand why the original launch failed in the first place. It is not
advisable to relaunch a flop brand just because the company is reluctant to write off the investment made
in the brand. A relaunch may work if out of the four 'P's of marketing, three P's were at fault to begin with
- distribution, price and promotion, but the fourth P - product - was alright. However, a faulty product
is never saved by a relaunch. It requires a new launch after correcting the flaws of the product. It is better
to be extremely cautious during the first launch, as there is no substitute to getting it right for the first time.
Nirrna when launched as a liquid detergent had flopped, but became marketing success as a powder later.
Even flops can be revived sometimes. But as Rajan Chibba, Manager, A.F. Ferguson and Co. (Gen.
Management and Marketing) remarks 'strateging the relaunch of a brand is akin to launching a new one.'
Brand Launches
Most of the marketers are today opting for big-budget launches, costing several lacs of rupees. A srong
start gives better mileage. Brand launches are not low key affairs. It has to be a noticeable and talked about
affair. A theme may be selected for a launch. Mostly companies prefer innovative launches. They should
be made memorable too. Launches provide a strong stimulus to buy, and to induce trails, thus making it
compulsory for the marketer to make his launch interesting. Launches create strong brand imagery, e.g.,
Zubin Mehta's concert was sponsored by Seagram, creating an exclusive image for the product. The media
blitzkrieg preceding and succeeding the event helps to create a brand image to a wider cross-section of users
and potential users. The launch events are a perfect communication tool - they not only register a brand
image but also register it to the right target audience. Present day launches are supported by feedback from
MR and test-marketing. There is emphasis on launch conference. The launch is not restricted to consumers
alone. It also spells out a mission statement for the employees. The event of course must not subdue the
brand. There should be a connecting link between the brand and the event, e.g., Pepsi sponsors cricket
tournament liked by the young generation whose choice obviously is Pepsi or Pierre Cardin sponsors
fashion shows. New product concepts require flashy brand launches. Complex products like computer
require high-tech launches. The use of event marketing to launch products is a new phenomenon. But
making too much noise costs too much.
A launch of a brand is a festive occasion. A brand is launched by holding a launch conference.
Formerly, brand launches were a laid-back affair. These day!> the launches have become spectacular and
memorable occasions. A soap with fresh lime in it is launched with limes all over the venue. There were
lime garlands too. Even the welcome drink was 'nimboo-paani'. The approach is to use all these activities
synergistically. Some launches are called firecracker launches. Here the product is launched by blasting
firecrackers to open up the pack with accompanying lights, music and confetti droppings. Yes, there is a thin
line that divides an innovative launch and gimmicky. The litmus test is relevance of the launch time activity.
Launches have become professional with event management companies offering their services.
Target Markets
Each company identifies the main prospective users of its product. These are the prime prospects. They
should ideally be early adopters, opinion leaders, be accessible at reasonable cost and heavy users.
Initial Marketing Strategy
An action-plan is put into effect in the roll-out market.
114
Product Management
New Product Development in Pharma Industry

It takes 12 years and about $ 300 millions to bring one new drug, which passes through the following
stages up to the FDA approval.
Laboratory and
Animal Studies
3-4 years
Phase [
Clinical Studies: Safety
One Year
Phase"
Clinical Studies: Effectiveness
2 Years
Phase III
Clinical Studies: Testing
3 Years
FDA Review
2-3 Years
Total Number of Years: 12
The gestation period is long, and there is cash outflow only during this period, with no returns at all.
The chances of success are extremely low. Out of 1000 substances being examined, only 20 enter animal
testing stage, and 10 come up to clinical trial stage. Out of these 10, one may obtain FDA approval. Pharma
industry depends on continuous innovation, but the process of innovation is so risky and uncertain.
New Time-Optimised Product Development Process

Hoechst A.G tried to develop in 1992 a product development process to save time, and to bring new
drugs faster than its competitors. The clinical development time as reduced by 30 p.c., representing a savings
of one-two years. It also enables Hoechst to extend the profitable life of the drug'S patent. Patents are
generally awarded during the initial research stages. The faster a drug comes into the market, the more selling
time under the patent an organisation can enjoy. It is a tremendous competitive advantage.
To begin with Hoechst put into place new product development teams. The testing standards were
developed for use all over the world. The information management system was streamlined. Clinical studies
conducted on thousands of patients for safety and efficacy world over generated a vast amount of data. The
systems used were changed. The way people worked with one another was changed. The individual product
management teams were required to share information and thus accelerate the development process. The
data collection was thus integrated. Even the collection process was improved. The patient's information
was continuously fed by the doctor to company H.Q. who made it available to drug safety representative.
The programme is called the TOPS: Time-Optimised Product Approvals. The investments in this project
are quickly recovered when the organisation develops just one drug more quickly. Hoechst has worked with
Anderson Consultants to develop this programme.
115
Limited Editions
Marketers come out with limited editions of the various products-limited edition cars, watches, colas,
soaps and denims. In 2006, Lux Choclolate Seduction, Lux Aromatic Glow and Lux Festive Glow were
introduced to coincide with the brand celebrating 75 years of association with film stars. All three were limited
edition fragrances, which by definition were available in the market for limited period. In 2007, the company
has launched another limited edition Lux Haute Pink. These editions were introduced to benefit the parent
brand. It creates buzz for the mother brand. There are opportunities of limited editions in different situations.
The release of Rang De Basanti provided Coca Cola to introduce a limited edition 300-ml variant. Palio
introduced Tendulkarsignature collection, and LG a limited edition Willow TV on the occasion of the World
Cup. Limited editions go beyond rejuvenating the brand. They test the market for new long-term launches.
In the luxury segment, limited editions acquire meaning in the form of collectibles. However, it is difficult to
measure or correlate the effects of limited editions initiatives to either sales or saliency of the mother brand.
Product Management
116
APPENDIX I
Product Profile Ratings: Ranked Data
Each new product idea is studied in terms of key <;:haracteristics which are rated ordinally on a five-point
scale. To illustrate, we have rated a product idea on ten different criteria on a five-point scale.
Very
Good
(V)
Criteria or key
characteristics
Good
Average
Poor
Very
Poor
(W)
(X)
(Y)
(Z)
1. .........
2 ..........
3 ..........
4 ..........
5 ..........
6 ..........
7..........
8 ..........
9 ..........
10..........
The above ratings are presented graphically below:

1
10
z
The above chart shows the new product profile in a graphicform. When we develop such profiles for
all new product ideas, these can be compared easily.
117
APPENDIX II
Product Profiles: Summated Data
It is similar to the ranked data method considered in appendix I. However, here all ratings are numerical,
and scores for different people are averaged. Each criterion is assigned a weight depending upon its
significance for the success of a new product. W x score products are summed up to get an overall rating
for an idea. This overall rating is compared with the overall ratings of the other ideas. Statistically, overall
rating R is given by the following formula:
R=
WiSi
where W is the weight assigned to a criterion i

S is the score of an idea on ith criterion
n is the number of ideas used in screening
We illustrate this method by taking example from appendix I. Each criterion is assigned a weight, and
alphabets V to Z are replaced by numbers 1 to 5. All weights put together sum up to 1.0, and the maximum
score of any possible idea is 5 corresponding to 'very good.'
To be acceptable, the summated rating of an idea should be 4.00 or above. An idea with a score
between 3.5 and 4 is placed between acceptance and r;ejection. The cut-off point, however, is a matter of
judgement.
The results obtained by using the above method are given below:
Key
characteristic
Weight
Very
Good
Good
Aberage
Poor
Very
Poor
(5)
(4)
(3)
(2)
(1)
1.
0.10
2.
0.18
3.
0.10
X
X
4.
0.13
5.
0.11
6.
0.11
7.
0.08
8.
0.08
9.
0.07
10.
0.04
1.00
Total
0.30
0.72
0.50
0.65
0.44
0.33
0.32
0.24
0.14
X
X
0.04
3.68
In product profile ratings, V ratings can be distinguished easily from W ratings, but when the pattern is not
so distinct, the sorting becomes difficult. Mathematical overall score thus is better than product profile ratings. ,
Product Management
118
APPENDIX III
Heuristic Ideation Technique (HIT)
We have already studied attribute analysis and know that there are several alternative combinations
possible, thus making the analysis cumbersome. The point is to reduce the number of alternatives being
considered. Heuristics is the rule of thumb developed from past experience. Heuristic ideation is also a
morphological technique. Here a two-way grid is formed by taking two dimensions. Variations of dimensions
are placed at intervals on the axis of respective dimensions. We shall consider a floor cleaner. The igredients
in this product is one dimension along with other dimensions like package, cleaning objects, cleaning materials
etc. Several possible ingredients are used in a floor cleaner, e.g., alcohol, peppermint, oil, disinfectants like
phenol, cleansing agents etc. These are the variations. Another dimension chosen is a package. Floor cleaner
can be packaged as a plastic dispenser container, glass bottle, aerosol spray, can, jar. These two dimensions
and their variations are given in the following table:
Table: Floor Cleaner Heuristic Ideation
Package
Ingredient
Alcohol
Peppermint Oil
Disinfectant
Cleansing Agent
Plastic
Container
1
6
11
16
Glass
Bottle
2
7
12
17
Aersol
Can
Jar
Spray
3
8
13
18
4
9
14
19
5
10
15
20
There are 20 cells here, and each cell is a source of new product idea. Certain cells can be eliminated
as technically infeasible. After eliminating these cells, the remaining cells are examined on the basis of
newness.' This leads to further elimination. The remaining cells are, checked for 'market potential' and
'production capability.' Finally, a cost-benefit analysis is done.
119
APPENDIX IV
Osborn's Suggested Questions During Brainstorming Session
Alex F. Osborn (1938) in his book Applied Imagination (N.Y. Scribner's 1963) has suggested the
following questions to stimulate the brainstorming group for generating better new product ideas:
Question
Sub-Question
1. Can you give existing attributes of this

product class?
2. Can you offer new attributes?
New applications? New Ways?
3. Can these attributes be adapted?
Is there any precedent?
4. Can these attributes be modified?
Modification with respect to colour, shape, size, form,

motion, sound, odour, meaning etc.
5. Can these attributes be magnified?
What can be added? Thickness, durability, value,

quality, frequency. Can we duplicate or multiply or
exaggerate the attributes?
6. Can these attributes be minified?
What can be subtracted? Size, length, weight, price,

tone.
7. Can these attributes be substituted?
Other processes?
Other markets?
Other ingredients?
8. Can these attributes be rearranged?
Other
Other
Other
Other
9. Can these attributes be reversed?
Backwards?
Upside-down?
Opposites?
10. Can we combine these attributes?
patterns?
schedules?
layouts?
sequences?
Combination of uses?
Combination of appeals?
Combination of objectives?
Combination of blends?
Combination of units?
A new assortment?
A different blend?
Another metal, material?
Product Management
120
APPENDIX V
Financial Criteria
Estimating Sales
Bass has used the following equation to estimate the probability of purchase at time (t).
P(t) = p + q [y(t) +where p
ml
probability of first purchase at t
= 0 or the
coefficient of innovation
q = coefficient of imitation
m = total number of potential adopters
y(t) = adoption purchases by time (t) and
y(t) +- m = fraction of potential adopters who have purchased
The number of adopters at t is
S(t) = pm + (q - p) y(t) - (q +- m) (y(t))2
Maximum adoption will occur at t+
t+ = (p + q) +- m (q +- p)
and
S(t)+ =
m(q + p)
4q
Fourt and Woodlock First-time Sales Model
New product penetration cumulative sales approach a limiting penetration level ofless than 100 per
cent of all households. The subsequent incremental gain keeps on declining.
The equation is
q, = rq (1 - rjl-l
where q, = percentage of total households expected to try the product in period t

r = rate of penetration of untapped potential
q- = percentage of total households who finally tIy the new product, and
t = time period
Say, it is estimated that 30% of all households will finally try a new product or q- = 0.3. Also, during
each period, 20% of the remaining households will be penetrated orr = 0.2. Therefore, the percentage of
households trying the new product in the first four periods are:
ql
q2
q3
q4
= rq= rq= rq= rq-
(1 - r)1-1
(1 - r)2-1
(1 - rj3-1
(1 - r)4-1
=
=
=
=
=
=
(0.8)2 =
(0.8)3 =
(0.2) (0.3) (0.8)
0.060
(0.2) (0.3) (0.8)1
0.048
(0.2) (0.3)
0.038
(0.2) (0.3)
0.031
In other words, as time rolls on, the incremental trial purchase percentage moves to zero.
Estimation of Rupee Sales from New Buyers
q, (trial rate for any period) x total number of households x the expected first purchase expenditure per
household of the product.
121
Forecasting through Awareness - Trial- Repeat Purchase Rate
Consider a market of 6 million customers. The purchasing rate per customer is 10 units per annum.
The organisation has the following data:
Awareness = 30 per cent of customers
Trial = 25 per cent of those who are aware
Repeat Purchase = 60 per cent of those who have tried
To estimate sales, these rates can be multiplied
60,00,000 customers x 30% x 25% x 60%
=
2,70,000 customers are repeat buyers
2,70,000 x 10 units = 27,00,000 units sales per year

27,00,000
Therefore 60000000
= 4.5% market share
, ,
(60m
= 6m
x 10 units per annum
= total unit market)
122
Product Management
APPENDIX VI
Barry M. Richman's Scale of Product Idea Rating
Here product success requirements or attributes are listed. They are assigned weightage. Consumers
are asked to rate each attribute by giving points out of total 100 points. The following diagram illustrates this
device.
Product
Success
Requirement
Average
Relative
Weight
Corporate image
Marketing
0.20
0.20
0.20
0.15
R&D
Human Resource
Finance
Production
Facilities
and Location
Materials
Total
Company Competence Level
0.0 0.1
0.2
0.3 0.4 0.5
0.6 0.7 0.8 0.9 1.0
0.10
0.05
0.05
0.05
1.00
Adapted from Richman, A Rating Scale for Product Innovation, Business Horizon, 1962, pp. 37-44.
123
APPENDIXVll
Brands
Brands communicate three things - a distinct identity, a set of associations and image beyond the
mere functional qualities or performance of the product. Any purchase decision poses a risk to the buyer.
Brands reduce this perceived risk. To survive in the turbulent market of the 90s brand management has come
to acquire added importance. Proliferation of products have expanded the role of brands - they have
become far more critical than ever before.
Brands that seek practically to build customer loyalty and deliver more than what they promise will
always have a future.
3 M's Innovativeness
3 M aims at 30 per cent of global sales every year from products introduced in the past four years.
Formerly, its goal was to have 25 per cent of sales from products introduced in the last 5 years. It is also
noteworthy to note that in 1997 3M got 578 patents in the US, thus earning the ninth rank. They introduce
500 products every year or around 10 per week.
It relies on hot teams to develop innovative products. Attimes 30-40 teams work simultaneously in the
company. They expect employees to spend 15 per cent of their time on developing products that are not
directly linked to routine work.
They select a basically new idea which meets a demonstrable human need. Innovations are not selected
strictly on market-size. Ideas that will change the basis of competition in a particular sector and has the
potential to become a $ 100 million business are called Placing Plus. This label attracts priority in resource
allocation and technology back-up. After putting an innovation in the market, they spend a lot of money
adding new features to their products.
They have a fairly high failure rate. For every two successful products, they have one failure. Each failure
is a learning experience.
Alan Robinson and Sam Stem in their book Corporate Creativity do not approve of 3M's rigid
numerical targets for new product development. This focus, they say, discourages researchers from improving
existing products - a process that can also lead to breakthroughs.
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Product Management
APPENDIX VIII
Product Development in Software Companies
Within the software industry, there is a clear distinction between the product companies and services
companies. The product companies are the realleaders. At the top end, we have Microsoft, Oracle, Sun and
SAP, which have proprietary (branded) software, copies of which are licensed to users all over the world.
The services companies on the other hand implement software solutions usually based on proprietary
software. Most Indian companies including TCS, Wipro and Infosys are services companies. But even
implementing or executing software projects based on branded software by itself is a herculean task e.g., ATM
cash withdrawals, and networking of branches. The real big money is still in the proprietary business. i-flex
is an Indian company which started as software solution company, but later developed proprietary banking
products.
Product development in the software area need close interaction with the users. Most Indian banking
products designed for PSU banks have no market abroad, because the Indian banks use age-old processes.
The world has moved much ahead. We need to be near the market with our product. Indian companies make
products to appeal to everyone. We need the right product for the right market. Product development is highrisk business, highly capital intensive. Till Indian companies enter this arena, India will have a battalation
of techno-coolies.
APPENDIX IX
Mr. Walkman
Nobutoshi Kihara from Sony born in 1926 turned 80 in 2006. He is responsible for designing Sony is
best-known products including the Walkman and Betamax video. He is a protege of Sony's co-founders Ibuka
and Morita. Kihara is the face behind first magnetic tape recorders, portable tape recorders and digital
cameras. He recently slipped into retirements after asix decade tenure at Sony. In his days, product designs
were drawn on papers. He used to visualize the products by closing his eyes. He imagined joggers with
Walkmans. The origin Walkman went on sale in 1979. It changed the way the music was received by people
around the world. He played a key role in developing the world's first commercially successful transistor, radio
in the 1950s. Lady luck might have watched over him, guiding him in the research.
THE CREATIVE SPARK

As we have observed that new product development begins with the creative idea which is
converted into the consumer concept or proposition, and eventually gets translated into the new product
opportunity. As we have seen, the initial idea is as important as the concept into which it is developed.
There are three currents of opinion about the creative ideas. According to the first, ideas are dime a
dozen. The second considers the ideas to be the be-all and end-all of the development process. If the idea
is good, everything else falls into place. This opinion is generally held by economists and journalists, that is
those people who never had to launch any new product. The last opinion on ideas expects us to strike the
right source of ideas. This by itself will put us on the road to success. This view is held by someone who has
never sourced any ideas, nor he will ever. We shall summarise the most reasonable views on this topic:
(1) It is not so difficult to find the ideas. Given some time, we may generate close to 50-100 ideas on
the specific area. The difficult part is to get good ideas and to screen them out of several hundred
ideas. Good ideas are like gems. They are few and far-between in any company.
(2) What is one man's meat is another man's poison. Just a good idea is not enough. It must be
consistent with our distinctive competence.
(3) The source of the ideas does not matter. Ideas may originate at the level of the chief executive or
a humble worker. Ideas are stolen too. Company must keep track of patent applications, academic
research, ideas in other countries. If the product succeeds, it is really difficult to pinpoint the exact
source of the idea. A couple of dozen people may claim the credit for it.
(4) Creativity knows no discipline. Creative ideas may come from anywhere, and at any time. The
company must have a flexible system to accommodate such eruption, or else the opportunities
will be lost. In the previous chapter, we have already considered a disciplined approach to idea
generation. A viable idea must be given a priority. Just treating the idea as promising, and then
putting it on back-burner is tantamount to losing the idea for ever.
Product Management
126
Edison's Story
People tend to make unwarranted assumptions. Thomas Alva Edison, the great inventor, so the story
goes, had adopted a criterion to judge the presumptive nature of people who desired to work as his
assistants. He took the candidate to restaurant and asked soup to be served. Most of the candidates just put
some salt and pepper into the soup bowl, and were rejected outright by Edison. Edison was of the opinion
that those who added salt and pepper, without confirming first whether the soup was alright in taste, are
not cut out to be innovative thinkers. They just assumed the deficiency without verification. Assumptions
without verification kill the spirit of creativity.
New Product Strategy
It forms a major part of any strategic corporate plan. A new product strategy is a product innovation
charter. It guides us from which sources ideas are to come and once there, how to evaluate them. The strategy
is to be realised by formulating new product objectives. It spells out the desired role of new products, e.g.,
25 per cent of our sales would be generated from products which are less than 5 years old. One important
new product objective is growth. The second could be less dependence on a particular market, e.g., a bank
may reduce the contribution of its corporate banking from 50 to 30 per cent and increase the contribution
of its personal banking division by 20 per cent.
A line-filling may be possible by introdUcing a new product. A car manufacturer may introduce a small
car to take care of first-entry buyers, who will later graduate to using expensive models. New products may
be introduced to meet the competition. Sometimes, products are introduced to tap the excess capacity.
New product objectives determine the size of a new product programme.
A company may spell out, apart from objectives, the areas which are relevant and non-relevant for it
as a part of its strategy. Areas of new product development must fall within the broad definition of business
an organisation decides for itself. Business today has multi-dimensional definition in terms of products and
customers or technologies and customers. A basic text of marketing will acquaint you that there can be a
market penetration and market development strategy. Product development strategy starts when new
products are introduced for existing customers. Diversifications have both the product and customers which
are new. Mostly, they are acquisitions. It is believed that an organisation that remains close to its core
technology and diversifies a little has greater chances of success than those organisations who diversify widely.
It is to be appreciated that we have to remain close to the customer rather than to technology alone.
New product strategies can be based both on technology and customers.
Serendipity
Have you heard the story of a couple and an unwelcome mother-in-law who went on a picnic one
day? It so happened that a stray dog barked at them. The man picked up a stone, and threw it towards the
dog to punish him. But the stone missed the target, and hit instead the mother-in-law. This is serendipity.
What one wants to accomplish is also equally valuable. The man wanted to hit the dog, but instead hit the
mother-in-law.
Many of the discoveries of the new products are the result of serendipity. Penicillin, X-ray and Viagra
illustrate serendipity. But serendipity rewards only the alert and perceptive. Had it not been for the keen
observation of Heming about the inhibition zone on the agar-agar petri-dish on account of a mould, there
would not have been Penicillin. This is true even for Viagra which is a serendipity discovery. Actually the
aim was to discover a drug to improve blood circulation to heart muscles. Science is replete with such
examples of serendipity gains. Recently, two women scientists from he food lab of BARe while working
on the effects of low-dose gamma radiation on popular legumes serendipitously discovered that the gamma
rays knock out the flatulence - causing carbohydrates called oligosaccharides from the legumes. Human
beings lack the enzyme that can dissolve the oligosaccharides and so the bacteria in the large intestine feasts
on the carbohydrate and in the process create an obnoxious mix of hydrogen, carbon dioxide and methane,
which often know their way out.
127
The Creative Spark
Timing of Entry
It is a part of technology strategy. As product advances in PLC, the shift in emphasis is from
performance to production and distribution strengths. It is also necessary to arrive at the most efficient design.
State-of-the art designs make a company work in a highly specialised area and errors may prove costly. These
considerations make technology strategy important.
The following are timing options available 1. be a pioneer marketer where the risks and rewards both are high.
2. be a fast follower either at growth stage or dominant design stage.
3. be a specialist and cater to the niches.
4. be a late entrant or introduce me-too products.
Large firms sometime allow smallerfirms to introduce new technology and make it popular. They enter
as followers and become successful on the basis of their marketing muscle and quality. Late entrants or those
who market me-too products are more process-oriented than product-oriented. These companies avail of
val: Ie-engineering techniques.
Idea Search
An idea sometimes emerges just by sheer accident. Such ideas are accommodated whenever they
occur. However, it will be stupid to waitfortheir happening. It is vitally essential to embark on an idea search
programme. Ideas can be sourced in a variety of ways. The following list ofthe sources ofideas is illustrative.
Methods of Generating New Product Ideas
Ideas can be generated both directly or indirectly. Direct methods rely upon the creativity of both
individuals and groups. Direct methods also rely upon the data collected by consumer surveys by methods
like multi-dimensional scaling (MDS), gap analysis, conjoint analysis. These survey techniques have been
treated separately. Indirect methods are 'synthetic' methods, and are used for other purposes, but can also
be used for idea exploration, e.g., quadrant analysis. The following table summarizes the methods used for
idea generation:
Idea Generation Methods
Direct Methods
Individual Techniques
Morphological
Analysis
Consumer
Surveys
Group Techniques
Indirect Methods
Attribute Listing
Conjoint Analysis
Focus Group Interviews
Quadrant Analysis
Heuristic
Ideation
Technique
Market-gap Analysis
Brainstorming
Consumer Engineering
Motivation Research
Synectics
Multi-dimensional Scaling
128
Product Management
Sources of Ideas
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Extensions of current products

Category search
Ideas from abroad
Marketing research - both formal and informal
Lessons from past projects
Brand extensions
Mapping exercises to find market gaps
Group discussions to assess consumer needs
Brainstorming/synectic sessions
Ideas from R&D
Study of technological developments
Study of packaging developments
Matrix exercises to focus on development priorities
Plant utilisation exercise
Reaction to competition
Let us consider these sources in a broad manner.

Range Extensions
The existing products are extended, e.g., a deo spray and a deo stick.
Category Search
Secondary data on a variety of subjects is available in the research studies of chambers of commerce,
marketing research organisations, central statistical organisation, government reports, National Council of
Applied Economic Research, Centre for Monitoring Indian Economy, census data. The data are on broad
economic trends, industry sales etc. Retail audit data provide information on brand off-take region-wise, and
outlet wise. We can make use of the secondary data available to search for product categories which are
promising. These categories have less competition and are profitable. We further explore which are the factors
responsible for this growth. While doing category search, socio-cultural trends are also analyzed, e.g.,
movement of instant food and the population of working women.
Idea Generation
New product ideas emerge from most unexpected sources. They may just be an accident or a whim.
They may also be based on a real need. The idea of Iridium, the world's first anytime, anywhere, phone
service emerged under the benign feminine influence. It all started in 1988 when Karen, the wife of Motorola
executive Bary Bertiger found her cellular phone useless while on vacation in the Caribbean. She convinced
her husband of the need for a worldwide mobile communication system. Thus Iridium was born. It is a
consortium headed by Motorola. It allows the use of a hand-set or pager with a single global number. This
is achieved by 66 low-flying satellites to link users to anyone, anywhere in the world. When an Iridium call
is placed, the signal travels 500 miles into space to the nearest satellite recipient, which beams it back, either
contacting the recipient's phone directly if it is also an Iridium set, or sending the signal through land line.
Sprint PCS, US sells Motorola satellite phones at around $ 3000. Calls are priced at roughly $ 1.75 to $
7 a minute. Paging services cost extra. The likeliest users are remote field-workers, sailors, journalists and
ranchers. These are not traditionally covered by cellular network. Satellite phone is still a bulky thing and
its antenna is a thick black cylinder. Calls get through if the skies are clear. Dense foliage obstruct the signals.
Motorola plans a PC compatible phone, but its speed will be low.
Alan Robinson quotes a case in Corporate Creativity (Berrett-Koehler). In 1980, a scientist at Snow
Brands Milk Products, a dairy Company of Japan, was fiddling with electric wires to test the conductivity
The Creatiue Spark
129
of milk. Once, when he forgot to switch off the electricity, he observed that milk has curdled. Had it been
any other worker, he would have drained down the curds, and would have thanked his stars that no one
noticed the mishap. Hori, however, studied the temperature graph and noticed an abrupt variation - one
that apparently coincided with curdling. This led Hori to develop the technology to automate cheese
production. The process was adopted by his company and spread around the world.
Tata ACE Mini-Truck Idea
Ravi Kant, Tata Motors MD arranges a training session at TMTC for executives with Harvard professor
Krishna Palepu. A separate session was arranged for top management. The idea of the TataACE mini-truck
was born out of this session. Palepu returned to TMTC, Pune later to meet a larger team of 170 engineers
and refine plans. ACE since then has become one of the Tata Motors most successful products in recent times.
ACE has come out of academic intervention.
Nano's Inspiration
C K Pralhad's The Fortune at the Bottom of Pyramid infected a lot of people, including the Tata
executives. This thinking is responsible for the innovative small low-cost car Nano.
Innovation and the New Product Development Process
A rubber mixture spilled over a hot stove. Thatled to the discovery of the vulcanization of the rubber.
Pancakes were rolled into cones to serve the ice-cream when the paper cups were not available. That led to
a new method of ice-cream serving. Accidents and necessities, thus, were responsible for many product
innovations.
Innovations, however, these days require huge financial commitments and a systematic programme
of an R&D. The R&D team consists of scientists from the requisite disciplines. Their efforts have the
organisational back-up. There are few who take up inventions as a hobby on an individual basis.
The product innovation process can take a long time while designing a technically complex project such
as a space satellite, but takes considerably less time for not so complex projects. Sometimes, the product
is simple, but there is market resistance to its acceptance. It then takes a long time to overcome such
resistance.
The standard new product development process consists of the following eight stages.
1. Idea generation
2. Ideascreening
3. Concept development and testing
4. Marketing strategy development
5. Business analysts
6. Product development
7. Market testing
8. Commercialisation
The first three stages (upto concept development) are critical stages. These are the least expensive
stages. As we move forward, there is larger commitment of resources. Most product failures can be attributed
to an unviable product idea or wrong concept development.
Out-ot-the- Box, Nay Out-ot-the Bottle Thinking
UB Group's Vittal Mallya Scientific Research Foundation, Bangalore has developed the technology
to convert the active ingredient of an Indian Fruit (Garcenia) that helps breakdown the sugar and fat cells
130
Product Management
in the digestive system into a liquid version. Garcenia soluble in liquid is patented in the US. That has led
to a legitimate diet whisky and diet vodka. It is a thinking out-of-the-box, nay out-of-the-bottle. Garcenia's
family's common fruit is Malabar Tamarind whose hydrocitricacid (HCA) can bring about weight loss. They
have made a soluble salt of HCA which lowers appetite and controls cholesterol. The salt is called
hydroxycitrosol, which is incorporated into beverages.
Som e innovative ideas are a result of accidents. According to Robert D. Austin, Lee Devin and
Erin Sullivan, there could be surprising mental association. Jenner discovered the smallpox vaccine when
he remembered a mailkmaid telling him about the immunity she got after sufferiy from cowpox. This
prompted him to use the less dangerous cowpox virus to protect against smallpox. Sometimes, an accident
happens when we stumble upon something valuable while looking for something else. Viagra for erectile
dysfunction was beig smadied in fact for cardiac problems. Some people notice the forest whereas other the
trees. Those who spotthe forest are greatseeig the opportunities to remake things from ground up, scrapping
an existing idea and replacing it with entirely new. Those who spot the trees are good at small incremental
improvements. It is difficult for one person to see both types of possibilities. As ideas emerge, we should
examine them critically so as not to miss something important.
Marketing Research
We can interact with our dealers, distributors, suppliers and customers in an informal manner. They
may indicate what they would like to see in a new product. They may state the problems in an existing
product. Consumers may want their detergents to remove stains of korma or paan chheet. Consumers
find it difficultto remove the stubborn dirt accumulated around the collars. This provides clues to a company
to develop the products further. A pharma company may find that an already harassed patient finds it
difficult to struggle to open a pilfer-proof cap. Such informal interactions lead us to develop lids of moulded
luggage which open with ease. A spectacle frame can become loose. We can study several thousand
customers to know the reasons and then find the solutions. In the field of instrumentation and appliances,
we can encourage user-generated innovations. Some lead-users can be interviewed. They are much ahead
of their time. In other words, they are trend setters for the future. These gentlemen and ladies help us to
anticipate the market trends.
Focus Groups
Here a group of existing or prospective customers is selected and interviewed to get new product ideas.
The group of about a dozen people is headed by a moderator. The discussion rambles freely and widely.
Later, the deliberations are narrowed down. Most of the discussions revolve around a specified area which
should be need-based rather than product-based. Thus instead of a soap, we can ask about the washing
habits. Later, specific issues can be raised, e.g., attitudes, benefits expected, attributes expected, problems
encountered and effect of the product on life-style.
After probing the focus group for new ideas, the new product concept or new product ideas developed
by the company are put before the group. The group is expected to react to this presentation. The group is
expected to indicate the changes and modifications, the additions and subtractions, the incorporation of
certain ingredients, the size of the product and the possibility of any other combination.
A focus group should be representative and should represent different user groups and interests. In
formal marketing research, we can generate ideas by using attitude and awareness surveys.
Through the surveys we can judge the favourable or unfavourable attitude towards brands, brand
recall, brands owned, brand usage, rating of attributes, buyer intentions. The data can be collected
segmentwise. Survey information when processed and analysed properly generates new product ideas.
The Creative Spark
131
Feedback from the customers in a formal manner also helps in getting new prod ud ideas. A separate
telephone line can be installed to record customers' complaints and suggestions and to provide them
information.
Ideas from Abroad
It has emerged as the most useful single source of ideas in recent years. Some companies set up special
centres abroad to get product information and product samples. It is naive to believe that a successful product
from one country can be transplanted as it is in another country. Ideas from abroad are sought because our
own people have stereotyped responses. Ideas from abroad can bring a freshness of approach. To illustrate,
in India people think of alcohol only in liquid form, whereas Japan has developed dr"\) alcohol to be
reconstituted in liqUid form by adding water. Though the product benefits of such dry alcohol are a matter
of debate, at least the very idea triggers off our thinking on a new wavelength. It is also economical to have
a worldwide search for new ideas. We can have relevant literature and samples in a matter of weeks. When
ideas have already been translated into product abroad, it helps us to hasten the new product development
here. The product samples or the literature from abroad can serve as a good stimulus material for initial
consumerresearch. It is not necessary to be apologetic about borrowing ideas from abroad, and developing
them further under the burden of the charge of plagiarism. It is a recognised way of new product deJelopment.
Lessons from Past Projects
The lessons learntfrom past projects undertaken both by the company and the competitors are a good
source of new product ideas. We can learn from the direct selling experience of companies like Eureka Forbes
and Oriflame. We can learn from Maharaja dishwasher marketing while thinking of marketing our own
dishwasher. Product failures also teach us valuable lessons. We can analyze the causes of failure. and rectify
them. It will be worthwhile to examine how far instant tea would be successful against the background of
a ritual of tea-making traditionally being followed by Indians. Though tradition would have prevented a new
product in this area a few years back, how far the tradition could continue with the new generation whose
choices are for instant products? Is the acceptance of tea-bags, a half-way product. not a sign of tradition
giving way to new style of living of this generation? It is to be examined whether what has failed at one point
of time will fare differently in the present context. Sometimes products need adaptation to succeed in a new
environment.
Segmentation Techniques
Mapping techniques are not used much but still segmentation techniques could indicate any gaps which
can be filled up by putting new products. Grid analysis is one such method where a grid is prepared covering
the relevant user groups, usage occasions and other characteristics of the market. A grid for insurance services
is given below by way illustration. We can prepare a much more comprehensive grid.
Product Management
132
:5
c
E
'"
]
c::
UJ
::E'"
~
0
"0
"0
1
f-
~~
u
'"
'" c::
0.",
(F).o
Men
Women
Babies
Children
Pensioners
Single adults
Upper classes
Manual workers
Families
Travellers
Sports players
House owners
Sick people
Disabled
Owners of valuable jewellery, etc.
Lecturers and teachers
Retailers
Small businesses
Large quoted companies
Motorists
Air travellers
Mothers-to-be
Pet owners
Parents of privately educated children
Users of home computers
Farmers
Fig. 7.1 Insurance
Source: Krausher, Practical Business Development, Holt, Rinehart and Winston.
The above grid will indicate the gaps in the insurance sexvices.
There is another scaling technique where product category being considered is assessed on the basis
of important factors to see whether there are any obvious gaps. This is called spectrum analysis. A typical
spectrum analysis for beer industry is given below.
The Creative Spark
133
Strong - - x x x x - - - x x x x - - - - - - - - - - x x - - - - - - - - W e a k
Male - - - x x x x x x
Female
Inpubs--- xxxxx
xx---xx
At home
Bitter
xxxxx
xx
Sweet
Dark colour - - x - - x
xx
xxxx
Light
Expensive
x - - x x - - - - - - - - x-x- xxx-------Cheap
For session drinking
xxxxx
x
x
For one glass
Young drinkers - - - x x x x x x x - - - - - - - - - - x x - - - - - - - - old
Fattening
x x x x x x x - - - - - - - - - - - - x x------Slimming
Old-fashioned
xxxxxxx
Modern
International - - - x x - - - - - - - x x x - - - x x x x x - - - - - Regional
xxxx-xx - - - x x x - - - xxxxx - - - - - - - I n c a n s
Draught
Drunk cold
xx
x x x x---x x x x
Warm
Fig. 7.2 Current beers: spectrum analysis.
Source: Krausher, Practical Business Development, Holt, Rinehart and Winston.
Many more dimensions could be considered. The above example also shows that there are a number
of gaps in the market, e.g., a low-alcohol content beer, not very fattening, fairly sweet beer for women to
drink at home or a modem very cold beerforthe young or a dark international sweet beerfor elderly people.
It takes business judgement to analyze the potential of these gaps. However, spectrum analysis throws off
new product ideas.
Ideas from R&D and from Monitoring Technical and Packaging Developments
Such ideas are of great importance in electronics and durables of all kinds. Even in those industries
which are nottechnologically advanced, this source provides ideas which competitors find difficultto match.
All technological ideation must have relevance for the consumer. We may praise an idea sky high
because it is technologically superior, but it may be acceptable to the consumers. Videophones are an
improvement on ordinary phones, but no one seems to be bothered why one's image is necessary while
talking. Similarly poor quality pictures come in the way of wide acceptance of Polaroid. Video-discs fail to
record broadcast material. Thus technical ideas have potential if they are commercially viable. It is necessary
to strive for a situation where the idea is both technically superior and commercially viable. This is possible
by a close co-ordination between R&D and marketing. It is also necessary to monitor technical and packaging
trends worldwide. Products like Frooti owe their success to tetrapacks which freed a consumer consuming
a soft-drink from being tied up to a retail outlet. There should be input from R&D in the idea generating
sessions.
Analysis of Competitive Products
When we analyze competitive products, we can learn which attributes should be offered. We can
conduct a survey to learn what consumers like about the products of our competitors. Many companies do
reverse engineering to examine the possibility of manufacturing similar products, and copy certain features.
Analysis of competitive products should also consider the needs of the customers.
Idea Generating Sessions
Brainstorming attributed to Osborn (1953) has been in the forefront of idea generating, and has proved
extremely rewarding if conducted properly and planned well. It is an exercise which enhances the creativity
of a group. The group is of carefully selected seven to eight people, and is led by an experienced person. The
members of the group are drawn from diverse backgrounds and disciplines. To illustrate a foreign bank
considering the introduction of a new financial product will have executives from marketing department,
finance department, computer department, a branch manager, a clerk and an officer in direct touch with
the customers, a market researcher and a few members from the irlVestingpublic. All members must bubble
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Product Management
with new ideas and must have inclination to express these ideas, howsoever wild they may sound. Fear of
negative judgement called Voice of Judgement (VOJ) is a barrier to creativity. At the initial stage, what
matters is quantity and not quality. The members are briefed carefully beforehand. Itis only atthe end when
all possible ideas have been squeezed out of the group thatthe process of critical examination of ideas starts.
The group's views on promising ideas are sought. The best ones are developed into concepts.
To stimulate creativity, during a brainstorming session, some special techniques like attribute listing are
used. A product can be described in terms of its various attributes. A few of these attributes are chosen and
an attempt is made to change them, keeping the remaining product the same. Walkman resulted from
attribute analysis of a tape-recorder. Here miniaturization was achieved by deleting the recording mechanism.
Besides, speakers have been replaced by the head-phones.
Predictions Difficult to Make
Sometimes the experts may go quite off the mark in their predictions. In a magazine called Popular
Mechanics, there was a prediction in 1949 that computers in future may weigh around 1.5 tonnes. These
days we use lap tops weighing less than 1.5 KG.
Thomas Watson. Chairman of IBM wme fifty years back when computer was born, commented that
there is a global computer market for maybe five computers. How wrong he was! Millions of PCs are selling
these days. In 1981, Bill Gates predicted that 640 kilobytes (KB) ought to be enough for anybody. Such
predictions have crumbled like biscuits. Predicting the future has become so much difficult in the wired world.
Progression IS unimaginable. Just in a few minutes when you are reading this, around 40 thousand pages
must have been added to the world wide web and around 125 million e-mail messages must have been
sent In the US alone. We have moved from gigabytes to terabytes to petabytes (equivalent to 1000 terabytes
or a million gigabytes).
A terabyte stored on floppy disks which were then to be stacked up would attain a height 7 times
the height of Eiffel Tower. We will soon have data warehouses having a system in terabytes.
Morphological analysis is a similar technique. Here each attribute is broken down in alternatives. Then
these different alternatives are combined. A music system thus can have in-built speakers, detachable
speakers and head -phones. It can draw its powerfrom a battery, solar cells or electric mains. There are nine
possible combinations of these two attribute variations. We may think of a solar-powered Walkman. Some
combinations may not be technically feasible. However a creative spark is likely to flash while considering
these combinations.
Synectics is a development of brainstorming and is an attempt oflateral thinking. A logical process does
not iead to a creative idea. It comes by accident. When our mind is charged with ideas, without finding any
solution to the problem, the solution emerges suddenly in a completely unrelated situation. This is the secret
of the famous 'Eureka' sensation. Synetics was developed at Harvard in the 1960s. In synetic sessions, the
participants discuss seemingly unrelated subjects. Then they get back to the initial problem. Then they try
to find original solutions through a/orce-fit discussion, e.g., by relating to the original problem words and
ideas which emerge from completely different word associations and thought processes.
Brainstorming is carried out after other sources of ideas have been considered. The data collected from
other sources can be subjected to brainstorming sessions.
It is to be appreciated that the most ambitious effort in history to promote creativity was the idea mills
in the Soviet Union where idea quotas were established. The results were, however, comical, tragic and
sometimes both.
Screening and Evaluation of Ideas

These are the steps to analyze the ideas which are generated to see which of them need further detailed
study. The subsequent stages of product development could be expensive, and so it is necessary to do
preliminary screening first to identify the best ideas out of so many generated. In the screening stage, we want
135
The Creative Spark
to ward off two mistakes - continue to develop further an idea that will not be successful or abondoning
an ideathatmay lead to a successful new product. We therefore should select such criteria of screening which
are neither too strict nor too loose.
Screening Criteria for Jet 45 Mosquito Destroyer Liquid
Marketing Criteria
Product Criteria
Is it safe?
Is it effective?
Is it consistent with
mosquito
mats?
the product benefit of
Does
using the liquid for 45 days
Financial Criteria
Estimated sales
Is it possible to market it with existing

capability?
Can existing sales force sell it?
What is its export potential?
Market share
Is it possible to use existing channels?
ROI
Ismat?it an improvement over
Can we become a market leader?
Working Capital
How will a liquid be packaged?
Does it lead to a major investment in

hardware for consumers?
Capital requirements
How will it be extended?
What is the growth potential of the market?
Does it lead to a new PLC?
Time required to
achieve positive cash
flow
The effect of a mat wears off

as night advances but the
effect of the liquid is constant. Is this a sufficient
value addition?
Estimated profits
add value?
Seth Godin's View
In Godin' latest book Purple Cow, he proposes that having an idea that is remarkable is the only way
a brand can survive. Some companies invent a Purple Cow and then keep on milking it. He has written
recently a book called Un/easing the Idea Virus. According to him, idea viruses are very hard to predict and
very hard to plan.
A screening process may have several steps. It all starts as judgmental screening. A few ideas are selected
depending upon their merits out of several hundred ideas. The ideas so selected are tested with small groups
oi consumers to know their reactions. The ideas in which buyers are interested are considered aga:nstseveral
criteria like consumer appeal, competition, expected sales, uniqueness of the product, PLC stage. New ideas
are rated against these criteria. The surviving ideas are sent to R&D where their feasibility in production is
assessed. There are rough estimates of time and expenditure for development. Companies may prepare check
lists to judge specific new product ideas. A typical check list used to screen a mosquito liquid is given here.
It is necessary to study the value chain of a product. Those activities where most of the value is added
and those where most of the costs are incurred are analyzed carefully. The attempt should be to produce a
product with greater benefits or lower costs than our competitors. For this we have to perform better than
the competition or we have to modify the value chain.
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Product Management
The overall attractiveness of the industry is to be assessed. We have already discussed this in an initial
chapter. The attractiveness of industry is greatly influenced by entry barriers.
There are some problems with the use of financial criteria. Estimates are difficult to make. The
assumptions behind the estimates are forgotten. Finance is conservative; and there is inherent resistance to
change. It is, therefore, necessary to do new product diagnostic audit.
Viability of the offer is to be examined against the possibility of reluctance of customers in accepting
a new technology. Traditional MR may not be useful. It is difficult to judge the viability of technological
breakthroughs. It is heartening to see, however, that most innovations are just evolutionary in nature.
It is very essential to consider the human element that backs up a new venture. In my considered opinion,
it is necessary that an individual is judged for his entrepreneurial ability. Project evaluation comes later. A
champion of a new idea allows itto flourish. A new product idea survives the vicissitudes in an organisational
environment by having a champion who makes it sail smoothly . Though new product development is a team
effort, idea generation itself is an individual effort. Individuals must therefore be motivated to search for new
ideas. An idea generator and a champion of the idea could be one and the same person, or these two could
be separate persons.
A product champion has the commitrnentto see the idea through. He must therefore be a leader. His
knowledge of his chosen area is exemplary. An organisation must provide an environment conducive for
product champions.
Innovative organisations are market-driven and theirfocus is always the customer. These organisations
are pro-active. There are differing opinions on how well the champions must be rewarded. But at least an
organisation must not punish them. A champion's role is informal. A champion may be helped in his mission
by a sponsor who has remained champion for some products already, and knows the trials and tribulations
of the whole process. A sponsor has to promote champions for which purpose he has to evaluate the ideas
to crystalise a few promising ones and remove the road-blocks in the developmental process.
Great brands keep on evolving. Recent colour copiers are so good that they can reproduce currency
notes. Ponds talc has extended the brand to Ponds Magic. Dreamflower talc itself is now available in a
customer-friendly pack. The products are improved incrementally. Complacency invites death. Great brands
deliver more to the consumer than he expects. Tooth-powders introduced by paste companies are available
in India only. Similarly detergent cakes are also made specially for Indian consumers. Cadbury chocolates
are made harder to withstand the tropical climate here. Utsav is a janta paint from Asian paints.
Vijay Govindrajan's View
Govindrajan, Professor, Internation Business, Tuck School of Business has come to one definite
conclusion after eight years of research - the single greatest impediment to innovation in organisations is
the performance management system which is focused on adherence to planned and expected results.
Organisations tend to spend more time managing the present. They may notfocus on strategy 10 to 15 years
hence, say by 2020. We have to do things in the presentto create a future we desire in 2020. It requires different
thinking processes. In the present, charges are linear and incremental. In future, they tend to be non-linear
and fundamental. There are shifts - technological, customers, demographic. Performance management
geared to the present kills innovation.
Gibson and Innovation
Rowan Gibson is a business strategy consultant who has written the book Innovation to the Core. He
does notfavour innovation rhetoric romanticized view of a lone innovator waiting for his 'eureka moment' .
He favours innovators with a fresh and perspective. He explains the lens of innovation.
137
The Creative Spark
Lens of Innovation
Challenge the Orthodox and Conventional; Airlines focused on luxury and customer experience. This
model was turned topSy-tUlVY by adopting a no-frills model of an economy.
Harness trends and discontinuities; The cutting edge of change must he understood and harnessed, e.g.
internet, file sharing, outsourcing to India.
Leverage the resources embedded in the existing business model;Disney famous for its theme parks
came up with a Lion King show on Broadway.
Understand unarticulated customer needs;A small car such as Nano and a private hospital such as
Apollo. iPod also falls in this category.
BlackSwans
Nassim Nicholas Tnleb Wrote The Black Swan: The Impact of the Highly Improbable indicating the
possibility of highly unpredictable, rare events. Swans are generally white, but in Australia they are black.
This was not known. The unknown events are a big risk. Black Swans are events whose probability is low,
and inspite of that they happen with great impact, and people do not see them coming. After these occur,
people say they saw them coming. They are prospectively unpredictable, but retrospectively predictable. The
black swans can be a negative event like the present financial crisis or a positive event like a new technology,
meeting a girlfriend or writing a bestseller. The computer, the internet and the laser are the three black swans
that came out of nowhere. We cannot predict a black swan. They have a life of their own. We have some
psychological blindness to black swans. Taleb does not favour quantitative finance, statistics and portfolio
theory. He advises managers to take maximum risk and otherforms of exposure to positive black swans; and
minimize exposure to negative black swans. Taleb is a critic of scenario planning because people do not think
out of the box.
Brilliant Ideas and innovation
Idea
Event
Innovation
Find a way to keep gold on paper for Fritz PfIeumer solved the problem by
gold-tipped cigarettes.
embedding the metal on plastic.
Application patented in 1921.
Contacted Badische Anilin Und Soda
Fabrik, a firm specialiSing in industrial
chemistry to give a follow-up.
Magnetic Tape
The firm's name was shortened as
BASF.
Christopher Schloes and Carlos They wanted the machine's function

Gildon invented a machine to extended. They took it to fire-arms
number pages.
company. It bought the idea.
The modern typewriter.

The fire-arms company
Remington's.
Painter discovered bottle-cap. He The employee thought of a disposadvised his employee to create able device for shaving.
something that is disposable so that
people buy it again.
King Camp Gillettle invented safety

razor.
A butter subsitute was created by Substance resembled pearl-like beads.

Hippolyte Mege-Mouriez using suet,
skimmed milk and bicarbonate of
soda.
Margaraine was the name given which

is Greek for 'pearls.'
was
138
Product Management
Cellini the Italian sculptor

and goldsmith created a
statue of Venus (1543).
The statute was put on wooden platform. He created something to enable

the statute to rotate and be viewed from
all sides
Ball-bearings.
Food should not rot.
Biodsey was sentto Labrador (1912) as

a part of a US govt. survey. Low temperatures preserved the fish.
Frozen food
Quick drying ink.
Biro could see quick drying printing ink

in Hungary.
He escaped to Argentina a little before
World War II.
Designed a pen that could work on
quick drying ink.
Ball-point pen (1943).
139
The Creative Spark

Innovative Organisations in India
Organisation
Innovation
Deccan Airline
Low cost airline. Now merged with Kingfisher.

Distribution was innovated Buying air ticket was
simplified.
Mahindra and Mahindra
Scorpio SUV. Customised vehicles. Idea shoebox

for employees to send in suggestions.
Jet Airways
Focus on customers. E-tickets self-service

Check-ins.
Tata Motors
Nano - the world's cheapest car. Value at a lower

price.
Maruti Suzuki
New targets - school teachers, government

employees. Productivity improvement on
assembly lines. Training the drivers.
Citibank
Suvidha saving accounts. Bio-metric ATMs with

voice navigator.
HDFC Bank
Use of technology. Quick loan processing Mobile

banking. Hub and Spoke model.
ICICIBank
Innovative products and processes. Ideas laboratory. Mobile banking. Microfinancing.
Philips Electronics
Repositioned itself in the life style, health care

and lighting space.
Samsung Electronics
Products are adapted to consumer needs and

wants in India.
rrc
Successful foray into foods.
Dabur India
Transformed itself from a manufacturer of Ayurvedic

medicines to an FMCG company. Rewards ideas.
LG. Electronics
Superior marketing and distribution skills. Product

innovations, e.g. Neo-plasma plus technology em
ploying a bacteria killing filter in ~Cs.
Apollo Hospitals
Telemedicine. Virtual patient visit by videos.

Holistic health.
Marico
Skin clinic Kaya.
Aravind Eye Care
Paramedical staff used in pre-and post-operative

work to reduce the surgery time. Manufactures
intra-ocular lenses to reduce costs.
SRL Ranbaxy
One day testing. The lab with ERP system.
Narayana Hrudyalaya
Surgeon's job restricted to surgery. Cost-effective

methods.
Infosys Technologies
Software Engineering and Technology Labs.
Product Management
140
TCS
R&D Arm, Tata Research Development And

Design Centre.19 innovation labs across the
world. Platform innovation and disruptive innovation. Clayton Chirstensen, the innovation guru is
on the TCS board.
Wipro
Innovation grid. Lean principles applied to

software development.
IBM Daksha
Idea sharing through the web. Taps IBM Research

Labs.
Wipro BPO
Platform solutions which act as templates.
TCSBPO
Idea sharing through Communities of Practice.

Cross-functional teams.
Dr. Reddy's Laboratories
R&D for new drugs.
Ranbaxy
Novel drug delivery systems. New drug research.

Life science research. Cost reduction of AIDS drugs.
Sun Pharmaceuticals
New drugs and novel delivery systems.
Airtel
Least cost business model. Reliance on Outsourcing.
Source: Business Today, April 20, 2008.
DESIGNING THE OFFER

We have already covered the development of new products previously. Here we shall consider two
techniques from the field of marketing research - perceptual mapping and conjoint analysis. These
techniques help to identify the business opportunities. They also help us to plan the product in terms of its
features, prices and promotion.
Perceptual mapping is useful at the stage of idea search. Conjoint analysis is used at the stage of concept
testing.
Designing the Offer
After taking the positioning stance, we develop the rest of the offer, and then put the marketing support
system. The decisions regarding design, price and promotion are inter-connected. They are, therefore,
addressed at one and the same time. These ultimately lead to brand preference. The decisions about the offer
and marketing support are delinked from each other as simultaneous consideration is a complex affair. Once
the offer is designed, othersupportingactivities can be undertaken. However, everything in the marketing plan
is integrated to each other.
Perceptual Mapping
Perceptual mapping is a technique to represent what people think about products or services, people
or ideas. Technically all these are objects. A perceptual map is a spatial representation of the perceptions
about the brands on the parts of different individuals. Perceived similarity of brands bring them closer in the
perceptual space, and dissimilarity puts them apart. Joint space analysis combines perceptions about the
brands and consumer preferences in a single space. In short, it represents both brands and people.
Perceptual Space Map (PSM)
We have illustrated the basic concepts of perceptual spaces in the following diagram:
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Product Management
In this map, we have taken two dimensions for taking perceptual judgements regarding washing
machines. On the horizontaLaxis, we have takn the dimension of price. On the vertical axis, we have taken
the dimension of degree of automation. The location of a brand relative to each axis indicates whether it is
low-priced or moderately priced or high-priced and whether it is perceived to be highly automated or
moderately automated or totally manual. To illustrate, Videocon Semi Automatic Washing Machine and
Godrej Semi Automatic Washing Machine are perceived to be more like each other. These brands, therefore,
compete with each other. Videocon neuro-logic machine is an expensive computer-controlled product. Bajaj
is a low-priced manual product. Videocon automatic. is high on automation but moderately priced.
HIGH AUTOMATION
VIDEOCON
NEUROLOGIC
z
o
VIDEOCON AUTOMATIC
VIDEOCON SEMI-AUTOMATIC
LOW PRICE
~
HIGH PRICE
(BUDGET)--------------;l.LJ7;-+-------------,(PREMIUM)
~
GODREJ
&3 SEMI-AUTOMATIC
.BAJAJ
LOW AUTOMATION
Fig. 8.1 Product Space Map
Joint spaces are then put on perceptual spaces. They are ideal points or preference vectors.
HIGH AUTOMATION
0NEUROFUZZV
LOW PRICE
VIDEOCON SEMI-AUTOMATIC
GODREJ SEMI-AUTOMATIC
-------------t-------------
LOW AUTOMATION
Fig. 8.2 Joint Space Map
HIGH PRICE
143
Designing the Offer
An ideal point shows most preferred combination of dimensions. In our case, the consumers prefer the
moderate price, moderate automation dimension the most. People have a second preference for
low-priced, moderately automatic machine, but this niche is still vacant. The third preference is for highly
priced neuro-Iogic machines. The least preferred machines are the manual ones.
HEAW
BRANDA
BRAND E
BRAND B
BRAND F
BRAND D
LOW ____________________
.BRANDG
~~~
______________________HIGH
pmCE
pmCE
BRAND H
BRAND I
.BRANDJ
UGHI'
Fig. 8.3 Space Map for Beers
Let us consider another space map for beers. The beer brands are plotted against the dimensions of
price and weight.
In the above diagram, we have indicated consumer preferences by a vector that travels in the direction
of ascending preference. Preference of an individual brand can be related to a preference vector by drawing
aline from the placement of the brand to the vector in a perpendicular fashion. The intersection is a projection
of the brand onto the vector. The brands that project on to the arrow-head are more preferred than those
projecting towards the tail of the vector.
How to Construct Perceptual Space?
There are two dimensions here - how to build up the space and which brands are to be chosen and
which attributes of the chosen brands are to be taken into account.
Construction of Space Map
There are two methods which are given below diagrammatically.
Product Management
144
Construction of Space Map
Decomposition
Composition
It is called similarity or resemblance scaling. Here a
Each brand is rated on different attributes using either a

five-point or ten-point scale. A washing machine brand
may be rated on automation, one means least automation and five means highest automation. Brands are then
located in a space that has one dimension for each
attribute. This method may generate many dimensions.
Reduce these dimensions by
brand pair or several brand pairs are taken. The

respondents rate each pair on a scale of similarity (one
to nine scale where one means very similar and nine
means very dissimilar). The judgements about similarity are used to estimate distances between brands in a
space of two or more dimensions. When more than
two dimensions are chosen, there are computer
programmes for multi-dimensional scaling.
I
Discriminant Analysis
Principal Conjoint
Analysis
Selecting the Brands and Attributes
Whatever method we may adopt to construct the space, we have to decide about the brands to be
selected and the attributes which would be chosen to make up the space. A wrong decision may make it
necessary to rework the whole thing.
The chosen brands must be familiar. As a group they should reflect the attributes chosen. In an
automobile market, it is better to introduce Indian and foreign models, large and small models, economical
and premium models. However, while studying fuel-efficient cars, the models chosen would reflect the range
of possible values for such type of cars. The nature of competition depends upon the scope of our studyjogging, Yoga, bike-riding, meditation may all be fitness alternatives. Consumers may consider several more
alternatives. Similarly, attributes are given preference values, e.g., colour may be an attribute of a soft drink
but is not considered while chOOSing it. Such an attribute may not be chosen. If all air-lines are perceived
to be equally safe, there is no point in choosing safety as an attribute.
Some attributes are cognitive - a matter of belief. Some attributes are affective - a matter of liking.
Though affective attributes are not generally included, those affective attributes which influence preference
should be included, e.g., rich flavour of tea, eye-appealing appearance. Price and value-for-money (VFM)
are also included.
Brand and attributes are chosen by using several methods. Brands and attributes influencing
preferences and choices are identified by questioning the managers. Consumers can be interviewed either
individually or as a part of focus group. They may be asked to suggest brands in certain situations they would
use. They can be asked directly about attributes. What is that which they think is ofimportance while buying?
They can be asked to do paired comparison between brands. They are asked which two brands from a triplet
are similar and how they differ and why they differfrom the third brand. Consumers can be asked abouttheir
favourite brands and reasons for it being favourite. They can be asked why they opt for other brands, if at
all they do.
Several brands and a number of attributes can thus be identified. They are reduced by using managerial
judgement. After this, a questionnaire is constructed, and pre-tested. The questionnaire can look like what
follows:
1. Encircle the number that approximates to your perception of the fuel economy of the following
brands:
Low Average
Maruti 800
Fiat Uno
Ambassador
1
1
1
2
2
2
3
3
3
4
4
4
5
5
5
High Average
6
7
6
7
6
7
8
8
8
9
9
9
115
Designing the Offer
2. Encircle the number that approximates to your perception about the price of each of the following
brands:
Expensive
Economical
Maruti 800
Fiat Uno
Ambassador
1
1
1
2
2
2
3
3
3
4
4
4
5
5
5
6
6
6
8
8
7
7
Conjoint Analysis of the Offer
We have to assess the response of the consumers to our offer before putting it in one market. This is
done by the concept testing. A new product concept describes the product. The consumer is asked whether
he would buy it. This can be done for a single concept or in relation to the concepts of the already available
products. The concept may be split into components to predict changes in results corresponding to changes
in any of these components.
Consumers can be asked what they seek in an ideal product or they can be asked about importanl
characteristics. Say while examining fuel efficiency it would be worthwhile to estimate the effect when fuel
efficiency changes from one average to another. This ultimately influences the desirability of the product. The
self-explicated method as this is called has its limitations. It is tempting for the consumers to seek the best
attributes at lowest price. Sometimes, important attributes are under-stated and unimportant ones overstated. Sometimes, an attribute may not influence decision-making, say a price below a certain level. To
overcome these limitations, marketers use conjoint or trade-off analysis. The consumers are asked to judge
complete descriptions of hypothetical new products. Alternatively, they may be asked to judge partial
descriptions. Regression may be used to calculate the utilities of various attribute levels. After knowing the
utilities of attributes of attribute levels, we can specify a product which will have the maximum deSirability.
Clarke spells out the assumptions of this method. A product must be amenable to be broken down into
separate features for which utilities can be arrived at. The overall utility of the product is a function of the
utilities of these individual attributes. A respondent buys the product with maximum utility. The attributes
chosen are relevant. There should not be double counting. Though all these assumptions are never fulfilled,
many situations are just close to them. When a product is not capable of being broken d,:,wn into its attributes
for which utilities can be calculated, we can use the traditional concept testing methods.
Full profile method which is popular expects the consumers to respond to complete product
descriptions. Paired comparison is another popular method, where the consumers are asked to choose
between two concepts, or to specify the irrelative preference to each.
Attributes and their levels must be carefully chosen. It should be seen that the consumers interpret the
attributes unifonnly. Readers are expected to refer to a book on Advanced Marketing Research to get the full
details of conjoint analysis.
Conjoint Analysis
Conjoint analysis enables an organisation to move towards the specifications for an innovation. In
its simplest form, we can say it determines the attributes of an innovation combined in such a way that it
appeals to a specific market segment. Such a combination wins the organisation market share and profits.
Products have several attributes, e.g., price, repairability, access, after-sales service, guarantees/
warranties and so on. Products also have performance features, e.g., speed of a car, maintenance costs,
pollution level caused etc. The important point is to appreciate that all these attributes are not valued equally
by all the customers. A customer may prefer an embroidered salwar kameez, with a contrastmg dupatta, while
another a plain salwar kameez with a matching dupatta. A person with several phone lines may not be so
particular about fault rectification, whereas a person with a single line may need immediate fault rectification.
The attributes thus have relative importance. and it is necessarv to evaluate this.
Product Management
146
Conjoint analysis can be used to determine the product attributes which are relevant for our market
and which are critical for our product's success. It also enables us to arrive at a price for a particular bundle
of attributes. It also helps us estimate the market share of the product.
We shall consider a piece of plant machine. It represents the following combination of attributes:
Factor A
Performance level (as against specifications)
Factor 8
Price
FactorC
Delivery time
Factor D
Terms and conditions.
Each factor can be sub-divided into sub-factors representing different specified levels:
Factor A
Sub-factor Al
Performance exceeds by 10%
A2
Performance exceeds by 5%
A3
Performance falls short by 5%
A4
Performance falls short by 10%
Factor B
Sub-factor 8 1
Price of Rs ..50,000
82
Price of Rs.60,000
83
Price of Rs.70,000
84
Price of Rs.80,000
Factor C
Sub-factor C1
Delivery time of 4 months
C2
C3
C4
Delivery time of 1 year
Factor D
Sub-factor Dl
Installation service with 1 year guarantee
D2
Installation service with half a year guarantee
D3
Installation service with no guarantee
D4
No installation, no guarantee, ex-factory delivery.
Let us put a value on each of the above sub-factors, and let us call it utility value.
Factor
Utility
Al
0.80
A2
0.70
A3
0.40
A4
0.20
81
0.85
82
0.70
83
0.50
84
0.20
Cl
0.60
147
Designing the Offer
C2
0.50
C3
0.40
C4
0.30
D1
1.00
D2
0.90
D3
0.20
D4
00
We are now in a position to compare two rival offerings of the same machine but with different
combinations of attributes.
Machine X
Utility
Machine Y
Utility
5% plus
performance
Priced Rs. 80,000
Delivery time
0.70
0.30
5% plus
0.70
Priced Rs. 50,000
0.85
of 4 months
0.60
0.50
Installation
with one year
guarantee
1.00
Six-month
delivery
Installed,
no guarantee
Total utility value
2.60
0.20
2.25
The respondents are shown cards each with a particular combination. The respondents are supposed
to rank the cards. The most attractive is put at the top. (It is least unattractive). The least attractive is put at
the bottom. The other are arranged between these two by preference. In other words, respondents reveal
their preferences by card ranking. Mentally, they are making trade off amongst the different offering. Data
are analysed by using computer software. The aim is to have the best fit.
Conjoint analysis is a great help to the designers. It pinpoints those product attributes which should
be given serious attention by the designers. It also pinpoints the less significant attributes.
The utility value is also called partworth. In our example, we have used an additive model. Overall
utility or preference of a product is equal to the sum of partworths for the attribute levels that make up that
product. If a product has three major attributes, say brand name, package and price, its overall utility or
preference is given by Overall Preference = Partworth for Price + Partworth for Package x Partworth for
Brand Name.
A useful concept in conjoint analysis is attribute importance. It is computed as the difference between
the most preferred level and least preferred level of a given attribute.
Conjoint analysis has its limitations. It assumes trade off among attribute levels. In practice, consumers
first consider whether the choice altematives meet their own standards of minimum acceptability. Later, they
may consider trade offs. Acceptance attribute levels suggest a conjunctive model. Conjoint analysis gives
a utility value to the unacceptable attribute, though it has been rejected categorically. Besides, the least
preferred level of an attribute may indicate a meaningless partworth value if that level is considered
unacceptable. Attribute importance analysis thus gets distorted. In paired comparisons, the conjuctive-trade
off process affects the data degradingly. The very comparison between unacceptable level and acceptable
level results in loss of information. There is over-load of data to be collected in conjoint analysis. There
are several combinations even in simplest problems. As the number of attribute increases, the number of
factorial combinations to be evaluated increases dramatically. Data can be reduced by using fractional
factonal expenmental deSigns.
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Product Management
Multi-dimensional Scaling
We have so far considered two attributes while constructing a perceptual space map. We can consider
more than two attributes or several brands if we use multi-dimensional scaling (MDS). It is a computer-based
statistical technique which converts information given by a consumer about his perceptions and preferences
into perceptual and preferential multi-dimensiollal space map. On this map, the brands or other stimuli are
expressed as points.
Process of MDS
We shall consider the soft-drink market of the colas. How the consumers perceive them'? We shall
consider how the cold drinks Coke, Pepsi, Thums Up and Campa Cola are perceived. What attributes are
used in their perception?
First, we will have to collect Similarly data pertaining to these four colas. The method used is that of
conjoint comparison. Here all possible stimuli like the fizz of the drink, the taste, the colour and so on are
chosen and the respondents must indicate two out of three which are most similar, and two which are least
similar. See the example given below:
Please select two brands you think are most similar, and then two which are least similar.
Campa Cola, Pepsi, Thums Up:
Thums Up and Campa Cola are most similar.

Pepsi and Thums Up are least similar.
The Similarity data are put into an MDS programme of the computer for the purpose of analysis.
However, computers do not accept data in the above format. It is, therefore, necessary to construct
similarities (dissimilarities) rank-order matrices.
In our example, Pepsi and Coke are more similar than the pair of Pepsi and Campa Cola. There is also
an implication for Coke and Campa Cola. They are less similar than Pepsi and Coke but more similar than
Pepsi and Campa Cola. We study the pairwise similarities and assign either a zero or one to paired
comparisons, depending upon whether one pair is more similar than the other. The data are presented in a
matrix as follows:
1. Pepsi, Coke, Thums Up
- and - are most similar

- and - are least similar
2. Coke, Thums Up, Campa Cola

3. Thums Up, Pepsi, Coke

4. Campa Cola, Pepsi, Thums Up

The above method becomes cumbersome if the number of stimuli becomes larger than 8. We can then
use anchor point technique. Each brand is selected as anchor point, and the stimuli according to their
similarities are ranked against it.
The completed questionnaire becomes:
1. Pepsi, Coke, Thums Up
Pepsi and Coke are most similar

Pepsi and Campa Cola are least similar
2. Coke, Thums Up, Campa Cola
Thums Up and Campa Cola are most similar

Coke and Thums Up are least similar
149
Designing the Offer
3. Thums Up, Pepsi, Coke
Pepsi and Coke are most similar

Pepsi and Thums Up are least similar
4. Campa Cola, Pepsi, Thums up
Campa Cola and Thums Up are most similar Pepsi and

Thums Up are least similar.
Table: SimilaritylDissimilarity Matrix of Response

Columns
Pepsi
Coke
Rows
Pepsi
Coke
Pepsi
Campa Cola
Pepsi
Thums Up
Coke
Campa Cola
Coke
Thums Up
Campa Cola
Thums Up
Pepsi
Campa Cola
Pepsi
Thums Up
Campa Cola
Thums Up
Coke
Coke
Campa Cola Thums Up
0
1
1
While constructing the above matrix, first zeroes are placed down the diagonal, as these pairs are
similar. The rest ofthe matrix is then completed. The first column is that of Pepsi and Coke. Look down and
we find the pair of Pepsi and Campa Cola. According to respondent, this is less similar than Pepsi and Coke
pair. At the inter-section, we therefore, put one, because Pepsi and Coke are more similar than Pepsi and
Campa Cola. In other words, all the pairs in columns are rated in terms of Similarity to those in the rows.
Zeroes mean more similar and one means less similar.
Pepsi and Coke in general are very similar as it has only zeroes in its row. It is more similar than any
other pair consistently, excepting Campa Cola - Thumps up. In other words , Pepsi and Thums Up are seen
as quite dissimilar brands. The row total is an indication of similarity. We can consider the row total of ones
to arrive at a dissimilarity matrix as shown below:
Dissimilarity Matrix
Row
Total
Pepsi
Coke
Pepsi
Coke
Campa Cola
Thums Up
Coke
Campa Cola
Pepsi
Campa Cola
Coke
Thums up
Pepsi
Thums Up
Campa Cola
Thums Up
Coke
Campa Cola
Pepsi
Thums up
Coke
Thums Up
Pepsi
Thums Up
0
0
The above matrix is consistent as no zeroes appear below the diagonal, and ones appear above it. This
is the transitivity relationship. This may be treated as Sweetness scale. Thus Pepsi is the sweetest and Thums
Product Management
150
Up, the least sweet. A computer is helpful when many such stimuli (brands) are considered. The computer
measures the distances amongst the brands on the space. It also assigns a set of numbers so as to be close
to distances, consistent with the ranked similarity of brands provided as input. The distances and the numbers
are compared by Kruscal's Stress Measure formulae. These formulae generate a map. Ideal point on the map
is established by judgement.
We ultimately assign the ranks to the brands as per their row total as follows:
Pepsi, Coke
1.5
Campa Cola, Thums Up
1.5
Coke, Campa Cola
Pepsi, Campa Cola
4.5
Coke, Thums Up
4.5
Pepsi, Thums Up
This leads us to ranked similarity input to MDS programme of the computer

Ranked Similarity of Brands
Brands
Pepsi
Pepsi
Campa Cola
Duke
ThumsUp
Campa Cola
Coke
4.5
ThumsUp
1.5
1.5
4.5
The uni-dimensional map of the above looks as follows:

Pepsi
Coke
Campa Cola ThumsUp
6
1 2 3 4 5
Pepsi and Coke are close to each other, and yet far away from Thums Up. This is commensurate with
their ranked similarity.
PRODUCT DESIGN
The consideration for design enters in the product development process too late, and with too little
consumer perspective.
To Caplan (1982), a design is "the artful arrangement of materials or circumstances into a planned
form."
Design excellence has the potential to give the firm a competitive edge. Though good design cannot
make a poor product good, it does contribute a great deal to make the product realize its full potential.
According to Watson of IBM, 'good design is good business.'
Design plays an important role into three areas % corporate identity, product design and brand identity.
Product design, according to Reynolds, involves the selection of a combination of functional structural
and aesthetic considerations. A pen must write. That is afunctional consideration. An umbrella must protect
from rain. That is a functional consideration. Structural characteristics are associated with the delivery of
the functions, and include size, shape, form, colour, odour and tacile qualities. A pen can have an ink-filling
mechanism, and a chip to attach it to a pocket. An umbrella can be made so small that it fits into a woman's
vanity bag. Its fabric should be visible from a distance and should be transparent enough to our sense of
beauty % it is a sensual impression. It could be a visual perception or thoughtful design.
Designing the Offer
151
Levitt (1983) advocated a universal strategy cutting across linguisitc barriers. Companies develop and
use universal symbols especially graphical as a part of their product design.
Design is the only visible aspect of the organisation available to the public. A product is in essence, a
firm's 'corporate identity', (Thomson, 1987).
Distinctive product design becomes the basis for product differentiation Kotler advocates 'a design touch'.
and corporate identity.
What is Design?
Design is an arrangement with a purpose. It achieves a unified totali ty for a specific purpose by selecting
the constituting elements and organising them aesthetically. The whole is greater than the sum totai of the
individual parts.
A design is driven by the function or situation. In other words, form follows function. A product must
work before considering how it appears. But a working product does not necessarily possess attractive
appearance. Function is justa constraint on the set of possible designs. The other constraints are the processes
and tools used to make a product, and the materials with which it is made. Thus the end use, the processes
and tools, and the material triangle of constraints call for the collaborative effort of a market researcher,
industrial engineer and industrial designer. Tax and engineering focus on technicalities and works inside out.
The designer focuses on an entire product concept, and works form outside in.
A designer is adept in handling space and provides visualform to something. He uses line, space, light,
colour, transparency, motion and texture. A design is based on principles of proportionality, balance,
harmony, emphasis, rhythm, unity, variety and scale.
These days the shift is towards the design of the circumstances in which things are used from the design
of the things. In-store layouts and interior design will become more important in service-oriented approach.
Feasibility both economic and technical is another requirement of a good design. The product
appearance is governed by utility considerations but not entirely. People respond emotionally to things put
before them. The holistic impression a product makes on our senses is called the presence of a product.
What is Good DeSign?

In order to be successful, a product must go beyond its functional utility. It must have ergonomic
tractability, usability, feasibility, aesthetic sensibility and image congruity. All these dimensions are to be
considered from the view point of both the firm and the customer.
Though the end user may not know how things work, he still expects them to work. And work they must
under most adverse circumstances, even if for a time. A product must proVide convenience of use, installation,
operation and disposal. It then is said to have a 'robust design.' Usability is the main criterion of a good design.
A usable product is a trade off between the physical and psychological needs of the people. Ease of use,
comfort, hygiene and safety are important. In case of a consumer durable, a good product design is such
that reduces the time taken to master its operation % say a consumer-friendly computer. A poorly designed
computer does not have a glare-free monitor causing eye-strain and rickety printer that makes noise.
Advertising highlights, those characteristics which make a product usable.
Anyone can claim that we market a usable product, say a comfortable chair. We have to prove which design
characteristics make it comfortable.
Ergonomics takes into account economy, energy and values. Cost per unit is an important
consideration for a consumable product. For a durable, we consider thl~ operating costs, say the cost of
maintaining a car or an A.C. Durability depends on the materials used and the way they are put together.
These materials make it suitable for use. Besides, we must use optimum quatity of these materials.
A product must be easy to manufacture and distribute. The physical requi-rements of a product design must
152
Product Management
be defined. The number of variations must be considered. Some features are optiunal and some are selected
by the buyere.g., colour of a car. Optional features may or may not be selected by the buyer. The components
that make up a product must be identified. Their sourcing must be considered. The total make up of the
product is compulsory. Special manufacturing conditions must be identified. Even dish'ibution conditions are
studied in detail. Physical characteristics affect the costing of the product.
APPENDIX
CONJOINT ANALYSIS
According to Green and Wind (1975), conjoint analysis is a method to measure preferences for
alternative products. In the marketing context, it seeks to answer the question why the consumers buy the
products they do. It seeks to answer this equation by first defining the products in terms of relevant attributes
which characterise all the products in that category.
Product attributes may include price features, packaging and brand name. These attributes are defined
in tem1s of discrete levels e.g., price may be Rs. 30 or 40 or 50, and packaging may be a cardboard box,
a paper bag or a plastic container. Different levels of multiple attributes are combined to get hypothetical
product concepts e.g., brand X in a plastic container at Rs. 50. The respondent is then asked to rank order
by overall preference a subset of all possible hypothetical options. Such a comparison might show that a
consumer prefers a plastic cotnainer container at Rs. 40 to a coardbox at Rs. 30. Thus the plastic container
is worth at least an extra Rs. 10 to that consumer. The rank order overall preference data are usually analysed
by computec software to give the relative worths of the product components. Thus after examing a
representative sample, market preference picture emerges. Atthe most rudimentary level, we can say conjoint
analysis enlightens liS regarding the values a consumer places on different components of a product. We can
divide the market into benefit segments by grouping consumers based on the similarity of their preference
structures. The wsu Its of conjoint analysis also provide managerial direction. They suggest what changes are
needed in the product e.g., lower price, different packaging. Such an analysis enhances to overall appeal of
the product to the consumers.
One of the objectives of conjoint analysis is to predict the likely market response to the changes in
products in terms of their attribute components. Simulation of changes provide us the best strategy to be
followed by the firm.
Conjoint analysis uses several basic concepts. The specific attribute levels have a utility value or
part-worth that represents appeal of that level to the consumer. Overall preference for a product is equal to
the sum of the part -worths for the attribute levels that make that particular product. It assumes a simple
additive model. To illustrate, if we take three attributes; price, package and brand name, then overall
preference is given by
Overall
BI'and
Preference
Partworth for price
+
Partworthforpackage
+
Part worth for brand name
Other complex interactive models are possible, but the additive model is robust enough for many
applied problems.
Attribute importance is another useful concept in conjoint analysis. It denotes the salience of each
attribute as compared to others. Mathematically, itis the difference in part-worths between the most preferred
level and the least preferred level for a given attribute.
153
Designing the Offer
10
10
10
10
Vl
'0
15 4
:s
2
0
o
Rs. 30
Rs. 40
Rs. 50
Box
Bag
Carton
Price
Package
Consider the following figure. There is the price attribute.
The most preferred price is Rs. 30 with a partworth of 10, while the least preferred price is Rs. 50 with
a part-worth of O. The difference between the partworths is 10 which indicates the impact on overall utility
on a change in price from the worst to the best option. The comparable difference for package
is 5, which is the difference in partworths of carton and bag. The difference is 4 for the brand. In this context,
price is the most important or critical attribute. It is two times more importantthan the package and 2.5 time
more importantthe brand. Critical attribute's importance can be assigned any arbitrary positive number. We
have set it here at 10. The other attributes have be ranked in importance with reference to the critical attribute.
Simulation can be conducted by taking two ormore products and specifying them in terms of attributes.
The parthworths are added across the attributes. A simple decision rule is that a consumer opts for a product
for which he has the greatest overall preference score.
Consider the following example
Product 1
Product 2
Attribute
Level
Partworth
or
Utility
Level
Price
Rs.40
10
Carton
6
5
4
15
Rs.30
Package
Box
y
Brand
Overall utility =
sum of partworths
Partworth
or
Utility
o
13
Chosen
The consumer here opts for product 1 despite the higher price on account of its brand name, and
to some extent its packaging.
Limitations
A consumer is willing to make trade-offs in traditional conjoint analysis among any attribute levels. But
in practice consumers judge choice alternatives according to their own standards of minimal acceptability
before they consider trade offs among particular attribute levels. A large family rules out a small compact
car before starting the trade off process. This alternative model is called conjunctive model. There is a screeing
Product Management
154
process here where attributes are evaluated in terms of acceptability. Products which contain unacceptable
attribute levels are excluded from further consideration.
In the first-stage of product evaluation, we follow a conjunctive model. We have a price threshold in
mind, and anything above that price is rejected. Some consumers may have a quality level in mind. Previous
brand experience also leads to rejection of some brands. All these are conjunctive approaches.
The compensatory decision process of trade-offs amongest alternatives based on partworths starts after
arriving at a reduced set of choice alternatives with attribute levels that are acceptable. A consumer may
choose a set of alternatives with a certain level of quality, price level and brand name. Yet later he may
sacrifice some quality for a lower price, but this quality level does not fall below a particular threshold level.
Thus we have accepted two-stage decision-making process, An unacceptable level is given a utility
value, when in practice it is totally rejected. Even attribute importance is improperiy represented. We have
not considered the acceptability threshold before finding the difference between the most preferred and least
preferred attribute levels. Under a conjunctive/trade off model, it is obvious that attribute importance is a
complex and multi-dimensional concept. Even data collection becomes complex in the two-stage process.
Respondent Over-load
Conjoint analysis has its own data collection burden. Originally, factorial experimental designs were
used. Here each attribute became a factor, and each level or feature option, a factor level. But factorial
combinations increase dramaticaliy as the number of attributes increase. To reduce the number, factorial
experimental designs were used. However, in order to have reliable part-worth estimates, the least complex
problems too had 16-18 combinations, and moderately complex problems, 25-30 combinations. Respondents then tend to focus on a small number of attributes and levels, thus ignoring others. Alternative methods
of matrix analysis in which attributes are taken in pairs are developed. But here also the number of matrices
increase quickly, as the number of attributes increase. In self-explicated method, part-worth values and
attribute importances are elicited by direct self-report from the respondents. But here attribute importance
is not sharply defined. Hybrid models have been proposed as a compromise between self-explicated and fullprofile methods. No method is proposed in which telephone alone is utilsied as data collection device. In this
method, only non-telephone households are excluded. Conceptually improved telephone-based method that
reduces respondent over-load is necessary. One such method is CASEMAP in which conjunctive trade off
integration is used, eliminating firstunaccetable attributes before questioning panworths relevant to trade offs
of acceptable attributes. CASEMAP is computer-assisted self-explication of multi-attributed preferences.
CONJOINT ANALYSIS FOR NEW PRODUCTS

This analysis helps in selting the specifications for a new product by determing the combination of
attributes or features a new product must possess to appeal to a specific target audience so as to obtain
maximum market share or profits. Conjoint analysis is also called multi-attribute utility analysis. It is asimple
trade-off analysis technique to
determine which product attributes are most important to a specific market segment.
clarify which attributes are most critical to the success of the product.
estimate the price the prospective product will command for a particular combination of attributes.
estimate the market share of the product.
155
Designing the Offer
The basic foundation of this technique consists of the following tenets:

A product is a bundle of several attributes or factors as illustrated in Table A.
Each of these attributes has a few specified levels, as shown in Table B.
Each level of each attribute has a measurable value, its utility, for a person as shown in Table C.
The utility of a product is the sum of the utilities of its attributes levels as shown in Table D.
Table A
Some attributes of a machine
Performance compared to specifications
Price
Delivery time
Terms
Table B
Some levels of attributes In Table
Performance specifications
Delivery Time
by 25 %
Exceed
by 10%
Exceed
Fall short by 10%
Fall short by 25%
69 months
months
1 year
1% year
Price
Terms
Rs. 700000
Rs. 800000
Rs.
900000
Rs. 1000000
Installed, 1 year Guarantee

Installed, lh year Guarantee
Installed, No Guarantee
Installed: No Guarantee
156
Product Management
Table C
Utilities for the levels of Table B
Factor A
Al
A2
A3
A4
FactorB
Bl
B2
B3
B4
FactorC
Cl
C2
C3
C4
FactorD
Dl
02
03
04
Level Utility
Performance Specifications
Exceed by 25%
Exceed by 10%
Fall short 10%
Fall short 25%
0.78
0.70
0.45
0.20
Performance Specifications
Level Utility
0.85
0.65
0.40
0.16
Rs. 700000
Rs. 800000
Rs. 900000
Rs.I000000
Delivery Time
6
9
1
IV4
months
months
year
year
0.65
0.55
0.45
0.15
Terms
Installed. 1 year Guarantee

Installed. % year Guarantee
Installed. No Guarantee
FOB Seller. No Guarantee
1.00
0.80
0.20
0.00
Table D
Two offerings of machine compared
Product A
ProductB
Utility
Utility
10% plus specifications
0.70
10% plus specifications
0.70
Rs. 1000000
0.16
0.65
Rs. 700000
9 month delivery
0.85
V2 year delivery
0.55
Installed. One year

Guarantee
1.00
Installed. No
Guarantee
0.20
Total utility
2.51
2.30
Conjoint analysis helps the design engineers to focus on important attributes. It also helps in estimating
market share by apportioning it in proportion to the product utilities. The more features a product has, the
more it costs to produce. We should be addingusefulfeatures that do not cost much, and which provide added
value to the customers. Conjoint analysis is first used to determine the price that can be charged for a given
combination of product features. Thereafter engineers estimate the costs to embody these features in the
product. Then the inflection points are located in the actual price us. cost relationship that are attractive to
us. A family of products can be offered at each or several of the attractive inflection points .
PRICING THE OFFER

Pricing is an essential component of the marketing mix. In an inflationary economy or economy with
high levels of unemployment or economy with many persons living below the poverty line, the price decision
takes an even greater importance.
Price is the value that one puts on the utility that one receives for goods and services. Price in our society
is generally a monetary amount, and is the value assigned to a bundle of form, time, place and possession
utility. The price set serves as the basis of exchange, and is thus an index of value for goods and services.
Price may assume so many names: tuition, rent, fee, salary, toll etc.
Price of a new product is very critical. Everyone is aware of economic theories of pricing, and the product
manager's insistance that the new product must be priced according to whatthe market will bear. However,
it is very difficult to measure what the market will in fact bear.
The correct and incorrect price often lead to the success and failure of a product. Mostly companies
consider cost-plus price which recovers all costs and puts a mark-up, though this approach had its own
fallacies. Competitive pricing is the other most widely practised method of setting the prices - consider the
market price of related products and services.
However, where are the useful price benchmarks in the case of new product categories? Sometimes,
a price-bench-mark exists but it is difficultto arrive atthe right comparisons. Competitive pricing ignores the
possibility of pricing much higher than the current prices or lower than the current prices. Besides, there may
not be market niches for yet another product at either cost-plus priced prod uct or competitively priced product.
A brand should not be underpriced in relation to its quality and reputation. At the same time, a brand
should not be over-priced price which is too high for the consumer. It is also difficult to set the price, when
the product differential is used to recover extra price. How much extra price can the consumer pay, other
things being equal, for the additional benefits? Then we come across two relevant products, and price
differential are introduced. There are price differentials between air fares, of first class, business class and
Product Management
158
economy class. The differentials are also on the basis oftime of flight - night or day. The air-fare differentials
are seen in season and off-season rates.
Brand image is relevant in pricing. It enables a company to introduce products at premium prices,
though they are only slightly better than the existing products. However, price premiums are possible in a
price-insensitive market.
Initial price at the introductory stage is as important as the price at the time of repeat purchases.
Price Barriers
India is a highly price-conscious market. For many products, consumers in India set a price benchmark. This acts as a barrier. Anything beyond this becomes generally unacceptable. Thus an audio cassette
of pre-recorded music is considered at a price of Rs. 25 which he thinks is right. A consumer is ready to
pay roughly Rs. 1000 per screen inch for a TV set. A mineral w3ter bottle is acceptable at Rs. 10. Matchboxes
are not worth more than 50 paise. In India, consumers consider affordability as number one factor. They
have set psychological reference points for even consumers durables. Mopeds have a reference point of
Rs. 10000. Lesser than this is good news. However, a moped priced at Rs. 14000 and slashed down to
Rs. 13000 is no news at all. It is difficult to shift these barriers. We as consumers want our rupee to go as
far as possible. We squeeze out the last drop of Frooti from a tetra pack, and the last remnant of tooth-paste
from a soft tube. Traditionally, we have been brought up on values of thrift and economy and non-wastage.
Most companies, therefore, play under a price barrier.
Overcoming the Price Barriers
A company can bring the price in line with the perceived value, while taking care that the value
delivered does not suffer. Microwave ovens and portable generators have lowered their prices below the
barrier levels. Package holidays and value tariff plans of cell phones are attempts in this direction. Some
companies offer a premium, a moderate and a lower price option, expecting the consumers to move towards
the moderate option. Prices can be lowered by cutting all frills, keeping the functions intact. Many firms follow
penetrative pricing strategy while entering the market and later on step-up ladder. Sometimes a company
follows a step-down price ladder, e.g., from high-priced Ariel Microsystem to a lower-priced Ariel Super
Soaker. In many product categories, people upgrade their product preferences. People have now started
using Ray Ban glasses costing over Rs. 1500. Shopping ambience also weakens the price barrier. Pric.evalue equations .::an be re-arranged, e.g., computer sold with after-sales-services or a copier sold with service
deals. It is not always possible to make the consumer shift to a new price-value equation, when the usage
patterns are fixed. Instalment plans is also a step-ladder technique. Liquor brands put the consumers on
imaginary experience curves, leading to enhancement of perceived value.
Whatthe Market can Bear?
The relative value of an offer determines what the market can bear. More than this people would not
pay. It is not worth more than a particular price. The value placed on an offer differs from person to person,
and from time to time, even for the same person. Over a period of time costs drive the prices. Thus it is
necessary to be conscious of both the relative value and costs. While measuring value, we start with what
the customer actually wants, and how well the existing offerings satisfy him. Product space mapping is a
useful exercise to know the gaps. Different benefits and prices are traded off by people amongst competitive
products.
Pricing does not equal cost of production plus profit at Hindustan Lever. They check the price the
consumer is willing to pay, deduct the expected profit from it and then work out the costs.
To measure value and demand, first we shall consider the role of managerial judgement.
Value Pricing
Value pricing is also called value-in-use pricing. Here a price is assigned to a product based upon its
value to the consumer in the use of the product. Consider a product like computers. It can be priced high
relative to its cost.
159
Pricing the Offer
The computer's life-cycle cost is made up by its price, start-up costs, service and maintenance costs.
The product can offer major advantages over the basic product, e.g., faster feeding. Value can be assigned
to this additional benefit. The following diagram illustrates this:
--I R:,6::0r:o~~:;~,~ -I : :: ~~~~~"

As. 6000
EVC
EJ
Advantage
- - - - -
As. 1750
IC;;;'t;~t~;
. Margin
to Supplier
T-
Price
As. 4750
As. 3000
~p~'~r'~ c:a~ __________ __
1_.
As. 5000
I
Bench
Mark
Product
Supplier's
Product
EVC
I
I
I
I
I
I
I
I
to the Customer
I
I
Customer's Economics
= Economic Value
I
Supplier's Economics
Price to Share
Benefits
Source: Adapted from Forbis and Mehta, Value Based Strategies, Business Horizons, May, 1981.
The value of the existing current product being used by the customer is first calculated. It is compared
with the value of a competitive product and the difference is established. The consumeroughtto be indifferent
between existing product at prevailing price and a competing product at a different price if the difference is
equal to the difference in relative value.
The life-cycle costs of a computer are Rs. 10000. Our product offers additional benefits. A value of
Rs. 1000 is placed on this. The customer is willing to pay Rs. 3000 for the basic product, he should in theory
be willing to play Rs. 6000 for our product- Rs. 3000 basic plus Rs. 2000 for savings start up and service
plus Rs. 1000 for the additional benefit. This is the customer's view point.
For a supplier, it costs Rs. 3000 to make the product. Any price above Rs. 3000 will then be a profit.
Any price under Rs. 6000 will give a consumer a better product than the existing product he uses. The
difference of Rs. 3000 between our costs and value limit is the competitive advantage.
The last section of the diagram mentions one possible price. It is Rs. 4750. It generates Rs. 1750 as
profit. But it offers an economic advantage of Rs. 1250 to the consumer over his currently used product. This
advantage induces him to buy our product.
Thus the final price reflects the value of the product to the end-user and the amount of inducement
(from relative value) the supplier wishes to give to the customer. The consumers make price-performance
trade-offs between competing brands.
160
Product Management
Hindustan Lever brand managers just do not create brands for the market. Their main task is to make
people move up the value chain, even when experiments with price-points happen constantly. People should
move from Wheel, an economy detergent to Surf Excel, a premium-brand. From Lifebuoy to Dove, it is a
longjoumey.
Price Elasticity of Demand
Price elasticity shows how price sensitive the customer is. It is defined as the percentage change in
quantity demanded relative to the percentage change made in price. Mathematically it is expressed as
Elasticity
(Original quantity - new quantity)/original quantity

(Original price - new price)1original price
(Ql-Q2)Ql
orE
(P1 -P2 )/P1
= Original price
where P 1
P2
Q1
Q2
E
~P
=
=
New price
,,;
New quantity demanded
=
=
=
Elasticity
Original quantity demanded
P1
P 2 the change in price
~Q
Q 1 - Q 2 the change in quantity
Let us illustrate this concept taking two different situations. Suppose the price of a 1V set in Jan. 1996
was Rs. 8000 and 20000 sets were sold over the year. In Jan. 1997, the price was reduced to Rs. 7000 and
22000 units are sold during this year.
(20,000- 22,000) 120,000
E= (Rs. 8,000- Rs. 7,(00) IRs. 8,000
-2,000 I 20,000
Rs. 1,000 IRs. 8,000
= (
2,000)
Rs. 1,000
(Rs.20,000
8,000)
- 0.8.
The significance of the minus sign is that it shows an increase in demand with a decrease in price and
vice versa. However, elasticity can be expressed without the minus sign. We have to appreciate the change
in revenue.
19%
Old situation
Rs. 8000 x 20000
= 16 crores
1997
New situation
Rs. 7000 x 22000
= 15.4 crores
Here the total revenue generated when the price decreases is smaller than the revenue in 1996. The
product is therefore, price-elastic. The elasticity of demand is less than one, and the demand curve is close
to vertical.
161
Pricing the Offer
UJ
I
I
--,-
()
a:a..
P,
UJ
()
a:a..
I
I
I
I
Q2
Q,
Q2
QUANTITY
ELASTIC DEMAND
Q,
QUANTITY
INELASTIC DEMAND
UJ
()
a:a..
UJ
()
a:a..
QUANTITY
PERFECTLY ELASTIC DEMAND
QUANTITY
PERFECTLY INELASTIC DEMAND
Fig. 9.1
In an extreme case where the quantity demanded will remain the same at any price, the demand is
said to be perfectly inelastic. It shows that there is no curtailment in the quantity demanded whatever is the
rise in price.
Suppose in January 1998, the price of the TV set is reduced further to Rs. 5500. The quantity sold in
1998 will increase to say 45000 units.
E
(22,000 - 45,000)/22,000
(Rs. 7,000 - Rs.5,500)1 Rs. 7,000
-23,000 /22,000
(Rs.1,500 / Rs. 7,000)
( - 23,000)
Rs. 1,500
(RS. 7,000)
Rs. 22,000
4.9 (minus sign ignored)
162
Product Management
Appreciate the change in the total revenue

1997 Old situation: Rs. 7000 x 22000
= Rs. 15.4 crores
1998 New situation: Rs. 5500 x 45000 Rs. 24.75 crores

Thus the total revenue after the price decrease is greater than the original revenue in 1997. The product
is thus price elastic. Thus the elasticity of demand is greater than one, and is represented by a nearly horizontal
demand curve. When there is perfectly elastic demand, the product fetches the same price irrespective of what
the supply is.
When the total revenue generated both before and after the price decrease is identical, itis called unitary
price elasticity. The elasticity here is equal to one.
Our TV example makes us learn one important lesson. The value varies as the price changes for a
product.
A number of factors affect the elasticity. The availability of substitute products is one such factor.
Consumers are less price sensitive when there are few known substitutes. If there are close substitutes, there
is price elasticity. If there are no close substitutes, there is price inelasticity. The products which are necessities
tend to be inelastic, e.g., textbooks and medical services. Luxuries tend to be elastic. Those products which
account for a large portion of our budget tend to be elastic, and for a small portion tend to be inelastic. Cars,
and housing are elastic and match-boxes, stationery and handkerchiefs are inelastic.
Products can be differentiated to make them immune from sensitivity. Price itself can be a powerful
differentiator. If consumers perceive differences, they will be quite price sensitive. Consumers show greater
sensitivity to prices as products move through their life cycles. Price may be used as a cue to higher quality.
The risk associated with a wrong decision acts as a deterrent to price sensitivity. The more the risk, the lesser
the sensitivity.
It can be estimated how much will be sold at different prices. These estimates take into account
competitive reactions. The following format illustrates this:
LiP in %
+ 20%
+ 15%
+ 10%
+ 5%
Base Price
-5%
-10%
-15%
-20%
Price
in Rs.
*
*
*
*
*
*
*
*
*
Competitive Prices
Our Sales in Units
Base price estimated in relation to our estimate of four competitors' prices, and the sales volume
forecast. The managers are asked to indicate to record their estimates of sales of our company and
competitors for each change in price.
Apart from managerial judgement pricing is also done according to consumer judgements.
163
Pricing the Offer
Price Sensitivity
Though we are price sensitive, we show wide variations in our behaviour. We may grudge the price
of a branded atta, but splurge a great deal of money at a restaurant. Though we are price sensitive, we are
prone to sales promotion deals. Marketers try to tranquilise the price sensitivity by bulding better value in
the products e.g. dry-weave sanitary napkins, and dandruff-removing shampoos. Certain products of overt
consumption categories like soft drinks, cars, cigarettes and jeans do not remain price sensitive because of
peer group pressure and social habits. Timing also decides price sensitivity. A Rajasthani gentleman frugal
in his habits aU throughout life spends lavishly at the time of marriage. Similarly, most of us are liberal in
spending during festive times. Lower income consumers are particularly conscious about functionality. They
are not brand conscious. A slightly more charge must be justified, e.g., plastic wrapper of Lifebuoy helps
retain the factory freshness.
Value of the Product and Brand
We can ask consumers how much more valuable the product in question is than another. In other
words, we have to assess what percentage rise in the preferred product will make him switch to the less
preferred one. Another dimension is to put priced products before the consumers. Then they are asked how
much of each product they are willing to buy. Prices can then be varied, and the same exercise is repeated.
It assesses the relative value of different products in the perception of the consumers.
In brand preference study, a pair of brands are put together with their prices. The consumer is asked
to select one brand from the pair. Next he is to state what price rise in the chosen brand will make him brand
switch. The output is analyzed by averaging the responses across all the pairs of which that brand is a part.
This represents the difference in price rise needed for brand switch. It equals the sum of price rise needed for
brand switch and the current price difference. A positive number indicates brand preference, and negative
non-preference. Let us illustrate this. Between Parle biscuits and Britannia biscuits, they are priced at Rs. 2.50
and Rs. 3.00 a pack, respectively. The price difference is Re. 0.50. Right now Britannia is preferred over Parle
by Re. 0.80, which is the sum of the current price difference of Re. 0.50 and Re.O .30 by which Britannia would
have to increase for a brand switch to Parle. By coJlecting such information from a sample of population,
a demand curve for one brand can be built up. Let us say, Parle's volum,'~' l5S if its price is raised from Rs.
2.50 a pack makes us consider those whom Parle is a preferred brand and then decide the number of brand
switchers once the price rises. Then we shall study the volume gain on lowering Parle's price. Here we shall
consider the number of people who will abandon their preferred brand, and switch to Parle as the price falls
relative to that brand. Both these - gains and losses - will make us aware of the strengths and weaknesses
of the brand.
The same technique can be extended to find the value of a brand's individual attributes. Two cars can
be compared on the basis of two attributes - price and fuel efficiency. Maruti 800 with a price of Rs. 2.40
lacs and a fuel efficiency of 18 kms per litre is one combination. Cielo with a price of Rs. 4.5 lacs and a fuel
efficiency of 8 kms per litre is another combination. This bundle of attributes which includes prices are put
before the consumer and he is made to select one. Then he is questioned which price rise will make him switch.
The output is analyzed with the help of regression.
The value of an attribute level in money for any individual can be estimated. Each attribute level has
a cost which is estimated by operations and design personnel. Value per rupee of cost thus helps us identify
the efficient designs. Thus:
Value delivered
by the design
in question
Versus
helps us in anticipating consumer behaviour.
Value delivered
by the design
of competing products
Product Management
164
Consumers can be segmented valuewise. Value attribute levels can be arranged in an ascending order,
beginning from the least to the highest. Each value level is divided by the incremental cost estimated.
Consumer surplus is reduced by an increase in price and vice versa. Basic product is upgraded to maximise
revenue against the cost incurred. it opens up possibilities of price changes.
The demand at different price levels can be estimated by asking the consumers how much they value
some chosen brand attributes.
Though the above discussion is useful and guides us about what the market can bear, price and value
are related to product performance in use over a period of time. The consumers may show a willingness to
accept high price, but this promise may not be kept in practice. Added value and premium pricing can lead
to most profitable opportunities in some specialised market segments. it is also to be appreciated that sales
volumes do not necessarily mean higher profits. Though new products are considered in terms of added values
and higher prices, actually there are occasions to price new products at lower prices. This can be a part of
our strategy based upon production efficiencies, marketing efficiencies, distribution efficiencies, less expensive
formulation efficiencies, less expensive formulation and technological breakthroughs. Pricing research in case
of industrial products may be misleading. The buyers may not reveal for strategic reasons their buying
intentions. Sometimes buyers do not know what would be their quantum of purchases. Besides, the above
exercises are expensive and take a lot of time. These are useful to the extent that they provide some insights
into the pricing decision. The following discussion of pricing strategies of an innovation and an imitative
product is useful.
Some marketers contend that products for which marketers cannot command their desired price are
actually commodities. This, however, is not the whole truth. While it is true that commodities are price-takers
rather than price-setters, it is not true that going for market determined price is a sure sign of branding failure.
Brand leadership counts a great deal in deciding pricing strategies. it may not work to undercut a brand leader
if it has set the original price perceptions. Sport Cola could not scratch Coke and Pepsi, though it was offered
at Rs. 5. Even Nirma has never harped on price. Rather it has emphasised its benefits in promotion. Hindustan
Lever believes in providing different products for different consumer segments, and at all price-points.
Pricing an Innovation
Patented innovative product when launched offers two pricing options to a company: (1) Marketskimming pricing, and (2) Market penetration pricing.
Skimming the Market
Here, a high initial price is set for the new product to 'skim' the market. The American chemical giant
Du Pont has followed this strategy by charging the highest possible price for their discoveries - cellophane,
nylon and so on. The initial high price is suitable for some segments of the market. Later, other segments
of the market are tapped by lowering the price. This strategy enables the company to skim a maximum
amount of revenue from the various segments of the market. Polaroid also adopts this strategy by introducing
a high-priced camera first, followed by lower-priced versions later to attract new segments. In India, there
are many publishers who publish a hard-bound deluxe edition of the book first. Later, they come out with
cheaper paperback'>.
Market skimming is relevant when the following conditions prevail:
(1) Substantial high current demand.
(2) Small volume is economically viable for production.
(3) The high initial price will not attract more competitors.
(4) The high price supports the image of a superior product.
165
Pricing the Offer
Penetration ofthe Market
Here, a low initial price is set on the new product, hoping to attract a large number of buyers, and win
a large market share.
Texas Instruments (TI) in the States has successfully followed this strategy. It sets up large plants. It
charges the lowest possible prices and gains a large market share. The costs start falling; and with that it
reduces the price even further.
This strategy is relevant under the following conditions:
(1) There is a price-sensitive market. Lower prices are an incentive to the buyers for market growth.
(2) Production and distribution costs decline when this experience accumulates.
(3) Low price is a disincentive for competition.
Price of Telco's New Car
At Delhi's Auto Exposition, 1998, Telco chairman Ratan Tata unveiled his company's latest offering
- the small car powered by a 1400 cc engine at a price of Rs. 2.5 lacs. Recently, Telco has branded this
small car as Indica, which was the name given to this car when it was conceptualized. Indica is derived from
India car. This incredible low price is possible because of its relatively cheap development costs. Telco has
established engineering skills and in-house tooling and die-making. This helped it to develop the car by
spending Rs. 260 crore. Internationally, the cost of developing a new car is estimated to be around Rs. 1500
crore. Besides, the total investment of Rs. 1700 crore on this car project will be spread over not only the
new car but on other models like Safari, and other mid-sized car in the pipe-line. Telco can also subsidize
the small car, as it is a multi-product automobile company. It can use margins it earns on Sumo, for instance,
to subsidise the new car. Telco hopes to penetrate the market by entering it with a low price, and may raise
it after attaining a critical mass. Maruti can meet Telco's strategy by subsidizing the price of Zen from the
margins it earns on Maruti 800. As it offers more than the other cars, it makes sense to price it below the
Santro and above the Maruti 800.
Pricing an Imitative New Product
Initially new product is not a technological breakthrough. Here, mostly it is a question of product
positioning. The product is to be positioned here on two attributes - quality and price.
Price
High
Medium
Low
High
1. Premium
strategy
2. Penetration
strategy
3. Superb value
strategy
Medium
4. Over charging
strategy
5. Average
strategy
6. Good-value
strategy
Low
7. Rip-off
strategy
8. Borax
strategy
9. Cheap-value
strategy
Fig. 9.2
In the above figure, we've shown nine possible price/quality strategies.

The newcomer may produce a premium quality product and charge a high price for it (Cell I).
If there is a market leader already doing this then other strategies can be adopted.
(1) Design a high quality product and charge a medium price (Cell 2).
(2) Design an average quality product and set an average price (CellS) and so on.
Product Management
166
The newcomer has to take into account (1) The size and growth rate of each market in each cell.
(2) The competitors for a particular strategy.
Value Proposition
An essential part of brand's identity is to provide a value proposition which is a statement combining
rational, emotional, and personality concept benefits delivered by the brand, and which provide value to the
customer. An effective value proposition establishes a bond between a customer and a brand and provokes
purchase decisions.
r-------~----------_r----------_r-
Emotional
Benefits
Personality
Concept
Value Proposition
The brand's price is set in relation to the values it delivers. If the price is higher than the values provided,
it undermines a brand. An over-priced brand as perceived by the customers fails to appeal to them in spite
of the clear benefit package being offered. But this is not as simplistic as this. Higher price itself can indicate
higher quality. Price can be used to denote different levels of quality as we have studied already - high or
moderate or inferior. Thus price changes the value proposition. The question, therefore, is what is the driving
force of the value proposition - the benefits or the price? If price is an important consideration, we have
to tie up the benefits to elements other than price. There are occasions of pricing a superior product at lower
price. The price is then seen in the context of the competitive scene.
Cost Analysis
Fixed costs are costs which do not change no matter what output is produced. Rent, amortization
charges, executives salaries, property taxes and insurance are examples of fixed costs. Average fixed cost is
fixed cost per unit. Variable costs vary with production. These include direct materials and direct labour
charges. Total cost is the sum of the fixed and variable costs. Marginal cost is the change in the total cost
of producing one additional unit. It is also the change in variable cost with one additional unit of volume.
When variable costs are very high with respect to prices, we should go in for a price rise, trying to keep
variable costs in control. Low variable costs give us two options - increase the price and consequently profits,
the choice depending upon the ease with which either can be done.
It is also necessary to be conversant with break-even analysis, and to get atleast a break-even volume
with the price change.
The fluctuations in unit sales do affect profits substantially when the fixed costs are high and variable
costs are low. Higher fixed costs put pressure on management to reduce prices so as to either maintain a
volume or increase it. The volumes are, however, offset by the corresponding price changes effected by the
competitors. Fixed costs are related to economies of scale. Average fixed costs decline when economies of
scale generate larger volumes. Design is closely related to costs, and any change in the design leads to a change
in total costs. Design may be used to save costs, but while doing so the desirability of the product must not
be reduced. Cost savings with the help of design may increase the contribution margin. An organisation might
source the whole product or its parts from outside; and the readers are advised to go through a 'make or buy'
chapter in any good materials or production management book. When things are bought, the entire cost is
variable cost.
As the volume of the product increases, per unit cost decreases. The contribution to fixed costs is by
more number of units. People learn to do jobs much more efficiently over a period of time.
Pricing the Offer
167
Technology also brings down costs. Economies of scale also tend to reduce the costs. Though learning
and economies of scale are incidental to some extent, most of the times cost reduction is by conscious
managerial actions, e.g., value analysis, product re-design. Along with cost reduction, in several product
categories, product performance improves on a continuous basis. Performance data indicate the direction
of price changes. Substitution of inferior products by superior products also affects sales and prices.
Push strategy means better margins to resellers while pull strategy means comparatively lesser margins
to resellers. All price changes are likely to initiate competitive response. Competitorresponds forcefully when
our lower priced product weans away customers from his mainstay product. When overhead fixed costs are
high as compared to variable costs, it encourages a competitor to match a price cut. Pricing action is not
always responded in terms of counter pricing action. There are non-price responses too. Some products have
a cost advantage - an initial low cost on account of a number of reasons.
Estimating the Market Size .
Conventionally, income and price-sensitivity data is used for market estimation. Together with these,
other demand driving factors are considered. This method, however, is not sufficient to estimate demand for
a new product concept. Cross-country data may be used by adapting it to local conditions, but such
adaptation is far from satisfactory considering the differences in the development aspects of different
countries. Sometimes, the product is developed for only the local market, and may not have cross-country
data. Insuch cases, efforts are made to correlate the new product with an existing one, and create a surrogate
for the income and price sensitivities. A.T. Kearney, a global consulting firm advocates rethinking on this
subject. It is necessary to understand the product first and identify features that create value for the customer.
Then a surrogate is chosen, and it is normalised for consumer and industry differences. Lastly, a demand
curve is plotted for sales potential at different price points. The crucial part is to understand the product as
a potential bundle of utilities or 'values' a product can deliver, and price that a consumer might attach to
them. The utilities can be tangible or intangible, and when quantified in money, it gives a price-value
proposition. The whole process is based on qualitative and quantitative market research. The surrogate bench
mark product must be chosen carefully, e.g., for car market it could be Maruti 800. We also have to find
a pair of products which are analogous and mimic the cost-functionality relationship, e.g., for car market
these could be mopeds and scooters where large historical data exists .
CONCEPT AND
PRODUCT TESTING
Sales and Market Forecasting
Forecasting is a basic technique for all kinds of planning. It anticipates a kind of future environment
which plans are to be implemented and assumes certain known and unknown conditions in future which may
affect these plans. Forecasting also includes predicting the specific outcome.
Demand forecasting takes place at a number of levels. Market potential for a product indicates its
maximum possible sales to a targeted audience in a given time frame. Market potential considers the sales
of all the sellers in the market. As against this, we have sales potential which is maximum possible sales of
one company's product to a targeted audience in a given time frame and environment. Sales forecast is the
expected level of sales of a company's product in a given time frame, under a specific marketing plan and
assumed environment.
The overall sales can be considered into two parts - trials or the first purchases and repeat or
replacement purchases. Let us first consider the model for estimating the total number of triers. The following
terms need explanation:
Target Market (TM)
Segment to which our market plan is directed.
Product Class Buyers (PCB)
Are expected to buy our product or substitute products.
Potential Triers (PT)
They make a trial purchase. They are familiar with the product, and know
about the availability.
PT = P x PCB where P is that percentage of PCB who will try the product
if they are aware and know about its availability.
Cumulative Trial Rate (CTRt)
169
It is that percentage in PCB who have tried our product atthe end of time
period t. CTR t depends upon awareness and distribution.
CTRt = p x f(APt)
where At gives awareness percentage and Dt distribution coverage.
These have tried the product and may repeat their purchases
Tt = CTRt x PCB
Maximum Number of
Triers (Trna)
Negative Trial Purchase
The largest number of those who have tried the product

This can happen due to forgetting, deaths and drastic changes in the
product preference.
Trial rate in terms of percentage of people who have tried the product is given by CRTt and number
of people by Tt' and both are related as follows:
T t = PCB x CTRt
In either predicting the trial rate in each period or just the total number of people trying the product,
we have to make a forecast of CRTt, which is arrived as follows:
CTRt = P x At x Dt
where P indicates people preferring the product
At indicates the percentage of people who can be made aware of the product.
Dt indicates the percentage of people who can find it.
The above relationship can be put in a more general form.
CTR t = p x f(APt)
The above equation considers CRTs a function of the product's preference, awareness and distribution.
It recognises that it does not have a natural scale, and Dt is volume-weighed.
The forecast of percentage of PCB that would ever try the product is given by
CTRmax =PxAmax xD max
Awareness results from promotional efforts. Distribution coverage results from personal selling, trade
promotion and offer's appeal.
A product manager has to generate trial for the product by having suitable support programmes.
Initial Growth of a New Brand: John Philips John
A new brand is purchased by a consumer, say under the influence of promotion. This is called the first
trial. Later, the consumer experiences the functioning of this brand. He may like the functioning or may not.
In case he does, he decides to repurchase the brand. The first repurchase is not done thus by all the consumers.
Some people continue their loyalty to their existing brands.
The sales of a new brand are generated mostly by the growth in distribution. After distribution level is
fully reached, the growth in sales comes from the increased level of sales atan individual retail outlet. Adoption
process increases the distribution often rapidly; in some cases to the extent of 70 per cent almost in the first
eight months of introduction; but not always.
There is a relationship between sales and distribution of predictive value. Let us consider a brand's sale
and its weighted distribution. This ratio gives us sales volume per percentage point of weighted distribution.
If one brand sells 30000 units and has weighted distribution of 30 per cent, the ratio is 30000 : 30 or
1000 units per cent point of weighted distribution. This is expressed as 1.00 thousand units per distribution
Product Management
170
point. The brand shows growth. The sales and distribution also grow. We keep on calculating this ratio for
different periods. There is a steady growth in this ratio. Itmeansoursalesare improving more than the number
of outlets stocking our brand. This is due to more sales per outlet as the acceptance of the brand improves.
The ratio may progress as 1.00, 1.S, 1.7,2.0,2.2, 2.S. As we compute further, the rate of increase slows
down.
Let us see the ratio for the second year; corresponding to the periods of the first year.
Second Year Period 1
2.7
(170 per cent than a year before)
Period 2
2.3
(S3.00 per cent more than a year before)
Period 3
2.S
(47.00 per cent more than a year before)
Period 4
2.9
(4S.00 percent more than a year before)
PeriodS
3.00 (36.S per cent more than a year before)
Period 6
3.3
(32 per cent more than a year before)
The above data can be used to make predictions. The future ratios are predictable on the basis of
decreasing rate of growth, projecting forward the trend in increase over the preceding year. Distribution growth
can be separately forecast or targeted. By projecting ratio to the targeted distribution, a forecast of sales can
be made. It is a very valuable tool for the brand manager.
Bass Model to Estimate First Time Sales
Frank M. Bass (1969) has developed epidemic or contagion model to estimate sales of appliances
introduced for the first time.
In this model, probability of purchase at time T is
P(T)
= p + q [y(T)/m]
where
coefficient of imitation
=
=
=
Y(T)
the number of adoption purchases by T, and
Y(T)/m
the fraction of potential adopters who have purchased.
p
q
probability of first purchase

total number of potential adopters
According to Bass, an innovator is an early adopter and an imitator is a late adopter. Imitator's
purchasing decision is influenced by those who are early buyers and users.
The number of early adopters is
S(T)
= pm +
(q-p) Y(T) - (q/m)[Y(T)]2
At T+ the maximum number of adoptions will occur.

T+
= (p+q)/m (q/p)
and
171
Fourt and Woodlock Model for First Time Sales
This model forfirst time sales has been developed by Fourt and Woodlock (1960) fornew consumer
non-durable products.
According to them, the cumulative sales approached a limiting penetration level of less than hundred
per cent of all households and the successive increases of gain decline. The equation is
qt
rq (1 - r)t-1
qt
percentage of households expected to try the product in period t
where,
r = rate of penetration of untapped potential
q = percentage of totai households expected to finally try the new product
t = time period.
Suppose our estimate is that 60 per cent of total households will finally try a new product or q = 0.6.
Also suppose during each time period, 40 per cent of the remaining untapped potential is penetrated or r =
0.4. Therefore, the percentage of households trying the new product in the first four periods a~e:
q1 = rq(1-r)1-1 = (0.4) (0.6) (0.6) = 0.240
q2 = rq(1_r)2-1 = (0.4) (0.6) (0.6)1 = 0.144
q3 = rq(1-r)3-1 = (0.4) (0.6) (0.6)2 = 0.086
q4 = rq(1_r)4-1 = (0.4) (0.6) (0.6)3 = 0.053
As we move on in time, the incremental trial purchase percentage moves towards zero. To estimate
sales in rupees from new buyers in any period, the estimated trial rate for any period qt is multiplied by total
number of households times the expected first purchase expenditure per household of the product.
Estimating Repeat Sales
It is necessary to consider both the first time sale and repeat sales for a frequently purchased new
product. Long-run sales depend on repeat purchases. Repeat buying also denotes satisfied buyers. Buyers
buy the product once, twice, thrice, four times and so on. When repeat purchases are important, long-run
retention rate (LRR) is considered. This is the market stage in the long-run of the brand amongst triers of the
product. When the consumption pattern is average, a steady state market share of a frequently purchased
product is:
MS
= CTR
max
x LRR
If the triers repeat the same brand MS would equal the number of triers (TRmax ). However, some ofthose
who try switch over to other brands, and hence some of them will not purchase the same brand ever again.
The current market share is thus a fraction of the percentage of people who try it. LRR is estimated by arriving
at repeat ratios.
It is observed that purchases are not repeated by all, and there is a progressive decay amongst the
buyers. Just a fraction of people who make repeat purchases do so again. Let us denote repeat purchase as
i. Then R(l) denotes the repeat ratio. It is proportion that takes i-I repeat purchases and who will also do i
repeat purchases. R(l) is the first repeat ratio. It is the percentage of people who tried the product and will
buy it again.
Product Management
172
Depth of
Repeat class
Ri - the ith
repeat ratio
where 53%
Percentage of people who tried

and will make repurchases
70%
70%
75%
53%
80%
42%
95%
40%
100%
40%
= 70% x
75% and 42%
= 53% x 80%.
Thus RI < R(i+ 1) < R(oo):5: 1.0

The more a person buys again, the more likely he is to buy again. In our example 40 per cent people
who tried our product made three or more purchases. Our brand share to begin with, is relatively high and
tapers off slowly to stabilize at the lower level. This pattern is observed in the case of a frequently purchased
product; and not in the case of durables.
LRR: Long Run Retention Rate can also be estimated by using the formula.
LRR = SBR/(l+SBR-RR)
Where SBR
Switch back rate (pecentage of triers who purchased some other brand
last time but will switch back to our brand next time)
RR
Repeat purchase rate (percentage of people who purchased our brand

previously and will purchase it again next time)
Estimating Replacement Sales
This is a useful estimate for durables like a car, AC, washing machine, scooter. We have to consider
the product's life of survival age. The first replacement sales can then be easily estimated. However, the time
of replacement depends upon the customer's socio-economic criteria, promotion of the product, and its price.
Replacement sales are difficult to estimate unless the product is actually in use. Marketers, therefore, like
estimate of first time sales while launching a new product.
Akai TV and Replacement Demand
Baron International formerly marketing Bush lV set up its Akai operations in 1994. It has reached
a sales turnover of close to Rs. 400 crore in a couple of years, with profit after tax of Rs. 28 crore. Akai targeted
the new entrants in the lV market by offering them gifts in kind, and created a huge replacement demand
with a series of new-for-old schemes. Most Indian lV sets were obsolete in the nineties, as they were with
limited-channel sets with poor audio and video quality. The replacement market was waiting to be picked
up. Akai pushed the replacement cycle forward by taking back the old lV. The lethargy of the Indian
consumer was broken by innovative sales promotion schemes. The key problem was to remove the feeling
of guilt in disposing of a durable that works. The old CTVs went to the rural and semi-urban market for
being passed off at a price of Rs. 2000 - Rs. 4000 a piece. Akai buys its CKD at lower prices by assuming
volumes, assembles them at lower prices, puts more emphasis on pulling the consumer rather than dealer
push, and successfully markets volumes. Baron has built a system that handles huge volumes at low costs.
Sales Forecasting Methods
Causal forces like product, price, distribution, competition lead to forecasting behaviour such as
awareness, trial and repeat purchase. Sales are then forecast through projections.
Causal factors can be the basis for judgemental forecasts also, where the judgement is that of experts,
users, managers or sales force.
173
Forecasting by Awareness- Trial-Repeat Purchase Route
Suppose a market consists of 15 lac customers who purchase 10 units a year. The following data are
obtained from a controlled sales test.
Awareness
Trial
= 40% of customers
= 30% of those who are aware
Repeat purchase
= 60% of those who tried.
Awareness, trial and repeat purchase data is multiplied by the total number of customers to obtain sales
forecast.
15 lacs x 40% x 30% x 60%
= 1,08,000 customers who are repeat buyers

1,08,000 x 10 units
Therefore
= 10,80,000 unit sales per year
10,80,000 x 100
15,00,000
= 72% market share
The computations are based on several assumptions. Sales have not yet materialised over the new
product, and the awareness, trial and repeat purchase data are partly true.
Judgement Forecasting Route
There are many methods of forecasting sales like time series analysis and regression analysis. But for
a new product, we do not have historical data. We, therefore, use judgemental forecasting methods for new
products. The most common judgement is that of executives. They use a bit of mathematics, and a lot of
opinions, information, parallels to arrive at the judgment.
Another judgement we make use of is that of sales force. Here the forecast is based upon the judgement
of sales representatives, sales managers or dealers. The method is extremely useful when the new product
is close to the current line or is put into the existing channels.
Mathematical Modelling Route of Forecasting
These models use intentto buy, rank order preference, and test market sales figures to forecast the sales.
It is better to consult experts while using them.
In the chapter of new product development process, we have already seen how a product idea is
converted into a product concept. Product concept is generally an expression of the product idea as a
statement. Product concept conveys the benefits and strengths of the proposed product. According to
Holbert, it is an expression of offer.
Concept statements have two dimensions core ideas and positioning. Core ideas describe a product
functionally, and persuade a customer to buy the product. Core idea may be supplemented by a visual.
Positioning concept statements listthe main and secondary benefits and distinguish a productfrom the other
competitive products by taking a positioning stance. These statements may also be supplemented by visuals.
Concept statements when ready are tested. Concept statements should be meaningful and clear. The
statements are tested with focus groups or on asample. The respondents are shown the concept statement
and are asked to respond to it.
The points being tested are:
Is the statement clear?
Product Management
174
Is it believable?
What are the benefits?
Are they important?
Are they relevant?
What are the pros and cons?
How likely is the consumer to buy it?
Based on consumer responses, the concept statement can be improved upon.
Concept Testing
A product class is chosen, and concept statements for different new products are presented before the
respondents. This is done to screen the concepts. Screening the concepts reduce a large number of product
ideas. Concept statements are rated on buying intentions or on significance credibility or uniqueness of the
major benefit. Buying intentions sort out the C0ncepts most favoured and other criteria sort out the most
favoured concepts so that a choice can be made from the most promising concepts. Data is collected by
personal interview method. Sample sizes vary from a small number of say 40-50 to a large number of 300500. When respondents rate only a small group of concepts out of a total large group a larger sample is
necessary. The analysis could be univariate or multi-variate. Concept testing by screening still is a difficult
exercise when there are a large number of concepts.
When each respondent is asked to rate one concept and is expected to answer a few questions about
it, the testing is called monodic. In competitive tests, the existing leading brands are presented as concept
statements and choices are made by putting chips on the basis of previous purchasing patterns, buying
intentions and preferences. Later, the new concept is presented, and the respondent is expected to redistribute
the chips. Monodic tests have been used succe5sfuJly by many organisations. It is a realistic method inasmuch
as it does not ask the consumers to judge the other brands. Those who advocate competitive tests, however,
feel that they are more realistic. They are useful for testing durables. Monodic tests are okay for frequently
purchased products.
Concept testing can also be done by using a focus group. Though personal interview either at home
or place of work is the most widely used method for concept testing, there are instances when telephone
interviews and mail-interviews have been used.
Concept Testing Questions
Buying Intention Questions
A new product concept is presented and the respondent is asked.
What is the likelihood ofyour buying the product described ijit were made available to you?
Definite to buy it
CJ
Probably would buy it
Mayor may not buy it
CJ
Probably would not buy it
CJ
Definitely would not buy it
CJ
Buying Scale
A buying scale between 0-10 points can be constructed, and respondent may be asked to rate his
likelihood of purchase by points, 10 indicating definite intention and 0, not buying at all.
0
1
2
3
4
5
6
7
8
9
10
c:::J
c:::J
c:::J
c:::J
c:::J
c:::J
175
Definitely would not buy it
c:::J
c:::J
c:::J
c:::J
c:::J
Definite to buy it
MR and Buying Intentions

Though MR is of some help, it still has a long way to go. Purchase intentions are highly fallible. It
is difficult to predict consumer behaviour. Their actual actions may run contrary to what the MR findings
are. There may be some bravado on the part of consumers when they are questioned by the investigators
who are strangers about their buying intentions.
Competitive Selection
We have presented before you the concepts ofthefollowing brands. While buying these
brands during next 10 purchases. how would you assign these ten chips.
Branda
BrandP
BrandQ
BrandR
Other
Main Idea
This is a probe-type question.
You have read the product description. What is the major benefit that is being conveyed
through this?
......................... .
This is followed by a question on the importance of this idea.
How important is this main idea?

Very important
Somewhat important
Somewhat unimportant
Very unimportant
c:J
c:J
c:J
c:J
Uniqueness
We can test how the concept is different from other concepts.
176
Product Management
Very different
Somewhat different
Slightly different
Not different at all
Relevance
Relevance can be rated on a five point scale.
Tick the box that best describes the relevance of the product to your needs.
CJ
CJ
CJ
CJ
CJ
Relevant
Not relevant
Credibility
We can test the credibility of the concept by asking a probing question.
Is the concept difficult to believe? If so, which part of it is difficult to believe . ....... .
Likes and Dislikes
This is also tested by putting an open-ended question.
What do you not like about this product concept?

Attribute Testing
Concept can be tested on a number of attributes. Bi-polar questions can be framed. A milk-additive
can be tested on
Easy to make
Pleasant taste
Nutritive
Health drink
1
1
1
1
Not easy to make
5
5
5
Not a health drink
3
3
4
4
Unpleasant taste
Not nutritive
The respondents are expected to encircle the number that best describes the product concept in
question. Later, each attribute can be tested on importance.
Comprehension
We can test a concept's clarity by asking questions. We can test whether a concept is understood
properly by asking specific questions.
Classification Questions
Each questionnaire, apart from seeking reactions of the respondents to the product concept, includes
questions about the respondents themselves to understand their profile. They are asked demographic and
socio-economic questions. Their current brands and how they fare with the product concept can also be
examined.
177
Analysis of Data
Buying intention can be compared with the norm set by studying the previous data of concept tests.
It can also be used to predict the percentage of people who will buy a product. The trial at the end of the
first year is
Ptrl = Top Box Score (TBS)

Where P tr
TBS
AWl x Of
trial at the end of first year

Top box score percentage for the concept
Awareness level during this year

AWI
Of = Fraction of distribution coverage estimated at the end of this year
I
When P trl , is multiplied by product class buyers, we can estimate the number of trial purchases. Al
spends generate a particular level of awareness and this is the basis of AW. Distribution coverage fraction
Dfl is estimated by past experience. Instead of the top box score, some researchers recommend the total
percentage of positive responses or the score of the first two top boxes.
Probability of purchases can be assigned weightage to find a weighted average, e.g., 10 points are
assigned a weight of 1 and 9 points a weight of 0.9. Graphically, we can plot the data of rating on probability
score by taking it on x-axis and actual purchase proportions on y-axis.
In competitive analysis, the chips given to a brand are taken as probabilities of purchasing.
Uniqueness, relevance, main-idea, credibility attribute rating data are analyzed by tabulation and crosstabulation. Classification data of respondents can be cross tabulated with the data of buying intentions.
ProductTesting (Pre-testing)
A product concept when found suitable is developed into a prototype product. The feasibility of doing
this is a matter of technical evaluation. The prototype of the product is tested (pre-testing). Here the customers
are allowed to use the product. Then testing is done, e.g., how the tea tastes is tested after a consumer takes
a cup of tea. Product testing and concept testing are sometimes done simultaneously to know whether a
product meets the expectations generated by its concept.
Product testing has several objectives (i) to assess how far the product fares on the product concept.
(ii) to assess the chance of improving the product.

(iii) to know what is liked and disliked in a product.
(iv) to know preference after extended usage.

Even a reformulated product can be tested to know how far it compares with the previous products,
and whether the consumers are able to perceive a difference. Apart from testing the physical product, product
pre-testing has three more dimensions - brand testing, package testing and positioning.
Some products and services need to be experienced before they achieve market acceptance. Xerox
plain-paper copier tested poorly because subjects felt it was too expensive. Once they used it, however, the
price became acceptable.
Blind Tests us Identified Tests
Imagine a consumer does not know the name of the brand or the name of the corporate organisation
which made the product which is being tested. Here, he was just to respond to the physical product. This
is a blind test. It is used to compare different physical products. Suppose sales ofthe brand are on the decline.
Is it due to some inherent problem with the formulation of the brand or the brand image, which has become
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Product Management
negative? If the physical composition ofthe brand is causing this problem, the blind testis a great help. Blind
tests are used to test the physical characteristics of the brand.
Identified test presents to the respondent the product as it appears in the marketplace. Thus identified
test can assess the physical characteristics as well as the bias on account ofthe brand name, image, corporate
image, packaging etc. These are used to know how well the product will do in the market place. It assesses
the reaction to the entire offer rather than to the physical entity alone.
Product tests are designed on three major types of test design - monodic, simultaneous and sequential.
Monodic product tests offer a single product to the consumer for testing. Simultaneous product tests
offer two products to the consumerfor testing, e.g., Coke and Pepsi. In sequential product testing, there are
two products, of which one is used first, and then the other is used after some time. In sequential monodic
test, a consumer rates one product to begin with and then uses another product and rates it. While doing
so, there is no comparison. In sequential monodic with paired comparison, first sequential monodic test is
carried out, and then comparison is made. In sequential paired comparison, both producers are tried without
rating. Then they are compared. Monodic methods approximate to real life use of the products - one at
a time. They are useful when there are no benchmark products. However, they are expensive.
Though simultaneous tests are sensitive, they are least realistic. Sequential tests fall between the
monodic and simultaneous tests. They are relatively realistic. We have to select a test design on the basis
of sensitivity expected, e.g., a comparison between new and old formulation requires sensitivity. Simultaneous testing makes sense when the new product and the competition are not substantially different.
Sensitivity and realism are exact opposites. In several situations, we, therefore, have to use the monodic and
sequential tests.
The questions posed in product testing are more or less similar to those used in concept testing. The
only difference is now there is a physical product before the respondent rather than a verbal description of
it.
Branding policy can be tested by association tests - images a brand evokes, memory tests - to assess
memorisability of the brand name, preference tests - to know which brand name is preferred to othernames
and why. In package testing, the physicalcharacteristics consumers expect in a pack are assessed, e.g., size,
colour, design and style. Consumers are shown a package, and theirreactions are studied. Positioning studies
decide where a product stands in relation to competitive products.
Importance of Concept and Product Testing
Before committing large resources to the product by undertaking further stages of development, we can
assess consumer appeal by concept and product testing. It also guides us to sharply define our target market,
depending upon which segment of population finds the product appealing. We can refine a product concept
by testing it. The testing also enables us to predict the trial rate for the new product, given that they are aware
of it and can get it at a place near to them. It also facilitates extension decisions and positioning decisions .

TEST MARKETING
Once the product's marketing programme is developed, we can think of test marketing. The frequently
purchased consumer products, even durables and industrial products can also be test marketed equally well.
What is a test marketing? It is the limited introduction of a product and its marketing programme under
controlled conditions basically to determine how well the product will generate sales volume, market share
and profits. Thus it is an opportunity to see how well the product will perform in the actual marketplace. In
other words, test marketing reduces the risk of marketing a product nationally that may fail under normal
marketing conditions.
Test marketing has another logic. It allows us to test some elements of marketing mix. We can use
variations in promotion in different markets, e.g., advertising and sales promotion in one market and
advertising alone in the second market. Similarly, test variations in the product can also be compared, e.g.,
alternative names. Depending, upon the results of the test market the product can be introduced nationally
or withdrawn. It can also be sent back to the development stage for modifications, either in the product or
its marketing programme. Test marketing is the only time when the entire marketing mix is tested. It makes
us learn how to market the new product most effectively.
Broadly speaking, test marketing is a rehearsal. It makes us learn not only marketing and selling but
also the making and designing.
Test marketing is a costly and time-consuming affair. The length of time for which a product is test
marketed creates a risk that the competition learns as much about the product as the organisation test
marketing it. They may imitate the product quickly, and may enter the market before we do. Sometimes,
they may just follow our introduction. Some organisations, therefore, skip the test market stage, and go
national directly. The chances to do so are more if there is spare capacity, the new product is just an extension,
the investment involved is not much and the organisation is quite sure about its marketing experience.
However, ifthe product takes the company into a new business and also expects the buyers to change their
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Product Management
behaviour, the chances of opting for the test market are more. It is also necessary to consider the opportunity
cost. The time consumed in test market can well be the earning time, had the product been introduced.
Simulated test market conducted in a store-like laboratory instead of a full test market can be a compromise.
Research shows thatproperiy conducted concept and product tests; along with simulated test market, ensure
a success rate of more than 65 per cent. Test marketing is not meant to assess those who will try the product,
and those who won't repurchase. Such questions should better be answered prior to test marketing stage.
Test marketing is not used to test just the acceptability of the new product. Only those products which have
found acceptance are put to test marketing.
Test Market Design
It is necessary to develop a test market plan. A proper plan helps in developing the proper test design,
and exercise necessary control.
The first basic question is whether to have test cities all over the nation or just a few cities having
proximity to the company headquarters. The number of cities, the time length for test market, the type of
data to be collected and the action to be taken are some of the decisions in test marketing.
Choice of Test Market Cities
In India, generally metropolitan cities or emerging metropolitan cities are selected for test marketing.
These cities are considered representative for most of the products. Besides, the costs of conducting the test
are also reasonable. Representatives of a test centre make the results projectable to the whole market. Small
organisations choose a few centres in the limited geographical region whereas larger organisations select
several centres all over the country. The products which are consumed even by rural folks should have both
urban and rural test centres.
A test centre ideally should be media isolated. A city which gets media from other centres is influenced
by 'spill in' effect. A spill in should not exceed a certain percentage. A 'spill out' means advertiSing in the
test centre goes beyond its boundaries. It is thus sheer wastage, since the product is not yet available outside
the test city.
Some organisations may prefer a test centre which is not traditionally chosen. A frequent test centre
gets immunized to the new products. A test centre chosen must provide good trade channel support.
Length of the Test Market
The test may run anywhere from a few months to some years. Generally it runs for 10-12 months. Tests
are run for average repurchase period. It should not get so prolonged that competitors take advantage of the
situation. Tests are run for at least 2-3 repurchase cycles. Tests are closed prematurely only when it is obvious
that the new product will not measure upto the expectations. A longer test costs more. Seasonality is also
a factor to be taken in account.
Controlled Test Market
As traditional test marketing is costly, some additional means of test marketing have been developed
recently. A forced distribution test or a sell-in test consists of a test programme managed by a research firm
which guarantees distribution of the test product in stores in the test market cities. This is also called 'minimarket' test. They warehouse the product, put it into the trade channel and get it displayed on the shelves.
The sales are monitored on regular basis. Results flow in quickly because of guaranteed distribution which
makes it possible to promote the product two weeks after the start of the test. In a traditional test market,
distribution itself takes several months. Even then we are not sure of distribution coverage. Controlled test
marketing is thus a quick method which can be completed in six months, at a fraction of the cost of a fullblown test market. A drawback of this method, however, is the low quality of data about trade reaction,
Test Marketing
181
because the distribution is obtained by the research firm at a price and company's sales force is not involved.
Asell-in variant ofthis test involves the manufacturer' ssales force in distribution. Forced distribution however,
is not realistic. They can be used just like simulated test marketing. They are used when the risk is not very
high.
Marketing Mix Variables to be Tested
We can gather data about buyers, trade channel attitudes, retail distribution. At the same time, we can
test sales promotion atthe level of consumers and trade, advertising expenditure and price. These elements
can be tested at their high and low levels, e.g., high ad spend or low ad spend and high price and low price.
In case of sales promotion, we can test its presence or absence. Thus when two variables are being tested
in terms of high, low and present, absent we have to select 8 test centres. We can use four cities for testing
two variables as follows:
Present
Absent
High
Low
Advertising
o has both high ad spend and SP.

P has both low ad spend and SP.
Q has high ad spend, but no SP.
R has both low ad spend and no SP.
Thus we can compare OQ to assess the effect of advertising. When PR is compared we know the effect
of SP. We can add one more city to each ofthese cells to guard against error in measurement, but that will
make testing expensive.
Data Collection
Data are collected by conducting store audits to measure retail sales and by conducting audit of
marketing support such as ads and SP. Consumer surveys can be conducted to assess trial rates and
repurchase rates. When both the trial rate and repurchase rate are high, we can commercialize the product.
When trial rate is high, but the repurchase rate is low, we either redesign the product or drop it. When there
is a low trial rate, but a high repurchase rate, we have to increase advertising and sales promotion. When
both the rates are low, we can think of dropping the product. We can collect data by maintaining a panel
who record their pur~hases in a diary.
Data Analysis
Retail audits can enable us to calculate market share directly. Marketshare can be calculated indirectly
on the basis of trial and repeat purchase rates.
Simulated Test Marketing (STM)
Test marketing using computer software models is being increasingly practised. Some popular test
marketing models are Microtest (Research International), A.c. Neilson's American model, Designer and Vista
model from France, Novaction (ORG-MARG), Tesi (GFK-MODE). Computer simulated test marketing came
on the scene in the seventies to overcome the problems of actual test marketing. Hindustran Lever in India
uses a model developed by itself to do STM. STM costs less than actual test marketing. The testing can start
even when the product is at conceptual stage.
182
Product Management
The model asks the consumers to react to the product concept, price and communication package.
In the next stage, the actual product is handed over to the consumers to try out. They are then asked about
their buying intention. In some models, consumers are given to buy products just as do in normal shopping
situation. It is a mock shop. The models are, however, not so alive to distribution and structure of the market.
The companies should provide data on distribution, ad spend, promotions planned, competitive strategies
and special considerations like seasonality. The information about the market and the consumer is run
through the computer model. It is called black box stage. The model assigns weights to the elements of the
marketing mix. The purchase pattern curve is then plotted based on this data.
STM is preferred to actual test marketing because the marketer does not want to alert the competition.
Besides, STM is cost-effective. It costs around Rs. 5 lacs at one centre. There are four broad models of STM
-assessor, bases, litmus and designer. A client must give a lot of information on distribution and awareness
levels that he will sustain after the launch. Unless he volunteers this information, STM cannot be successful.
Limitations
Test marketing is not a sure-shot technique which ensures success. It merely reduces the risk. It helps
us to tune in our offering to the needs of the target audience. Sometimes test marketing exercise is not done
properly. All its assumptions may not be true; e.g., a particular level of distribution. Many a time, marketers
ignore the sensitivity of repeat purchase to product price. Even innovative products may fail to generate repeat
purchases on account of price.
PRE-TEST MARKET MODELS (PTM MODELS)
Since mid-eighties, pre-test marketing (PTM) modelling has been practised to convert the readily
obtainable marketing information into forecasts of market share or sales volume and recommend
improvements in the product, its pricing and promotion while introducing new products.
The data is collected usually through simulated test markets, the proposed marketing plan, past
experience with the product category, and the judgements of the executives.
SIMULATED TEST MARKETS (STMS)
These are also called laboratory test markets (LTMs). They have been developed in the 60s. They helped
marketers in the 60s. They help marketers in predicting the success of new products. These models have been
drawn from the work of Pessemier who established the utility of lab data in predicting price elasticities and
demand.
STM aims at measuring in a controlled way the trial and repurchase intentions of a target market toward
a new product as a result of the proposed marketing plans. STM's venue is either a permanent or a travelling
lab. These labs are located in shopping centres, or are in-home.
Respondents are intercepted at the shopping centres. Their attitudes and usage behaviour toward the
product category are surveyed. They are exposed to the concept boards or commercials for the new product.
They can buy a new product in either a real or mock store, if they are interested. Non-buyers or those who
are not itnerested may be given a sample of the new product as a gift. After they try the product at home,
say for a few weeks, they are contacted and their attitudes, use and intention to repurchase are surveyed.
Sometimes sales wave is conducted % repeat the offer to sell and deliver more of the product to those who
have tried it.
STMs provide:
(a) estimates of percentage of aware consumers who will buy the product
(b) percentage of triers who will re-purchase
These percentages are adjusted downwards to rectify the upward bias of a lab technique.
183
Test Marketing
There is a relationship between STM results and product performance in subsequent test market and
commercialisation.
PTMModeis
When rightly used, STM enables us to decide whether further development of the new product is
warranted by giving us a fairly accurate prediction of the market share. PTM models are further refinements
of STM models which convert the STM data into accurate market share predictions and to simulate effects
on share and profits of the different elements of marketing mix. Though not exactly scientific, they make use
of a conceptual framework, historical data and managerial judgement.
Burke Marketing Services in 1984 developed BASES II. In 1985, ASSESSOR and ASSESSOR IT were
developed by Information Resources. In 1983, LITMUS II came on the scene. In 1982, we had NEWS/
PLANNER .. Other related models also TRACKER and SRINTER by Mahajan (1984). BASES, ASSESSOR,
LITMUS and NEWS are the representative models, very extensively used.
Importance
Products successful in PTM have about an 80 per cent chance of succeeding in test market. This is
illustrated in Fig. 11.1. The left curve is proposed to describe the relationship between the market share
attained in PTM and the probability of succeeding in test market. The curve indicates an 80 per cent chance
of succeeding in test market when PTM achieves its goal % indicated by 0 per cent difference on the horizontal
axis.
z
I-
1.0
ex:
:E
0.9
I-
0.8
0
i=
CJ)
I...J
()
::::>
Cl
ex:
l-
0.7
...J
::::>
u.
::::>
u.
CJ)
CJ)
0.6
CJ)
CJ)
()
0.5
()
()
()
::::>
CJ)
::::>
CJ)
ex:
:E
0.4
0.3
u.
I-
::J
0.2
f;
I-
...J
(!J
CD
0.1
ex:
a.
u.
0
iii
iii
CD
CJ)
1l:
a.
0 S2
ex:
a.
-100% - 80% 60% - 40% - 20% 0+ 20% + 40% + 60% + 80% + 100%
PERCENTAGE DIFFERENCE IN PTM SHARE FROM THAT REQUIRED FOR A NATIONAL SUCCESS
Fig. 11.1 Proposed Relationship between PTM and Probabflftles of Test Market Success
and Introduction Success without Test Market
The right curve in Fig. 11.1 relates pre-test results to the probability of succeeding nationally without
a subsequent test market.
In cases where PTM forecast exceeds the required share, say by 30 per cent or more, we may skip test
market, ifwe have a lot of experience with the new brand's category. This, however does not take into account
the competitive reaction.
184
Product Management
Advantages of PTM
It is a cost reduction device in developing and introducing new products. It provides more timely data,
and corrective measures can be taken to improve the concept product and or its marketing plan.
It guards the company against competitors, who do not come to know about corrections. It has the potential
to optimize certain aspects of the marketing mix. As it provides a conceptual framework, it improves the
managerial understanding of the new product intorduction process.
Disadvantages of PTM
These models do not address the problems in implementing the marketing decision e.g., sales force
acceptance, delays in production and delivery, trade acceptance or support. It does not consider the
competitive reactions and changes in economic environment. Managerialjudgements used in certain models
may be not valid. STMs are unrealistic and unrepresentative. These models are not suitable for new-to-theworld products orfads or minor line extensions. They are not suitable for products sold in outlets other than
supermarkets or drug stores.
BASES
It is a model used to make sales predictions at several stages ofthe new product development process
e.g., business analysis, test marketing and commercialisation. At earlier stages, past data are used for
extension based on managerial judgement. At later stages, instead of previous averages, specific product or
brand-centric data are used. e.g., we replace product concept by the actual product and package or concept
tests by actual product usage.
BASES I
Consumers are intercepted shopping mall to do concept test.
BASES II
In-home test of a physical product. A good forecasting accuracy is claimed.
BASES III
It measures the effect of retaling ambience e.g., shelf placement, presence of competitive
brands, packaging and merchandising materials. This test is not used frequently.
BASES II
It uses a new product prototype. It also uses a finished concept board or commercial; with a package
photograph, product description and key selling points. Consumers are interviewed in-store to identify high
potential triers. They are provided with the product for in-home trial. A subsequent survey collects after-usage
data. It also assesses buying intentions and frequency of purchase. Price-value assessment is also elicited.
The data read with other marketing assumptions, are used to forecast first year trial rate, first-repeat rate,
average time between purchases, average trial and repeat purchase volume, and year-end sales volume.
BASES III
A finished test product is put in a retail environment after pricing it. 6-12 outlets are chosen across the
geographical spread for this exercise. A sample of 1200 - 3000 shoppers is interviewed individually. TV
commercials or print ads of the test product are shown. A off-coupon is given for the product. Coupon
redemptions indicate trial volume. Coding permits identification of triers and non-triers. Subsequently also
triers are surveyed to assess repurchase intentions and other reactions.
Product
Category
Concept
Marketing
Plan
Inputs
CD
Consumer
Reaction
Awareness
Model
Concept
Tables
(2)
@
Coupon
Redemption
Model
t
t
Trial
Model
After
Use
Tables
Repeat
Model
@)
~
Promotion
Adjustment
Model
..
Volume
Model
Fig. 11.2 Bases Volume Forecasts Flowchart (Adapted after Burke Marketing Services)
186
Product Management
In Fig. 11.2 we have given the flow-chart of the BASES forecasting model. It considers media and
promotion plans, distribution, seasonability and brand and cateogry development indices. It generates first
year trial estimate.
Celibrated
Trial Estimate =
Bying
Incentive
Score
(Distribution)
1
SI
(Seasonal index)
(Awareness)
1
CD!
(Ctegory development index)
where calibration of buying intentions is based on the past data of a dozen years, and adjusts
overstatement of buying intentions. Calibration considers the cultural background of the respondent, his
nationality, the product category and unit price level. Repeat rate estimates are dependent upon three afteruse measures % buying intentions, like -dislike score average, average price-value . After-use buying intentions
are also calibrated just like the trial measures. They are then combined with the two other measures. We then
'
obtain a refined first-repeat rate.
The average purchase cycle is estimated on the basis of after-use intended purchase frequency adjusted
for overstatement. Long-term repeat-rate decay is calculated using like-dislike scores and price-value
measures for the test product.
Average purchase units at trial and repeat are estimated from potential buyer's statement of proposed
buying quantities adjusted from overstatement.
All above are used to produce sales estimates using the following model:
=
where St =
Tt =
I\ =
St
Tt + Rt
(1)
total sales volume up to time t

trial volume up to time t
repeat volume up to time t
and
Tt
(TM)PPo
(2)
where
=
=
Uo =
TM
Pt
and
target market size (number of households in the target market area)

cumulative trial rate upto week t.
average units purchased at trial.
~ (N.
I\ = i=l
1 tY t U )
1
I
1-,
(3)
where
N j.1, t
cumulative number of customers repeating at least (i - 1) times by week t where
Yjt
(No,t = (TM) Pt)

conditional cumulative i th repeat rate at week t given that (i - 1) repeat purchases
were made upto week t.
UI
average units purchased at repeat level i.
Test Marketing
187
BASE I and II do not use an STM and make greater use of product category norms.
ASSESSOR
The following Fig. 11.3 depicts the basic ASSESSOR model.
Consumer Research
Management Input
Marketing Plan
and Positioning Strategy
Input
Lab and after use measures
~---o
------
_ _ _J
~~
I
I
I
I
I
I
Fig. 11.3 ASSESSOR model
It consists of two components % a preference model and a trial and repeat model. STM provides data
for both these followed by tele talks. The two estimates should be similar. If not, the convergence is achieved
through data reconciliation. It is a dual approach. Prefemece model is judgemental. Trial repeat model is
based on (choice) behaviour in the STM.
Prior to being exposed to commercials in the STM, respondents are asked to list their consideration set
or evoked set of brands from among those being tested. They are then asked to allocate a fixed number of
points among the evoked set. It gives relative prefemece rating for each product. A follow up telephone call
is made. The respondents are again asked to allocate points among the brands, but a new product is included
this time. A market share can be estimated from the relative preference for the new product, and its draw
from competitors product can be determined from the change in relative preferences.
In the trial repeat model, long-run steady-state market share (S) achieved by a new brand is given by
product of long-run levels of trial and repeat purchasing
S=
where T =
TRB
long-run cumulative trial run (the proportion of all buyers in the target group who ever try
the product)
188
Product Management
R=
long-run repeat purchase rate (new brand's share of subsequent purchases in the product
category made by previous triers)
B=
the index to adjust the users of buyers of the new brand relative to other buyers in the category.
ASSESSOR estimates T by assuming that trial follows the use by initial purchasing or receipt of
samples. First purchase is a result of awareness levels due to product availability and its promotion. T is given
by
T=
where F =
K=
F* K* 0
+ C* U - (F* K* 0) (C* U)
long-run probability of trial of the new brand given 100% awareness and availability.
long-run probability of awareness of a consumer in the target market.
0=
long-run probability of the new brand being distributed.
C=
probability of a consumer receiving sample of a new brand in t,he target market.
u=
probability of using a sample by its receprient.
F is obtained from the lab test market. It is the corrected proportion of respondents who buy the new
brand in the mock store.
U is obtained by asking respondents who received sample whethere they used it. It is the proportion
of people who used it.
Kis given by advertising budget specified in the marketing. The marketing plan also indicatres the level
of distribution (0) and sampling penetration (C).
ASSESSOR estimates R as the equilibrium rate share of a first-order, two-state Markov process.
We have to obtain probability of brand switch to the new brand of a previous purchaser of any of the estimated
brands and probabity of new brand repeat ofthe last purchaser. Both these are obtained through STM data.
ASSESSOR - IT is supposedly the successor to ASSESSOR. However, it is quite different, and not
wei! documented.
LITMUS and NEWS
As both these are structurally similar, they are described together. Their basic structure is given in Fig.
1 1.4 below.
Test Marketing
189
Consumer Market
Couponing
and Sampling
Media and
Promotional Impact
Brand Awareness
Product Concept
Ad Persuasion
Packaging
Distribution
Price
Brand TrialFirst Purchase
Product
Quality
III
Repeat Buys
Trial and
Repeat Purchase
Volume
Sales in Units
Price
Sales in Rs.
Fig. 11.4 LITMUS Model of New Product Introduction
Both lJtmus and News are a decision process or hierarchy-of-effects models. Awareness is built by
promotion. Awareness to trial is influenced by ad persuasion, product concept, packaging, price and
distribution. Trials to repeat are affected by price and product quality. There are periodic forecasts of
awareness, trial, share, and sales and even profitability. While NEWS uses consumer survey data, LITMUS
uses STM data to estimate trial and repeat probability to make consumers travel from awareness to trial and
from tiral to repeat, whereas NEWS allows just two. LITMUS also calculates profitability estimate .
BUDGETING FOR PRODUCTS

We have already seen that product planning and development is integrated to the marketing planning.
Budgeting in essence means resource allocation for marketing. Product budgeting is resource allocation for
products. Budgeting has been traditionally considered just a spending exercise to predetermined goals.
Budgeting is unpalatable for organisations because there are hassle factors like attending meetings and
bargaining for larger allocations, reluctance to provide funds for product management, conflid between
finance and marketing/product executives. Marketing and product expenditure does not fall into the
jurisdiction of one department. In recessions, when sales are affected, the first axe falls on marketing/product
budgets whereas in reality the expenditure must increase precisely at such times.
It is necessary to explain to the top management that all their goals of sales, market share and profits
are attainable at a specific cost. If you want goals to be realised, you must be ready to pay for them. If you
pay less, to that extent your results will be affected. There is a direct linkage between the goals set and the
objectives accomplishment.
Marketing and product planning do not happen without spending. Mostly, management indulges in
such wishful thinking. Budgeting is just not an account's job. It has strategic significance.
What is Marketing and Product Budget?
Ideally, it is the budget for all direct and overhead costs associated with marketing and product
functions in a company.
Accountants find it difficult to apply marketing costs to products anyway. They treat marketing
expenditure as an overhead.
Generally, marketers should not be held responsible for things they do not control, e.g., order
processing, transport, selling costs, distribution commission. In practice, many companies hold marketing
191
responsible for commissions paid to distributors and order processing costs. If these items accountfor a large
chunk of allocated marketing budget, there are no funds left for legitimate marketing activity like promotional
campaigns.
Companies spending large sums on advertising and marketing in fast moving consumer items sector
have their budgetary control decided atthe Board level. Marketing executives have little control over the size
and allocation of spread.
It should be appreciated that budgeting is not just a quantitative monetary exercise. Our resource
requirements include people, space, IT, training and so on.
No proof can be provided that a particular marketing expenditure has led to particular result. It is a
'black-box.' Inputs like advertising, personal selling time, promotion and discounts can be measured. Outputs
like market share , profits, cash flows can be measured. But we are notsure which inputs create what ~utputs.
Complex mathematical models do not really help in practice.
Marketing/product budgets have three dimensions - analytical, behavioural and organisation.
The major emphasis traditionally is, however, on analytic techniques.
Approaches to Market Budgeting
The following approaches are used to set marketing/product budgets.

Economic Analysis
It is based 0)1 marginal analysis. We keep on spending till the incremental or marginal income from
the marginal unit of expenditure is equal to its cost. Till this point, income generated is more than the cost.
It is a way to maximise profits.
Management Science Models
These are quantitative models which decide the optimum marketing and ad spends. These
sophisticated models are not used much in practice, and whenever used, they are used for wrong reasons.
Corporate Budgeting Approaches
Here, an attempt is made to remove some uncertainty regarding the response of sales to marketing
efforts. Programme budgeting, output budgeting and objective and task models are designed to work in this
direction. They organise the things logically to illustrate, objective and task approach.
(i) translates corporate goals into marketing goals. For instance, the corporate goal of 8 per cent rise
in product sales may need 45 per cent increase in consumer awareness, 15 percent growth in trial
of the product, and 2 per cent growth in distribution coverage.
(ii) breaks down marketing goals into tasks to be achieved. For instance , awareness is created by media
exposure, trial is increased by sampling, and distribution coverage is increased by trade promotion.
(iii) calculates the costs for each of these tasks - advertising, sampling, promotion etc. needed and
their costs.
(iv) sums up these costs to give the marketing budget for the product.
(v) repeats this for each product and market in the marketing plan to get the total marketing budget.
Many companies just adopt the budgeting methods of their competitors. The approach is judgemental.
All these approaches can be combined to play safe. All these methods, however, do not overcome the blackbox uncertainty. In an organisational setting, methods are adopted without actual participation in the
budgetary process.
192
Product Management
Precedent is followed to predict the next year's figures. Many a time incrementalism is followed. Rulesof-thumb like percentage-to-sales, affordability, parity with industry and objective-task approach are some
other factors followed while making the budget. In experimental budgeting, something is tried to see what
happens. In negotiations, the budgets are set on the basis of bargaining and negotiations.
Budgeting in Practice
Who actually runs budgeting in an organisation? There are two practices - bottom-up budgeting and
top-down budgeting. At product management level, the process of bottom-up budgeting starts. Resource
demands are pushed up the organisational hierarchy. In its pure form, this is not followed in many
organisations. Ratherwe have bottom-up/top-down budgeting, which involves more negotiations/bargaining.
However, it is also initiated at product level. Top-downlbottom-up budgeting combination provides more
control to the top management over marketing/product budgets. It also shifts the focus of negotiations. Lastly,
in top-down budgeting, there is no scope for negotiations as the man at top dictates what is to be spent.
The practice is influenced by whose initiative it works in resource allocation, the negotiations involved
and the participants involved. Marketing/product budgets are influenced by the position enjoyed by this
department in the organisational set-up, the strategic significance of product planning and budgeting and
corporate culture.
Budgeting for New or Modified Products
The most important thing for such products is to generate trials which are function of product
preference, product awareness and prod uct distribution. It is necessary to track awareness at regular intervals,
as also the distribution level, keeping product preference constant. Regression is used to predict cumulative
trial rate. It is necessary to examine how cumulative trial rate is influenced by different yearly expenditures
out of total marketing budget allocated to push and pull activities. Pull expenditure is linked to awareness
and push expenditure to distribution. In the planning period, all purchases are trial purchases. As the rate
of trial grows, we consider the long-term-retention rate (LRR). It gives the rate at which
last-time buyers buy back the product (RR) and the rate at which former triers who were lasttime buyers of
competing products switch over to our products (SBR). LRR also computes the long-term market share
amongstthose who have tried the product. Product's health profile is given by changes in LRR, RR and SBR
over a period of time. After attaining a substantial level of travel, a new product finds repurchase behaviour
has become increasingly important. The more often people buy a product, and the higher the brand switching
phenomenon, the stronger the effect will be. Managers have to decide how the total marketing budget will
be spent on retention of existing customers and luring the new buyers. In niche marketing, there is a constraint
on the number of triers. However, these triers are faithful as they have not many choices to fall back upon.
It takes little effort therefore, to retain them. It also means a focused marketing programme to retain this
specialised segment, as there is no possibility of getting the brand switchers. A computer programme called
NEWSTRAT has been developed for this types of budgeting.
Marketing Budget for Established Products
As we have already seen, several companies adopt goals down, plans up approach. The plan is made
for a year. Its main aim is to implement the strategy decided by the top team. Strategy, therefore, is the key
variable. Management must have strategic plan for product or product line. The offer, its positioning,
promotion, and pricing, though do affect the demand and sales, they are not direct marketing expenditures.
The direct marketing expenditure is attributed to the marketing support activities like competitive analysis,
cost ~nalysis, spending on marketing activities, forecasting. The nature of the offer however, has a direct
bearing on these support activities and their budgeting.
193
MARMlX model captures the above philosophy. It points out the total budget required for marketing
and its allocation to the expense categories (or mix elements). It is integrated to LRP -long range strategic
planning; from which we derive the annual marketing plan or budget. The decisions to be taken pertain to
both the offer and the marketing support activities. Performance feedback forms an essential input in the
annual marketing budget, which in turn affects the strategic plan.
The MARMlX model has been developed by Pessemier in 1982. Another model is called BRANDAID
and is developed Little by in 1970.
BRANDING DECISIONS
Modern Business has to take a crucial decision -branding a product. Once a business opts for branding,
it starts building up that brand by appropriate brand strategies, advertising, promotion, pricing, distribution
and packaging. Brand building activity is an investment, and is a long-term process. Some manufacturers
are content to remain just the producers, and hand over the entire marketing and branding exercise to another
firm. There are thus firms who just market a brand name, and keep no manufacturing base at all. Brands
ultimately command customer loyalty.

What is a Brand?
This word brand is comprehensive, and covers several other narrower terms.
A brand is defined as "a name, term, sign, symbol or special design or some combination of these
elements that is intended to identify the goods or services of one seller or a group of sellers. A brand
differentiates these products from those of competitors" (American Marketing Association, Chicago).
A brand in short is an identifier of the seller or the maker. A brand name consists of words, letters,
and/or numbers that can be vocalised. A brand mark is the visual representation of the brand like a symbol,
design, distinctive colouring or lettering. Mercedes Benz is a brand name and the star with it is a brand mark.
A trade mark is a brand that is legally protected. All trade marks are brands and include both the brand name
and the pictorial design. Exclusive rights to use the brand in perpetuity are granted by the trade mark law,
whereas the Patents and Copyright Laws have expiry dates.
Essentially, a brand is a promise of the seller to deliver a specific set of benefits or attributes or services
to the buyer. Each brand represents a level of quality. Irrespective of the fact from whom the brand is
purchased, this level of quality can be expected of the brand. A brand is much more complex. Apart from
attributes and benefits, it also reflects the following.
Values: The values which govern a producer are reflected by the brand, thus Tata stands for quality,
fair price and so on.
Branding Decisions
195
Culture: A brand represents a certain culture, e.g., Coke is an icon of American culture, while Shilpa
Bindis are typically Indian.
Personality: A brand projects a personality. Had the brand been an animal or an object or a person,
what would come to our mind? Videocon suggests a lion, MRF suggests a muscle man and Rin suggests a
lighting flash. Sometimes a brand may take on the personality of an actual person, e.g., Charlie Chaplin and
Cherry Blossom.
User: The brand suggests its own target audience. We know what a Garden Woman is. We know that
Sunny is for teenagers. We expect a Mercedes to be driven by an executive or a top-class businessman. These
users correspond to the values, culture and personality of the brand. Because of the imagery associated with
the brands, they actually have the power to enhance or limit a consumer's perceived image or self-image.
The above discussion makes one thing very clear- a brand is a complexsymbo1.lt is not just a name.
Branding, therefore, involves developing deeper meanings for the brand. The lesser the dimensions a brand
possesses, the shallower it is. The more the dimensions, the deeper it is. A brand cannot be just a bundle of
physical attributes. Attributes are very easy to copy. Besides, attributes valued today may not be valued
tomorrow. Even benefit-oriented brands are not on firm grounds.
Maruti's fuel economy can be attained by other brands. Maybe, the benefit valued today may not be
valued tomorrow. A brand becomes enduring by its values, culture and personality. These constitute the
essence of the brand. Mercedes stands for prestige, success and high technology. Actually, this should become
the building blocks of its brand strategy. We just cannot think of a Mercedes being offered at the price of a
Maruti. Perhaps, this will dilute the values associated with Mercedes. And remember, it takes years to build
these values.
Branding Decisions
Branding is interwoven with religion. Mankind built branded environments, places to go and practise
religion. The chants and bells were to bring people into these places, which is very much like advertising. The
concepts and ideas have been there forever, and as SOCiety developed, brands proliferated to differentiate
and generate business.
Historically, most products were unbranded. Producers sold goods or commodities to fulfil our core or
basic needs like taste, hunger or energy. These products did not have any identification mark on them. The
first step towards branding a commodity is to package it, e.g., rice, papad, salt. Water, for example, used
to be sold as a commodity. Today, most mineral waters are sold as brands. The company enhances the value
of the commodity functionally. Branding started formally when craftsmen put trade marks on their products
to protect them against inferior quality. Painters started signing their art works. Pharmaceutical companies
were the first to put brand names on their products. Today hardly anything is unbranded. Products from
unorganised markets like vegetables, salt, fruits etc. are unbranded. But now we have branded salts and atta
too. Venky's and Godrej have branded chicken successfully. In spite of a brand movement, products have
been demanded in generic, unbranded form in pharmaceutical and staple consumer goods sector. Al Ries
feels a commodity, is a good category to launch a new brand because one becomes the first in the category.
When commodities are branded, they have to counter the retailer resistance, who get greater pricing
freedom when they are unbranded. Along with this, there is consumerresistance - a housewife loves to select
foodgrains, clean them, get them ground into flour. A readymade Captain Cook or Trupti atta deprives her
of all these sentimental actions. However, if we are successful in lessening the consumerresistance there arises
a demand. The pull effect compels the retailer to stock the brand and his resistance also comes down.
Consumers want a good value for money from a branded commodity.
Functional products and commodities take less to branding than aspirational products. Manufactured
products are branded easily, whereas it is not so for agricultural ones. Of course, a commodity can evolve
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Product Management
into a brand in stages. Branding evolves through stages - a commodity, a functional brand, a high value
added brand and a premium product. Pads were used as sanitary napkins. The next improvement was belted
napkins. It was followed by beltless napkins. We now have dry-weave napkins. The consumers are expected
to adopt each ofthese product versions one by one, as they come in the evolution of brand. However, it may
so happen that the aspiring middle-class with high disposable income leap frogs into the high end brands like
"Whisper" and "Ariel."
While branding the products, an attempt is made to go beyond mere functionality. Brand equity is to
be built up by advertising appropriately to reduce the initial consumer resistance. The low involvement product
can be made a high involvement product by emphasing certain situations, e.g., Cease Fire demonstrated how
a family's bliss can be shattered by a sudden fire. Sometimes, non-functional elements like fun are
emphasised, e.g., Captain Cook salt. Textiles are sold on imagery and not on functional appeals. The brand
becomes aspirational. Later, textiles are associated with values like machoism, friendship and growing up.
Benetton ads do just this. The brand then becomes an icon - it stands for something. However, all brands
cannot become icons.
The core need of clothing is satisfied by a set of product classes - jeans, shirts, dhotis. If we consider
two-legged garments only, we have a choice between trousers and jeans. Jeans are denim blue material, with
rugged cuts, metal zippers and buttons and is a tough piece of clothing. This product is augmented by giving
fancy pockets, double stitching, wider range and designs, and is associated with youth and machoism. The
augmented product takes the brand name of FM jeans. Brands thus help to make a personality statement.
FM Jeans declare your anti-traditional intentions and your desire do find a cause in your life. The onlooker
may like this attitude and shares it.
Evolution of Brands
Brands start off as products made out of certain ingredients. Over a period of time, brands are built
through marketing activities and communications. They keep on acquiring attributes, core values and
extended values.
EXTENDED
VALUE
CORE VALUE
ATTRIBUTE
CATEGORY
ASSOCIATION
PRODUCTS
INGREDIENTS
TIME
Fig. 13.1
Despite the branding, consumers may treat a certain product as a commodity, e.g., cement, since the
price is the same for all the brands and all of them have established the same identity. To begin with, just
a little value addition like packaging makes a commodity a brand but when all competitors do the same thing,
there is the danger of the brand again switching back to its commodity status. Many consumers prefer lower
Branding Decisions
197
priced generics which are sufficiently satisfying. Generic products are a challenge to high-priced brands and
weaker brands. Some companies cut their prices to compete with generics. It is desirable, however, to fight
them on the basis of quality - offering greater quality than generics at competitive price.
As we have already observed, branding makes it easierfor consumers to identify products and services.
Brands ensure a comparable quality when products are repurchased. Brands simplify a cansumer' s shopping.
Choosing i'l commodity is far more complex than choosing a brand. Commodity selection is based on rational
left-brain logic. Brands have emotive associations. They can be chosen on a more holistic basis involving
parallel left and right brain processing. The firms find that brands can be advertised. The firms also get the
advantage of recognition when brands are on the shelves of the retailers. There is no confusion between
branded products amongst consumers. Branding makes price comparisons difficult. Good brands help build
a corporate image. Branding gives added prestige to the marketer. Branding also gives legal protection to the
seller. Brand loyalty protects a firm against competition. Branding enables a seller to segment the market.
The distributors prefer branding as an identification tool for vendors, as a convenient tool to handle the
products, and as a guarantee of certain production standard. These are some of the factors which encourage
sellers to brand their products though branding is a costly proposition, involving the costs of packaging,
labelling, advertising and legal protections.
The firms have to carry out two onerous tasks once they decide to brand - promoting the brand and
maintaining a constant quality. If these two requirements cannot be met, products are better left unbranded.
Branding decision is related to the nature of the product and the trade channel is involved. The sophistication
of the distribution channels is conducive to branding. The opening up of a vast national market also augurs
well for branding. Brand development and personal disposable income have a positive correlationship.
Onate, brand-driven businesses are doing well, while commodity-driven business are faring poorly. The
market is handsomely valuing brand-driven companies that have tailor-made their strategies for the Indian
market. It is considered more sensible to acquire rival brands than investments in fixed assets per se.
Brand Names
The company has to choose its brand name strategy.
Each product can have a separate brand name, or one family name can be extended to all the products.
Philips follow the family brand name strategy. Hindustan Lever brands the individual products. Let us
consider the pros:
Family Brand
(a) It is cost effective in as much as it reduces product launch costs and also the promotional expenses
incurred on a continuing basis. The success of one brand when well-promoted gives a push to the
entire product line. Management of trade channel also is easier. In tyre marketing this approach
is highly successful.
(b) For products of uneven quality, this approach is a dicey proposition. Even in markets showing
variations in consumer profiles, this approach is not useful.

(c) Each product is denied a special identity which can go a long way to make it click.
Nokia is a corporate or family brand. There is no sub-branding and the individual products are merely
defined by numeric descriptors such as 5110, and even these do not appear on the product itself. Yet, the
brand has leap frogged most of its competitors like Motorola and Ericsson. Even in technology-based
businesses, a company can have a brand strategy. The biggest technology brand is Microsoft.
Individual Brand
(a) Individual brand invokes associations and imageries. These psychological factors influence the
buying decision.
1':18
Product Management
(b) Even if the product fails. the effects are restricted to that product only. They are not transferred
to the whole product line.

(c) Costlier strategy.
(d) No benefit to the brand of the organisation's reputation.
Modified Strategy
These days companies tend to brand the products individually, but also give prominence to the
company's name or logo in all promotional efforts and product packaging. For instance, ATATA PRODUCT
is a legend that goes with every individual brand name of Tata Oil Mills Co. (TOMCO). Some companies
adopt brand extension strategy, by introducing similar or dissimilar products, e.g., Nirma toilet soaps. Some
organisations decide several brand names ofthe same product where each brand has its own following. The
brands compete amongst themselves. Soap manufacturers follow this strategy. AI Ries and Jack Trout are
against brand extensions. In their opinion, brands are not dying - the companies are killing them through
mindless line extensions. When a company line extends, it weakens itself. Product categories can be given
extensions, e.g., gel pastes, detergent ultras, puri-gerators. Telephone directory reclassified becomes Yellow
Pages. It is more than mere positioning. It is creating a new prod uct category with just an extra push. Tinker
in the iab and let the brand or product plus emerge, e.g., gel, cologne soap, microsystem, germicheck etc.
The choice of an individual brand name is the next important decision. The choice is not so easy. There
are really few good brand names. As a wit has aptly remarked, "Searching for a brand name is like sear:::h
for a wife - there are lots of choices, but the best ones have already been taken." Sometimes, brand names
are based on a person's name, e.g., Honda, Estee Lauder, Khaitan. Brand names can be based on locations,
e.g., Indian Airlines, Kentucky Fried Chicken. Brand names can suggest an important product attribute, e.g.,
Duracell. There are brand names which suggest a life style, e.g., Fleet Footers. EXXON and Kodak have an
interesting history behind them. When ESSO found it necessary to change its name, the computer was fed
with various vowels and consonantial combinations, and 44,990 four-letter and 500,000 five-letter
combinations came out. EXXON was finally chosen because it is distinctive and has graphic design
possibilities. Kodak was coined by George Eastman in 1888 because he liked the letter 'K' and wanted a name
which could not be misspelt.
Characteristics of a Good Brand Name
A good brand name should possess as many of the following characteristics as possible:
(i) It should be distinctive: The market is filled with over-worked names and over-used symbols. A
unique and distinctive symbol is not only easy to remember but is also a distinguishing feature.
"Northstar" shoes have a distinct name.
Oi) Itshould be suggestive: A well-chosen name orsymbol should be suggestive,of quality, ormay be
associated with superiority or a great personality. The name VIP Classicfortravelwares is suggestive
of a superior quality for a distinct class of people. Promise is suggestive of an assurance of tooth
health.
(iii) It should be appropriate: Many products are surrounded by a certain mystique in the minds ofthe
consumers. Carefree is an appropriate brand name of a sanitary towel.

(iv) It should be easy to remember: It should be easy to read, pronounce and spell. Tide, Surf, Gold
Spot are examples of such brand names.
(v) It should be adaptable to new products: Videocon is a good brand name for TVs and VCRs but
when it is extended to refrigerators and washing machines, some of the sales appeal is lost. Hotline
was a good name for gas stoves, but is definitely not a suitable name for TVs.
(vi) It should be registrable under the Indian laws of Trade Marks and Copyrights.
Branding Decisions
199
Mostly a company develops several names for a product and makes a choice later after debate and
discussion.
Generic Usage of Brand Names

Sometimes, a brand name becomes so succ~ssful that it comes to be associated with a particular
product category, e.g., frigidaire is brand name used for any refrigerator, Dalda is a brand name commonly
used for anyvanaspati ghee. The brand names then do not remain distinct and become generic. Cellophane,
nylon, fiberglass, celluloid, Kerosene, Vaseline and aspirin have thus become generic. Xerox and Band Aid
are not yetlegally generic, but they have been so well promoted that many people just use them generically.
Though each firm strives to have a popular and preferred brand names, it does not like them becoming
generic. It is a tight-rope walk.
To protect against such generic use, a brand name can be combined with a company's name, e.g.,
Eastman Kodak. A brand name can be combined with a generic name, e.g., Dacron polyester, Dabur
Chyavanprash. The public can be given a notice about the copyright of the brand name. Some companies
assume the name of the brands, e.g., Sony.
Generic Brand
A brand that becomes generic becomes a product category, and no longer remains a brand. Frigidaire
is GE's brand. But now we call any refrigerator a 'fridge.' So it has become generic. Other well-positioned
brands have overtaken Frigidaire, and it is no longer a market-leader. Dalda Vanaspati has become generic.
It is now again trying to lose its generic label. Though consumer asks a product by the generic name, he
ends up buying a brand that offers attractive benefits. The generic brand sits on the shelf.
Brand Strategy Decisions

A company has four choices in respect of its brand strategy.
(i) Line extensions: Extend the existing brand name in the existing product category.
(ii) Brand extensions: Extend the brand name to new product category.
(iii) Multiple brands: Have new brand names in the same product category.
(iv) New brands: Invent a new brand name for a new product category.
The following diagram illustrates these four choices:

PRODUCT CATEGORY
EXISTING
EXISTING
NEW
LINE
BRAND
EXTENSION
EXTENSION
MULTIPLE
NEW
BRANDS
BRANDS
BRAND
NAME
NEW
Fig. 13.2 Brand Strategy Choices
Most of the new products in the day-to-day use and grocery products are line extensions. A few are brand
extensions. A few new brand names appear in both multiple brand strategy and new brand strategy.
Line Extensions: Here the company introduces additional items in the same product category,
keeping the brand name same. The additional items may be of a different size (say a 150 gm cake of Palmolive
Soap). There may be a new form, say Liquid Lifebuoy Soap. The additional item can be of different colour,
say, a lilac soap instead of a white soap. The package may be different, say a satchet of a shampoo. Some
additional flavours can be introduced, say Brown & Polson Custard Powder is now available in chocolate
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Product Management
and with elaichi flavour. There may be added ingredients, say, Lifebuoy Gold. Lux ;s available in three skin
types, say for normal skin. dry skin and oily skin, making it "your kind of soap for your kind of skin." Line
extensions can be innovative, or "me-too" or may be void-filling. Most of the new product activity is of line
extension type. Line extensions offer a variety to the customers. An advantage can be taken of consumer's
latent need. Or eise, a competitor is to be matched in terms of its offer. Line extensions also allow a company
to command more shelf-space at the retail level.
Line extensions can be made available through a specific mix of trade channels, e.g., lower end
products are available at general stores and higher end products at a few specialised outlets.
Line extension, though very popular, is not without its drawbacks. The specific meaning of a brand
might be lost by heavy extensions. Ries and Trout are against line extensions. Today, Coke in India means
a 300 ml bottle vf the real thing. Say, an extension brings a 500 ml and 1 litre bottle. Again, a can may be
introduced. Perhaps, there may be a diet Coke later. All this may become confusing. Besides, what is the
guarantee that all these extensions will have sales sufficient to cover the costs? Even additional sales may
be at the cost of other items ir. the line. Line extensions work only if the sales are taken away from the
competitors. Mostly, they eat up the sales of our own brands.
Brand Extensions
An existing brand name is extended to a product being launched in a new product category. Honda
is a brand in the field of motorbikes. The same brand name is given to products in the field of lawn mowers,
and marine engines. Brand extension works well for rubbing off the success of established brand names to
new products. Th8 flew product, therefore, finds easy acceptance. However, if the new product is not
satisfactory in pelformance. it might affect the reputation of the company's other products. Most of the time,
hrClnd name n la9 nOl be appropriate for the new product category. While brand extending, if it advisable to
SCI? how the as~.oc;ations of the parent brand are consistent with the extended brand.

THE ANATOMY OF A BRAND
A brand consists of several important aspects, each of which constitutes its anatomy. The first concept
is that of the brand image.
Brand image approach was developed by Ogilvy. According to him, what advertising does is to provide
the brand a first-class ticket through life. A brand is invested with a set of associations, favourable
connotations and psychological overtones. These may not be an intrinsic part of the brand, but just add-ons.
This is the brand image chemistry at work. Marlboro cigarettes evoke the image of the maverick cow-boys.
They remind us of freedom, machoism and the mystical West. These perceptions have been woven around
the brand. Most of these are extrinsic, though some of these could be related to the intrinsic characteristics
of the product. According to Oglivy, brand's market share is a function of how the marketer shapes the image
of his brand.
We have broadly understood the concept of the brand image. As we know now, the brand image is
evocative. It evokes a set of associations. According to Aaker, there are several types of associations -product
attributes, life-style, personality, intangibles, customer benefits, relative price, user or application, celebrity/
person, product class, competitors and country or geographic area. Brand managers study these associations
and their relevance. When a brand is positioned on these associations, it is called a brand belief. Brand beliefs,
taken collectively, make up the brand image.
A brand image is also affected by the organisation that markets it. There is a link between the corproate
image and a brand image. Some companies build their brand advantage on the basis of their corproate
image. Corproate brands generally provide credibility to the product brand. Corporate image generally
provides a strong unassociable brand image.
The unique selling proposition (USP) and brand image are related. The USP is more focussed on a single
benefit. The brand image is diffused and open-textured. These two are different in the degree of complexity
only.
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Product Management
Brand Identity
Every individual in society has an identity. An individual stands for some values. He has certain
aspirations. He wants to project a certain image. His overall personality distinguishes him. He establishes
relationship with others.
Brands like individuals, too have identity. It consists of brand associations created by the brand
manager. Brand identity has two dimensions % an inner core identitty and extended identity.
Brand Identity: Strategic Slant
Brand identity is not just the brand image. It is also not just positioning. It is also not just the physical
attributes of the product. It is also not just the outsider's percpetion. Brand identity is a comprehensive
cOT\cept. Brand image is the current perception. Brand identity is the goal which the brand manager wishes
to reach. It is proposed that one will travel from the current image to a future perception. Brand position is
a small part of brand identity chosen for communication with a target audience.
Core Identity
It is the essence of the brand. Core identity is the soul of the brand. Core identity is generally reduced
to a few words, say Lux is a beauty soap. But this may not always represent the entire core identity.
Extended Identity
Core identity is not enough to describe a brand. Elements of extended identity makes for complete
description. Close Up toothpaste has oral freshness as its core identity. It allows young people to come closer
to one another. It is not just a paste, but a mouth wash too. This is its extended identity. Nycil powder for
prickly heat takes our care in the scorching summer. This is its core identity. But it is also a sweat fighter.
This is its extended identity.
A brand can have multiple identities. Citi is considered to be a middle-class bank all over the world.
But here il1india, it is elitist. Citi is also perceived as a foreign bank. Global brand identities need adaptation
to the local conditions. Multiple identities have overlapping common set of associations, which reflect partly
the core identity.
COMMON ASSOCIATIONS
IDENTITY A
IDENTITY B
Fig. 14.1 Multiple Identities
Brand identity is now considered to be a platform to build brands. Brand identity has six key elements
-brands physique, brand personality, brand relationship, image of the target audience, self-image and brand
culture.
Brand Personality
Human beings have a personality which is summation of several chracteristics or traits. A brand too
similarly has a set of characteristics which are human in nature. Some of these characteristics are
The Anatomy of a Brand
203
demographic (sex, or genre, age, income-class). Some are considreed to be old laid-back brands e.g., Weston,
whereas some are considered to be mod and latest brands e.g., Samsung and LG. Mopeds are feminine
whereas motorbikes are masculine. Surf Excel is upper-class, whereas Nirma is a down-market brand.
Raymond makes you a complete man. Poonam saris are commonplace. AmEx is a prestigeous card, but
there are other cards from nationalised banks which are down-to-earth.
People like to interact with brands. Many amongst us would like to whisper a thing or two to our house,
bike or car. Many have a lotto say to their garments. They may refer to their products as if they were human.
Brands like humans have certain abilities and skills. They have certain associations and attitudes. They
thus appeal to our senses, reason and emotions.
A consumer must be comfortable with the brand personality. Brand personaltiy must be consistent over
a period of time.
Jenifer Aaker has developed a brand presonality scale by identifying five brand personality factors such
as sincerity, excitement, competence, sophistication and ruggedness. There can be several sub-traits under
each of these e.g., we can include honesty, wholesomeness, cheerfulness and down-to-earth quality under
sincerity. The scale is also used to measure attitude towards the brand. Some factors generate positive
attitudes, whereas some others generate both positive and negative attitudes.
Several factors contribute towards the shaping of a brand personality % both product-related and nonproduct related factors. User imagery is a non-product related factor. Sponsorship also is a
non-product related factor. Symbols like Air India's Maharaja contribute a great deal to the personality.
Brand personality provides an added insight into the brand. It helps to differentiate a brand. It has
expressional value. Brands speak for people. A person can have a relationship with a brand. The brand
personality and product attributes should complement each other.
Brand Positioning
Brand positioning is an act of occupying the mindspace of the consumer. The more distinct and valued
this is, the better it is. Positioning makes us stand out in consumer's mind against the products of our
competitors. Aaker considers the brand proposition as 'a part of brand identity and value proposition that
is to be actively communicated to the target audience, and that demonstrates an advantage over competing
brands'. Ogilvy was an advocate for positioning in 70s. AI Ries and Jack Trout, the then ad executives in
Madison Avenue and now consutiants, wrote on positioning in the late 60s. Their book Positioning: The
Battle for the Mind (McGraw Hill, 1980) is a mile-stone. According to Ries and Trout, positioning is a
creative exercise that starts with a product. But positioning is not what you do to a product. Positioning is
what you do to the mind of the prospect. The shortest route to heart is through the mind. Product positioning
is both % tinkering with the product, and the mind. We have to search a hole or a niche in the consumer's
mind not occupied by someone else. Communication helps a great deal to achieve positioning. But it goes
beyond communication.
Positioning statement is a concise statement culled from the brand identity and value propositon. While
developing the positioning statement, we have to assess where our brand stands and where do the competitive
brands stand. This is called market exploration. Then we look up for the marketsegmenets we have in mind.
The essence of the brand or its core identity is identified. We have to understand the value proposition of our
brand. We have to assess which critieria potential buyers use to prefer one product to another. We have to
see how our brand is perceived against the competitive brands. Ultimately, we choose the best position. If
that position is already occupied, we may decide to bypass it and choose some other position. But if we are
strong, we can assault an already occupied position.
Product Management
204
Positioning statements are useful in product development, in promotion, in training and other
marketing activities. Brand positioning just like brand identity tends to be aspirational.
Positioning can be application-oriented (longest lasting batteries) , target-market -oriented (complete
food for children), exclusivity-oriented (a rub for colds for children), benefit-oriented (toughens you up from
within), functionality-oriented (soap with a moisturizer).
Sacrifice is the sessence of positioning. For effective positioning, a brand has to stand outfor one quality
or benefit in the mind of the consumers, instead of being all things to all people. This involves sacrifice of
opportunity to diffemet market segments.
Positioning is really, to quote Prof. Sen Gupta, a crusade against the slothful marketing philosophy of
offering me-too products.
A brand position may change over a perid of time. Sometimes, it is changed deliberately. It is called
repositioning.
Positioning Statement
It tells us what the brand is all about. Since there is a time constraint, positioning statement is succinct
and articulates in a couple of sentences the essentials of the company, what its products stand for, its main
benefits or USPs, the target audience, markets and relevant corproate relationships. POSitioning statement
states facts and evokes feelings.
A good positioning statement quickly introduces us to the company and its product and their relevance
to us. A positioning statement can both be general or specific-audience-directed. The most elementary
structure of a positioning statement is:
V (company or product) is W (definition) that offers X (benefit) to Y (target audience) in Z markets.
The nextsetence can spell out USP and/or proprietory technology which provides new benefits.
A (USP and/or proprietory technology) provides B (new benefits) and C (new benefit) .
BRAND CULTURE AND

BRAND RITUALS
As we have already observed, brand culture is a key element of the overall brand identity.
It influences and penetrates a brand. Mercedes Benz has German values. Coca-Cola is all American. Some
brands promote individuality and some collectivism. Brand culture provides an internal spirit to the brand.
Culture comes over a period of time. The founders provide the first feeding of cultural values to the brand.
The brand owner indoctrinates the brand with his own culture, and invests it with his own value system.
Many brands weave a culture around themselves- Charlie girls of Revlon are comfortable in corporate
world, Disney characters remind us ofthe 'child' in us, and Mercedes symbolises prestige and opulence. Some
perfumes are serene, while some emphasise an all-consuming lust. Close-Up is our neighbourhood girl, but
Colgate is a protective mother. Nirma housewife does the chores herself, but Ariel represents the mod working
woman. Each brand has its own image, and represents a unique culture.
It is the endeavour of marketers to fit the brand culture in the overall culture of the target audience.
The greater the congruence between the two, the more is the acceptance of the brand.
Pillsbury started in India on a clean slate. In the US, though Pillsbury started as flour, it soon diversified
into baked foods. The company stood for family life enriched by moms with the feelings of warmth and
togetherness. Even in India, these values can be extrapolated. When a mom puts a chapati on the dining
table, she is putting a bit of herself into it. The company developed this culture for the Pillsbury brand. It did
not communicate the technology of its manufacture. It just emphasised the chakki freshness and tradition.
The dough boy has been used as a mascot. He is assistive, and helps moms in the kitchen. He provides cheers.
He helps the women to live up to their traditional image, while using the modern means. Thus Pillsbury is
extremely sensitive to culture.
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Product Management
Local Culture Influences a Brand
McDonald's culture is to bring a smile on the face of everyone by being childlike. Even the old relish
the youthful spirit once they are at McDonald's. The layout of a McDonald restaurant suits its target audience.
In a family-oriented Indian society, it serves dishes distinctly Indian in taste.
De Beers had to change the mindset of the Indian society while promoting diamonds. In fact, De Beers
is selling love. Indian women can afford a costly Kanjeevaram silk sari, butthey are apprehensive to pick up
a flawless diamond. De Beers sells love with a price tag. It educates the Indians aboutthe fourC's of diamonds
- cut, clarity, colour and carat.
Brands have to provide value for money (VFM) in India. They should not hurt the religious sentiments.
The elderly approval is considered a good thing in India.
Kellog has found it very difficult to sell its breakfast food in India on account of cultural factors. India
loves idlis and parathas. Pepsi succeeds by being a youth brand who wants to juice the maximum out of life
(yeh dil maange more). Even Chinese food and pizzas are adapted to Indian palate.
T ropicana orange juice being sour was not accepted by Indians, and so it positioned itself as 'the taste
of good health' to overcome its 'not so sweet' barrier. Louis Jadot is a typical French wine. Gucci is typically
Italian. A country of origin is used as a surrogate for product quality.
Brands Influencing Culture
IBM is serious and sober. Apple is just opposite. Nike wins at all costs. 'Just do it' is educative - it
teaches us to beat the competition, and be a winner. Singapore girls of Singapore airlines are from nowhere
else, but Singapore. Gucci presents its Italian pedigree. Basamati rice is typically Indian. Ferrari is the pride
ofitaly. Red Label tea is associated with a loving mother who says 'Jiyo mere lal.' Mother anchors the family.
So does the tea. Amul is the taste of India. McDonald cannot Indianise cent per cent or else it loses its focus.
They do use spices to suit Indian taste, but they don't sell the samosas. McDonald is neither too American
nor too Indian. It does not dilute its core values of quality, service, cleanliness and value.
New Culture
Virginia Slims make 'women come a long way.' Body Shop is a cosmetic company whose products
are not tested on animals. It thus wards off negativity associated with cosmetics. MTV has spawned MTV
generation. Dockers put Americans on casuals who so far were dressed in pin-striped dark-blue suits. Zodiac
created a tie culture in India.
Coca-Cola invented the friendly old Santa Claus in a scarlet jacket in 1920s while releasing its Xmas
ads. Pre-Coke Santas were stem-looking and wore multi-coloured jackets. Brands trigger off latent desires
and stimulate unfelt needs. They put new meaning into the lives of people and change the attitudes and
outlook of the consumers. They set new trends, and mould the consumer behaviour. They become social
artefacts. In due course of time, they create cultures - the sum total of man's learned beliefs, values and
customs.
Barbie dolls have stirred the imagination of countless little kids who want to be what she is. A macho
Marlboro man has a profound impact on the youngsters. We know what MTV generation looks like - fast
lives, fast vehicles, rhythmic music, outlandish clothes, tattoed skin, and wierd hair-style. MTV has taught
youth to celebrate the zest oflife. Chivas Regal is a new standard to bid goodbye to an orange-coloured dusky
day-end. Brands make us aspire higher.
Michael Jordan, the basketball star asks us to 'just do it' with Nike. Valentine Day is a new way to
express our emotions, and has generated a whole array of cards to greet our beloved. Brands teach us to
overcome the effects of ageing e.g., Synergie anti-wrinkle cream. They make us conscious of fitness and
health. Cosmetics make you a gorgeous woman - with eyes having mascara and contact lenses, lips
207
Brand Culture and Brand Rituals
coloured exotically, and foundation to take care of blemishes. Brands teach us new habits - iced tea. They
provide convenience all around us - ATMs to dispense cash, ready-to-eat food packets to make our meals,
washing machines to wash our dirty linen.
Some brands symbolise global consumer culture. Benetton, computer companies and consumer
electronics companies make globally relevant ad copies.
In Asia, bikes are a means of transport, but in the States, they are a health and fitness product.
In the Arctics, refrigerators prevent food from freezing and in the tropics, they are used to preserve the food
and keep it cold. Some countries like less-sweet products. Coffee consumption differs from society to society
- black coffee, milk coffee, coffee with chicory. Campbell's soup changes its composition to suitthe different
tastes. Soaps like Camay are marketed under the same brand name globally, but the composition varies from
country to country.
Rituals
Brand culture can be experienced, but cannot be seen. What we see are the rituals. Vespa, a funky
Italian brand of scooter, has owners who meet each Sunday in Manhattan to ride their favourite machine.
Santa Claus bringing X-mas goodies is a ritual. Ronald of McDonald is patterned after Santa, and is a ritual.
Khadi symoblises self-help and austerity, and wearing it became a ritual ali through the freedom struggle of
India. Pillsbury's mascot, the dough boy, got people to taste seviya kheer during Ganesh Chaturthi. It
amounted to a ritual. Femina's beauty pageants are an annual ritual for the brand and so are the Filmfare
awards. Kit Kat's consumption - breaking a finger and eating it - is a ritual. A noisy opening up of a Coke
bottle with something to munch is also a ritual. Say 'Cello' instead of 'hello' on the phone to get the prize
is ritualisitic. Brand loyalists tend to form a strong user community around the brand; and celebrate their
emotions with rituals. Man is social, and tends to build ties and tries to belong to groups. Brand rituals are
a celebration, and user community provides a sense of belonging. Rituals have prons and cons. They enhance
the brand equity further. Some have a sad story. New Coke could not replace the old one inspite of costly
research.
Brand Experience
'Fire and Ice' lingers when we wear it to a party. Amul Icecream is just 'mmm ... so tasty.' Chicken
Biryani emits a strong aroma. Gautierfurniture has typical French look. Pepsi's electric blue is loved by young
generation. Kya swad hai zindagi mein of Cadbury is a haunting tune. Brands are to be experienced, and the
dimensions of these experiences are sight, sound, taste, smell orfeeling. These appeal to the consumer, and
are retafned in his memory. They act as stimuli which are interpreted by his CNS. Sometimes, these stimuli
are too weak to be perceived conSciously but are strong enough to be received by the receptor cells. Brandassociated stimuli may be in the presentation or content of the communication, the ad jingle, the physical
characteristics of the brand, the brand image and the brand name itself. The core of brand experience is
diagrammatically presented here:
Experiences
Sight
Brands
Sound
BrandsAssociated
Stimuli
Rituals
_ _-I.~
Appeal
Feeling
Taste
Smell
Sensory
Organs
Message in
the CNS
208
Product Management
Demonstration Effect
Ordinary people may aspire to have extra-ordinary products under the influence of brands.
A middle-class youngster may be seen wearing a Provogue shirt, spending almost 1/3 rd of his parent's
monthly income on one shirt. Brands make people status-conscious. They stimulate people to spend more
than they ought to. This is called demonstration effect. It rises the general propensity to consume.
Art of Living
As we learn how to make the best of life, we do so by dreaming big and aspiring more. Brands teach
us the art of living. They represent the spirit of the age .
LEVERAGING BRANDS
A brand is a very prominent asset owned by an organisation. It is endowed with awareness, perceived
quality, associations and brand loyalty. An organisation can leverage brand to grow bigger and better. There
are a number of ways this can be done. An organisation can put line extensions in existing product class or
can think of brand extensions in the same product class by upward or downward stretching or brand
extensions in different product classes by ad hoc extensions or putting a brand range or by co-branding. The
following diagram illustrates how a brand is leveraged.
Line Extensions
..-----1 in the same product
class
Making
Brand Extensions
most of
in the same
the Brand:
Leveragingl-----t product class
a Brand
'----------'
Brand
Extensions
in different product
class
Upward stretching
Downward stretching
Ad Hoc Extensions
Put a brand range

Adopt
Co-branding
Fig. 16.J Brand Leveraging
210
Product Management
Line Extensions or Stretching
The product is offered as a new version in the same product class. New sizes of TV by an existing TV
manufacturer is a case of line extension. A new packaging option like shampoo in a sachet is a case of line
extension. A new flavour, for instance, Elaichi Horlicks is a case ofline extension. Line extension may shoot
up costs if increasing volumes do not compensate them. A brand that is line extended too much becomes
diffused and loses focus. It is difficult to promote such a brand. The merits of line extensions are that they
broad-base the users and accommodate modifications. The purpose behind extensions could be to block the
competitors. Extensions also make a brand vibrant and provide variety in the market.
Innovations are managed well by line extensions. They enhance the value of a brand. The context of
the brand usage is expanded. A brand becomes differentiated. Sanitary napkins are a good example. Thus
we have belted napkins, beltless napkins, perfumed napkins and so on. We also have broad napkins. Broad
napkins can absorb the heavy flow, and trim ones are suitable for teenagers. Dry-weave napkins with funnellike absorbent material is the latest extension. These different types of napkins are possible because of line
extensions.
We can add a functional benefit to extend the line. Addition of this functional benefit helps attract the
new customers. Line extensions must not always be financially successful. Sometimes, they serve a strategic
purpose. They pre-empt a competitor's move.
BRAND EXTENSIONS
We shaH consider two dimensions - downward stretching and upward stretching of brands.
Downward Stretching of Brands
In many instances. consumers do not just want status and prestige from a brand. They may need just
acceptable quality and features at reasonable prices. This is the motivation behind downward stretching of
a brand. Such downward stretching should not dilute the original brand.
The market environment itself may drive the marketers to stretch the brand downwards. It may so
happen that consumers are not willing to pay a brand premium. The market share may then decline, if the
prices remain what they are. Retail environment in which cheaper unorganised industry's brands are available
at lesser prices may also be a driving force to downstretch. Technological change may also bring about a shift
in market, e.g., cheaper disposable cameras, low cost calculators.
Moving down the brand is easy, but this by itself creates problems in retaining the original values of
the brand. Moving down brings about a change in brand perceptions. However, it is not correct to assume
that going downwards is always risky. A new brand extension should be distinguished from the parent brand.
Perceptions should be compartmentalized - as those for the high end and for the low end. The task is to
create a separate contextfor the extended brand. A brand's identity can be separated in two product classes.
Though parent brand's equity must be protected, a strong brand can afford to take some risks by attempting
a sort of separation. It is true that a new brand rather than a brand extension creates 100 per cent separation.
But that means building the brand rightfrom scratch; and this by itselfis so very risky. Downward movement
of a brand by lowering price is a very common method. A company can create sub-brands to keep the parent
brand unaffected. The danger of cannibalization, and the tainting of the original brand name should not be
neglected.
Sub-brands distinguish a downward brand from a parent brand. If the extension is qualitatively different
from the main brand, there is a lower risk. A descriptive sub-brand suggests a lowerlevel product, e.g., IBM
Value computers and Videocon Budget-line TVs. A brand that is stretched downwards must project the same
basic identity when stretched vertically upwards. Thus all Lux Soaps are beauty soaps.
A sub-brand can be given a strong pers0nality to avoid cannibalization and to reduce the image
tarnishing risk to the main brand. If we considerfather-son relationship, the son takes after the father in many
Leveraging Brands
211
respects, and is thus called the chip of the old block. However, a son as an individual also differs in many
respects from his father. The same is valid for brands.
A sub-brand is distinguished from the parent brand. This is easier when the product features are
different. However, it is difficult when key product characteristics are not visible, e.g., camera rolls or different
computer brands. Targeting the brand to a different segment is one way out. An upscale resort can down
scale itself for honeymoon enjoying couples. Thus a small segment is being catered by its down scaling, while
the entire market of holiday and business tourists remain unaffected.
It is sometimes necessary to manage both the parent brand and down-scaled brand by sub-branding
them simultaneously.
Upward Stretching of a Brand
A brand may be market leader, which is assaulted by price brands or private brands. This brand can
be stretched upwards. The margins at the upper end of the market are high. Mineral waters from Alps like
Evita, luxury cars and specialised magazines are all niche market products, and are less price sensitive. We
have now India Today stretched upwards as India Today Plus. Sometimes, a new brand name is created for
upward stretching, with no reference to parentage. Thus we have Lexus car from Toyota and Zen from Maruti.
Alternatively, a sub-brand can be used to upscale the brand. Thus we have Amex Gold card, as distinguished
from Amex Green card for high-income individuals. The risks involved in damaging the brand equity of the
parent brand are much less while moving up, than while moving down. Sometimes, the premium brand may
make the parent brand look ordinary. It is necessary to develop a distinct identity of a sub-brand. Sub-brands
which are premium use descriptive terms like Kodak Gold, Captain Cook Premium salt, AmEx Platinum card,
limited edition Iiqour etc. Butsuch descriptive terms make the move to make the sub-brand distinct that much
more difficult. A brand being stretched upwards must have consistent identity and must contribute positively
to the original brand identity.
Brand Extensions in Other Categories
Brands are extended to other product categories, e.g., Videocon is extended from washing machines
to TV to audio products to refrigerators to water-purifiers to air-conditioners. This is done to take advantage
of the brand's associations, perceived quality and awareness levels. Such brand extensions re-inforce these
associations and awareness levels. The risk is that sometimes the brand name does not add anything to the
new product category. It may so happen that negative associations of the original brand pass on to the
extended brand. In extending the brand this way, we may even dilute the equity of the original brand.
Sometimes, we may lose an opportunity to develop an original brand name for a new product category.
Organisations extending brands across categories create mega-brands. The better term, however, is range
brand that works across several product categories. The decision to have range brands is more strategic and
long-term.
Co-Branding
Another method to leverage a brand is to adopt co-branding. In co-branding, a brand is not extended
while moving into another product category.
Ingredient brands use branding for key ingredients in a brand. Composite brands combine two brands
to add to consumer benefit or to reduce costs.
Times Card, under the Master Card logo, issued by Citi Bank is an example of a composite brand.
Affinity brands are co-brands used forfurthering a cause. A card issued to further women' s movement, and
branded as women's card is an example of an affinity brand. Citi Bank's World Wild Life Card is also an
example of an affinity brand, where part of the transaction money goes to serve some social cause .
BRAND EQUllY
A brand is as much an asset as a factory and plant and machinery are. A brand does not become an
asset as soon as it is born. It is 'built up' over a period of time. Before it comes into existence, there is a long
development process at a great cost. After creation, there is investment to improve it continuously. Brand
equity is just the process of brand building. A good example of brand equity is Wills Filter cigarettes which
has a heritage of more than three decades, and which has taken close to 30 price increases in its stride, and
yet it holds its own. It enjoys immense loyalty. The Wills Filter Made for Each Other campaign has been
nurtured, nourished and continuously freshened. Another example of brand equity is Lux, which has
consistently followed a strategy of 'beauty soap of film stars' position.
Brand Heritage
Heritage brands have a glorious past, and a carefully nurtured image built over a period of time.
However, heritage alone or the core values built over a period of time around the brand may not be sufficient
to be a winner in the market place. Sometimes, heritage becomes an inherent weakness rather than a strength
especially in the face of a target audience of new generation. We have to keep adding on new values to
the brand, taking care that old core values are not diluted while doing so. At times, line extensions are put
in the market which have the same core values of the past, but are contemporary in the delivery form for instance Lux and Lifebuoy. Lux has tried to remain as young as the reigning star. Wills Navy Cut cigarette
is another heritage brand that has adjusted itself to the present times. It is to be noted that what works for
one heritage brand may not work for another. Sometimes, the product category to which a heritage brand
belongs loses its relevance. Cad bury chocolates enlarged its base by being relevant to adults. Horlicks lost
out as a milk substitute and became a health drink with proteins, calcium, vitamins and iron. Heritage
sometimes becomes generic - Duckback provides protection from water. This can be extended beyond
the present product to products like wind-cheaters and cost-wool shirts. It should be noted that management
of heritage works the magic, rather than heritage by itself.
213
Brand Equity
Brand Equity
To Upshaw, brand equity represents 'the total accumulated value or worth of a brand.' Konapp (2000)
considers brand equity is 'totality of brand's perception.' He includes the feelings of consumers, customers,
employees and all stakeholders while measuring the brand equity. Keller (1993) defines brand equity in terms
of marketing effects whereby certain outcomes occur as a result of brand name, and these would not have
occurred, had there been no brand name. To Trout, brand equity is simply the reason one should buy a
specific brand instead of a competitive brand. The equity of a brand consists of its assets and liabilities.
We have to understand that in order to have equity, there should be a brand. Ifthere is no brand, there
is no equity. Customers respond to a brand in a discriminative manner or are willing to pay a premium for
the brand. When these responses are converted in terms of money; it represents the brand's financial worth.
A brand draws customers on a sustained basis, and this can be attributed to its perception in their mind or
its image. It is the key driver. This loyalty of customer towards the brand on account of their perception is
customer equity.
Diagrammatically, brand equity can be presented as Brand
(Product
+Associations)
Brand Identity
Brand Image
(Perception)
Revenue + or (Equity)
The output of the process of perceiving a brand image clothed in the brand name leads to cash flows
or equity. Brand identity is in the consumer's mind space. Brand name is just a cue. It triggers offthe process
in the mind. The intervening variable between brand name and the brand equity is the brand identity or image.
Strong brands take the equity upwards. Weak brands lead to marginal increase. The key driver of brand equity
is the brand image. Brand image is a matter of customer perception. Therefore, brand equity has a customer
perspective. Brand equity gets affected by the attitudes of the consumers towards the brand. Brand
associations are embedded in the information nodes of the brain. These nodes store information about the
characteristics of the brand, its benefits, its functions, its psychological position etc. Brand name is the central
node to which these information nodes are connected. It determines the buyer's behaviour. From the
viewpoint of the customer, brand equity shows strong positive brand attitude dependent on the beliefs and
meanings accessible from the memory when activated.
Aaker calls brand equity a set of assets associated with a brand, and which add to the value provided
by the product/service to its customers. Brand equity is usually measured using brand awareness quality,
loyalty, associations and/or brand assets. A brand equity is in effect the aggregate of potential customer's
beliefs that it will deliver on its promise.
Brands have equity both for customers and investors. Brand equity translates into customer preference,
loyalty and financial gains. Brands are appraised and traded in the market. Brand equity has several
dimensions. According to Kotler, these include performance, social image, value, trustworthiness and
identification.
In the final analysis, the term brand equity refers to the value inherent in a well-known brand name.
A strong brand equity means easy acceptance of new products, willingness to pay more for the brand,
preferred shelf-space. A strong brand equity gives financial c1outto the company. Brands with strong equity
can be bought and sold. It is easier to buy than to create a brand name with enduring strength.
A Relationship
Let us take a simple example. You meet a friend of yours after a long time, but he does not show
the type of warmth that you expect in a long-standing friendship. May be, he is experiencing the 'blues' due
to a bad day at the office. You are hurt but you are generous enough to understand his predicament. At
the next meeting, the friend still is not in his element. You imagine some family problems may have told
214
Product Management
upon his temperament. But when you are short-changed repeatedly, you put an end to this relationship.
A brand can be compared to your friend. Though you may have a great relationship with the brand, you
may ultimately discard it if it fails to meet your expectations. Once or twice, you can understand some
shortcomings. Over a period of time however, your experience with the brand must not be unsavoury. Brand
equity though initially high is diluted everytime the brand does not measure up to your expectations. A brand
is a person, a friend, a companion. Your relationship or connect with the brand develops over a period
of time. The more the number of people who have such connect with the brand, the more is its equity.
Aaker's Approach to Brand Equity (1996)
Aaker calls brand equity a set of assets associated with the brand.
Which is this set of assets Aaker is referring to, which when associated with a brand lends it equity?
Brand awareness, brand loyalty, perceived quality of the brand and brand associations are the four assets
which brand managers create and enhance to build brand equity. It is also necessary to realise that a brand
is an intellectual property and so patents also form a brand asset. Besides, we cannot undermine the
importance of the relationship between a channel and a brand. We shall consider these assets one by one.
BrandAwareness
We say we are aware of brand when its presence is registered in our mind. The level of awareness can
range from mere recognition to recall to top-of-mind to dominant. We recognise a brand on account of past
experience. Recognition by itselfleads to positive feelings. Familiarity also means that a company is spending
money to keep it in our memory. We remember some brands when a product class is mentioned. Thus,
detergents bring to our mind, Surf, Ariel and Nirma. Though recognition is a positive sign, it does not
necessarily indicate the brand's strength. We recognise a weak brand too. When for a product category, we
name only one single brand, it is called brand name dominance. Say computers and we remember just IBM.
Say copier and we remember just Xerox. However, such dominance may make a brand generic, e.g., Dalda
for any vanaspati ghee and Aspirin for any headache tablets. While creating awareness, we make use of
advertising, promotion, event management, sponsorships, PR and direct marketing. Some brands have small
life, and so it will be uneconomical to incur heavy promotional expenses for them. It is economical to use
corporate brand names in such cases. As promotion is expensive, we must have a policy regarding the number
of brands which are selected for brand-building. Awareness ultimately enhances brand equity. Some brands
should have a different kind of awareness as they are strategic brands. A brand that is promoted over a period
of time retains cumulative level of name recognition.
Brand Loyalty
Brand equity concept tends to exclude brand loyalty, as loyalty itself is an outcome of a good equity.
However, Aaker includes brand loyalty in the set of assets, because the other a...c;sets that make up brand equity
and brand loyalty work simultaneously in tandem. A brand manager who conceives programmes to build
brand loyalty is actually enhancing brand equity.
Brand loyalty gives us a stable and growing market share. It is reflected in the purchase price. Brands
with larger market shares, according to one study, have proportionately larger group of loyal buyers.
Brand loyalty means to retain our existing customers on a continuous basis. It is less costly to do so
than to attract new customers. Even when we lure new customers, it does not mean we have to ignore our
existing customers. Strong brand loyalty is an effective entry barrier for the competitors.
Brand loyalty can be c;lefined in terms of consumer behaviour or consumer attitudes. Frequency of
purchase is a behavioural indication. Attitude towards a brand is an attitudinal indication. Food products
have more brand loyal users. A customer who has found a satisfactory brand resists the promotional efforts
of rival brands. Brand loyalty is not necessarily based on perceived differences amongst brands. Brand loyalty
is also time-related. Brand loyalty is related to involvement. High involvement leads to extensive information
search, and hence to brand loyalty.
Brand Equity
215
An organisation can put its customers into loyalty segments - those who are really committed to the
brand and those who buy brands possibly due to habits formed. These two categories of customers need
marketing support to retain their loyalty. There are non-users of the brand and customers who are indifferent
to it.
Brand loyalty develops quite early in family life cycle. Marketers should not play around with brands
having loyal following without considering all the factors. A new Coke formula was not acceptable to its brand
loyal customers.
Brand loyalty is enhanced by creating brand awareness, improving perceived quality and establishing
a clear identity. To enhance brand loyalty, there can be incentives forfrequent buyers, benefits of a customer
club and data-based direct marketing. Sales promotion also helps in arresting a declining brand loyalty.
Brand switching is a headache for brand managers. It happens when there are new products with
distinct benefits. There is brand switching due to pricing. Sometimes, customers develop fatigue with an
existing product-brand. Product line extensions and product-form extensions are sometimes used when brand
loyalty starts declining.
Brand loyalty is closely related to brand associations and imagery evoked. These are emphasised in
promotion to enhance the brand memory.
BrandAssociations
Consumers associate the brand with certain tangible and intangible attributes, a celebrity endorser or
a visual symbol. Most of these associations are derived from brand identity and brand image. Each
organisation has to carve a brand identity and develop it further to build strong brands. Brand associations
have already been discussed in the previous chapters.
Perceived Quality
Perceived quality becomes an important asset for a brand as it is a major thrust area of a business.
It affects all other elements of a brand identity. Perceived quality is a result of an understanding of the
requirements of customer segments. Perceived quality leads to financial performance. It is a key positioning
dimenSion, and often a part of company's mission statement. Quality achieved, however, in an area not
considered important by the customers may not payoff. Perceived quality is based on judgements of quality.
It is necessary to understand the cues associated with quality. Perceived quality is not the same thing as actual
quality. Suppose the physical quality of the product improves, butthe consumers still carry a poor image the
product had, the perceived quality will be low. It is necessary to educate the customers about the right
parameters to measure the quality.
The building blocks of brand equity are awareness, loyalty, associations and perceived quality along
with patents and channel support. Upshaw (1995) calls this identity equity. There is another kind of brand
equity called valuation equity which focuses on the financial value of the brand.
Brand EqUity's Diagrammatic Representation (Aaker)

When we say a brand has a high equity, we mean it has a high value as a tradeable asset. This equity
may be due to a number of factors. Mostly, brand equity is because of its reputation, loyalty that it
commands, the awareness it has, its distribution, patent and other brand associations. David Aaker has
diagrammatically represented brand equity as follows:
It is obvious from the Fig. 17.1 that brand equity is captured in the brand name and symbol of that
brand, A brand has equity both with the consumers and distributors. Coke is having very high brand equity
because it is within our reach anywhere in the world owing to its wide distribution.
High equity brands are preferred by the consumers since they find it easier to interpret what the brand
stands for - what benefits it offers, and are confidenl' in dealing with it. They do get more satisfaction by
216
Product Management
using a high equity brand. Such preference of consumers can be leveraged, and a company can charge a
higher price , and can command loyalty and run more effective marketing programmes. (It need not do more
sales promotion and can extend the brand). It has a higher asset value.
Reputation
Awareness
Brand
Equity
Brand name-Symbol
Brand Assets
such as Patents
Loyalty
Value to the Consumer
Facilitates information
processing and interpretation
Assurance regarding purchase decision
Consumer satisfaction
Value to the Company

Effective marketing programme
PriceIMargin leverage
Extensions
Loyalty
Competitive advantage
Fig. 17.1 Brand Equity (Aaker)

Adapted after Managing Brand Equity (N.Y. : Free Press, 1991)
Keller's Approach to Brand Equity (1993)

Keller has focussed on the relation~/:lip of a brand with the consumers. According to him, brand equity
is related to a consumer's familiarity with the brand, and his favourable associations with it. These
associations are strong, congruent, unique and leverageable. Both these lead to greater consumer preference.
Keller's approach is diagramatically represented in the following figure:
Brand Knowledge
I
Brand
Awareness
Brand Image
I
Brand Associations
~
Recall
Recognition
Attributes
Favourability of
Brand Ass,ociations
Non-Product Related
Price
Packaging
+
User Imagery
Strength of
Brand Association
Benefits
Usage Imagery
Uniqueness of
Brand Associations
Attitudes
I
Functional
Experiential
Fig. 17.2 Brand Knowledge of a Consumer

Adopted after Kevin Keller, Conceptuallzln,g and Managing Customer Based Brand Equity,
Journal of Mal'ketlng (1993), AMA
Brand Equity
217
It can be seen from the above figure that brand associations relate to the attributes of the brand, or
benefits or attitudes towards it.
Brand associations generally contribute to brand image. A brand is just not a physical entity. It is what
the consumer thinks and feels it is or visualises itto be when he comes across the brand name or its symbol.
Strong brands are brands with a substance - they evoke more favourable or stronger associations.
Explanation of Keller's Approach to Brand Equity (1993)
Keller has focused on the relationship of a brand with the consumers. He talks in terms of brand
knowledge which is either favourable or unfavourable. Consumer's response, to a brand depends on this.
Consumer's brand knowledge results from brand awareness and brand image. Brand knowledge evaluates
the consumer's interpretation of the values linked to a brand. Brand image reflects consumer's perception
of the brand's characteristics. Thus, these two are core components at the bottom of brand attributes.
Brand awareness reflects the salience of the brand and helps consumers identify the brand with a
specific prod uct category. It can be measured through brand recognition (previous experience with the brand)
and brand recall (retrieve the brand from the memory).
Brand associations relate to the attributes of the brand or benefits or attitude towards it. These generally
contribute to the brand image. A brand is not just a physical entity. It is what the consumer thinks and feels
it is or visualizes it to be when he comes across the brand name or its symbol.
Strong brands are brands with a substance. They evoke more favourable associations.
Brand associations are strong, congruent, unique and !everageable. Brand awareness and brand image
lead to greater consumer preference.
Alex Beil on Brand Associations
Alex Beil puts brand associations into two categories - hard and soft. Hard associations are tangible
or functional attributes such as price, speed etc. Soft associations could deal with personality (a youthful
personality) or life-style. Brand associations, according to Beil, are drawn from product image, or company
image or user image. Some associations flow from the country of origin, in case of global brands. Brand
associations put together lead to brand image, and to brand equity. Non-image factors such as market
growth, margins also contribute to brand equity. Beil's thinking is diagrammatically given here:
Soft Attributes
Demographic
Factors
Functional
Attri~utes
Company /
Product
Image ~=------.....
~ Imtge '"----- - - - - . Brand
Image
Non-image
Factors
Brand
Equity
jer
~ Image
Soft
Attributes
Market
Value of a Brand
Fig. 17.3 Types ofBrand Associations

Adapted after Alex Bell, Converting Image into Equity,
Journal of Advertising Research (Nov.-Dec. 1992), ARF
218
Product Management
Brand Valuation Methods
Brands can be valued in a number of ways. The following table illustrates different brand valuation
methodologies:
Criterion of Valuation
Description
Cost-based
Historical cost
Replacement cost
Actual cost in establishing a brand.

Cost of establishing a similar brand under current market. It includes costs
for product development, test marketing and promotion.
Market-based
Comparable market value
Value paid in comparable transactions recently.
Comparable royalty rate
Royalty paid of usage of a similar brand.
Economic
Capitalisation of earnings
Future potential of the brand in terms of earnings.
Brand contribution
Premium generated by the brand over a comparable generic product.
Royalty
Potential revenue generation by making use of the brand name by

another group.
Hybrid
Asset-approach
Net Asset Value (NAV) of the business.
Multiples
Multiple of earnings or sales paid for acquisition of the brands.
Consumer-based
Equi-Trend
Consumer's perception of the brand's quality on an eleven-point scale.
(Total Research Corporation)

Conversion Model
Willingness to continue to buy the brand.
(Market Facts)
Image Power
Brand equity is based on how well the brand is known and is regarded.
(Landor Associations)
Brand Equity Index
(Longman Moran)
Four factors are considered - the high market shares or concentration of

the brand, the repeat rate, the substitutability and brand equity index.
Brand equity is brand awareness liking perceived quality.
Historic Costs
In this approach, the costs of establishing the brand are aggregated. These costs are investment costs
such as marketing, advertising and R&D expenditure incurred since the birth of a brand. We assume all these
Brand Equity
219
costs have contributed to the value of the brand, and none of them were ineffective. But in this model, an
older brand is more valuable than a younger one. Historical costs therefore should be adjusted for inflation.
A brand acquires value after several years of nurturing. It is to be decided at exactly what point of time its
value is to be considered. This model ignores the qualitative factors such as creativity of advertising support.
Some factors are unquantifiable, e.g., management expertise and organisational culture. There are brand
failures involving huge expenditure. But out of these failures, managementleams to make a successful brand.
How costs incurred on failed brands could be allocated? This approach is far from perfect.
Interbrand Approach
Future EarningsDiscounted to Present-Day Values

Interbrand Group PLC is the pioneer in the field of assessing the brand value (Birkin, 1994). In order
to assess the brand value, a company must compute the benefits offuture ownership, i. e., current and future
cash flows of a brand, and discount them to take inflation and risk into account. In this model, the net present
value of the future earnings of the brand determines its value. A brand is evaluated against two factorsearnings and strength. Strength represents the potential of future earnings - it represents the discount rate
given by a brand multiple. The greater the multiple, the larger the scope of future earning, and to that extent
the lesser risk. It also translates into a low discount rate.
Brand Earnings
Just as a PIE ratio gives company's market value, brand multiple is used to provide the value of a single
brand. Brand multiple is given by
Brand Multiple
Brand Equity
Brand Profit
Therefore, the brand value is given by Brand Profit x Brand Multiple = Brand Equity.
A brand's earnings are adjusted. First historical profit and loss account is made, since future earnings
are extension of the present earnings. The profit taken is post-tax profit, after deducting central overhead
costs. If earnings are composite from manufacturer's brand and private label brand, there should be suitable
adjustment. Even earnings that do not relate to brand strength are adjusted - earnings that a generic would
have earned. Generally, average profits of the previous three years are considered. It reduces the effect of
any unusual year's performance. But while doing so, we can assign weightage to the different years; the most
recent being given a weight of 3; and year immediately preceding it a weight of 2 and the year before that
a weight of 1. The aggregate profits are then divided by the weighting factors, i.e., six in our case. Each year's
earnings are adjusted for inflation also.
Brand Multiple
After calculating brand's earnings, we should calculate brand's multiple. Brand multiple is given by
brand strength, since it indicates its future earning potential. Interbrand proposes that a brand's strength can
be found from evaluating the brand against seven factors.
Brand Strength
A brand's strength is a composite constituted by measuring the following seven variables:
(i) Leadership
How the brand influences the market? Dominance, strong distribution.
(ii) Stability
How enduring the brand has been in the market? Established brand, consumer
loyalty.
(iii) Market
How attractive is the market in terms of growth, entry barriers etc.? Stable and
growing market. High entry barriers.
220
Product Management
(iv) Geographic
How appealing and acceptable the brand is across different markets? Appeal
across main market.
(v) Trend
How relevant the brand is and whether it is contemporary? Long-term trend

healthy.
(vi) Support
What marketing support has been made to maintain the brand? Investment and
focused support.
(vii) Protection
How the brand is protected legally? Trade mark registered. Legal protection.
After auditing the brand against the above seven factors, we tabulate the maximum scores for each
factor as follows:
Strength Factor
Maximum Score
Leadership
Stability
Market
Geographic
Trend
Support
Protection
25
15
10
25
10
10
5
Total Score
100
Source: Interbrand, Berkin (1994).
Relationship between Brand Strength and Brand Value

The relationship between the brand strength and brand value follows normal distribution represented
by an S-curve. As the brand becomes stronger, it shifts to the right of the S-curve. The multiple on the left
and the curvature is decided by considering all the brands of that particular segment or industry. The higher
the score of brand of strength, the greater is its multiple score.
WEAK BRAND
MEDIUM BRAND
STRONG BRAND
20
J.I.l
.....l
1=1-.
......
!:l
~
~
J.I.l
--~
0:::
......
Z
IZl
......
Cl
0
0
25
50
BRAND STRENGTH
75
100-D
Fig. 17.4 Relationship: Value and Strength
If the brand strength is known, as taken on x-axis, then corresponding brand multiple can be obtained
any-axis.
Brand Equity
221
A brand adjusted estimated earnings are discounted by the measure of brand strength so as to getthe
present value.
Limitations
(i) Interbrand approach has an accounting focus. It has relevance for audit purposes.
(ii) Market multiples may not necessarily be correct indicators of brand strength.
(iii) It is used at the time of acquisitions. But the final figures for brand acquisition may be inflated on
account of overbid. The S-curve ignores this factor.

(iv) A slight variation in the multiple can modify the value of the brand significantly.
Interbrand Survey
Businessweek Interbrand Survey lists the world's 100 most valuable brands. Eight of the top 10 slots
are taken by the US brands - Coca-Cola, Microsoft, IBM, GE, Intel, Disney, McDonald's and Marlboro in
that order. The only exceptions are Nokia at No.8 which has originated in Finland and Toyota at No.9
originated in Japan. The list contains a fair sprinkling of brands from Asia - Toyota (9), Sony (20), Honda
(18), Samsung (21), and Europe - Mercedes (11), BMW (17), Nescafe (23) - to name a few. Not even
one Indian brand figures among the top 100. Interbrand's list is not consumer but number-based.
Interbrand
Interbrand started as an organisation specialising in brand and corporate name development in

London in 1974. Later, it developed into a multi-disciplinary brand consultancy firm. In 1994, Interbrand
was asked by Ranks Hovis MacDougall (RHM), a UK-based food company to fend off a hostile take-over
bid by Goodman Fielder Wactie (GFW), an Australian food group. RHM could repel GFW bid on the basis
of a brand valuation exercise by Interbrand for RHM. Thus, Interbrand was given the first opportunity to
try its hand at brand valuation. This ability was further consolidated in collaboration with London Business
School by developing a proprietary brand valuation methodology through cash flow analysis, brand
strength scoring and discounted cash-flow valuation. The UK Accounting Standards recognised this
methodology as the basis for balance sheet valuations of brands.
Interbrand has so far valued more than 1200 of world's leading brands. It has recently tied up with
Equitor Consulting, Bangalore to have a foothold in India.
Several elements are considered to decide the world's most valuable brands. Even for the purpose
of qualification, the brand must have a value of greater than $ 1 billion, draw about one third of its earnings
outside its home country and have publicity available marketing and financial data. Some brands do not
satisfy one or more of these criteria and are thus eliminated e.g. Visa, Wal-Mart, Mars and CNN. Parent
companies are not ranked and that is why P&G is eliminated. Air-lines are excluded since it is difficult to
factor in the effect of brand on sales.
Interbrand's methodology evaluates brands just like other assets - the potential of future earnings.
The projected profits are discounted to a present value, assuming that those earnings will actually materialize.
As a first step, we have to figure out what percentage of a companies revenue can be attributed to
a brand. The brand may be almost the entire company e.g. McDonald or just a portion e.g., Marlboro.
Interbrand projects five years of earnings and sales for the brand. Out of these earnings, operating costs,
taxes and a charge for capital employed are deducted to get the intangible earnings. Intangibles such as
patents and customer convenience are stripped out to assess the portion of earnings entirely due to a brand.
In the last step, the brand's strength is assessed to determine the risk profile of those earning forecasts.
The elements considered are market leadership, stability and global reach. This generates a discount rate,
which is applied to brand earnings to get the net present value.
According to Interbrand, a nascent brand shows slow growth to begin with but its growth increases
exponentially as it moves from national to international level. But research suggests, the relationship between
the brand strength and brand multiple may be of less regular pattern.
Interbrand, in spite of the above limitations is a popular method of brand evaluation.
222
Product Management
Young and Rubicam Brand Asset Valuator Model (Y&R Model, 1994)
Rediffusion DY & R brought its Brand Asset Valuator (BAV) to India in 1998. BAV is a tool for building
and managing brand equity, and was perfected through a study involving over 40,000 people across 40
countries. The agency claims that BAV is the most extensive worldwide study of brands ever undertaken. BAV
takes the agency beyond creative services and closer to advisory services. BAV has been used for 11 clients
so far including Maruti, Airtel, Citibank, Herbertsons and ING Insurance. Brand consulting is however, not
possible unless there is partnership with the clients.
This model is based on consumer perceptions, and evaluates a brand on two dimensions - brand
strength and brand stature.
According to this model, brand strength is the combination of differentiation and relevance, where
differentiation means distinctiveness of a brand in the market and relevance means its appropriateness or
meaningfulness to the consumer. We have no reason to be in business if we are not differentiated. Relevance
is important to build and sustain a business.
Brand stature is a combination of esteem and knowledge. Esteem means the quality perception,
popularity and regard for the brand in the minds of the consumers. Knowledge refers to an understanding
by the consumer about what the brand stands for. Esteem is what the consumers give back to the brand.
By measuring the brand on these two dimensions, we can assess the health of a brand. This model
can be used as a diagnostic tool.
Young and Rubicam propose that scores on the relevance and differentiation provide an assessment
of brand's potential for growth. They call this brand vitality. Scores on esteem and familiarity, as we know,
measure brand's current strength brand stature. A matrix can be prepared by plotting these values:
or
High
Unrealized
Potential
Leadership
New
Low
Eroding Potential
0
~
Low
Brand Status
High
Fig. 17.5 Strategic Direction of Brand Strength, After Young and Rublcam (1994)
The life of a brand begins in lower-left hand quadrant A. It has low scores on all attribu.tes. Managers
have to invest so as to move the brand upwards to quadrant B, and to gain vitality in terms of differentiation
and relevance. Brand managers can then have two options - maintain them as niche brands or build its
esteem by investing more so as to move it to quadrant C.
This top right-hand corner quadrant is home to strong brands. They have good brand equity growth.
But still there is scope for further growth. Managers have to maintain brand's stature and handle its vitality
creatively. This ensures a long life to the brand. But if it is not maintained properly, its vitality falls (in terms
of differentiation and relevance). The brand is on price promotions, and declines to quadrant D. It then
223
Brand Equity
becomes vulnerable to price competition. As its future is bleak, its marketing support is cut, resulting in a fall
of familiarity and esteem. As a result brand equity falls, as the brand slips back to quadrant A.
Advantages
(i) We can identify the aspects of brand (familiarity, esteem, differentiation, relevance) which need
our attention in the long and short-run.

(ii) It juxtaposes our brands and competitor's brands. We can then formulate suitable strategies to
increase our brand equity and protect them against competition.

This database of knowledge called BAV helps in gaining insight on the driving forces behind great
brands. When a brand begins to erode, the first thing it loses is differentiation. If a brand can maintain higher
scores on the other three, it can turn things around. But if no action is taken, all the factors start eroding,
and eventually a brand dies.
Landor's Brand Economic Model (BEM)
Landor is a branding consultancy firm of WPP group. Brand Economic Model is a component of
Landor's proprietary research on brands. The research has a sample size of 1.51akh people around the world.
It covers 2000-3000 brands, 500 of which are global, and looks at them from the consumer perspective.
It is a component of BAV. BEM enables brand evaluation modelled on financials to be combined with
consumer perspectives to get the full picture. BVA provides consumer insight which is read with financial
performance and economic context using EVA methodology. Landor assesses a brand's contribution to
company's financial performance by looking at the relationship between changes in brand health and
changes in financial performance and value.
Perceived
Personal
distinctiveness
appropriateness
of the brand
of the brand
(Differentiation)
(Relevance)
Brand Asset
Valuator
(BAV)
Approach
Regard for
Understanding
the brand
of the offering
(Esteem)
(Knowledge)
Stature = Esteem + Relevance

Strength = Differentiation
+ Relevance
Fig. 17.6 BA V Approach
Price Premium
This is a measure of brand loyalty. What kind of money a consumer is willing to pay for a brand in
preference to its competitors? A consumer may be willing to pay more for brand A than for brand B. This
224
Product Management
is the price premium associated with brand loyalty. It could be high or low, and positive or negative. While
measuring price premium, it is necessary to divide the market into loyalty segments. Premium is always with
respect to one or a set of competitors, which must be specified. A simple question put to the customers
measures price premium, e.g., how much more would you pay so as to buy Sony TV instead of Video con
TV? A sophisticated approach would be to conduct conjoint analysis or trade-off analysis. A drawback of
this approach is its reference to a competitor or set of competitors. It is necessary to arrive at several set of
price premiums when there am a number of brands in the market. Even then an emerging competitor might
be missed.
Premium Price
We can compare the premium price of a branded product over a non-branded or generic product. The
difference between the two prices multiplied by the volume of sales of the branded product represents the
brand's value. But it is not always possible to find a comparable generic product.
Customer Satisfaction
Satisfaction or preference for a brand shows how loyal the consumer is likely to be to a brand.
Consumers are asked abouttheir experience with the brand, and whether the brand mettheir expectations.
Preference is measured by asking them whether they would recommend the brand to others, and whether
they would again buy the brand. It is also assessed whether the usage of the brand caused some
inconvenience. There can be direct questions about loyalty to the brand, e.g., are you loyal to this brand?
Satisfaction model is very useful in service industry like airlines and banks. One drawback of this model is
that it can be applied only to the users and customers.
We have discussed evaluation of brands with respect to the market and consumers. We have to consider
one more factor- competitors. How the competitors assess the brand is also important in brand valuation?
Brands limit our competitors' options.
Sustainable Competitive Advantage

Being an asset, a brand is source of competitive advantage which is sustainable, e.g., share of mind,
share of heart, perceived quality. This advantage is brand equity. It is difficult for the competitors to imitate
this advantage. Equity of a brand due to competitive advantage is also subject to threats of imitation and
substitution. We have to nurture a brand continuously to protect its equity. A brand as an asset is leveraged
to realise its value. In the process, it depletes in value. There should be constant value addition to it so as
to exceed its value depletion. This alone maintains the sustained competitive advantage.
Brand Buying and Selling
Knoll sold Coldarin brand of anti-cold tablets to Johnson and Johnson at a price of Rs. 22 crores, four
times its net sales. Knoll sold Burnol to Reckit Piramal at a price of Rs. 12 crores. Duphar Interfran received
Rs. 45 crores on selling its brand name Crocin to Smith Kline Beecham (SKB). It is more than its peak sales
ofRs. 27 croreswithDuphar. The current sales ofCrocin is Rs. 35 crores. LeverpaidRs. 110 crores to acquire
Lakme's brand in 1997. In 1993, Coca-Cola paid about Rs. 175 crores to buy Thums-Up, Limca, Citra and
Gold Spot. Generally, payments made are three times of actual sales. Potential sales are expected to be 78 times of current sales. The more meaningful valuation of brands would be a multiple of potential sales,
and not a multiple of actual sales. Companies generally sell off marginal brands to emphasise on core areas.
Brands come clean when bought and generally without field staff, liabilities and add to the top-line
immediately. In India, MNCs consider buying brands in those segments which they understand due to their
presence in the segments internationally, e.g., Johnson and Johnson bought Coldarin as it has experience
of selling Tylerool, a popular anti-cold preparation in the US. Under-promoted and potential to leave brands
are also targets. Sometimes, brands are bought to synergise with existing brands, e.g., Ranbaxy purchased
MOX from Gufic as a companion to its Ampicilin brand. Brands are purchased to tap areas of market so
225
Brand Equity
far untapped. Crossland's takeover bought dermatological brands to Ranbaxy. It is essential to be accurate
about our estimates of sales or else the valuation will go wrong. Ranbaxy paid Rs. 80 crores for Max, Zole,
Excel and Suprimox. It is also necessary to separate pure brand profits from product profits. It is so difficult
to separate the brand from the restofthe company and from otherintangible assets like patents, know-how
and business relationships.
BPL has been sold to Essar with BPL earning at least Rs. 1400 crores. Corn Products Co. India Ltd.
has acquired the Captain Cook Brand. Years ago, Dhangadra Chemicals Works (DCW) made Captain Cook
salt. In 1998, InternationalBest Foods bought the brand. Later, it was sold. Corn products have also acquired
Tarla Dalal Food (TLF) brand name. United Breweries (UB) Group is re-structuring its brand portfolio and
is evaluating all its brands. Its McDowell and Kingfisherbrands are alre adyworthaboutRs.2000crores.Boots
has acquired anti-acne brand Clearsil from P & G for $ 340m. In India, the brand will be used by Boots
Piramal Health Care. The big brand acquisition recently was that of Dabur buying Balsara.
Brand valuation, though a financial exercise, should be based upon marketing research. Brand
valuation must also be related to distribution. A market leader's loyal distribution channel can be assigned
a high value. A brand may have some value independent of the distribution channel, but it is rare. The
distribution network is valued on the basis of cost, time taken, potential to sell other products, and potential
to act as entry barrier. We can also consider the market value of the company's shares since they capture
the brand's value indirectly. Under the Indian law, a brand can be sold only when it is registered. An
unregistered brand can be sold along with the business. In India, there is no need to amortise brands in
accounting.
THE MAJOR DEALS

Date
December 2002
December 2002
September 2002
June 2002
June 2002
May 2002
December 2001
September 2001
November 2000
September 2000
September 2000
June 2000
March 1999
January 1999
Bestfoods
January 1999
June 1998
(Abott India)
December 1997
December 1997
Acquirer
Seller
Brand
Acquired
Transaction
Value
Sales
(Rs. Mi11ion)
PIS
Guinness UDV
Label
East Asiatic
Pfizer
Raymond
ColorPlus
Ranbaxy
P&G Healthcare
Dr. Morepen
Yash Pharma
Desai Brothers
ADF Foods
Morepen Labs
ReckiU
Zydus
Cadila Kopran
E. Merck
GSK
US Vitamins
GSK
Universal Medicare GSK
Macraberin
Glenmark Pharma Lyka Labs
Sensur
Ranbaxy
Gufic
International
DCW Home
Products
HLL
Lakme
Gilbery's Green
600
1143
05
Alcohol
Protinex
Colorplus
Veratide
Lemolate
Mother's Recipe
Piramal Burnol
Aten
Livogen
Anovate, Derobin
Multivate FM &
350
600
250
110
60
90
950
90
60
100
200
570
192
96
88
62
380
75
60
100
1.8
1.1
1.3
1.1
0.7
0.5
2.5
1.2
1
1
Pharma
Apparel
Pharma
Pharma
Foods
Pharma
Pharma
Pharma
Pharma
Pharma
Alex, Flucort &
350
233
1.5
Pharma
Gufic
Captain Cook
700
785
636
800
1.1
1.0
Pharma
Foods
Lakme
1,101
1,376
Personal
Knoll Pharma
Epilex
100
50
0.8
care
2.0
Burnol
Coldarin
125
210
55
60
2.3
3.5
Pharma
Pharma
United Breweries
Reckitt India
Reckitt & Colman Knoll

Johnson & Johnson Knoll
Sector
Pharma
226
August 1997
Bestfoods
January 1996
1995
Food Division ,
October 1994
1994
care
Product Management
International
SmithKline Beecharr
Heinz
Complan, Farex
Colgate-Palmolive
Ciba-Geigy
Godrej
Tarla Dalal
Tarla Dalal
50
50
1.0
Foods
Duphar Interf f'I Crocin

Nycil, Glucon,
Glaxo
420
2,100
280
1,400
1.5
1.5
Pharma
Foods
Hindustan
Cibaca
1,309
573
2.3
Translektra
Good Knight
NA
NA
Personal
care
1.5 Personal
Source: Business Illdia, JUlle 9-22, 2003.
Brand Buying
As we are aware, establishing and bUilding a new brand is a complex time consuming exercise, replete
with risks. It is safer to buy an existing brand that has some equity in the market, and start the process of
building it from that point onwards.
Reckitl and Colin has picked up Colin, a surface cleaner brand from Fernlill Labs. Henkel has picked
up Brisk, again a floor-cleaner brand of Modem Home. Spencer is likely to fetch a good price for the RPG
group. P & G acquired Ezee, Key and Trilo from Godrej and sold them off to Cussons. Binacca may stage
a comeback through Dabur, and Rasika through Modem Foods. J & J has allowed Lever to use its Savlon
bra.nd to improve its position in germicide soap market. Ranbaxy is interested in buying 15-20 brands which
it has identified. Go::lrej bought Transelectra (Goodknight) for Rs. 80 crores. Glaxo received Rs. 210 crores
from Heinz. Colgate bought Ciba Geigy's range of toothpastes and brushes for Rs. 131 crores. Sundrop was
transferred at Rs. 25 crores. Brand value is the difference between market capitalisation and book value.
Business valuation is the brand value plus book value; or market capitalisation of the company. Merges can
generate additional business value.
Valuation by Capitalisation
Recently, the chairman of lTC estimated the value of its brands at Rs. 3,000 crores, though it is an
understatement. lTC's present equity consists of Rs. 11.673 crore shares of Rs. 10 each, amounting to Rs.
116.73 crores. Considering the stock market quotation of Rs. 450 per share, the market capitalisation
amounts to Rs. 5,253 crore.1f we deduct the net current assets of Rs. 4,210 from this, we getthe minimum
premium for the brands as estimated by the stock market. Nestle paid 2.5 times the amount of market
capitalisation to Rowntree. As per this norm, the valuation of ITC brands on the basis of 2 V2 times of market
capitalisation would be Rs. 13,132.5 crores. Coke' market capitalisation is accounted by its intangible assets,
mainly the brand. On Dec. 31,1997, Coke's market capitalisation was $ 165 billion, while its book-value
excluding goodwill, was $ 16.2 billion. Thus, almost 90 per cent of Coke's value is intangible.
We can capitalise the actual royalties commanded by the brand name, since they represent the
premium that an external party is willing to pay for the use of that brand name. This method is useful only
when a brand is licensed against royalty. In the absence of such actual arrangement, a notional royalty can
be calculated by a hypothetical arrangement where the hypothetical licensor owning the brand imagined to
have licenced it to the business against a royalty rate equated to lease rental. The imputed royalty is then
c3pitalised. The crucial part is to arrive at a reasonable rate of imputed royalty by making several subjective
assumptions.
Brand Equity
227
BRAND EVALUATION
Organisation
Ammirati-Purls
Model
Lin Solutions
Lintas
Ogilvy & Mather (O&M)
Insight, Consumer Speak, situation

Linkered is a quantitative tool.
Linsight is a qualitative tool. Lincepts is the creative
development tool.
Brand Audit
Qualitative assessment of brands.

Cadbury's brand audit led to the insight 'childhood
without end.'
McCann Erickson (M.E.)
Road Map
Based on Consumer knowledge,

dialogue and contact.
It goes beyond brand positioning.
Pulse monitors collective cultural undercurrents.
Brand-Footprint defines a brand essence.

Selling strategy emphaises generation of brand building
ideas.
Adworks provides born validation and feedback from
customers.
Priceless moments the famous
Mastercard campaign is inspired by Road Map.
The value of a brand can be evaluated by comparing the profitability of branded products to the
profitability of unbranded products of similar nature. The cost structure of both branded and unbranded
products is studied. The difference represents the premium price that the brand commands. This difference
is applied to a brand's sales level and the consequent after-tax earnings are capitalised at an appropriate rate
to arrive at the value of a brand name.
Brand Profits vs. Brand Sales
In India brand valuation is done 'prlce-to-sales' multiple, i.e., how many times the current annual sales
does the brand value present. However, this method does not work satisfactorily with a brand that shows
higher sales but only marginally higher profits. The valuation, therefore, should reckon with brand profits and
not brand sales.
Brand Consolidation
Birla group is consolidating its eight-odd cement brands into just one or two umbrella brands. ICICI
wants to use its corporate brand for its new business like retail finance. ANZ wants to leverage its corporate
brand equity by putting eight-odd consumer loan brands under one common name ANZ loans. Hong-Kong
Bank and its various subsidiaries will now be called HSBC and will emphasise a hexagonal logo in all its
advertising.
Brand Ownership vs. Shareholders
While brand strength does prove beneficial to the shareholders in a going concern, does it really benefit
them when the brands are sold, especially by the promoters who own them? Nirma is just marketed by Nirma
228
Product Management
Consumer Care. It is actually owned by Nirma Chemical Works, a closely-held company. Parachute and
Saffola do not belong to widely held Marico Industries, but to Bombay Oil Industries owned by the Mariwalla
family. They have been leased to Marico. The Tata name is owned by TataSons. The arrangement is perfectly
legal and does not violate the Trade and Merchandise Act. Lakme's share prices declined after the company
announced sell off its brands to HLL. Mostly promoters treat the brands as their personal property.
Synopsis
Brand value equals the net present value of its future cash flows. Future cash flows arise from future
sales volumes and prices. We have to consider also the leveraging option of the brands by extending them,
and put a value on this leverage.
Brands equity, as we know, also depends upon its key resources like product features, the number of
loyal customers, and sales outlets. We also consider intangible resources like the quality of retail display and
employee morale. We must identify the factors contributing to the valuation of the brand.
All these resources inter-act and create a system. It contains time-delays and feedback loops.
Management needs insight into the inter-dependence of the various factors.
There are efforts to develop software of valuation incorporating both the qualitative and quantitative
aspects. This model helps in identifying the revenue streams for each strategy. It reveals the impact of different
management actions.
Knowledge-based and Brand-based Measures
Traditionally, companies measure their value creation by financial yardsticks such as ROI. EVA,
ROCE, CVA etc. Capital has been considered a critical resource since the process of industrial development.
As now we have entered knowledge-based economy, we need not use capital-based measures of performance
for knowledge-intensive businesses. For those businesses forwhich the critical resource is knowledge, e.g., an
infotech company, the principal measure should be the productivity of knowledge assets of the business,
rather than the productivity of capital used. Similarly, for those businesses that create value through brands,
the productivity of brands has to be a principal measure.
Knowledge-based assets are usually in two forms. Some of the knowledge is in the form of intellectual
property such as patents. But much of the knowledge cannot be separated from the people who create it and
use it. Therefore, the principal knowledge assets are its people.
Value added per unit of capital is defined as profit produced by one unit capital, with profit defined
as sales less all costs, including people costs, but excluding cost of capital. If the critical resource is people,
then the denominator in the equation should be the number of people in the business and the profit in the
numerator has to sales, less all costs which should include capital costs but exclude people costs. This gives
the value added per unit of people or knowledge assets of the business. We can substitute brands for capital
to know the brand productivity. These measures are less precise than capital based measures. It is difficult
to know the cost of creating and maintaining brands. But we should overcome this difficulty and should not
use it as an excuse to exclude brand-based perfo!11}ance measures.
Superbrands
Marcel Knobil is devoted to the subject of brand management which has led him to set up Superbrand
Organisation in 1993 to promote excellence in branding and the discipline itself. It tracks brands in several
countries ofthe world where it maintains aSuperbrand Council. Every year, the council selects in each country
top brands in different product categories. Such selection puts the brands in a different league and represents
the best practices in brand management. Superbrand Organisation has now set The Superbrand Council of
India (2003). The Council has an eminent jury from the marketing and advertising world.
Brand Equity
229
According to Knobil, branding distinguishes a product from the competitors when all competing
products are technologically similar. Even in consumer products, consumers are not able to distinguish one
beverage from another or one cigareltle from another. Branding differentiates in such situations.
According to Knobil. branding is an evolving process. It uses new methods to capitalise on e.g. the
internet, SMS an product placement in movies. Branding has become sensitive to ethical considerations.
Some brands are being built solely on ethical platform e.g. Shell which cares for its customers.
Brand ranking is done the world over. Butthe consumer gains from such rankings only when they are
ranked against criteria such as 'the ability to deliver against promises.' Such ranking incentivise brands to
deliver quality to consumers.
Knobil also advocates good corporate brands since this reputation rubs off the sub-brands.
A brand is built upon much more than advertising and PR. Customer service is an essential element
of the brand. British Airways is the 'world's favourite airline.' They invested several million dollars in training
to live upto this ambitious claim. There was a significant improvement of service, and consumers started
admiring the brand.
Companies may adopt practices like 'putting change in the hands of the customers' , baby changing
facility, 24-hour open facility, loyalty cards etc.
Superbrand pays tribute to the most exceptional brands by awarding them after scoring .
BRAND BUILDING
Brands are developed over a period of time-they are not made in a day. The process of brand building
is continuous. At the new product development stage, the unique selling proposition (USP) is built into a
brand's concept. However, brands take on most values when they enter the market. Positioning at the
development stage is important but the real test of the brand is after it is launched. The destiny of the brand
is mostly shaped by the actual users. Brands should be constantly improved upon during the consolidation
phase. Brands are consolidated sometimes by extensions either to re-inforce the existing values represented
by the brand or to introduce new values to give it a new lease of life. The extensions could become 'new
generation' for a brand. In short, brand building process has the following stages:
1. Product Development - Idea/Concept
2. Positioning and Launch
3. Brand Development
4. Brand Consolidation
5. Brand Extension - Brand Improvement
'Being first' gives a head-start to brands, though laggards may overtake the pioneer. Brands are built
along four dimensions - attributes, benefits, values and relationship. Attributes and benefits represent 'skills
of a brand' and 'values and relationship' represent its character. Obviously, no brand can sustain on values
and relationship alone. It must stand on its attributes and benefits first. Simultaneously, there should be
creation of values and relationship.
Brand benefit is stated in brand proposition. This leads to brand's personality. Brand is presented as
a creative idea. The place a brand occupies in consumer mind is its positioning. If the brand proposition,
personality and creative idea are allowed to remain constant, the brand can take a relevant contemporary
position. Advertising builds brands over these four 'P's - proposition, personality, presentation and
positioning. There can be a shift in advertising - from attributes to values.
Brand Building
231
Brands are monitored in terms of their strengths and weaknesses on a regular basis. Competitive brands
are reviewed. Each stage of brand building is managed by keeping a correct time-frame. Despite the best
efforts, a brand may show a decline. We, therefore, should have a contingency plan.
Keith Reinhard, DDB Needham ad network's chairman and CEO had suggested the following steps
to build brands:
(i) Have a clear point of view.
(ii) Communicate it with pasSion.
(iii) Create a distinct personality.
(iv) Support it with money over time.

Significance of Brand Management
Brands communicate three things - a distinct identity called brand identity, of which brand
associations and image are a part. Any purchase decision poses a risk to the buyer. Brands reduce this
perceived risk. To survive in the turbulent market of the 90s, brand management has come to acquire added
importance. Proliferation of products have expanded the role of brands - they have been more critical than
ever before.
Brands that seek proactively to build customer loyalty and deliver more than what they promise will
always have a future.
Role of Publicity in Brand Building
AI Ries and Laura Ries in their latest book 22 Immutable Laws of Branding recommend publicity
to build new br3nds. According to them, advertising is u~ed generally to maintain existing brands. For new
brands, concepts are thrown into the environment. Press coverage and media coverage are improved.
Publicity helps in creating perceptions. In the past, advertising might have worked in the new brand building.
Today it is not true. There is the element of clutter in our over-communicated society. Without favourable
publicity in the media, the brand cannot be a winner. Publicity, according to the Ries, is best generated by
being the first brand in the new category, for instance, Band-Aid is the first adhesive strip, CNN, the first
news channel and Zee lV, the first Indian satellite channel. Being the pioneer or new or better has its own
publicity potential. A new category has more potential of making news than, a new product version in an
existing category. Publicity is what others tell about our brand. It is much more credible than advertising
which is what we say about our brand. Public relations thus is very important in building brands.
Advantages of Building a Brand
A company gets the following advantages through brand management:
Better profit margins. Customers pay more for successful brands. The higher the realisation, the
higher the margin. This leads to higher profits.
Better cash flows. As successful brands are sold continuously, there is a stream of cash inflows.
This inflow allows us to manage our assets better, leading to higher productivity.
Entry-barrier to competition. A successful brand can withstand the competitive pressure.

Competition has to spend heavily on promotion to sustain its brand. All competitors may not have
that type of financial muscle.
Immunity from cyclical fluctuations. Economic cycles have little impact on successful brands; as
they are not price sensitive to a great extent.
Better market valuation of stock. Successful brands give better valuation to company's stock.
Generic Brand
A brand that becomes generic becomes a product category, and no longerremains a brand. Frigid~1ire
is GE's brand. But now we call any refrigerator a 'fridge.' So it has become generic. Other well-positioned
232
Product Management
brands have over-taken Frigidaire and it is no longer a market leader. Dalda vanaspati has become generic.
It is now again trying to lose its generic label. Though consumer asks for a product by generic name, he ends
up buying a brand that offers attractive benefits. The generic brand sits on the shdf.
Xerox has ceased to be a brand, and is used as a verb for photocopying process. Xerox ads exhort the
customers to copy the document, rather than xerox it.
Brand Power
Brand power is evaluated along four dimensions:
(i) Brand weight is the influence of the brand over its category or market.
(ii) Brand length is how enduring it has been in the past, and is likely to be in future.
(iii) Brand breadth is its age spread, consumer spread and universal appeal.
(iv) Brand depth is the degree of commitment it has gained amongst users.
Brand Extensions
Developing a new brand and launching it is an expensive as well as a risky proposition. As an alternative
strategy, companies resort to brand extensions which reduce costs as well as risks. Besides, the values if
embodied in a brand are transferred to the extended brand.
There are three types of brand extensions:
Brand Extension
I
Line
Extension
Vertical
Extension
Horizontal
Extension
Brand extensions occur when firms 'enter markets they had not previously been present ... under the
name of one of their existing brands' -Jean Noel-Kapferer in Strategic Brand Management. In other words ,
what Ries and Trout call line extension, Kapferer calls brand extension.
The extended product's qualities should not go againstthe consumer perception of the original brand
name, e.g., Camlin' s effort to extend the stationery and art material brand name to cosmetics has not proved
successful. Similarly, Dettol antiseptic's extension to Dettol beauty soap could not succeed, though after
repositioning, there is some amount of success.
Many companies in India have opted for Iinelbrand extensions, e.g., Amul, Maggi, Nirma, Lux, Clinic,
Milkmaid, Lakme, Bata.
Brand extensions reduce the initial resistance of the consumers to a new brand since they are already
familiar with the original brand. The trade channels also support the extension readily.
There should not be, however, uncontrolled extensions. The danger is to the identity of each brand.
The associations get diluted. Sharp association is necessary for a product.
By themselves, brand extensions do not spell out success of a product which also depends upon other
factors like quality, price, market characteristics, consumer perceptions and promotional efforts.
Wrong extensions damage not only the extended brand but also the original brand.
According to a study by the US-based Neilsen Company, 40 per cent of new product launch in the US
grocery trade in recent times were brand extensions. No such study exists for the Indian market.
In 1997, Smith Kline Beecham Healthcare (SKBH) extended 2 ofits beverage brands - Horlicks and
Boost - into biscuits. In 1999, Kellog breakfast food introduced glucose biscuits. The logic is to leverage the
Brand Building
233
equity of the existing brand and enter asegmentthat is considered profitable. The incremental costs are merely
the costs involved in production, packaging and distribution.
Ries and Trout do not favour brand extensions when the company tries to be all things to all people.
They lack the confidence to build the brand from scratch. To develop a new brand requires corporate courage
which is very much in short supply. Ries and Trout find that brand extensions are never the leaders in the
US in any product category, the only exception being Diet Cola segment.
Pond's toothpaste is a very glaring example of an extended brand failing in India. Lakme shaving cream
failed to work as brand extension due to Lakme's strong feminine connotation. Similarly, Vicks Hot Sip did
not work.
Each brand has certain core values. When brand extension is for dissimilar products, the brand has
to draw more on its core values (provided they are present) to be successful. Besides, brand extensions creating
new products must be symbiotic - the new brand puts something back into the mother brand, and mother
brand rubbing off its values to the new brand. Sometimes, the new brand overshadows the mother brand,
e.g., Wipro computers have overshadowed Wipro Oils. We may say that what is considered to be mother
brand today may become child brand tomorrow - the composition of the family may change.
In the ultimate analysis, brand extensions are the second-best options to launching a new brand. Given
the capacity to invest, one must opt for a new brand name.
Extensions
A single brand can be extended to two markets - from industrial markets to the domestic consumer
markets. It increases the consumer base of the industrial marketers. Industrial market products are associated
with a specific technology. Ultimately, the markets for such a technology shrinks. It is logical for them then
to expand in the domestic sector. The industrial marketers identify the need for gaps and extend theirproducts.
The successful extension in India of several such products can be quoted here - M-Seal of Mahindra, Fevicol
of Pidilite, Zero-B of Ion Exchange, Cease Fire of Real Value Appliances. Of course, once an industrial
marketer decides to enterthe consumer market, he has to put in fresh brand building efforts. They may involve
new communication strategies, new methods of packaging, changed distribution strategies and selling
techniques. The product should be made more user-friendly. However, industrial to domestic transition may
not always succeed, e.g., Super Glue. To ward off failure, the industrial marketer might tie-up with a
consumer marketer, e.g., Grindwell Norton's tie-up with Lever to supply scrubbers with Vim.
Brand Stretch or Extensions
Brands are stretched to tap the business opportunities in new areas where the company believes it has
technical, financial and marketing expertise. Brand stretching logic can be better understood within a
framework of marketing forces in which they have a better chance to succeed.
There are three types of extension philosophies:
Commercial: There is an opportunitys. We have a strong brand. Extending the brand to the new
opportunity legitimises it in the minds of the consumers, and lessens the ad expenditure to make it familiar.
This is an economical option. However, underpromotion may not always work.
Marketing: Marketing viewpoints restrain the wanton extensions. It emphasises brand equity. Ideally,
there should be one brand-one product form. Brand equity becomes diluted due to extensions. Brand equity
is to be guarded. It is a narrow viewpointthat makes one prone to neglect the marketing opportunities, e.g.,
Colgate entered the gel category very late.
Naive: Brand is a symbol of quality and promises a particularq uality. Brand extension rubs off brand' s
quality promise to new categories. Each brand, however, also stands for a host of benefits and expertise in
product areas. Cadbury's learnt this when they entered biscuits market.
234
Product Management
Successful Extensions
These extend the core brand benefit. They consider the brand's area of expertise. They are timed
critically. Had Colgate gel come earlier, it would have been a market leader instead of Close-Up. When core
brand benefit is reflected in the extended product, the extension becomes credible. Dettol antic;eptic was
extended to Dettol Soap. The benefit associated with Dettol was that it was a cut and care product whereas
Dettol soap is a 'love and care' product, which thus runs contrary to the care benefit of the parent brand.
However, Surf becoming Surf Ultra, and Lifebuoy becoming a liquid are examples of the brands remaining
confined to their core benefit even when extended. These extensions have strengthened the brand equity. Each
brand has an area of expertise. Lipton's expertise in tea would not make it successful in biscuits market. Even
category Experience counts. Pond's have no category experience in toothpaste market, and thus its extension
into this area was troublesome. Maggie has successfully exploited its expertise in culinary across different
brands. There are hardly any other brands having expertise in areas in which Maggie extended. It has in the
process created new categories. Each extension has to be timed properly. Shower gels were unimaginable
a decade back. The state of development around must be conducive to the acceptance of the extension.
Line extensions have become popular on account of the prohibitive costs of entry for new products,
ranging from Rs. 5 crore for a soft drink to Rs. 30 crore for a detergent. Line extensions, normally, could mean
a one-third reduction in entry costs.
Experiments in Line Extensions
Product Plus
Price-linked Extras
Positioning
Using Form
Product Synergy
Horlicks' extension into Chocolate Horlicks.

It is within a product category. A brand is extended to gain niche markets. Pricing is used
to differentiate products. The well-known example is that of Johnson and Johnson in

sanitary napkins market. Carefree is in belted segment, whereas Stayfree is in beltless
segment. Stasyfree is available as a regular, double and deodorant. Stayfree silky dry
is poised against Whisper. Cheaper line extension, however, may endanger the equity
of the mother brand.
Palmolive Extra Care was launched as a premium skin care soap in 1989 with three
colour variants. Colgate Palmolive used skin-typing as a distinguishing factor; white for
normal skin, pinsk for dry skin, and green for oily skin. Lever has three variants of Lux
International based on skin typing. Palmolive took the risk of downgrading its product
by offering Palmolive regular in the popular segment. It has also three variants based
on skin typing.
Sharply positioned line extensions are also sometimes an opportunity for rejuvenating
stagnating brands, e.g., Cinthol from Godrej Soaps. Cinthol is extended to include
Cinthol Lime, Cologne and Sandal. Liril's attempt to extend to cologne segment is,
however, not so successful.
Vim has successfully used form to extend line. It was a scouring powder. It became then
a liquid cleaner. Now it has become a washing bar.
As already explained, a brand extension should be in harmony with the mother brand.
A lack of synergy between the two leads to a near-certain failure, whether there is
product-plus or no product-plus. Cibaca Top was extended as Cibaca Lime, but it did
not have synergy with Cibaca Top. On the other hand, Colgate Dental Cream (CDC)
was extended as a blue gel in the South. The blue gel combined the therapeutic and
cosmetic properties of the parent brand (stops bad breath and fights tooth decay).
It was further positioned as the confidence product which became its USP. The gel
extension gave consumers a reason to stay with the brand name.
(Based on Nandini Laxman, Stretching
the Leader Brands, The Strategist Recollected 1993-94.)
Brand Building
235
Ingredient Marketing
Some components or ingredients that go into the making of the final products are promoted heavily,
e.g., Intel chips which are integral parts of the computers. Such components or ingredients are never seen
or bought directly by the consumers. Courtlauds, UK has started promoting its fibre Tencel which is as soft
as silk and is bio-degradable. Dolby logo is put on those audio products which use this technology. Such
promotion of components ensure continued success of the company, which might face commodification
of its product otherwise. The consumer is also ensured of the quality of the end product. Du Pont supervises
all Teflon using cookwear manufacturers. In ingredient marketing, the ingredient or component is branded.
Irrespective of the brand of the end product, the ingredient which is branded ensures a certain quality level.
In export markets, hang-tags of Iycra (Du Pont) ensure the consumers of what has gone into the making
of this garment.
Quality assurance labels like Woolmark awarded by International Wool Secretariat also play the same
role. It ensures conformance to certain international quality standards. In carpet marketing, the Rugmark label
ensures that the carpet is child labour free.
Although ingredient branding is used commonly, the broader concept is attribute branding which
describes the practice of branding qualities, characteristics or distinctive features of a product or service
including form, functions, ingredients and components. To illustrate, in terms of form, Power Tip bristles
on Oral B tooth-brushes. For functions, we have Crest Dual Action Whitening. In terms of components, we
have evolution engine in Harley - Davidson bikes. A new host brand lacks an established identity one gains
by attribute branding. Ingredient branding provides the missing link when the host brand is perceived to
be deficient. It provides additional proof to support the positioning of the host brand. It also acts as a
differentiator. ingredient brand may be present in so many products. It will have to then enrich itself
constantly. Intel thus puts newer chips. Though attribute branding provides a value, the whole product is
a collection of values provided by different attributes. There should not be mismatch of attribute and the
whole brand.
Unique Selling Proposition of Rosser Reeves
Rosser Reeves was by profession ajournalistwho switched tracks to be an advertising professionala copywriter with Ted, Bates & Co. in 1940. He rose to become the chairman 15 years later. He wrote an
advertising classic Reality in Advertising, where he explained how the concept of unique selling proposition,
USP, originated. The concept of USP was developed at Ted, Bates & Co. in the early 40s. It became the
catchword of the 60s and the 70s. With a USP it is easy to create a distinct brand position in the mind. The
product differentiator becomes a brand differentiator. The USP has the following three major features:
1. Each ad must make a proposition to the consumer. Each advertisement must say to each reader
what specific benefit the product offers if bought. Dove soap has a unique proposition to offer - it contains
1/4 moisturising cream. Therefore, the benefit offered is 'it won't dry your skin.' Reeves, however, does not
define benefit.
2. The proposition or promise made by the advertisement must be one that the competition has not
so far made. There are very few genuine differences amongst brands. Technologically, they may be similar.
When we make a promise, the competitors also follow suit. Fluoride ingredient was a unique proposition for
a paste to begin with, but now several pastes have fluoride. Ariel with bio-enzymes is a microsystem and
Surf Ultra with its utrons or stain digesters is unique. The USPs should endure to give a benefit position not
claimed so far by competitors. This position is strengthened in the consumer mind so that promise and
company are identified with each other. Competitors then find it difficultto atlemptto wrest the benefit away.
To illustrate, clove oil's presence is a USP for Promise. Promise was the first to be synonymous with clove
oil. Any other company has not adopted this USP. An important point to remember is that the USP then
should stimulate rational thinking in the consumer. Creative strategy need not remain in the domain offeelings
and emotions only but should operate rationally too. The USP is supported in the body copy - how clove
oil has been traditionally used to arrest toothache and is related to customer's needs or his perception of those
236
Product Management
needs. Mere promises are not enough. They must be rationally justified - a credibility issue. Reasons,
therefore, must be given. It is possible that the connection between promises and reasons may be tenuous
- more myth than scientific reality. We may doubt whether Pepsodent's germicheckmight keep on working
against germs long after brushing teeth. If there is disbelief the USP may fail. But if we believe in the claim
made, we may ignore the evidence since belief and desire are strongly correlated.
3. The consumer tends to remember just one thing from the ad - one strong claim or concept. The
claim or proposition should, therefore, be so strong that it can move the mass of millions, i.e., to pull new
customers to your product. Maggie 2 minute noodles revolutionized children's eating habits, which were
pulled over to this new style of eating. Its USP is its shortest possible time to cook, and so instant gratification
of a hungry child's desire to eat.
Brand Images and USP
Though apparently the image approach and USP look a distance apart, they are quite close. USP
makes the consumer identify the brand with a particular benefit. Brand stimulates an association of the
benefit. But this very association is an image. The difference between USP and the brand image is the
difference of the degree of complexity of the associations. Marlboro gave a cowboy image via USP. It is a
focused identity, a narrow identity. The company was the first to do it. Perhaps, brand image gives a rather
diffused identity, open-textured identity.
There is one essential difference between USP and the brand image. The former established itself by
logic and rational appeal. The latter does so by psychological and emotional appeals. But ads do not work
solely on rational appeals. Even appeals like economy are expressed through emotionally charged 'Surfki
Kharidarimein Samajhdari' - a self-congratulation on being thrifty. Every rational appeal needs emotional
trigger. Thanks to Surf, Lalitaji is a better housewife. Appeals manifestly are a blend of reason and emotion.
USP
All through the 60s and 70s USP was a catchword available to the marketers. This is, however, not
so for the 90s, basically because a USP based on technology remains unique for a shortwhile, and is copied
soon by the rival me-too brands. To illustrate, can we say now with confidence as to who pioneered the nofrost fridge, whether BPL or Videocon or Godrej? The premium brands find USP to be inadequate. USP as
a product differentiator is inadequate for the premium brands. They need a different communication strategy.
In addition to the tangible properties of the product, critical intangibles like retail environment, ambience of
the selling set up, and the life-style that is projected in advertising are highlighted. These are all value-addons. The aspirational benefits are also made to stand out from the clutter.
Premium brands have two marketing dimensions - top-end pricing and perceivable or endowed sense
of product superiority in the concerned category. Top-end pricing is to be justified on the quality platform
- ranging from total functional superiority to imagery-related superiority or shades of both (in-between).
BPL's 'fuzzy logic' is an example offunctional superiority. Zodiac Grill's power breakfast is imagery-related
superiority. Citibank's priority banking is a mix of both. A premium brand has not only a level of technology
but also ease of use, serviceability and status. Power of Philips is an example of this.
In the light of the above, a marketer relies not on USP also, but offers a package of benefits to
differentiate the brand. These benefits may be functional or aspirational or both. Ariel's launch is an example
of this approach. The product has three functional benefits - superior stain removing capacity, benefits of
a powder as against a bar, and less volume of powder for more value. The emotional benefits are a victory
of the modem over the traditional (daughter-in-law and mother-in-law communication). Here the brand
proposition cannot be a single argument.
Brand Building
237
It must be appreciated, however, that a single USP of lemon freshness initiated for Uril in the 70s is
still a winning proposition today. Dove soap has a USP of having 1/4th moisturizer in it. Since all soaps are
cleaners, a secondary benefit can be converted into a USP.
In general, however, one can venture to say that the concept of a single USP is outdated. Premiumness
as USP is too general. For Lakme's premium make-up line, the USP is 'the shades you want are the shades
you get.' Premiurnness is just incidental.
USPs are defined more in terms of aspirationallevels. Tanishq watch of Titan does not keep watch
just a chromometer, but elevates it to the level of an ornament. BPL Home theatre brings cinema to one's
living room. Rayban glasses give status.
USPs are short-lived: A pioneer gets more benefit out of a USP, e.g., Titan quartz us. HMT quartz.
USPs based on functional superiority are outdated, since technology is copiable with ease. Brand USP's are
becoming a package of functional and aspirational unique benefits.
Working of USPs
Marketers give certain tips on making the USPs work for the brand:
Credible USP: The brand, its equity and heritage are to be built up over a period of time.
Be the First: It is necessary to have a brand locking with a particularfunctionaisuperiority much ahead
of others.
End-result Orientation: Rather than depending on superior technology, itis safe to emphasise the
end result.
Price Wars not Beneficial: Instead emphasise the core benefits.

Flexibility: It may be necessary to strike a golden mean by taking the rational as well as emotional
route to form a USP. Surf Ultras Dhoondte Reh Jaaoge is a mix of core and emotional benefits.
Guard the USP by Appropriating Segment Benefits: On being challenged, guard the USP on your
surf. The benefits of the whole segment can be appropriated as our core benefits. Coke met Pepsi challenge
on taste by declaring it 'the real thing' or by insisting that 'coke is it.' The generic becomes here the USP of
the brand.
Maintain a Wider USP: Each brand has established core values. They must not be diluted. There
can be add-on values say Videocon TV becomes Videocon Bazooka. Add-on values should keep alive the
core brand properties. Upgradation of the brand move it a few notches above in the consumer's mind -set.
Consistency: Enduring USPs maintained over a period of time vest a brand with a character which
is difficult to assail, e.g., Power of Philips, Sony for innovations.
Brand building in short, means developing a brand identity, value proposition and positioning of the
brands. It further includes managing the brand system, and leveraging the brands by extending them. The
ultimate aim is to build brand equity, and evaluate it continuously. Brand building requires organisational
mechanism which we shall discuss in the next chapter.
Based on Marion Arathoon write-up in ET, May 17-23, 1995.
Brand Relationship
While building a brand, the foremost task is to understand the brand. A brand goes beyond functional
utility. It symbolises something special to consumers. This something special can be technological superiority
or emotional satisfaction it gives. When consumers find this something special, a relationship develops
between products and customers. They identify with the product, become their loyal users, and start feeling
238
Product Management
a kind of kinship with it. In return, they may be ready to pay even more. The promise of something special
and the relationship this creates with the customers convert a mere product into a brand.
Second Quality Products
John Rutledge strongly recommends that good companies must protect their brands. Mistakes are
made, and second-quality products come into being. Have we ever come across a factory-second Porsche
or ascratched-and-dented Mercedes? No Tiffany diamond necklace that has been damaged in shipping ever
appears on the market. Premium companies sell premium products. They throw off the damaged ones. It
builds a long-term value in a business.
Attributes of a Great Brand
Steve Rivkin, a communication consultant in the US and the author of the book The New Positioning
(1995), interviewed Jack Trout, the author of six best-sellers on marketing and asked him what constitutes
a great brand. According to Trout, most great brands have good names which can verbally be connected
to their positioning strategies. Many great brands are the pioneer brands, but more important than being first
is to be with a good idea. The most powerful brands own up a word in the consumer's mind, say IBM and
computers, Aspro and headache, Vicks and common cold. Great brands remain focussed on their words or
concepts. They should not fuzz up their identities. Brands should stay for a long time. Those that arrive like
mushrooms in the rains or shooting stars come and disappear. A great brand is sensitive about tomorrow.
In the changed environment, a brand has to change. If it is too late to change, someone else will pre-empt
it.
Characteristics of a Strong Brand
A strong brand exhibits three strong characteristics, viz., clarity, consistency and leadership. Clarity is
spoken with reference to the values which the brand delivers and is expected to deliver. These values should
be distinctive and relevant. Consistency defines a brand - what it is and what it is expected to do. It is aligned
with brand values. Consistency makes a brand trustworthy. Leadership gives the brand an ability to lead and
exceed expectations. Such a brand is capable of self-renewal. Thus a brand is represented by this triangle
of clarity, consistency and leadership. Leadership is a matter of building up the brands. Clarity exists when
a brand is differentiated. Consistence is the ideal.
Leadership
Clarity
Consistency
Discontinuity
It is seen that a brand is made to break off from the identity it has created as a matter of strategy.
Product-proposition is re-worked. In the process, new benefits or usage-occasion or values are created. Brand
context is changed. Consumers' ingrained beliefs and attitudes are questioned. All this is a part of discontinuity
- a paradigm shift by rebuilding the brand, or using new technology to present fresh product-offering, or
putting a different marketing mix for penetration. Disconuity is thus a big revolutionary idea. When it works
for the consumer, it becomes a breakthrough.
Need for Discontinuity
Over-crowded markets are an incentive to discontinuity, especially atthe time oflaunch. Akai made
TV acquisitionadeal, rather than a purchase. Onida used a devil to symbolise envy due to its superior quality
for several years. But now it has left this old baggage in view of the better models available from MNCs.
Discontinuity is not just new positioning. Kellog is attempting a discontinuity by putting biscuits as a breakfast
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Brand Building
food. In any discontinuity, we have to retain the core values of the brand, but we can change the entire
marketing mix. It is easier to recognise discontinuities but difficult to create them. After identifying what is
good for the customer, we have to check whether he likes these attributes.
Vehicle for Discontinuity

We can putthe discontinuity through an existing brand or a new brand or a brand extension. Parachute
lite is an extended brand. Here the mother brand Parachute Coconut Oil was subjected to discontinuity by
putting modem design and a new logo, but retaining the benefits of coconut. The brand is now not just hairoil, but retains its core value ofthe goodness of coconuts. Discontinuity need not always begin with the mother
brand. Brand extension can bring about it. Cadbury Gold is an example. Discontinuity must be supported
by clear objectives. We can introduce discontinuity in sales and distribution system (multi-marketing of
cosmetics), product attributes and pricing. Discontinuity works when supported by product cues, thus Surf
Ultra chose stain-removing property as a discontinuity from the existing detergents, butthe product cues were
not present. Later Surf Excel was created, with a special package and perfume.
The following matrix illustrates the scope of discontuity over the life-cycle of the product through
different elements of the marketing mix.
~M~
PLC
Introduction
Growth
Product
'-I
'-I
Maturity
Decline
Promotion
Price
Place
'-I
'-I
'-I
'-I
'-I
'-I
'-I
'-I
'-I
X
'-I Indicates scope for discontinuity

X
Indicates there is no scope for discontinuity
Limitations of Discontinuity
When the discontinuity does not provide either a superior product or a distinct benefit that is relevant
for the customer, it may not work. Shower gels could not work, as this discontinuity from the existing soaps
did not interestthe consumers. Along with sponge-scrubs, they did have some effect. Ruf-and-Tuf ready-tostitch jeans kit did not enthuse the customers. What is introduced today as discontinuity may become
standard tomorrow. Behind the successful discontinuity, you will find continuity. We have to change for the
better.
Brand - An Experience
In the Brand Summit at Chennai (November, 1999), a brand is viewed as an experience. Much more
than functionality, a brand is defined in terms of how it relates to the user. We have to see how a brand fits
in our lives both rationally and emotionally. A company is very broadly positioned today beyond its functional
products. Thus GE 'brings good things to life' adding value beyond lighting, cooking, transportation and
medical science. Pepsi is just not a drink, but represents the way young people think and feel. Tata represents
trust of the people, crossing the functionality of the Tata group of products. Customers look not for
relationship benefits. They form an emotional bond with the brand through a history of experiences. The need
today is to build complete brand experience. We have to use communications in such a way that they shape
their attitudes towards brands. The dialogue with the customers is the done thing. We also need dialogue
240
Product Management
between customers. The user-groups should meet regularly to exchange views and discuss problems regarding
products they use. It strengthens customer loyalty and builds up brand image. Customer relationship
marketing would define the future of marketing.
Brand Experience
It is necessary to provide consumers an experience which they cannot get elsewhere. A product has to
move from being a commodity to brand to service to experience. A decision to buy does not just remain
an intellectual decision, but as the brand develops, it becomes an emotional decision which engages the
customer's senses. An emotional response develops a stronger relationship and commitment to the brand.
It also results in a willingness to pay more for the experience. A product has to fulfill customer's dreams, for
which we must engage their senses - both their head and heart. Senses are addressed through an experience
- which could be as rich as the brand can afford. Literally, a physical structure may not be builtto experience
- which could be as rich as the brand can afford. Literally, a physical structure may not be builtto experience
the brand, but experience can be built adding sensory texture to it. Experience is created by incorporating
the following.
(a) Personalisation of transaction
(b) Surprise element
(c) Charge to participate or get in
(d) Customisation opportunity
(e) Product is used as an accessory to an event
(f) Souvenior of the event is made
(g) Engage the senses
Experiential marketing is packaging of the best marketing abilities integrated to sensory experience. An
emotionally starved customer seeks succor in our brand, but after being satisfied, it is possible for him to seek
greener pastures elsewhere. We have to think afresh how we can reach him with out brand.
Experiential Marketing
Marketers of different product categories are opting for experiential marketing. McDonald's is visited
not just for fast food, but for the experience. Super-markets are not for selling just products. They sell the
experience. In India, we have to go a long way. India has yetto tap the full potential of branding. Experiential
values supplement, and at times replace the functional values. A brand is just not an identity (brand = JD),
but is a source of sensory, affective and cognitive associations leading to memorable and rewarding brand
experiences (brand = EX). Experimental marketing is a focus on customer experiences. In this approach, the
whole consumption situation is taken into account, and try to fit in products into this consumption situation,
and see that the consumption experience is enhanced by design, packaging and communication. It is a holistic
view of the consumption experience. Experience has five dimensions:
Brand Experience
Sensory
(sight, sound,
touch, smell)
Feeling
(emotional
brand
symbols such
as Mickey
Mouse)
Thinking
(Corporate
campaigns)
Action
(Targets
physical
and
life-style
interactions,
e.g., Nike)
Relationsf1ip
(Beyond individual's
personal feelings,
e.g., family
group
relations)
241
Brand Building
The above contribution is made by Dr. Brand Schmitt, the evangelist of the concept of Experiential
Marketing. Holistic integrated marketing experiences can have several dimensions at the same time. Cars,
as a means of transport, are functional. But they have aesthetic value too (sense), and make the individual
who possess them proud (feel). When we get an Indica, an indigenous car, we are full of praise for Indian
talent (relationship) . Cars appeal to our intellect (think) and affect our lifestyle (action) .
Brand experience is provided through communications, salespeople, co-branding and spatial environments. Through a mix of such experience provider mechanisms, a consistent holistic brand experience appeal
is created.
Each experience has to be thought of in terms of depth, breadth, intensity and linkages. Depth refers
to the broadening experience or its narrowing to a single experience. Breadth refers to enrichment of
experience by using several experience providers or simplifying it by concentrating on only a few such
providers. Intensity of experience providers can be increased or decreased. Dimensions of experience and its
providers have interrelationships. Should we have one experience for everyone or different experiences to
different segments?
A company may have a corporate brand and sub-brands. Here corporate brand may carry experiential
qualities or these can be reserved for the sub-brands. Some companies have the experiential qualities both
for the corporate brand as well as the sub-brand, e .g., Swatch.
Swatch (Corporate Brand)
What is time?
It presents sensory, affective, cognitive, behavioural and rationale images
Visual-design
intensive
watches
(Sensory)
Romantic
symbols
like hearts
(Feeling)
Conceptual
watches
(Thinking)
Exercise
watches
(Action)
Cultural
events watches
(Relationship)
Product innovations are related on the degree to which they enhance the experiential image of the
brand, add new experiences that can be leveraged, and create holistic experiences. Global brands are a
complex matter. Across the nations, we may have different dimensions of experience. We may also have to
choose the experience providers judiciously.
Bernd Schmitt, Professor of Marketing, Columbia Business School and Evangelist of

Experiential Marketing
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Product Management
Experience-oriented organisations must have a conducive atmosphere and an ability to integrate

communications.
New Brand World
Scott Bedbury has written a brilliant book titled New Brand World (Viking) where he offers eight basic
principles for achieving brand leadership in the 21st Century: (1) Relying on brand awareness has become
marketing fool's gold (2) You have to know it before you grow it. (3) Just because you can doesn't mean
you should (the Spandex Rule ofBranding). (4) Transcend a product-only relationship with your customers.
(5) Everything matters (6) All brands need good parents. (7) Big doesn't have to be bad.
(8) Relevance, simplicity and humanity - not technology - will distinguish brands in the future.
According Bedbury, advertising, marketing, products and services serve the brand, and not the other
way round, as traditionally thought. As consumers confront countless choices, itis time to build a brand that
evokes trust from customers.
Bedbury built Nike and Starbucks which are two of the fastest growing brands. While building these
brands, he learnt that brand building shapes and directs everything companies do. Branding started simply
as a stamp of differentiation which the artisans, traders and guilds placed on their goods. But it has now
become a complex and challenging process which has more elements of intuition than analytical rigour,
making it less amenable to 'immutable laws' or 'theories, guidelines and case studies.'
Winning Brands
According to Fitzerald of Unilever, there are three factors which contribute to the success of the brands.
Consumer Understanding
The most crucial aspect to achieve brand success is knowing, understanding and anticipating the
consumers. Consumer connection comes from the deep insight. We have to know how a brand meets
consumerrieeds. We have to assess how their attitudes and needs are changing. It keeps the brand relevant.
We can also evolve the brand by anticipating the future change.
Focus
We have to concentrate ourresources where they matter most. Instead of dissipating our efforts on large
number of unproductive brands, we have to focus on a few powerful brands.
Innovation
Innovation can be minor, just tinkering with the functions of the brand but these add little value. True
innovation pushes the boundaries of market in new directions. Innovations also keep the existing brands
contemporary.
According to Fitzerald, though brands can be valued in a number of ways, cashflow remains a reliable
method of brand valuation. Brand is a capital asset and a reservoir of future cash flow . According to Fitzerald,
good brands invite trust, earn trust, honour trust and reward trust.
PRODUCT AND BRAND FAILURES

The market place is full of corpses of failed productslbrands. There are basically two types of failed
brands. Type A failure is a result of some marketing flaw- either in product itself or its branding or distribution
or pricing - that could easily have been avoided through more effective use of MR. Type B products fail for
no apparent reason. There is a paradox of perfect me-too. There is a brand that successfully satisfies a human
need, A perfect me-too productthat copies the successful brand is developed. The marketing mix is kept the
same. Hopefully, perfect me-too products then should do as well as the successful products or brands copied.
Paradoxically this never happens. There may be high trial rate, but there is rejection later. So intertia is also
ruled out. The obvious explanation is that the product fails since it has not met the consumer expectation.
The question is what this expectation is. Every new product should satisfy the desire for a change. All
successful products change consumer usage habits.
The following table illustrates some successes and failures in the Indian market.
Table 19.1
Successful Products
Product
Raymond Suitings
Status
Successful
Reasoning
Changed suiting habits of Indian males.
Charms Cigarettes
Changed smoking occasions and frequency of

young people.
VIP Suitcase
Changed travel habits.
Maggi Noodles
Rin Detergent
"
Changed snack habits.

Changed laundry habits.
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Product Management
Table 19.2
Unsuccessful Products
Product
Reasoning
Status
Bombay Dyeing Suitings

Chesterfield cigarettes
Failure
LML Vespa Scooters
Failure
No change of habits in spite of high profile.

High trial. But no habit change.
High trial. But no habit change.
Elements of Change
1. Doing new things (activities, processes) with the product.

2. Changing the frequency of use of product.
3. Changing duration of use/consumption of product.
4. Changing sharing habits of products.
5. Changing buying habits of products.
The above Delta elements are scaled along five points.
Table 19.3
Element
Doing new things (A)

Changing frequently of use (B)
Changing Occasions (C)
Changing Duration (D)
Changing Sharing Habits (E)
Changing Buying Habits (F)
V. High
High
Fair
Low
5
5
5
5
5
5
4
4
4
4
4
4
3
3
3
3
3
3
2
2
2
2
2
2
V. Low
1
1
1
1
1
1
1. DHF: Delta Habit Factor of a successful brand is higher than that of a failed product.
2. After trial only, the question of change in habits arise. Change in habits leads to repeat purchases
and brand success. Low DHF means less chances of success.
DHFSurvey
Select 10 consumers and 10 executives of an organisation whose products are being surveyed. Ask them
to rate the products along Delta scale. High DHF (3.5 plus) means repeat purchases and brand success,
though initial trial is difficult and expensive. DHF score between 2.5 - 3.5 means easy trial but retention
is difficult. Low DHF (below 2) means likely rejection of the product. There are two alternatives then 1. Change the target market so that DHF becomes high 2. Change the product, to increase DHF for the same target market.
DHF Aanalysis us Better Products
Though there is low DHF score, the consumer may switch to a better-tasting product without any
change of habit, e.g., biscuits. Even here, consumption level may go up, and purchase may be made by more
than one family member or in larger quantities, indicating high DHF.
Conclusion
Products with high DHF require greater effort for initial trials but are more likely to succeed.
245
The Delta Habit Factor (DHF) Model
It assesses the strength of a brand and provides a new perspective for the windows of opportunities to
relaunch the brand. It contends that a brand succeeds because it changes the consumer's usage habits. The
consumer uses the brand again and again. He then develops brand loyalty. The change in consumer habit
itself indicates his satisfaction with the brand. Every brand has an inherent DHF - the ability to change
consumer habits. The higher the degree of DHF the higher the chances of its success. If a brand is on the
marketplace for quite sometime, competitors try to switch consumers to newer habits. Therefore, every brand
must renew itself by changing other dimensions of consumer habits. The DHF dimensions are doing new
things to personal products, change frequency of use category, change occasions for use, change duration
of use, change sharing habits, and change buying habits.
Case: Rajan Chibba's Delta Habit Factor (DHF) Model
This model provides a framework for marketing strategy. A brand succeeds when it changes consumer
habits in using it in a particular product category. His change in habits indicates his satisfaction with the brand.
Market share is thus achieved by achieving 'share of habits' in a particular product category. According to
this model, every brand has an inherent DHF or the ability to change consumer habits. The higher the degree
of DHF, the higher the chances of the brand's success in other similar product categories. In other words,
it influences collateral habits.
To illustrate, for a non-alcoholic beverage, we have to consider the drinking habits for an alcoholic
beverage also. Other products like lassi taken socially also form collateral habits. Close Up has brought
changes in the collateral habits of two prod.uct categories - tooth-pastes and deodorants. The habit factors
could be doing new things with the brand, changing frequency of use, changing occasions of use, changing
duration of use, changing sharing habits and changing buying habits.
Case: Flop Cigarette Brands
Brand
Company
Now
rrc
Style
GTC
Chesterfield
Godfrey Philips
World Cup
NTC
Silver Kings
VST
Year of Launch
Late 1985
1985
1987
Why do cigarette brands flop so often?
1. Even in international markets, one out of 11 cigarette launches truly succeeds.

2. The sheer number of new brand launched kills their charm.
3. From brands, cigarettes have gradually turned into commodities. And, commodities do not
succeed as brands.
4. The cigarette industry is a shrinking industry. More brands compete in a shrinking market.
5. The companies do not invest a large sum of money in brand names. New brands are not
aggreSSively marketed and advertised on a sustained basis.
6. The fiscal policy of the government hits this industry. It serves as a milch cow for the national
exchequer (contributes Rs.lS00 crores as taxes: 1988). Many brands get priced out of the market
(e.g.,Now and Style. When the govt. decided levy excise on the basis of the length of the cigarette).
7. Cigarette companies launch now-a-days 2-3 brands at a time, see their performance, and back up
the successful one.
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Product Management
8. There is dearth of creative ideas to launch new brands. The agencies promote at best an upmarket life-style. All brands are promoted with the usual stuff that is associated with high class living.
9.
Most of the innovations are inconsequential or are related to packaging.
10. The price is the most important factor. Brands like Rothmans flop here because people 'can't
afford it.'
11. In the cigarette industry, while new might be bold, the old is still gold.
Some recent examples of product failures, and possible reasons of failure follow.
PRODUCT FAILURES
Description of the
Product
Possible Reasons
for Failure
D'Tach Tooth Brush (Ajay)
Toothbrush with Detachable head.

A spare head provided.
Replacement concept in toothbrush

did not click.
Cool Cats (Polar)
Fans with decorative bladp.s
The basic function of the fan is to

rotate. When it does so, the colours
dissolve into a grey blur. No extra
functional benefit to justify its
premium price of Rs. 1200.
Kinetic Merlin
Combination of a 1V set and a

Computer Terminal.
The combination was not

acceptable.
Cibaca Lime Gel
Offered user squeaky clean teeth

and a tangy, tasty brush.
Other gels were available.

Lemon flavour leaves a jarred
feeling on teeth.
Spredit Merigold
Margarine
Refining standard of sunflower oil

poor in India.
Margarine starts disintegrating soon
and stinks.
Artificial flavouring which makes
margaraine an acceptable product
abroad is not allowed in India.
Puma (Carona)
Premium shoes
Top-of-the-mind-brands were
Reebok and Nike. Adidas came
next. Puma had poor recall. Rs.
600, a premium price, could not be
justified. Bata's Power were selling
at Rs. 200-300.
Paloma
Iced Tea Mix
Indians drink their tea hot.
Name of the Product!

Company
247

Name of the Product/
Company
Description of the
Product
Nestea
(Nestle)
Possible Reasons
for Failure
They cannot relate to iced tea.
Jaisalmer
(GPI)
Cigarettes
Brand has North Indian connotations.
Milk Food
Yoghurt
Superior form of curd
Consumers considered it as an
icecream at a premium price.
Ritz Bits (Britannia)
Snackfood for teenagers
Boring biscuits attributes.
Fa range (Menezes)
KB 100 RTZ (Bajaj)
Deodorant
High tech robotic cheetah.
Poor positioning.
The engine power could not match
the expectations raised by the ad.
Top Ramen
(Brooke Bond)
Challenger of Maggie
Noodlesbath.
Taste not acceptable. Positioning as

snoodles not sensible.
DEAD BRANDS
Appela
A fruit drink launched by Cadbury
Binaca
As Cibacca, it lost its sheen.
Do It
A cola after Coke's exit in 1977. It was a diet cola and Nandini Sen modelled
for it in leotards.
Double Cola
Came in mid-eighties and vanished.
Illustrated Weekly
Media once popular, now defunct.
Indrajal Comics
No longer available.
Kolynos
Paste with no trace.
Le Sancy
Soap was supposed to last, though water flow did not. However, soap itself
did not last.
Lux Shower Gel
Discontinued.
Milkfood Yoghurt
Flavoured curd, couldn't make an impact.
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Product Management
Murphy
Murphy boy was very popular.
Neko Soap
Medicinal soaps give clinical bath.
Ovaltine
Generic for all chocolate flavoured brown powders.
Polson Butter
A big melt-down.
Quaker Oats
No longer available.
Signal
Red stripes containted hexa-chlorophene, later proved to be carcinogenic.

Added fluoride later.
Levi Strauss Co. announced in February, 1999 a new slate of 5900 lay-offs with a vow to retool its
marketing to tune it to the fast food consumer of today. Ipana, the ubiquitous 1950s tooth-paste (Briesna,
brusha, brusha) is virtually forgotten today. American history is full of stories of companies that could not
adjust to changing markets.
Failures of Brand Extensions
The most glaring example of a failure of the extended brand in India is Shringar where this Kumkum
brand was extended to nail-polish. Another popular example of the failure of the extended brand is given by
Pond's tooth paste. Lakme shaving cream also could not succeed, as the original brand is a woman's
preserve.
Pepsi extended to Crystal Pepsi in 1992. It was trying to cater to a new niche of clear, natural,
effervescent, holistic drinks like Snapple and Canadian. It is a segment of sweetened sparkling water. There
were clear products in other categories like clear beer, clear mouth wash, clear soda etc. Clarity in a sense
represents purity. Pepsi tried to address to the growing New Age Market. Crystal Pepsi was a pure drink. But
in consumer perception Pepsi is brown, sweet, refreshing soft drink. Crystal Pepsi belied all this. The product
thus failed.
Improving Product Abandonment Decisions
Paul Hamelmon and Edward Mazze dwell on product abandonment decisions in their article in the
Journal of Marketing (Vol. 36, April 1972). New products added to the existing product line may result in
over-population of products. An organisation must, therefore, carry out Product Review and Evaluation Subsystem called PRESS. It tries to identify those products which no longer earn revenues commensurate with
the marketing effort put in.
Weak products are abandoned on financial considerations. The considerations could be the stage of
PLC, the financial opportunity, financial security, marketing strategy, social responsibility and possibility of
intervention in an organised manner against such deletion. Financial factors are quantifiable in terms of
profits and profit potential on improvement. The rest are qualitative factors which can be rated on a scale.
Some more criteria for abandonment are scope of product line, production efficiency, marketing efficiency,
cost price, value, service and competition. Kotler used PERT model to phase out weak products in a planned
manner. PRESS is a computerized model. Basic data serves as first input step in this model. It is based on
249
variable cost accounting approach. In step 2, price-volume relationship is established. The effect of price
change is recorded on the contribution margin of specific products under study. In step 3, sales trends are
studied to extrapolate historical sales by using moving averages method. It identifies potential good
performers. In the last step 4, product complementarity and substitutes are analyzed. An eliminated product
may affect the sales of a complementary product. If substitutes are available in the product line, there would
be no loss of total sales. This model is extension of Kotler's earlier work. Management accounting system
is a great help while adopting this model.
Product success and failure are invariably linked to business organisation as a whole. Let us briefly refer
to business success.
Business Success
Business success is a matter of having several attributes. Successful organisations are customer-driven.
They analyze competition, are flat and flexible with good internal communication and have strong leadership.
Poorly performing organisations, on the other hand, are product-driven, do not analyze competition properly,
slow and inflexible with poor internal communication and rigid structure. Successful organisations believe
in doing the right things, whereas poorly performing organisations do the things right. It is not so important
what the business produces, but rather what 'value' the customer derives from that it produces.
Mere R&D is not a recipe for the success of new products. It is how best the money is used that
determines the success rate. Besides, what matters most is the ability of the innovating firm to gain acceptance
for its innovations in the market by proper marketing.
Sometimes products fail because the target customers are not prepared to receive them. Sometimes,
after developing an innovative product, the firm remains stodgy feeling there is no market for the innovation.
Victor company developed VCR, but Matsushita introduced it in the market.
Reasons of New Product failures
Don Debelak spells out some reasons for the failure of the new products.
Faulty Distribution
Products move in the distribution channel to reach the final consumers. The channel may consist of
distributors, wholesalers, manufacturer's representatives and retail stores. A distribution plan is developed
to chart the movement of the product. Each marketer must determine the types of outlets where the product
will be sold. One has to study how these outlets receive their supplies. One has to study the requirements of
the distribution network -storage racks, credit, returns policy etc. The point-of-purchase requirements must
be studied. The role of incentives and promotional measures must be understood. The ideal order size must
be determined. We have to find out whether the distribution network will carry our product. Research gives
a better chance to succeed.
Industry Insiders
Our marketing people, distributor's managers, and branch managers of retail outlets are all industry
insiders. They are well conversant with the market and know the steps to introduce a product. If we are
marketing medicines, we must know how ethical promotion through medical representatives is carried out
by calling on doctors. We must study industry journals, meet industry professionals, and attend industry trade
shows. Knowing industry insiders facilitate the introduction of new products.
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Product Management
Spending Habits
New product development requires heavy investment. Sometimes, entrepreneurs spend money fast,
and create liabilities for themselves. Sometimes, even after developing the product, there is no money to
market it properly. Investors support only a product that has sales history. Sometimes, product requires a
charge. That also requires money. We have to spend prudently. Initial product development should account
for 30-40 p.c. It makes a market test possible. After a market test, the remaining 20-40 p.c. resources are
used us establish sales to a small target market. When all this is over, one can expect a dose of additional
capital getting injected.
MARKETING ORGANISATION
So far we have learnt the principles and practices of marketing from the short-term as well as long-term
perspectives. These principles and practices are implemented through the mechanism of organisation. In this
chapter, we shall study the current trends in a corporate organisation and the organisation of marketing
department. We shall also study the interface of the marketing department with other departments.
Current Trends in Corporate Organisation
As we have seen, business environment has undergone drastic changes in the last few years, and
continues to change further veryyear. Instead of a bi-polarworld, we have a uni-polarworld, with the decline
of the totalitarian ideology and the disintegration of the USSR. The European Economic Community has
formed one economic bloc. GATT has come into force. Economies are opening up. There is a trend towards
globalisation. Rapid strides have been made in telecommunication. Service sector is emerging as a major
contributor to the GDP. Companies have started reorganisation and re-engineering. They are examining their
core competencies and are developing core business. New opportunities are being picked up by smaller
companies. Larger companies, therefore, have started encouraging entrepreneurship within the company by
forming small venture teams. There is a trend towards mega-mergers. The companies try to reduce the
administrative distance between the top layer of the organisation and the final consumer. There is a case for
flat organisations, rather than tall organisations. Instead of a hierarchical pattern, there is a trend towards
matrix-formation and team-building. Teams are formed around core business processes. We shall now
consider how the marketing department is organised.
Re-engineering
In this turbulent environment, change is to be managed pro-actively to remain competitive. Maybe,

we can re-structure or re-design or re-organise. Recently, however, we have another tool- to re-engineer.
Re-engineering symbolises a full range of change initiatives, from the lowest operation to the restructuring of
252
Product Management
the whole business. Re-engineering is just not tinkering or superficial, but is fundamental in its approach. It
means fundamental reshaping and realigning business processes, technology, people, infrastructure with
customer needs so as to maximise the organisation's performance. It is a re-think on the wayan organisation
does business.
Strategies of the new millennium will emphasize team-work, customer focus, marketing speed and
quality management. We will have to design strategies for new markets, new alliances and new customers.
Globalisation has become the cornerstone of business strategy.
Business processes need improvement. All processes should add value. Business structure which was
formerly functional should now be process-oriented. The cardinal principles of this process-driven organisation
are service delivery, customer satisfaction and product development.
Technology that is new will have to be applied to new methods, rather than old methods. There are
opportunities to re-tool. Retail dynamics will change. There will be EDI, bar coding and scanning. Information
technology will bring about changes in the financial market. Technology, however, would have to be matched
to people.
The people component, the most critical, is found in the organisation structure, job structure and
content, career planning and management, performance appraisal, organisation culture. All these can
change. All these above components -strategy, processes, technology and people - are inter-dependent,
and so re-engineering needs careful co-ordination.
Key for Successful Re-engineering

(i) Top management commitment and involvement.
(ii) Customer focus.
(iii) Long-term goals. Continuous measurement of performance.
(iv) Review of all processes. Elimination of non-value added activities.
(v) Operations developed around customer-driven business results.
(vi) People empowered with knowledge, tools and authority.
(vii) Continuous improvement.
Each organisation decides its agenda for change. Then, there should be simultaneous alignment of
technology, processes, people so that each of them support the overall strategy.
Re-engineering
This term has its origins at the Massachusetts Institute of Technology (MIT) in the early 80s. It was
coined there to signify the changes in business practice likely to be produced by IT (information technology)
revolution, with rapid information flows, instant and direct communications and automation of business
process.
Re-engineering has technological roots in an information network. In the recession, re-engineering is
driven by hard-cash rather than by computers.
Evolution of Marketing Organisation
To begin with a company has only a sales function, along with other importantfunctions like finance,
personnel, production etc. The sales manager manages a team of sales representatives. However, when the
company grows both in terms of market and product mix it adds more functions to the existing sales function,
e.g., marketing research to assess the needs and wants of the customers and sales promotion to induce sales.
Slowly, we see the emergence of a separate marketing department with functions like marketing research,
advertising, sales promotion and customer service. The sales function and marketing function remain
253
separate in the beginning, but integrate later to convert into a modern marketing organisation. The presence
of a marketing department, however, does not mean that the company is marketing-oriented. A marketingoriented company keeps consumer in the focus, and all its functions, be they production, finance, personnel
or marketing, revolve around the customer. All these departments work towards fulfilling the needs of the
customer. Marketing ethos pervades the whole organisation.
The following diagrams illustrate the evolution of the marketing organisation.
Chief Executive Officer
CEO
(CEO)
Sales Manager
Sales Manager
uu
Sales Force
Sales Force
Other Marketing
Functions
Fig. 20.1 (a) Sales Function Only.
Fig. 20.1 (b) Other Functions Added to Sales
CEO
CEO
I
Sales
+
Marketing
Manager
Manager
Sales
Force
Marketing Manager
Other
Marketing
Functions
Sales
Manager
Fig. 20.1 (c) Emergence of a

Marketing Department
Promotion
Manager
Marketing
Research
Manager
New
Product
Manager
Fig. 20.1 (d) A Full-fledged Marketing Department
Internal Organisation of Marketing Department

As marketing has a broad spectrum of functions to be accomplished, the marketing department as a
whole is put under a marketing manager, to whom the other functional specialists report.
Marketing Manager
Manager
Administration
Manager
Sales
Manager
MR
Manager
Advertising
Promotion
Manager
Sales
Relations
Manager
Public
Products
Product
Fig. 20.2
Marketing manager is on par with other functional heads like personnel manager, finance manager,
production manager and materials manager. Marketing manager reports directly to the chief executive officer
of the organisation. In some companies, a marketing manager becomes a member of the board of directors
(BoD) and then he is designated as marketing director. A number of functional specialists report to the
marketing manager, depending upon the business size, nature of business , and the markets served. We can
have customer service manager, marketing planning manager and physical distribution (PO) manager.
254
Product Management
The functional organisation forms the backbone of any further improvement. The limitation of this
structure is the co-ordination problem among functional specialists. There is also a lack of focus as products
keep on increasing, and markets keep on expanding. Each functional specialist also tries to appropriate as
much of the total budget as he can and assume as much of the status as he can.
As the company's markets expand geographically, the set-up of the sales organisation reflect this
geographical reality. A company having national market may have four regional sales managers who are
specialists of that region reporting to all-India sales manager.
Product/Brand Organisation
To supplement functional organisation, a product type organisation is created to take care of different
groups of products that a large company is supposed to handle. This organisational layer is created when
there is a large number of different products which a functional marketing organisation will find difficult to
handle. The pioneering product-type organisation was by P & G in 1927 to restore the sales of their Camay
soap. Camay's responsibility was assigned to a separate product manager. This successful experiment
encouraged introduction of product managers for several other products. What exactly is the role of a product
manager? A product manager develops plans for the products which are assigned to him. He monitors the
results and takes corrective action. The following six tasks are preformed by him:
(i) Develop strategies for the product.
(ii) Do sales forecasting for the product and prepare an annual plan.
(iii) Develop promotional strategies for the product by working in close co-operation with the ad
agencies.
(iv) Render assistance to the sales force and distributors to sell the product.
(v) Collect marketing feedback.
(vi) Think of product innovations.
Advantages of a Product-type Organisation
(i) The product manager can concentrate an developing a marketing mix for the products assigned
to him in a cost-effective manner.
(ii) He can take quick decisions.
(iii) As it is a comprehensive function, it provides training to young executives.
(iv) Smaller brands are not neglected, as they are defended by a product manager.
Limitations of Product-type Organisation
(i) All product managers are not vested with adequate authority to carry out their expected functions.
Though in the textbooks they have exalted functions, in practice, they become mere co-ordinators.
In the absence of authority, they have to rely on their persuasive powers to get things done.
(ij) Though product managers know all about their products, they do not have mastery over all
functions they are supposed to execute, e.g., advertising. When the success of a product depends
upon such a critical factor like advertising, such a situation does not bid well for the product.
(iii) Product managers get over-burdened, and demand assistants. This makes the whole concept a
costly proposition.
(iv) Product managers do not stick to the same product group for a long time. They either move
vertically upwards or horizontally to other product groups. This affects the long-term planning of
the product or brands.
255
To make the post of product managers effective, we must have an appraisal system for them thattakes
into account theirrole, a mechanism to sort out conflicts between line and staff, and a sound job description
of the product manager' s post. Some organisations have instead of an individual product manager, a product
management team. Generally, a hierarchical team consisting of a product manager, and his assistants is
formed. A triangular structure consisting of a product manager, a marketing research manager and a
communications manager can also be formed. At times, we may have a horizontal team of several
specialists, e.g., sales, engineering, design, laboratory, marketing research, finance etc.
Team-approach encourages group decision making for a product plan. Product managers for minor products
can be eliminated, transferring their products to the remaining product managers.
Market-type Organisation
Instead of the products, here a market is chosen as the basis of organisation. Generally it is a good
structure for a multi-market organisation. A chief market manager can have several market managers. They
are also called market development managers. For a major market we can have separate functional
specialists. Or else, the market managers draw upon the existing functional services.
Brand Management
In order to build a brand identity, co-ordination amongst several divisions using the same brand name,
coordination across the different media and marketing, we have to create an organisational mechanism. The
trend today is to have brand managers. We shall discuss this concept here.
Brand Managers
Brand managers have the following functions:

(i) To formulate brand strategy sand implement it.
(ii) To take tactical decisions concerning the brand.
(iii) To maintain and build brand identity and position.
(iv) To arrange marketing support, say promotional expenses to maintain a brand's identity. They
should arrange to getthe attention and resources the brand needs from the company. They are
forceful advocates of the brand, since all other brands are competing for the same resources.
Brand managers are responsible for brand's sales and profits. They are thus likely to be after shortterm gains, at the cost of long-term brand building measures. Besides, a successful brand manager when
promoted is taken away from this area, and thus denied an opportunity to remain involved in long-term brand
building activity.
In P & G, every CEO has come through the brand management ranks. In fact, 90 per cent of company's
management positions are filled by graduates in brand management system. In P & G, brand managers listen
to the consumers. They are expected to know more about their brands than anyone else in the company.
To ensure a blend of short-term and long-term measures, we have to see that both these are
complementary and supplementary to each other.
Brand Equity Manager
We can have clear demarcation between strategy and tactics. A brand equity manager (though he may
be called brand manager) takes care of strategic considerations like brand research, and brand equity
evaluation. The day-to-day management of the brand from tactical perspective is left to other managers.
The overall review of tactics is done by the brand equity manager.
256
Product Management
BRAND MANAGEMENT IN INDIAN COMPANIES
Company
Brands
Role of Brand Managers
HUL
Lux is a 65 year old brand. The company take 5-7 years to establish a
brand.
Brand managers take tactical

decisions. Strategic decisions are
taken by the top management. They
have brand group heads.
Philips
Leader in audio products.

Works to make things better.
Products have good brand equity.
Brand managers are assigned

product development and pricing
responsibility. Budgets are based
on sales turnover. They have product group heads.
P&G
Vicks - the most well-known brand.

It has been here for the last 30 years.
Ariel has been built up in just seven
years.
They have the Category Manager as

the ultimate custodian of brand
value.
Godrej GE
Since 1991, it is the market leader in

refrigerators.
Marketing managers act as brand

managers. Half the company's budget is ear-marked for the brand
building activity.
Cadbury
Under the family brand name, it advertised all its brands. Since 1985, Cadbury
Dairy Milk (COM) has been established
as a separate identity.
Brand managers have been given

added importance.
Amritanjan
The brand formulation

was
improved and packaging was made
contemporary keeping the core
values in tact.
Brand managers have to identify the

brand opportunities and do
consumer research.
Palmolive
Brands inspire confidence, and

command loyalty. Colgate tends to
become generic.
Brand managers are brand champions. They take decisions of all aspects of the brand - advertising
and promotion.
Range Brand Managers

Consider a brand like American Express. It is a brand whose identity works across different product
classes - charge cards, banking and travel-related selVices (TRS). American Express is thus a range brand
or a mega-brand. Brand extensions extend the brand within a product class only, for a short-term. A range
brand is a strategic extension across several product groupings. In each product class, a range brand name
has a distinct competitive advantage. Creation of a range brand is economical. It adds to the visibility of the
brand.
An organisation having range brands adopts products or brand-type organisation. Each brand is placed
under a brand manager. They all report to the range brand manager who takes strategic perspective. He puts
overall promotion to maximise brand synergy.
257
Global Brand Manager
Multi-nationals have brand managers in several nations, and a global brand manager who develops
a universal brand identity. A global brand manager ensures that the brand strategy is faithfully implemented
in different countries. He guides the universalisation of promotion. He ensures consistency and synergy across
various countries. A country brand manager manages a brand locally but within the parameters of global
thinking.
Chief Executive Officer
Brand decisions are left to top functionary of the organisation in several companies. Though
advantageous this arrangement is as it ensures commitment of top management, it over-burdens a busy
functionary who cannot afford undivided attention to brand building activity only. This drawback is overcome
in some organisations by creating a team of senior executives, who consider the proposals of the brand
managers. These teams are important from strategic point of view but are incompetent to understand the
brand contents of several different kinds of brands.
The CEO has to build a corporate image. At Oshkosh B'Gosh, Douglas Hyde, the CEO is personally
involved in all new product introductions. He is involved in all aspects of product management and
marketing. This ensures that all their products are consistent with their corporate image. Even high-tech firms
have CEOs who are brand managers. At Microsoft, for instance, no major product is shipped without the
approval of Bill Gates. That approval comes only if the product meets Microsoft's standards and fits the
corporate image of the company. It improves the chances of product success. The company has to keep in
mind its core values, which project its image and the image of its products. The company should not stay
off these core values.
Brand Champions
Instead of a team, a senior manager is appOinted as a brand champion for a single brand. He makes
strategic review of the brand manager's decisions. He is thus equivalentto brand equity manager. The only
difference is that he is sufficiently high up in the organisational hierarchy.
Category Manager
Here a brand product category is placed in charge of a category manager, e.g., toiletries, home remedies
etc. He develops strategies for all products - brands and sub-brands within the category. It is easier to
coordinate the functions across a few category managers rather than coordinate across several brand
managers. However, it is a moot point how far this type of structure will be conducive to brand building.
Product category teams have research managers, brand managers, and market managers headed by a
category manager. This team consolidates the existing brands and throws off new product ideas for brand
groups all over the world.
Brand Committee
This committee can have promotion executives drawn from different business divisions. They develop
an integrated communication plan for bUilding up a brand.
Promotion Co-ordinator
A promotion manager takes care of integrated communication made by integrating promotional tools
such as advertising, IR and publicity, sales promotion and supportive services like marketing research and
marketing information system. Promotion co-ordinator renders staff functions and to be effective must carry
others to his view-point by winning them over.
258
Product Management
Brand Equity and Advertising
Brand equity is the process of building up the brand by piecing together the elements like brand name,
packaging, pricing, distribution and advertising. A brand's equity is in effect the aggregate of potential
consumers' beliefs that it will deliver on its promise. The impact of advertising in building a brand varies from
category to category and even from brand to brand. But in essence, contributing to brand equity is what
advertising is al/ about. To quote Indranil Gupta, if we are in the business of building brands the biggest reality
we need to face is 'that we would never go doing so in isolation. And that means building over equity better
than (the equity) of others."
Advertising agency therefore , has to playa vital role in developing the brand strategy. In these days when
brand managers do change frequently, the agency is the custodian ofbrand equity. Ad agencies have to put
brand strategy to execution. International advertising believes in developing a common strategy adapted to
local conditions for all markets.
There are other promotional heads who contribute equally to brand equity. An agency, therefore, must
develop an integrated communications plan for the brand. There is a trend in India to set up different divisions
ofthe agency to take care of different communications tasks, e.g., direct marketing division, public relations
division, event management division etc. Even a single agency can provide multi-functional services. An
integrated agency is in a better position to decide which promotional tool will be the driving force behind
establishing a brand identity.
Many clients do not leave the entire brand strategy to agencies, but do it within the organisation.
Atthe most agency can provide some vital inputs. Clients may approach different specialist firms rather than
rely on one large agency. A client can develop its own expertise over a period of time .
PACKAGING
Packaging has one most widely accepted definition. It is an art, science and technology of preparing
goods for transport and sale. Packaging has two dimensions - the technical which is related to packaging
materials, pack design and the behavioural which is related to the art of product design which is so closely
linked to consumer motivation and buying behaviour.
Packaging as an indusry has two sectors - those who make packaging material and those who convert
these materials into packages. In addition, there are printers and MR agencies to do packaging research. New
packaging materials are fast replacing the traditional ones. Packaging materials include metal, plastics,
wood, paper, glass, laminates and polyester. There is a wide variety of package formations. However, the
master-cartons in which unit packages are kept are standardised to facilitate handling and transportation.
Packaging performs five basicfunctions: (1) It protects. (2) It appeals. (3) It performs the task for which
it is designed, e.g., an aersol is not only a package but is a performing device. Uit does not perform, the product
is useless. (4) It offers convenience to the end users and (5) It is cost-effective.
Packaging
Is packaging a component of advertising? Or is it really a component of a product? These are the

questions that are most commonly asked. The answer to both the questions is "yes." We already know that
packaging is an integral component of a product; but the package also plays an important role in its
saleability . It, therefore, becomes partly a component of promotional advertising. Packaging is no longer a
mere outer covering for the protection of the product; it is very much a contributing factor to its increasing
marketability. Ads after ads feature a beautiful package; and the product image in the minds of consumers
is, to a good extent, due to attractive packaging. In the case of the similar products, the brand difference
is only due to differences in packaging. Good packaging covers an idea of the quality of the product; it has
a value which is distinct from the value of the product. Attractive packaging is an effective Point of Purchase
(POP), and stimulates gift sales.
260
Product Management
As the old adage goes, "Clothes make the man." So, also, does the package make the prt>duct.
Products are often judged by their packages-particularly for impulse product. Perfume is a good example
of this. There is a close interrelationship between the advertising and packaging components of the marketing
mix. Several advertisements feature the product in its package.
Though packaging is primarily a means of protection during transportation and storage, our interest
in it is primarily for its use as a marketing and promotion tool. Advertising people are involved because, in
addition to being a protective device, packaging is featured as a campaign theme. The package is a vehicle
for carrying the manufacturer's name, the brand name, the trade mark, apart from the information it provides
about the ingredients and direct advantages of product use. Packaging identifies products, their quantity,
constituents, shelf life, mode of use and nutritional or use value. Packaging serves as a significant source of
information.
The other marketing significance of packaging is that it helps in achieVing product differentiation.
Packaging is designed for convenience in the use of the product, and may be used to differentiate a brand
from the brands of its competitors. Further, packages are designed to have a re-use value. Good packaging
will gain for a prod uct more shelf space than for a product with unsatisfactory or unattractive packaging, and
will result in its extensive exposure to the customers visiting retail stores. This will improve the sales of the
product.
A beautiful packaging is an advertisement atthe point of sales. A package is made visually attractive.
In short, packaging is an important advertising medium, carrying varying messages from the marketer to the
consumer. In view of the advertising and promotional significance of packaging, professionals in this field
should have a profound understanding of packaging so as to make it an effective marketing and sales tool.
Packaging as a function has two separate dimensions - the physical aspects related to the science and
technology and the behavioural aspect related to the art of product design associated with buyer behaviour
and motivational research. It enhances the value of the contents and passes on the impression to the
consumer directly or subtly.
In case of consumer products, package serves as a silent salesman. It performs self-selling tasks.
It should attract attention, and tell the product story. It should build the confidence and give a clean and
healthy look. It should be convenient in handling and usage, as well as in storage. It must reflect good value.
Packaging research concentrates on the colour of the package and its matching with the product and
the consumer. Packaging research also studies the design aspects of packaging - the desirable properties
of a container. Graphics and logos are an important part of package design, and in conveying the total
product image. Packaging has donned the cloak of convenience. Single dose packs, ready to eatfoods, easy
open and dispensing features are important in selling product.
Packaging and Sales Promotion
Product package has a vital role to play in SP (sales promotion). Some of SP techniques used are:
(a) Money-off Pack: A message of a reduced price is flashed in distinctive colour on the package.
(b) Coupon Pack: Coupon can be made an integral part of the package or can be placed inside it
separately. For instance, Johnson and Johnson put coupons for redemption in its sanitary napkins
packages.
(c) Pack-in Premium: A premium or gift used to be placed in the package, e.g., charms placed inside
Cibaca Fluoride Paste.
(d) Premium Package: It is a specially designed package having re-use facility or a prestige storage
value, e.g., instant coffee package doubling as tumblers, tea packages later serving as jars,
alcoholic beverages later used as display items.
Packaging
261
(e) Self-liquidator: The buyer preserves either packages or their parts as evidence of buying the
product. In return, he is given a reduced price at the time of repeat purchase or is rewarded with
a different product.
(f) Other Applications of Packaging as a Marketing Tool: Shelf-life of a food product is an important
consideration. Shelf-life can be increased by using special packaging materials, e.g., tetra-packs.
Packaging can be used to avoid direct price comparison with the competing products, e.g., Maggie
Ketchup packages 400 gms. bottle which is not comparable immediately to industry-wise norm
of 500 gms. bottles. Dhara edible oil packages are popular since they are pilfer-proof and spare
the consumers of the adverse effects of adulterated oil.
Perfume Packages
Containers of perfumes are as important as the contents. They not only sell scent but also status.
Perfume packages evoke imagery. Tocade from the house of Rochas, Paris is packed in a bottle which follows
the curves of a woman's body, with an amusing hat as the stopper. Jean Paul Gaultier's signature line in
the tin case reminds us of a woman in Madonna corset. L'Air du Temps and the dove flying off the flacon
are conjured together.
Packaging Scene in India
The progress made by Indian packaging industry recently is commendable. Still, this 10 thousand plus
crore industry has to go a long way when compared to its counterparts in other countries. The middle class
is the main consumer for packaging products. The average consumption of plastics in India per person is one
KG whereas in the Western countries it is 14 KG. Per capita consumption of paper is around 5 KG where
as it is almost 50 KG allover the world. The packaging industry in India is mostly in the small scale sector.
These units convert the basic materials into finished and semi-finished packaging forms. Medium and large
units, however, contribute over 60 per cent of the value of the packaging materials produced. Still the scale
is not very large by world standards. Ever since the liberalisation, the industry is changing rapidly. Many items
required here are now under Open General Ucense (OGL). Duties have been reduced progressively.
Machinery for this industry can come in India at zero duty if six times the value of this machinery is exported
in a specified time-frame. Excise on domestic packaging materials has been reduced. '
India being an agricultural economy, packaging will playa greater role in food related sector. Processed
food sector will be a main buyer of packaging materials. Transportation of milk, food grains and commodities
like tea, coffee, edible oil overlarge distances, and under varying climatic conditions is a big challenge to the
packaging industry. Fruits and vegetables are perishable and do require protective packaging like Modified
Atmospheric Packaging (MAP) and Controlled Atomspheric Packaging (CAP). Cold storage facilities are
required more and more.
Pharmaceutical packaging is a very promising area. Consumerdurables with high value products also
require a scientific packaging approach. Even a small dent on a durable may result in its rejection Industrial
products also require packaging. Packaging should be a value added function. Packaging can provide support
to Indian exporters.
In packaging raw materials, we produce plastics such as low density polyethylene, high density
polyethylene, polypropylene, polyestel' and otherpolymers. We also use glass, metals cans, aluminium foil.
Several projects to make basic packaging materials have been launched. We also require a vibrant packaging
machinery sector. Our packages lack precision and sophistication. Some machines such as filling and sealing,
and measuring machines should also provide sophistication, precision and speed, Ancillary industry of
adhesives, ink and coating must also develop. In these times of globalisation, our packaging standards must
be raised to international levels.
262
Product Management
Rigid and Flexible Packaging
Packaging is generally classified into rigid and flexible varieties. Rigid packaging include metal
containers, glass, injection or blow-moulded, HMHDE plastic drums, wooden crates and paper board and
corrugated boxes. Flexible packaging comprises plastics such as LDPE, HDPE, PVC, BOPP, polyesterfilm
etc. Aluminium foils used in laminates, paper, polypropylene films are also considered flexibles.
Bulk Packaging
A fairly high percentage of products still needs to be moved in bulk while distributing. Bulk packaging
is commonly needed for bulk drugs, chemicals, agri inputs, fertilizers, cement, solvents, petroleum products
etc. Some bulk containers also serve as transport media. Jute, multi-wall paper sacks, plastic-based
materials, HDPE-woven fabric, circular woven HDPE bags, polypropylene woven bags and co-extruded bags
are used. In rigid systems, so many materials are used. Bag-in-box concept started with simple wine and fresh
juice institutional packs. We also use combination of jute fabric with polyethylene fabric.
Flexible Packaging
Non-functional packaging attributes like the aesthetic appeal and image are becoming as important
as the functional aspects.
Consumer products companies are willing to spend between 10-12% of their investments on packaging
of their brand.
Flexible pack is a pack constructed with a laminate - which is a combination of layers of polyester,
BOPP, po!ythene, aluminium foil and paper. The layers of each laminate vary depending on the product
required to be packed.
Flexible packaging is a concept whose time has come. It has lower investment costs, both for the
packager as well as the consumer products company. It offers greater variety in design and print. It gives VFM
(value for money) to the end consumer, who pays less for the product as much as 80 per cent of the time
as, packaging costs are lower.
Unit packaging in sachets (e.g., shampoos and coffee) has given a further boost to flexible packaging.
Flexible packaging industry has two components:
(i) manufacturers of BOPP and
ble packaging)
polyester films
(the raw material for flexi
(ii) the converters who laminate and print on the raw material giving the packaging its final form.
Multi-layer flexible packaging is a technique which produces composite layers of a variety of substrates
using co-extrusion, extrusion coating or adhesive lamination.
Essel Packaging
It has tapped a significant niche -laminated tube packaging. Essel's lambitubes are today used by
for the Hli.. and Colgate-Palmolive toothpastes, Pond's face wash, Fevicol, Vamicol, Moov of Paras , Burnol
of Boots, Vicco Cream, among other brands. To expand market of lambitubes, the company is now
convincing manufacturers to put shampoos and soaps in gel form, and package them in tubes. Essel's
competitor is Ras. It earned revenues of Rs. 228 crores for the year end March, 2001, and has 22 per cent
ofthe world market, making over 2 .2 million tubes a year. In India, these accountfor 75 per cent of the market
in 2000. Over the years, seamless or co-extruded plastic tubes have become popular. Aesthetics make us opt
for tubes, though they are expensive. They are to be packed in cartons again.
Flex industries is a big player in the area of flexible packaging. The other big players are Paper Products,
and Sharp Industries. U Flex is another big player. It has also broutht ZIPOUCH - a range wonderfully
versatile packages in the kitchen.
Packaging
263
Packaging Trends
Packaging cannot be considered in isolation. It has become a part of the core product. Packaging can
convey the message of a good quality product to the end users. The cost of packaging material could be as
high as 50 per cent of the total product cost, e.g., Kellog's Cereals. Packaging has emerged as important
component in respectoffood products, cosmetics and liquors. Packaging can make the brand stand outfrom
the rest. In some industries, packaging is the cost - the rest is just water (mineral water). Packaging-led
success of Frooti proves its importance. Packaging protects the customerfrom adulteration, pilferage, short
weighing. Packaging innovations can change the way the product is consumed and sold. Imagine the preFrooti days when a consumer taking soft drinks was tied to a counter for returning the empty bottle. Frooti
setthe consumerfree. Cordless and cellular phones similarly promise us freedom of movement. Pepsi's pet
bottles converted the outdoor consumption to indoor consumption. Satchet shampoos have allowed the
women who could not afford an entire bottle to enter the branded shampoo market. HLL made available
Close Up paste in Satchets a few years back. It has now added a nozzle at one end of this satchet of 15 gms.
It is first of its kind anywhere in the world. In this version, the satchet becqmes a small tube available at a
much lower price. This satchet is enclosed in a plastic cover. Intra-venous fluids cannot be innovated further.
There is no scope, except in methods of packaging them. When core product's superiority is difficult to
establish, packaging takes care of the brand. Lakme's packaging shows that it is a company offering products
for women, by contouring their bottles after the shoulder curve of women and giving them muted colours.
Packaging innovations are, however, short-lived. It is thus necessary to innovate further and the cycle goes
on, e.g., soft-squeeze tubes oftoothpastes. Some packages are re-usable as storage containers thus adding
value to the product. Packaging system is related to the distribution system, e.g., tetra pack of Ohara of
rectangular shape is found convenient by trade though for the consumer it is notso convenient. The Frootis,
the Dharas and the Pan Parags are prominent successes of packaging innovation. But it does not work always.
Carton packaged electric bulbs are inconvenientfor trade since it is easier to test a sleeve-packaged bulb on
the board. A slight change in packaging can create problems of brand acceptance, e.g., colour of a Charminar
pack. International packs of MNCs may not be accepted here, e.g., Le Sancy soap in individual packaging
stored in jars. Now Le Sancy sells in unit packaging. Imagine the way the glue was packed formerly. It was
a glass bottle with a rubber nipple which required cutting with a blade for the glue to flow out. Even then,
the flow was not smooth. There were possibilities of the fingers getting injured while cutting the nipple.lttook
many years before the package design was changed. The glue is now available in convenient plastic tubes.
Though these cost more than the glass bottle, the tubes have replaced the glass bottles because, 'the blade
and the blood', as S.K. Palekar puts it cogently, were not just worth it.
Sachets
Small packages such as sachets give deep penetration of the market. They are convenient as well as
affordable. Brooke Bond introduced tea sachets in 50s. Cavin Kare popularised the concept in the 90s by
launching shampoos in sachets. Diverse products such as shampoos, hair conditioners, dyes, beverages like
tea and coffee, pickles, pan masalas, mints and sweets, detergents and hair oils have gone the sachet way.
Sachets initiate trial. They are convenient for people on the move. Sachets broaden the user-base. Sachets
make style accessible to a large section of consumers. Tomato puree tetrapak container has been introduced.
Package of Pillsbury-Gordrej Chakki Fresh AHa
This is a distinct package especially designed to protect the chakki freshness of flour. It achieves this
by the two layers of plastic. It ensures that the package does not break, and there is no spillage. The lower
layer is linear low-density polyethylene (LLDP) which acts as moisture-barrier. The top layer is polyester.
It acts as gas or odour barrier. The top layer is laminated over the LLDP package.
The brand personality character is a doughboy. He represents softness, approachability and
trustworthiness. In his hand, he holds the finished product - a roti.
264
Product Management
The top portion shows a barrel-head, with Pillsbury inscribed in it. The barrel "tores flour in the US.
The blue and white swiss dots along the barrel head and the doughboy are part of the brand dress.
The package shows golden hued wheat fields - the source of raw material to build up credibility.
Blue colour of the package indicates it is a premium brand. Red re-inforces this premium look. The package
carries labels like Chakki Fresh Atta, a desirable attribute of the product, the quality of ground flour whether medium, or fine and a promise that it is 'whole wheat atta.' It also promises 'no maida mixed' to
northem customers who are paranoid about such adulteration.
Demand for Packaging Materials
The demand for packaging materials is given in the table below:

Demand for Packaging Media
Packaging
media
Polymers
(PE, PVC, PS, PP)
(in lac tonnes)

1999-2000
2.52
Paper boards and corrugated boards
31.60
Metals (tinplate and aluminium)
14.70
Glass
13.40
Composites
1.80
Rexible laminates
4.20
Packaging Machinery
This is a very large sector. It consists of packaging machineries, machineries for package manufacturing
and conversion of basic packagitg raw materials. An estimated 500 manufacturers in India today produce
the following types of machinery:
(a) Manufacturing (conversion)
(b) Processing (packaging)
(c) Handlingmachinery
(d) Testingmachinery
Conversion
These conversion equipments produced include those of manufacturing corrugated boards and boxes.
collapsible tubes, crown corks, ROPP caps, folding cartons, glass ampoules, glass bottles, laminating and
coating, metal cans, paper cones and composite containers, plastic films, bags, bottles, and woven sacks,
paper bags and steel drums. This is supplemented by a variety of printing machines.
Processing
These are package processing machines such as capsule filling, pouch making, tube filling. wrapping
machines, blister pack machines, ampoule filling and sealing machines, bottle filling machines, bagging,
capping, cartoning, strip packing, thermoforming and bulk packing machines. There are machines to fill inert
gas and create vaccum.
The emphasis is more on low cost packaging system using flexible packaging materials.
Packaging
265
Aerosols
In its true sense, an aerosol means the suspension of very fine (liquid or solid) particles in a gaseous
medium e.g., smoke, fog or mist. Today, however, the aerosol pack has come to mean a special container
fitted with a release valve in which a product is packed under pressure of a liquified or compressed gas. It
enables dispensing the product as liquid spray, foam or fine powder spray. Aerosols are not only a form of
packaging but a total delivery system. Aerosols are used for personal products, household products, industrial
products, medicinal products and automotive products. In India, aerosols were first introduced in 1965.
Aerosols are high cost containers, but cost is not a deterrent in its spread. Aerosol containers can be glass
bottles, aluminium containers or metal containers with inside lacquering to prevent corrosion. Valves are of
several types. Press-button valve is pressed vertically down and shuts off automatically by an internal spring
or tension of a membrane. In the stem, there is a slit which determines the rate of discharge. Metering valves
dispense a fixed quantity of the contents and are used for premium perfumes and medicines. In tilt valves,
the actuator is pressed sideways. A one-shot valve releases the whole of contents within one shot e.g. a fire
extinguisher.
Aerosol propellants are a necessary ingredient. They can be liquified gases or compressed gases.
Liquified gases are generally used as they provide cosntant pressure and vaporise instantly. Fluro-chlorohydrocarbon compounds such as mafron/mafrosol are widely used as propellants.
Aerosol machinery consists of product-filling unit, crimping unit for crimping valves into the containers
and propellant charging unit.
Space sprays are very fine. Surface sprays have not to drift from the surface and hence should not be
very fine. Foam sprays have to expand. There is no atomisation. Product is whipped into a fine lather. The
propellant content in foam sprays is less, i.e., 7-15 per cent by weight.
CONSUMER PROTECTION
Who is a Consumer?
According to the Consumer Protection Act, the word 'Consumer' is defined separately for 'goods' and
'selVices' .
Consumer for Goods
One who buys or agrees to buy any goods for a consideration which has been paid or promised or partly
paid and partly promised or under any system of deferred payment.
It includes any user of such goods other than the person who actually buys the goods and such USE is
made with the approval of the purchaser.
It is to be noted that a person is not a consumer if he purchases goods for commercial or resale purposes.
However, the word 'commercial' does not include use by consumer of goods bought and used by him
exclusively for the purpose of earning his livelihood by means of self-employment.
Consumer for Services
One who hires or avails of any selVice or selVices for a consideration which has been paid or promised
or party paid and partly promised or under any system of deferred payment.
It includes any beneficiary of such selVice other than the one who actually hires or avails of the selVice
for consideration and such selVices are availed of with the approval of such person.
Rights Enjoyed by a Consumer

Right to be informed about the quality, quantity, potency, purity, standard and price of goods
and selVices so as to protect the consumer against unfair trade practices .
Rihgt to be protected against the marketing of goods and selVices that are harazdous to life and
property.
Consumer Protection
267
Right to be heard and to be assured that the consumers interest will receive due consideration at
appropriate forums.
Right to choice wherever possible, access to a variety to goods and services at competitive prices.
Right to seek redressal against unfair trade practices and unscrupulous exploitation of consumers.
Right to consumer education.
Right to clean and healthy environment.
Consumer Protection Act, 1986
The CPA, 1986 provides for the better protection of consumers. The provisions of this Act are
compensatory in nature (i.e. they are not punitive or preventive unlike the other Acts). The Act is intended
to proVide simple, speedy, and inexpensive redressal to the consumers' grievances, award relief and
compensation whenever appropriate to the consumer. The Act has been amended in 1993 both to extend
its coverage and scope and to enhance the powers of the redressal machinery.
The Act applies to all goods and services unless specifically exepted by the Central Government. It
envisages establishment of Consumer Protection Councils atthe central and state levels and protectthe rights
of the consumers.
The three-tier quasi-judicial machinery is National Consumer Disputes Redressal Commission,
State Consumer Disputes Redressal Commission and District Consumer Disputes Redressal Forums.
They are known in short as the National Commission the State Commission and the District Forum. If
the cost of goods or services and compensation asked for, exceeds Rs. 20 lacs the complaint can be filed
at the National Commission at New Delhi. If the cost of goods and services and compensation asked
for is more than Rs. 5 lacs, but less than Rs. 20 lacs, then the complaint can be filed before the State
commission. If the cost of goods and services and compensation asked for is upto Rs. 5 lac, then the
complaint can be filed in the District Forum.
What is a Consumer Complaint?
Under the CPA, a complaint means any allegation in writing made by a complainant in regard to one
or more of the following:
Any unfair trade practice as defined in the Act or restrictive trade practices like tie-up sales adopted
by any trader.
One or more defects in goods. The goods hazardous to life and safety, being offered for sale to public
in contravention of provisions of any law for the time being in force.
Deficiencies in services.
A trader charging excess of price.
The complaint can be drafted on plain paper and copies thereof are filed before the appropriate fora .
CASE STUDIES
CASEl
AMULCHOCOLATES
In the west, chocolates are used as mini-snack in between meals. In India, chocolates are bought as
small gifts. They ae aslo shared, as all sweets are in India. Amul chocolates are, therefore, positioned as 'gifts
of love', from and for people of all ages.'
1975-78
'Enjoy it with someone you.' The illustrations variously giffting and sharing of Amul chocolates. The
partners of sharing were children, sweethearts, parents, grandparents.
1975 Fig. 23.1
269
Case studies
1979
We can expect to receive a chocolate treat from 'special people' called 'chocolate people.' Ads covered
different age groups and emphasised family relationship To illustrate, we had:
Chocolate Wife
Chocolate Aunty
Chocolate Granny
Chocolate Daddy
Chocolate Friend
~~"l::f."-f(
)
~'L~D.I-'Sit
*':'-j
,~ ~
'"
1979
MIU<
EnJOY
w,th
love
_ _,t
_
_ saneore)OU
__ _ _ _ --"' . ______
MILK CHOCOLATE
I:j!'.
_ _\;:;t
Fig. 23.2
1982-1985
'Enjoy it with some one you love' is difficult to render in Hindi. Thefore the Hindi rendering read 'Pyarki
Meethi Bhent' which was rendered into English as 'A gift for someone you love.' This baseline continues even
today 'A gift some one you love' become a head-line in some copies.
~------~----------~
1989
1982
Fig. 23.3
One may be too old or too young for certain activities in life bu 'I think you're just right for Amul
Chocolate.' It is an endearing jingle. It also appeared in print.
Product Management
270
1989
Fig. 23.4
1990
There was further segmentation. Chocolates were positioned as gifts for various reasons.
Will you be mine?
I will give you Amul Chocolate everyday.
1990
Fig 23 .5
1991
Issues
Try to appreciate the positioning of Amul chocolates. Compare it with the positioning in recent times
of Cadbury Dairy Milk (CDM) chocolate.
Case studies
271
CASE2
LUX BEAU1Y SOAP
A ","ouly hinl ,tyoighl from
Lux
It sells in over 70 countries.

Introduced in
Lux was launched in 1899 as the laundry soap
in the UK. In 1925, the brand was introduced to
the toilet soap category.
Advertising
Endorsement by film stars from the very beginning.
The campaign was conceived by Helen Resor, the
wife of Stanley Resor, the founder of JWT.1t came
to India with already established advertising campaigns. The positioning as the beauty soap for fIlm
stars was an international proposition and subsequently adapted to the Indian scene.
Launched in India
In 1929.
First models were foreign actresses like Ginger
Rogers and Loretta Young.
The brand has been evolving ever since its birth. There are new
colours, fragrances, packaging and variants. The brand has been
extended to shower gels, liquid soaps and moisturizing bars. It has a 1930
romance angle that is kept constant.
GINGER R<XiERS
FIg . 23.6
1941
Leela Chitnis was the first Indian actress to endorse Lux*. Shobhna Samarth, mother of Tanjua and
Nutan, also endorsed Lux.
HERE IS A .!EAUn TIP
FROM
ELY/.eeLa .
('ltilit/~
..._--- .......
......
-......---'-.- -_.-..... ...--.
, ,, ...... " .... ... . w_' _ '

, ,-.
,
,._
'JJliirn'ili ~~Ei~~~
FIg. 23.7
1941
Leela Chitinis acted in films like Bandhan, Kangan and Jhoola opposite the legendary Ashok. She had taken up acting in
1930s. In 1951 , Chitnis appeared in Raj Kapoor's Aawara. She moved to the US in 19805. She expired at the age of 93
in July, 2003.
272
Product Management
19505
Classic beauties of Hindi films like Madhubala, Nimmi, Nargis and Meena Kumari were featured in
advertisements.
So whitt
Lux
Toilet Soap has ~UC

creamy
a
fragranl lather
rh.lr, .. h\ I .. r..." .
.LO
,;\ .r,,"'" 'l"';' ~,I~
"IUI.h.t,.1
1950
"n
.tl lt/ f l ' \ r,...
Fig. 23~8
Actresses who featured in Lux ads were

Mala Sinha
Sadhana
Vyjayantimala
Waheeda Rehman
The colour era of Hindi films had started, and so also
different coloured Lux cakes were launched. It was in 1961
that pink, yellow, green and blue cakes were introduced for
the first time. Saira Banu endorsed the brand in 60s which
was once endorsed by her legendary mother Naseem Banu.
........ ..
. !' !:!1~
1961
Fig. 23.9
Case studies
273
19705
Till 1972, Lux account was with Lintas. After that it moved to HTA.
In the 70s, glamour girls like Hema Malini, Zeenat Aman, Sharmila Tagore and Rakhee were used.
1970
1975
Fig. 23 .10;
1980s
Actress models continued in 80s. The wrapper was redesigned in 1983. In 1989, International Lux was
introduced as a premium soap.
~O:"- ''-'''l/nUl!:ll1tC
~:!.,fJ..Jn<t "('om,llcxton (\lIe
> t- ~ .+...~
Sl~'"
by lw.:
t,,jjl(;"
1!~:( " c;,,:~I~1

(!~<.
':
'\"'''l,I{.!".
I'ur.'. rnlltll Itt.... ~ul\ :'O\).lI'I.lth~I;II" ..
1983
f..,., '><. 11 ..
t." ..
~'"'."_
til", ,' ......
1989
1985
Fig. 23.11
274
Product Management
1990s
In 1991, three product versions ofthe premium soap were put in the market - for oily, dry and normal
skin. In 1990, itwas launched as All New Lux. Even in popular category, different perfumes and colours were
introduced.
Since 1992, Lux chose 1V as the main media; using Madhuri Dixit and Sridevi.
Right now, we see Pooja Bhat and Juhi Chawala on 1V endorsing Lux. The latest to endorse
Lux is Tabu.
Constant Appeal : Beauty and complexion.
,. ,
:'*,"",_
~"" '"
+_
....
-,-.k.<_.>e' ;"c.F.,",,"
~ _i~_"";-
.~
~UX
:/yit'~:-,;~/?j{
1990
1991
Fig.
23.12
2000
Aishwarya Rai and Priyanka Chopra endorse the brands. Lux stars continue to charge much lower than
their market value to be a part of Lux legacy.
Lux
Lux has been endorsed by Mumbai stars from Leela Chitnis to Aishwarya Rai all these fifty years. It
has become a soap of film stars. Over the years, Lux brand has lost its confidence and unique identity. The
brand must be made younger. A Lux woman must be an achiever, to put Lux into a confident, strong
position. The new packaging has strong visuals- bold and bright colours. Aishwarya appears in striking reds,
purples, magnetas and greens. Lux variants are available.
Issues
What do you say about Lux soap for different types of skin? How does it fare with Palmolive soap?
What do you say about its positioning? Describe the brand image of Lux.
In this' new millennium, stars like Kareena Kapoor are endorSing Lux.
Case studies
275
CASE3
SURF: HILL
Launched in
Agency
Changes in the brand name
Qualities associated
with the brand
Advertising Strategy
Theme
1969
1970s
1975
Early 80s
1984
1990
1959, second detergent powder to be launched in India.

Lintas.
Super Surf, High power Surf, Power-packed Surf, Extra Action Surf,
Surf Ultra, Surf Excel, Surf Excel with Active Oxygen.
Whiteness.
Mother's care.
VFM (value-for-money).
Concept selling initially.
Product usage later.
Whiteness froms 1959-1970.
Brand proposition: Surf washes whitest.
Distinctive lines radiated from the whiteness star. Till date, it continues
in various forms in ads and on the package.
Mother's care for her child's care.
It was combined with whiteness.
How-to-do it format
(How-to-get-the whitest form,
How to tackle special-washing problems)
,
Coloured clothes, were taken in ambit. 'Good for whites, good for
coloureds.'
Nirma appeared as a low-priced option. Surf was felt expensive.
Advertising theme communicated the value-for-money along with the
core values of whiteness and mother's care. Comparative advertising.
According to MR agency A. C. Nielsen, Nirma had 15.2% share of the
detergents segment and 8 .2% of soaps (in terms of value) in April,
2006. But by June 2007, the market share had dipped to 13,5% in
detergents and 6 .74% in soaps. The decline is due to Nirma's inability
to innovate, and be ready with new pricing policies. Nirma has no
aspiration brands for switch over for economically better consumers.
Nirma's promotion has remained the same, and its visibility is on the
decline.
Lalitaji campaign appeared. Legendary campaign. Lalitaji is a nononsense, aggressive, value conscious, sensible housewife , Lalitaji was
an invention of Lintas in India and not a figment of Lintas Worldwide.
The entire concept was unique to the Indian scene because nowhere else
in the world itwas facing the kind of competition that it was from Nirma.
Lintas did manage a breakthrough with advertisement and captured
some part of the market and today Nirma is not as much talked about
as it was in the 80s. Shunu Sen, the then marketing chief of HLL used
Lalitaji commercial during Olympics on the condition that after the
event, there would be a recall test, and if the commercial passes the test,
it will be backed up. Lalitaji scored higher than any other commercial on
the box; on notice and memorability. Lalitaji ran for the next seven years
after the Olympics. Padamsee says, 'In a sense, Lalitaji rescued Stirf.'
Campaign emphasing whiteness once again.
276
Product Management
2004
2007
Surf almost became generic for any detergent. Lever decides to put it
under Surf Excel umbrella as Surf Excel Blue. The one that washes with
half the quantity and half-the effort will be called Surf Excel Quick Wash.
The low foam variety will be called Surf Excell automatic. Thus there will
be three variants of Surf. They have similarly done this with Lifebuoy
which was relaunced with a high level of TFM, better smell and better
package . The Lifebuoy which was phased out was a red carbolic bar.
Similarly, Surf brand will be phased out, and Surf Excel Blue's
formulation will be improved and prices will be held steady.
HUL commands 38% share in the Rs. 8000 crore detergents market
segment. Godrej consumer products has 11 % market share in the Rs.
6000 crore soaps category.
Issues
Describe the evolution of Surf as a brand. How the product has been reviewed time and again? How
did it meet the competition from Nirma? What are the core values of this brand? What are the extended
values?
Case studies
277
CASE4
MISCONCEPTIONS
Markets are neverfull of mature customers. Many myths circulate in the market. A tiny razor with twin
blades was seen with suspicion. Will it deliver? The myth in circulation was that heavy razors do a neat job
of shaving. Similarly, people expect stiff bristles of a tooth-brush to brush better. Several products can bring
about cold, e.g., ice-creams in winter, bananaS etc. Several products are too hot for the body, e .g. , fish ,
spices. Viscous juices are considered nutritional. Kajal is good for the eyes, whereas lipsticks harm the lips.
Old wives' tales are too many to list. Some new husbands also join the race . Who will accept blue food as
blue is considered poisonous? Lord Shiva after consuming poison became Nilkantha. People do have beliefs
and faith in them. These may be passed on from generation to generation. Managing the myths and busting
them is a challenging communication task. We do need more 'reason-why' advertising. Myths have a life
cycle. New evidence busts several old myths. Weak myths tend to fizzle out on their own. Education can kill
several myths like 'Kissing leads to pregnancy.' A sweater provides warmth by hugging the body on account
of close fit and so close fit is as much important as the thickness of a sweater. Such ideas are acceptable
to today's girls. Some myths require a sustained assault. It is sometimes necessary to modify the existing
misconception. Some tend to ride the myth to cash on it. It is only a short-term approach. Bucketwash is
now acceptable. Cadbury has to fight the myth that chocolates are bad for health. There should not be a
frontal attack on beliefs. Savlon antiseptic is non-burning and it had to attack Dettol's sting. Strong smell
of a disinfectant does not always mean better power. Uzol is pleasantly perfumed and has successfully
attacked the myth of phenyle being better. Sometimes advertising alone may not be sufficient but it triggers
off the process.
Chyavanprash is now positioned as an immunity builder to be consumed in all seasons. Formerly it
was the so-called hot product to be consumed in winter. A PR campaign goes a long way in busting the myth.
Formerly, people wanted heavy products, e.g., irons and music systems. These days lighter versions are
acceptable. Mobikes are related to horses on which warriors rode. However, sleekeffiminate machines may
be as powerful. Sound and size do not contribute to power. Sometimes, there are shifts in image-reality ratio.
A frost -free fridge is considered hassle-free but at the same time there is the fear of power break-down in which
case frost-free has no cooling agent to sustain the low temperature.
Issues
Many myths circulate in the market. Which of these myths are you aware of? What can be done to
fight them?
278
Product Management
CASES
AIR INDIA'S MAHARAJA
Air India's ads often surprise us. They are dynamic and change with the times. Still, they do have a
character. The paradox is change and consistency.
At a traffic function in Bombay's Kemp's Comer, Air India hired a hoarding on which messages were
painted and still are painted. The following hoardings appeared between 1969-1979. The advertising was
surrogate for a salesman. The copy platform is sociability of the Maharaja.
Maharaja as a mascot has not aged. Maharaja is about India and not networks and destinati~ns . An
icon or mascot stands for certain values. It should not be used to sell something.
1969 Landing on the Moon
1972
To. my countrymen -
When nature eolls - do On5wer.

But pleosemuat you have on audi. .e ?
1975
Fig. 23.13 (Contd.)
Keep
your
c ity
c'ean.
279
Case studies
. "'\
-~~~~-.
...- -. , -,,' ~
If your problem is
fll handle your
I
1976 Emergency
..
:#
!.
,~
hose parly will VOCA join?

ers, U(8' o( mine?
1979 Formation of Congress (I)
\\. Sing Charan Sin.9 !

1979
1981
FIg. 23.13 (Contd.)
280
Product Management
1983
, f;J~
Your Godfither Too.

Now runninlJ in 39counfries.
During the Screening of Godfather II
Sir 'Richard
A#aboy'
M~'
;-e,,}",
itS
yo
1983 On 'Gandhi's' Winning the Oscar
When SUllil Dutt was elected ~heriff ofBomb~'

Fig. 23.13 (Contd.)
Case studies
12ajiV
eo.d5 vou
1987 Commonwealth Heads of State meet, Vancouver
1991 Message to Gorbachev
1991 The recent Amul butter shortage

Fig. 23.13
281
OUTDOOR:
CAMPAIGN
Award: Gold
Agency: Hindustan Thompson Associates,
Bombay
Client: Air India
Service: Air India
Fig. 23.14
Objective : To continue using topical

issues to ad\'antage in a tongue-in-cheek
fashion.
Target Audience: The general public.
Case studies
283
These hoardings become a topic of discussion. The organisation creeped into the consciousness of the
potential fliers. Four more hoarding sites were setup, one each in Delhi, Kolkata and Chennai, and asecond
one in Mumbai. Just these four cities comprised the medium of AI.
Ai's advertising of course goes beyond its hoardings - print medium and 1V advertising.
Issues
Describe the role of a mascot in building a brand. What qualities are associated with the Maharaja
which rub off to AI?
284
Product Management
CASE6
NA VNEET - GUIDE TO SUCCESS
1945
1959
Why Navneet
Product Portfolio
Key to Success
Saleforce
Distribution
Strategy
1972
1975
1985
Children Books
Growth Rate
Market Share
1993
1995
1999
A modest bookstore setup by Dungarshi D.R. Gala, a gentleman who had studied
upto 9th standard, was set up by the name of Dhanlal Brothers.
GalasbroughtouttheirfirstpublicationHindiDoDinoMeinundertheNavneetbanner.
Ganesh D. Gala, son of D.R. Gala says, 'It is just a brand. It honoured the wish
of the author of the first book Hindi Do Dino Mein.'
Subject Guides for the S .S. C. Examination, first in Gujarati, followed by Marathi
and English.
Guides were considered a taboo. They had to crack it. They had to penetrate the
market amongst the actual users, and influence the decision makers- the parents
and teachers.
They had to do a lot of concept selling before building the Navneet brand.
Guides are not just spoon-feeding. They can be effective tools of learnings.
They approached the schools directly for concept selling. Guides are used as
additional inputs and supplement the texts. This realisation on the part of the
teachers led to their being recommended.
Canvassers who visit almost 20% of all the schools in Gujarat and Maharashtra
at least twice a year with specimen copies of the books. Canvassing tends to peak
in summer months before school begins.
Supplies directly 10 per cent to schools, and around 6000 booksellers.
Navneet is a quality hallmark. Authors paid well for writing, and revision. They
are also paid a regular percentage of sales as royalty. Attracts the best talents from
academic field to create the titles.
Subject committees consisting of senior teachers to monitor a book. In-house
proofreaders and editors. A-Grade paper used.
Workbooks published for use in schools. They are ready to ask questions with
blank spaces for answer.
Convenient for students and teachers. Brand name chosen for work books-Vikas.
Succeeded as a concept.
Cash cows for Navneet
The 21 Most Likely Question Sets were launched. Instant hit for students
appearing for Xth and XIIth.
General books like the Health Series under the brand Gala were launched.
Vikas was extended to children books on general knowledge, activity books,
puzzles, mathematics, drawing books, writing practice books.
Expected growth rate of 15-20 percent in the educational books segment, and 50
per cent in other divisions.
Hovers between 55 and 58 per cent.
Paper stationery division was launched for exports.
Paper stationery division on domestic basis.
Navneet, Vikas and Gala - these three brands were transferred to the listed
company for a token consideration of Re. 1.
Case studies
285
Competition
Jeevandeep Prakashan, Chetna, Seth Publishing, Balvidya.

Biggest Competitors are their own second-hand books.
Newspaper Line
Advertising Media
Newshouse for kids launched in Mumbai.

Navneet offers back covers as advertising space to suitable manufacturers.
They started producing books on the MP state board lists too.
Book publishing and paper stationery are the two major divisions. The publishing
division comprises two categories of books-educational and children's/general
books. It contributes 56 per cent to the total turnover. The stationery division, with
a 42 percentshare, concentrates on educational stationery, mainly exercise books
and other scholastic products, and office stationery. Though the stationery
business is emerging to be eqUivalent to publishing business, it is not as profitable.
Navneet earns about 28 per cent operating margin in publication business, as
against 13 per cent in stationery business.
Equity Capital Rs. 19 crore. Holdings of Gala family 62 per cent. FIls and OCBS
4.45 per cent.
UTI and other mutual funds 3.98 per cent General Public and bodies corporate
29.66 per cent.
Rs. 139.65 on BSE
2003
Two major divisions
Company's
Capital Structure
Current Share Price
Average daily volumes
at the counter on both
BSEand NSE
. Dividend Policy
Plants
Main method
of selling
Total Market
(All India)
Western India
Market
catered to by Navneet
Market Share
of Navneet
Product portfolio
Royalty Paid
Issues
5000
Distribute 25 per cent of its net profit by way of dividend.
Four manufacturing plants:
Vasai : Stationery and Children books
Daman: Stationery and Children books
Sil"assa: Stationery only
Dantali (Gujarat) : Educational books
Personal selling by distribution of specimen book to the concerned teacher for
favour
of recommendation if liked. Field force in Maharashtra - 130
Field force in Gujarat - 80 -85.
There aSSSre 14000 schools in Maharashtra out of which their field staff services 8500.
There are 8000 schools in Gujarat of which field staff services 4500-5000 personally.
Rs. 1000 - 1500 crore
Rs. 300 crore

55 - 58 per cent
3000-plus titles in educational books.
Rs. 5 .92 crore for 18 months ended March 2003.
How Navneet brand equity can be strengthened?
286
Product Management
CASE7
PEARS SOAP
For a century it existed as a soap which had a loyal but a not-too-Iarge following. Then it was taken
over by Unilever.
Andrew Pears knew the obsession of middle-18 th century Victorian Britain with the beauty and
appearance. He was seeking a soap that dealt with skins more gently. In 1789, Pears Transparent Soap was
born. Andrew Pears' soap has survived two centuries and has grown into a global brand.
In 1902, Pears was introduced in India. Since then it has grown from strength to strength, and remains
a strong rich brand in the glycerine soap category.
\
Why the brand is relevant?
(i) the brand caters to a specific need - gentle skin.
(ii) promises 'purity'
Some complexions just newr grow
up'
(iii) product is transparent

(iv) the brand delivers what it promises
Presently one of the most expensive soaps in the

market.
Communication
Emphasises 'mildness and purity.'

Ad Position
Some complexions just never grow up.

Visual
Mother-daughter bond to convey the rele Ovant message.

Issues
Pears has recently put a version for oily skin. Is ita right A Pears ad campaign: a never-aging brand
move? How Pears can compete effectively other glycerin
1983
soaps like Emami?
FIg. 23.15
Case studies
287
CASES
AMULBUTTER
The branded butter market is worth Rs. 200 crores. Amul here is an outstanding brand with 80 percent
market share.
Amul was born in 1956. It has been extended to many other products. The Amul brand name was
coined by Kurien to stand for Anand Milk Union Ltd. Incidentally, it meant 'priceless' in Sanskrit. It was
originally marketed by Kaira District Milk Producers Union, Anand. It was taken over by Gujarat Milk
Marketing Federation (GCMMF) in 1973.
There are 20 brands now in the market which is growing at 12 per cent per annum.
Amul had to dislodge established brands like Polson (Bombay) and Keventers (Delhi) when it was born.
The market was also dominated by Anchor form New Zealand. Amul butter was the second product from
Amul after milk.
Amul hired Press Syndicate, the ad agency in 1958 to handle its account of 2 lacs, of which 70 per
cent was spent on print media. The message was: 'Ask for Amul by name.'
Amul butter advertising as we know today emerged in 1965. It has the distinction of entering the
Guinness World Records as the longest running campaign. The chubby little girl (called Amul Girl now) adorns
all Amul press ads and hoardings along with the line 'Utterely Butterly Delicious' came to life then. 'Utterly
Butterly Amul' became a well-known slogan. The mascot and the base-line are an integral part of the brand
now. The Amul girl rarely talks about butter. She celebrates and laughs at current affairs, celebrities and film
industry armed with a golden yellow slice of bread and hopes the message gets across. The first Amul
hoasssrding went up in 1966 when the brand was handled by Advertising and Sales Promotion (ASP). Amul
hoardings sell an attitude. It is interesting but is devoid of the brand. The appeal extends to the degree and
looks forward to the next hoarding. The hoardings have come to benefit the mother brand, much more than
Amul butter specifically.
The brand 's visibility was improved by using outdoor ads , POP and SP. The catchy two-liners sprang
to life during this period.
The account was shifted to daCunha Associates in 70s. The package was made brown and yellow.
The verses were slapped on the back of the pack.
Competition expected in future from margarine which is cheaper and more healthy.
What held the public's interest and also brought about a sense of involvement with the ad, were the
messages on the hoardings which changed from time to time. They always reflected a topical situation that
people could easily recognise. Today Amul butter has almost become a mirror of life. It reflects the
kaleidoscopic events that make our world an ever-changing order.
A thematic continuity is maintained for more than a quarter of a century. It all started in 1966, when
Sylvester da Cunha took the Amul account from ASP. It has still not aged . It is the largest running hoarding
campaign in the world and has made it to the Guinnes Book of World Records . The magic works because
of the freshness of approach. Today, it enjoys a 75 per cent share of the market. The ad budget is only 1
per cent of the sales of the brand.
Amul ads have been written by different writers in the last forty years, but still consistency has been
maintained. One of the first writers was Usha Bhandarkar, group planning director, Lowe. The hoardings
have never been malicious or cruel. In the first year, the hoardings made statements, but were not topical.
Amul's first campaign was made for the lV in the mid-sixties and it was only later that the outdoor campaign
was planned.
288
Product Management
Amul decided to create a mascot. It wanted Amul to be afun product. Mascot should be closer to the
children. A little girl in polka-dotted dress called the Amul girl was thus created. The girl had blue hair and
orange face. There was no shading. The sketch was created by artist Eustace Fernandes, now 71 (2007) . It
was approved by Dr. Verghese Kurien. It offered a contrast to the sexy milk-maid, brand mnemonic for Polson
butter, a major competitive brand at that time.
It is mascot created by Eustace Fernandes, then art director at ASP drew some 40 years back. She was
an orange-faced, winking, blue-haired pony-tailed cherubic girl wearing a polka-dotted dress; one knee bent
and teasing us with her perfectly sliced, buttered golden bread. The team then consisted ofK. Kurien, Group
Head, ASP, Mike Khanna, Sylvester da Cunhta and Fernandes and Usha Katrak. Of late, Fernandes has
witnessed shift in terms of language and appearance of Amul moppet-It used to look much different in the
past.
Though Amul has been synonymous with the naughty butter girl for the past 40 years, daCunha
Associates that nurtured the mascot would like to keep it up-to-date. She, therefore, wears fresher and modern
clothes to take on the mantle of younger generation. As she is amenable to animation, she cannot possibly
age. The agency does not expect her to sell a product. She is to represent a company and its values.
K. Kurien, now 79 (2007) recalls that the moppet created by Fernandes was to be used to tap the
outdoor medium. It was to be assured that it is amenable to drawing easily as the paintings in those days
were manual. The moppet had to mouth topical lines.
Hoardings have become subliminal. They are just a reminder. To being with the headline and baseline were about Amul. Today only a third of them really plug the product.
Hoardings give top-of-the-mind awareness. Because they are topical, they involve the viewer. The
humour wins over the consumer heart. Lastly, it is the taste that matters.
Amul girl moppet works better than the celebrity-based endorsement campaigns.
Amul' campaign has become more of a corporate campaign. Amul's budget is very tiny. Just 0.01 per
cent of total sales. It is good value for money.
Amul has used hoardings as primary medium.
Amul account was handled by Advertising and Sales Promotion (ASP) since 1966.
Sylvesterda Cunha wroteAmul campaign forover 12 years-1966 to 1978. When Sylvester da Cunha
started da Cunha communications in 1967 the brand moved with him. In 1979, Bharat Dabholkartook over
from Sylvester. Kundal Vijaykar, Cyrus Broacha and Mohammed Khan have been associated with the
account at some time or the other. Rahul da Cunha and Manish Jhaveri have been associated with the
campaign in the past ten years. Jayant Rane has been the artist and illustrator for the campaign since 1988.
'Butter' was formerly a part of the headline. These days they try to connect the baseline to the headline.
The latest in the series is patterned after Kabhi Khushi Kabhi Gham (K3 G). Itreads 'Kabhi bread, Kabhi
bun' and the base line is 'it's all about loving your butter.'
On the release of Swades (AshutoshGowarikar movie starring Shah Rukh Khan and Gayatri Joshi)
Amul brought out an advertisement titled 'Swad Dish: Amul eaten by we the people.'
The latest in her memorable long list of one-liners, Anohonee ko dhoni karde, came after the Men in
Blue, under M.S. Dhoni's captaincy, became Twenty20 Champs. There are around 150 hoardings allover
India. They change the topic every week.
'Forget-oil-for-food, try Maska' ad reflected Iraq food scandal. 'Taj Mahal' was released when the
controversial Taj corridor project was okayed. These days Amul hoardings are film-industry inspired, e.g
'Chini kum, Butter Zyada' 'Lagate Raho Maska Bhai' . The focus is lesson politics. Bhaji's slap on Shrishant
was captured with a tag line 'Amual-Slap it on'. To promote he, lmets it put 'use your head' with the base
line 'utterly put-phutterly Amul.'
Case studies
Eustace Fernades with his creation .
Sylvester da Cunha, who writes wrote Amul Campaign
289
290
Product Management
Sylvester da Cunha, wrote Amul Campaign for 12 years
Fig. 23.16 (Contd.)
.bon, of a Sunny
era.
1983
Case studies
291
1989
1991
Fig. 23.16 (Contd).
292
Product Management
1992
No .scam about this .thare f
1992
1967
Flq. 23 .16 IC"nld )
293
Case studies
1975
... Roti, l(apada aur

I
Makhhan...
~.
~'(.
Arnul
r.;
1976
1978
Fig.
23.16 (Contd) .
294
Product Management
in populardemand)
1978
Taste tube baby

Amul
1979
Hurnhome
hurry
tD Am.,1
1981
, FIg. 23.16 (Contd) .
Case studies
295
~eer b ba.5
dtl(( '"
I ~. "
-;~
'Y'
)
,? ',~
~
' ' m~
.
--
",
"
.;;)
And have some

utter~ .bat'terly
\l
Amul
1983
Fig 23.16
Some recent Amul ads are given below
Fig. 23.17
Issues
Comment of Amul's advertising strategy. What is your opinion about the corporate Taste of India'
campaign of Amul these days?
Product Management
296
CASE9
COCA COLA: 120 YEARS OF THIRST
Coca Cola was created by an Atlanta-based pharmacist Dr. John Styth Pemberton in his back-yard.
Another Attantan in pharmaceutical business As a G. Candler bought it in 1888. The brand was promoted
by him constantly by distributing complementaries carrying a trade-mark and painting signs on walls, which
gradually led to nation-wide use of billboards in 1925.
.
Coke right from the beginning was deliberately associated with fashionable people, opera stars, film
actresses and models. These all were painted on trays, card-board cutouts and were featured in print ads.
They all enjoyed life and Coca Cola.
Coca Cola was l;egistered as a trade-mark in 1893. Coke was the name used by consumers to refer to
Coca Cola, but this was discourage<;l without any success. Coke was first used in advertising in 1941. It was
registered as a trane-mark in 1945. The bottle design having peculiar contours was registered in 1977. The
six-bottle carton was introduced in 1923. The cooler arrived in 1929 increasing retail sales as Coke can now
be served chilled. In 1933, at Chicago World's Fair, the automatic fountain dispenser was introduced.
Candler sold the business to Ernest Woodruff - an Atlanta-based banker in 1919. Robert Woodruff,
his son was elected President of.t he company.
Coke first sponsored the Olympic Games (Amsterdam) in 1,928. Since then it has been sponsoring the
games. Coke was beihgbottleE\ in44countrjes at the start of the World War II. All uniformed men were given
Coke for 5 cents wherever they were. Bottling plants were shipped abroad. It thus registered its presence
globally.
In 1955, the packages available were la-ounce, 12 -ounce and 25-ounce. Metal cans were first meant
for armed forces dverSeas. By 1960,they were made available on retail shelves. PEr package was introduced
in 1977.
Coca Cola has been put 'within an arm's reach of desire.' It is available today in more than 185
countries, and called' for in more than 80 languages. If all the 6V2 ounce bottles produce globally are
aggregated, they beceme 2.4 trillion bottles. End to end they can wrap ilie earth 11, 863 times, reach the
moon 1237 times, and stretch 1/3 of the way to Saturn!
Coco Cola's recent product innovations use Coca Cola Zero (Coke with zero calories), Coca Cola Black
(a fusion of Coea Cola and coffee}. The contour-shaped bottle's aluminum version has also been launched.
The folldwihg tilble highlights the milestones in the promotiona~ history of coke.
Year
Headline
1886
Orink Coca .Cola
1883
Asa Griggs Candler registered Coca Cola

as a trademark.
1904
belicious and refreshing
1905
Coca-Cola refreshes and sustains
1906
The great national temperance
1917
Three millions a day
Remarks
First ever advertising line.
297
Case studies
19'22
Thirst knows no season
1925
Six million a day
1927
Around the comer from everywhere
1929
1932
The pause that refreshes

Ice-cold sunshine
1938
The best friend thirst ever had
1939
Coca-Cola goes along
1942
Wherever you are, whatever you do, wherever you may be, when you think of
refreshment, think of ice-cold Coca-Cola.
1942
1948
1949
1952
The only thing like Coca-Cola is Coca-Cola

itself. It's the real thing.
One of the Coke's most famous ad slogans which

appeared in the Saturday Evening Post.
In the thirties, illustrations from top artists like
Norman Rockwell were widely used in colour
ads. Haddon Sundblom made Santa Claus
portraits for holiday season in 1931 which later
became a definitive image of Santa.
Radio was used as a medium first in 30s.
'It's the real thing' was first used and brought back
27 years later.
Where there's coke, there's hospitality.

Coca-Cola - along the high way to anywhere.
What you want is a Coke.
Fifties produced "sign of good taste.'
1956
Coca Cola better.
1957
Sign of good taste
1958
The cold, crisp taste of Coke
1959
Be really refreshed
1963
Things go better with Coke
1970
It's the real thing
1971
I'd like to buy the world a coke
Advertising in 70s and 80s positioned the drink

as a simple pleasure of life though it is a s~cial
pleasure. Anywhere, anytime.
1975
Look up America
Football star Joe Green featured in lVs spot.
1976
Coke adds life.
1979
Have a Coke and a smile
1982
Coke is it!
making good things taste
This line marked the entire sixties. It became a hit

radio spot.
Borrowed from the campaign in 1942.
A new campaign.
A celebration of the positive spirits of the 80s.
An affirmation of the company's confidence.
298
Product Management
1985
We've got a taste for you

(Coca-Cola and Coca-Cola Classic)
America's real choice
1986
Catch the wage (Coca-Cola)

Red white and you
(Coca-Cola Classic)
1989
Can't beat the feeling
Spirit of celebration.
1990
Can't beat the real thing
Spirit of celebration marches to the 90s.
1992
Always Coca-Cola
1996
Always Summer, Always Coca-Cola
2000
(India)
Jo Chaho Ho Jaye,
Coca-Cola Enjoy
2004
(India)
2007
Thanda Matlab Coca-Cola.
Here cold drink is equated with Coca-Cola by

putting Aamir Khan Commericals.
The Coke side of Life
Balance in inviduallives, social lives and on the

planet
The first ever outdoor

. advertisement for Coca-Cola
was an oilcloth sign hung from
the awning of Jacobs' Pharmacy
in Atlanta
The line "Delicious and Refreshing" first appeared in 1904 and is

used sometimes even today
Fig. 23.18 (Contd.)
Coca-Cola advertising satisfies the need of myths. This mythical world puts aside differences and comes
together. Coke is the catalyst that brings people together. Coke becomes a shared cultural experience - the
power to bring people together regardless of racial, cultural or generational differences.
Case studies
299
Clocks bearing the

Coca-Cola trade mark were
among the t!rst prizes
awarded to dealers for
achieving sales quotas
From 1903-1905, opera star

Lilian Nordica's picture
appeared on metal serving
trays, sampling coupons,
magazine ads, metal signs,
menus, bookmarks
and calendars
FJiOm the early days, Coca-Cola's

ads have always tried to project
an association with fashionable
Uwith-itW people
Santa Claus, as we know him
today, first appeared in '305
. Coca-Cola advertising, in an
illustration by Haddon
Sundblom. Till then, Santa
had not had any universally
accepted face and dress
The brand's association with the

Olympics started in Amsterdam,
1928, and continues till date
"Th ings go better with Coke", a

highly enduring slogan,
appeared in 1963
Fig. 23 .18 -<C,ontd.)
300
Product Management
Drive
refresh
The advertising has always

tried to move- with the time-s,
as this '50s ad demonstrates
In the '70s, the commercial

starring 'Mean' Joe Green
turned out to be
extremely popular
The "Coke is it!" theme,

launched in 1982, has been
translated variously to reach
customers worldwide
Fig. 23.18
Aamir's Eight Avtaars in Coke Campaign 'Thanda Matlab Coca Cola'
1. Tapori (2002)
2. Punjabi
3. Bihari
4. Nepali Guide
5. Manno Bhabhi
6. Bengali
7. Hyderabadi
8. DinuKaka
People liked the Nepali gUide character the most. Dinu Kaka was the least liked. The campaign was
created by Prasoon Joshi, McCann Erickson. His favourite is the Bihari Paanch commercial.
Case studies
301
make purchase decisions according to the social occasions and their moods, e.g. wines for socializing and
fun, spirits for social conversation over a dinner and Champagne for celebration. All these are not healthy
alternatives. There are different solutions for different moments dn the life of consumers. Coca Cola fits many
such moments. There can be healthy and unhealthy habits and people. If you know the limits, nothing can
harm your system. Take nutrition and good exercise and you can afford to have some fun without any guilt.
It is a matter of balance in social lives and on the planet.
Issues
What is the distinction between Coke and Pepsi ads in India?
302
Product Management
CASE 10
TIMEX: HOW TO MAKE UP THE LOST TIME

Titan - Timex Alliance in India
1991
Titan -. Timex Break-up
1998
It is considered a classic seven year itch.
Timex Watches Ltd.
A subsidiary of the US-based $ 600 million Timex

watches BV
Timex positioning in the Titan association days
Lower end of the market, with a range of children

watches and sports watches.
Organised Watch Industry
Rs. 1000 crore
Competition
Sonata from Titan (Rs. 350 to Rs. 1200)

Maxima from PA Industries (Rs. 350 to Rs. 1000)
Swarna from HMT (Rs. 630 to Rs. 885)
Shreyas from HMT (Rs. 495)
Future Growth
Depends on how Timex positions itself.
Fairchild Consumer
Awareness Survey, 2000
Timex is the No.1 fashion statement in the US.
Timex Worn by
Bill Gates, Bill Clinton, AI Gore - the most powerful

and Bruce Willis, Sharon Stone, Elton John - the
beautiful people. It is also worn by lots of common
people.
Emphasis
Sporty, fashionable, trendy watch.

Residual equity of the fun and youthful brand remains.
It is a brand that is America's No.1 fashion statement at
a price that does not pinch (Rs. 355 to Rs. 5,000).
Omega range starts at Rs. 30,000.
Swatch at Rs. 1,500.
Citizen is conservative, steel and gold-plated watch.
Catch-line
Ridiculously easy to wear.
Portfolio
Rationalisation of portfolio.
650 models.
Phase out some, and introduce 180-200 new models.
Ad Budget
Awareness building campaign.

Rs. 9 crore budget (10 per cent of turnover)
TV and print media.
Focus
Brand imagery and attitude in TV commercials. Product

technology in print media.
Case studies
303
Agency
HTA
Distribution
5,000 retail outlets.

28 exclusive show-rooms.
1,100 towns and cities.
Service
330 centres across India.
Problem
Most consumers still think it as a down-market brand
Issues
Why does Timex face problems today? Is its current positioning correct? How can it promote its range
of watches?
Product Management
304
CASE 11
8 P.M. - THE WINNING SPIRIT

Company
Radico Khaitan
Product
8 PM Whisky
Year of launch
1999. It was launched in the regular segment.
Sales
1 million cases in one year. Now sales closer to 2 million cases. Market share of 3
to 3.5 per cent.
Competitors
Bagpiper (Herbertson) - Took nine years to cross 1 million mark. 35% share.
Diplomat No. 1 (McDowell)
Green Label (Gilbey, UDV)
Director's Special
Seagram's Imperial Blue
Positioning
Premium product within the upper regular segment. (It was a blended scotch, making
it aspirational)
.Packaging
Must coincide with its premium positioning. Sold in cartons, whereas other regulars
sold unpacked. Imported art paper, gravure printing process, gold foil and guala or
temper-proof seal, associated with imported scotch. Made packaging economical.
Brand Name
8 P.M. indicates the time when drinking starts in India. It was chosen from 700
options. Market research indicated that there was a specific time at which people
would start thinking about an evening peg. It was a break-through idea. The brand
chimed its way into the consumer's mental clock.
Communication
Developed by Enterprise Nexus. It uses the contemporalY political scene of

tensions across the borders. The generals exchange 8 P.M., after initial hesitation,
forgetting their hostile posturing. Rivals become friends. 8 P.M. was adjudged one
of the best three ads of the century by the Ad Club.
Ban on liquor
advertising
Effective from 6 October, 2000.
Plans
They want to introduce a premium whisky (Special Appointment) and want to enter
the branded beer market. They want to put Contessa Rum in the civil market.
Issues
Comment on communication and packaging strategy adopted by Radico Khaitan.
Case studies
305
CASE 12
KAUN BANEGA CROREPATI
History of Quiz Shows 1

DD started accepting sponsored programmes. The Bournvita Quiz programme run by Cadbury on radio
had been successful. It had remained centre-stage on Vividh Bharati for abbut a decade and a half. Ameen
Sayani anchored Bournvita Quiz for a good part of its radio life. His brother Hamid ran it in the early years.
Firstthe questions were chosen by Cadbury's advertising agency. Later, Cadbury's own staff did the same.
Cadbury had developed an awareness of the quiz programmes. Cadbury later developed a successful TV quiz
for Bournvita.
Ishwar Bajpai approached Cadbury to sponsor TV Quiz to advertise Cadbury chocolates. He had
prepared the pilot episode. Cadbury then did not accept the offer. Bajpai then approached Radeus who was
handling Amul Chocolate account.
AIR, Chennai had run a popular quiz progamme in the forties which had high listenership. The quiz
master was Rev. R.S. McNicol, a professor of English at Madras Christian College. K. Kurian who headed
Radeus did not like the pilot made by Bajpai. It was improved upon and the whole programme was recast
with a new quiz master - Siddartha Basu. This programme Quiz Time was sponsored by Amul Chocolates
and Limca. It had high viewership in the south.
Basu went from strength to strength, and never rested on his laurels. In 2000, he emerged as the
triumphant producer of Kaun Banega Crorepati (KBC) with Amitabh Bachchan as the quiz master. It is
indeed a formidable combination.
Genesis of KBC
In early 2000, Steve Askew, Sameer Nair of Star TV and Siddartha Basu met on a lunch in the Oberoi,
New Delhi. Nair casually gave Basu a video cassette of a few episodes of the famous game show Who Wants
to be a Millionaire? Nair wanted Basu to look at the programme, and hoped to pattern a programme on these
lines in future. He also had a crazy idea of having Amitabh Bachchan as a host of the show, where the prize
money will be a lac of rupees. Both these executives had never known thatthis 'crazy idea' would be converted
into a winner in Kaun Banega Crorepati a year later. KBC has made Star TV, till then a floundering channel,
a leading satellite channel. KBC started in June 2000.
KBC's Popularity
KBC generated very hi.gh TRPs all over the country. KBC has re-written the rules of small screen
entertainment in India. The terminology used in the programme has already become part of the pan-Indian
lexicon. KBC is followed by GharGhar ki Kahani andKyonki SaasBhi Kabhi Bahu Thi, daily soaps created
by Balaji T elefilms headed by Ekta Kapoor. They are also immensely popular. This bouquet of programmes
captures the audience between 9 and 11 p.m. through the week. KBC also wants to build up Sunday
viewership in its version of Junior KBC for children. Star has rode on the back ofKBC. India is the only.country
in which the show is hosted by a superstar.
Planning for KBC

Midnight oil has been burnt to make KBC a big ticket success. The show was to be telecast four nights
a week. First, they tried to rope in Bachchan. He agreed after initial hesitation. Nair informed Peter Mukherjee,
CEO, News TV India about Bachchan's consent.
(Based on Kurian's forthcoming book Episodes from an Advertising Career)
306
Product Management
Bachhan, Nair and Dutta flew to London to have a look at Millionnaire show, the rights of which are
held by Celedor, a British TV company. The first set of prom os with Bachchan were shot on the original set
in London. Basu, as the show director, did the research and worked out the details. It is a challenging job
to select questions which appeal to a broad spectrum of society. All questions are fed into a computer, which
chooses a set at random for a participant.
Nitish Desai, a veteran set designer, was chosen to build the set at Film City, Goregaon. Under the
licensing arrangement with Celedor, the KBC set has been a replica of the Millionnaire show.
Bachchan is available to Star eight days a month for a specified number of episodes. Two one hour
episodes are shot in a day starting from about 8 in the morning.
Back-up systems were organised to sustain the show. It involved negotiations with MTNL for phone
lines. Excluding prize money, the per episode cost was between Rs. 12 lacs and Rs. 15 lacs.
Apart from Bachchan, another draw for the show was to be the prize money . To begin with, they just
wanted KBC to start with Rs. 1 lac as prize money. Murdoch found the dollar equivalent of 1 lac is a very
modest amount '- say $ 2000. He wanted the next slab of Rs. 1 crore, the dollar eqUivalent of which is $
2,00,000. Though this was also nottoo pleasantfor Murdoch, he agreed. Prize money and Bachchan became
a potent combination.
Chris Tarrant and Regis Philbin are the hosts of the British and American iterations of Who Wants to
be a Millionaire. Bachchan met both of them.

Promotion
There was high-pitched above-the-line and below-the-line communications strategy. Both the
marketing and communication strategy must be consistent. They made effective campaigns. Nearly $2
million were spent in pre-launch and post-launch phase. Radio and cinema were also tapped to put across
the message. KBC inserts were placed in 20 publications. Dainik Jagran, a popular Hindi daily in UP had
full middle-six columns ad featuring a huge Bachchan photo on the front page. July 3 was the inaugural day
for KBC.
Advertising Attracted by the Show
Advertisers jostled for the airtime. On an average after the programme appeared for the first time, 1214 new advertisers had been coming. Star did not make KBC a branded show to keep the Star identity strong
and to maximise the revenues from KBC. Star welcomed FMCG companies as advertisers since their ad
budgets were the largest. Before KBC, the advertisement rates were between Rs. 1.5 lacs to Rs. 2 lacs per
10 seconds. After KBC, the rates have doubled. Zee started in 1992, almost nine years back. Sony started
in 1996, and is ten years old. But KBC has made STAR to overtake both these established rivals in just a
couple of weeks. Star delivers the advertiser's TRPs. Star also insists on advertiser's buying time on other
programmes over and above KBC. Even there is promotion of Star's other programmes during a commercial
break of KBC. Star tied with Britannia and ran a contest, whereby the candidates answering questions on
biscuit packet were allowed to skip the hurdle to the final round of 10 participants.
Clones
Similar game shows announced by other channels did not click as much as KBC.
Zee's Sawaal Dus Crore Ka and SET's Jeeto Chhapar Phadke did not succeed.
Challenge
Despite the success of KBC, the real challenge will be posed to Star after KBC outlives its utility.
Case studies
307
TRPs
KBC atits peak had a TRP of 27.1. It plateaued to an average of 4.6 in October 2001. In April 2001,
the maximum and minimum TRP went below 10, Its anniversary episode had a TRP rating of 18.9. KBC
is slated to go off air in Jan. 2002. KBC's TRP shot up to 15 when Mihir (Amar Upadhyaya) and Tulsi (Smriti
Malhotra) from Kyonki Saas Bhi Kabhi Bahu Thi appeared on the show.
KBC ends on Jan. 9, 2002
Kaun Banega Crorepati called it quits in Jan, 2002, Nine p.m. slot will not be the same again. STAR
has again been showing main episodes of KBC since Sept., 2002. In its life, KBC had 3000 participants out
of which 500 reached the hot seat to get Rs. 26 crore in prize money. KBC had 300 episodes and a studio
audience of more than 60,000. It had over 9 crore phone calls. Its first participant was Divya Nair of Mumbai.
KBC to resume
Star proposes to resume KBC once again in a changed format and an enhanced prize of Rs. 2 crores.
Mr. Bachchan is under contract to do more episodes, and star wants to utilise this opportunity. KBC-II as
its second version was called went off the air abruptly because of the sudden illness of Amitabh Bachchan
in Jan. 2007.
The Weakest-Link
BBC has a successful quiz show anchored by Robinson called The Weakest Link which punctures the
ego of the participants. It is known for its meanness. Kamzor Kadi Kaun anchored by Neena Gupta is
patterned on the same lines, and follows KBC after its first phase termination in 2001. KKK is also a money
based game show. It has gone off air now.
KBC with Shah Rukh Khan
Shah Rukh Khan will anchor KBC from Jan. 2007 to pitch perfectly for the younger generation. The
format and presentation will fundamentally be the same but the tone and tenor of the conduct will be
different, reflecting the personality of the new host, which is youthful, sharp, witty and highly energetic.
Issues
Can you imagine the logistics involved in the production of a programme like KBC? How KBC has
become a driving brand for Star? What is the contribution of Amitabh to KBC's success? What is the
significance of KBC for Star? What do you feel about KBC's promotion as a programme both pre-launch
and after launch? What do you feel about the recent campaign Jo dekhega, woh kheiega, woh jeetega in
which a housewife, a paanwalla and Mishraji in a hair-dressing saloon are featured?
Product Management
308
CASE 13
PLAYING CARDS
Jokers and aces and other 48 pieces which make a pack of cards are having harrowing times. In the
early 80's the business was good. Then there was a glut mainly due to unorganised market players. The
demand remained constant, and the market got fragmented. The costs of material and printing was rising.
The printers then diversified into other areas of commercial printing. Exclusive manufacture of playing cards
became a thing of the past. Some have called it quits.
Playing cards have two qualities - club quality and non-club quality. Club quality is a premium high
priced product made in Mumbai. Delhi is known fornon-club quality. The other card manufacturing centres
are Bangalore, Vijayawada and Calcutta. In Mumbai alone, more than Rs. 15 crore cards are sold per
annum. North, however, accounts for a larger volume.
The main users are the clubs. Some companies use playing cards as sales promotion tool, or as a
complimentary give-away. The wholesale market accounts for majority of sales. The retail sales are
insignificant. Though different manufacturers make cards, they bear the common brand names such as 555,
Bonus. But the prices and quality vary.
The raw material used is the laminated black-centered art board. It is made domestically. 4-colour
printing and UV and infra-red dryers are used. Ordinary and plastic-coated cards are in use, but 100% plastic
cards are not much in use. They are packaged well.
Other avenues of passing leisure time like TV, computers and the like compete with card playing habits.
Cards have lost a great deal. But once a person becomes a card addict, itis difficult to give up. But itis certain
that children's baby playing cards have lost in the race. Manufacturers have stopped producing these. Special
magician's cards are also not much in demand.
Exports are necessary for survival. It is for the government to treat cards as sports goods, and provide
the incentives to boost exports. Cards are perceived to be a gambler's product. But almost all sports have
some element of gambling. Bridge should be promoted as a sport.
Cards manufacturers may have some aces up their sleeves. Or will the joker have the last laugh?
Issues
Is branding possible? How card usage can be promoted?
Case studies
309
CASE 14
ME DIM IX: JUST THE RIGHT MIX

Medimix is an ayurvedic soap made and marketed by Chennai-based Rs. 200 crore Cholayil group.
It has built its success on medical platform.

Revenue
Rs. 50 crores (1998)

Rs. 200 crores (2001). It is today the ninth largest selling !soap in the country.
ORG Rating
Marketing
No.9
No high-decibel promotion
Down-to-earth packaging
No compromise on its shape, perfume or colour.
Six Plants make 1.5 crore cakes of soap each weighing 75 gms and 30 lacs cakes
of 125 gms variety
Manual. No power used.
Cutting done by hand-operated hydraulic cutters.
Modern plant to be set up in Goa.
Dr. V.P.S. Sidhan, after retiring from the railways, focussed on skin-care products
of ayurvedic origin. His work with Viprathy Oil (extract of wild ginger) and its
effectiveness in treating skin conditions yielded promising results. He wanted to
deliver the benefits of this research and thus Medimix was born. It contained 18
herbs in coconut oilbase. In 1969, Medimix was launched.
The soap got establishad in the market on the basis of word-of-mouth publicity
given by the actual users.
2625.3 tonnes (July-September; 2001 ORG figures) out of which 1873.7
tonnes were sold in South zone only. In South, It is the sixth highest seller. Total
soap market 3lac tonnes. Ayurvedic soaps comprise 7 per cent of which Medimix
has 3 per cent.
Medimix started its sales from rural markets. The village kiranawalla was targeted.
He influenced the decisions of the buyers. Village me/as were attended. People
were addressed directly.
The brand went national just in 1999.
Chandrika - it has taken the direct marketing route.
Between 1969 and 1990, the growth was slow. The firm has taken off now.
It targets 3000 small hotels all over India. Soaps supplied at cost, and not MRP.
NRIs in the middle east
Brazil and Italy. Export revenue targeted Rs. 10 crore (2002).
The soap has a need to shed its small town moorings and make it relevant for the
Surban audience. Ayurvedic brand needs to be contemporized.
Plants
Manufacturing
Process
Origin
Word-of Mouth
Publicity
Tonnes Sold
Rural Marketing
National Marketing
Competitor
Hotels Targeted
Farther Targets
Exports
Promotion
Diversification
The company has launched many new products such as Ziva Herbal Shaving
Cream, Medimix Coconut Oil, a cough syrup and Tejaswini skincare capsules.
They have also entered the food segment.
Issues
'Back to nature' can be a platform on which many products are sold. Can you think of other such
examples?
310
Product Management
CASElS
AMULICE-CREAM
Launched by GCMMF in 1996.

It is six year old in 2002.
A market leader in Mumbai which is a 7.7 million-litre market. Amul has a market share of 37 per cent
against HLL's 35 in Mumbai.
Amul's market share in India is 35 per cent, just slightly less than that of HLL's Kwality Walls. Amul
soid in 2001,20 million-litres of ice-cream as against Kwality wall's 24 million-litres.
Ice-cream market grows by about 20 per cent per annum. Amul grew by 60 per cent in Western India
and 40 per cent in the North. Its average growth is 50 per cent in 2001-02.
Total ice-cream market is estimated to be worth Rs. 2000 crore. There are branded products and
products from the unorganised market. The branded market is 60 million-litres, and is worth Rs. 500 crores.
The major players are Kwality Walls, Amul, Mother Dairy, Vadilal, Dairy Fresh and Baskin Robbins. There
are some powerful regional brands. Some 2000 units are from the unorganised sector. This unroganised
market has major players like Tulika and Rollicks in the east, Nature World, Pastonji, Naturals, Dinshaws,
Havmor and Yum in the west, Nirula in the north, and Arun, Joy and Nandini in the south.
Per capita Consumption of ice-cream
106 ml of ice-cream per year in India

22 litres in the US
18 litres in Australia
14 litres in Sweden
5 litres in the UK.
Ice-cream is still considered to be a premium product in India. It is also an urban product. This myth
must be broken. It should be reasonably priced to penetrate the vast rural market and urban market. Its
consumption must be increased. Amul sells 30-50 per cent lower than the competitive brands. Amul has
expanded the market.
Amul also proposes to enter Delhi by setting up 2000 ice-cream outlets. It is setting up manufacturing
facilities across the country . It expects to have 25 manufacturing facilities by the end of2002. Amul is thinking
in terms of parlours which will sell the whole Amul range including ice-creams.
Amul wants to expand the consumption level of 106 ml per annum to 500 m! per annum.
Issues
What do you feel about Amul's brand strategy of price lower and aim higher? What is the role of
promotion in ice-cream marketing? How can we develop new products in this category?
Case studies
311
CASE 16
THE STORY OF AMBASSADOR
INDIAN ICON REACHES 50
Hindustan Motors is celebrating 2007 as the 50th year of Ambassador car.
Ambassador was a very popular car till the Maruti 800 rolled out in 1983. Ambassador's plant Hindustan Motors, began rolling out cars in 1949 patterned after Morris cars of Britain who transferred Oxford
Series II and III model's technology and was put under the brand name the Hindustan 14. In 1954,
Landmasterwas launched. It was completely the Oxford Model from soul to body. It achieved a 74 per cent
market share. It looked like Ambassador from the front but had a different back. In 1957, Ambassador first
appeared on the road. It was the rebranding of Land master. It was Mark I Model. In 1963, an upgraded
version Mark II was launched; followed by Mark III (1975) and Mark IV (1979). Nova was launched in 1990,
and Classic in 1999.
Ambassador's best year was 1973-74when it sold 28000 cars. In 1975, it sees as first exports-seven
cars to South America and Mauritius. And the Mark III is launched. Till 1980-81 , it was the topper. Today,
Ambassador has just 3 per cent share in 6.5 lacs cars being sold per annum.
Recently, ithas launched the Ambassador Retro, the heritage model. The upgraded car involved a cost
of Rs. 75 crore.
Ambassador was a great Indian icon for nearly three decades from 1950s to 1980s. Its dimensions
remain unchanged since Mark I, 1957. The car had to begin with just one wiper in front ofthe driver. It was
c1ieselised in 1980s. From 1954 to 1963, the Landmaster and Ambassador had a traffic indicator. Electric
hom was introduced in 1970s. In 1994, laminated windscreen was introduced. Till then, the glass in front
was highly brittle. In 1998, the Amby 1800 Petrol is launched making it the first car to be equipped with
a factory-fitted CNG Kit. In2003, Ambassador Grand decked up with 137 design improvements, including
the shifting of hard-brake to the centre, hits the road.
It is positioned as the 'mid-size option for the large family.' About 65 per cent cars sold are used a taxis.
The government buys as much as 20 per cent cars. According to Mark Tully, its relevance in India is as a
relic of the past. The 2004 model is called Ambassador Avigo. It has the rounded bonnet. Amby has leafspring suspension at the rear, which is better than that of a bullock-cart. Though leaf-spriing is crude, it is
simple and longer-lasting. Amby as a car has served people well all these years but it is time now for it to
drive into the sunset. But we cannot write it off so easily. Still, 15000-odd cars continue to roll out from HM
Factory in Uttarpara near Kolkata. The central and state governments account for quarter of the sales.
In 2007, it celebrated its 50th anniversary. It rolled out a special model to celebrate it. HM also
manufactures at its plant Mitusubishi Motors' vehicles in India. It has launched Contessa car in 1980s which
was officially, withdrawn in 2003. HM ha'i now descided to introduce a new car after 25 years.
With upgraded manufacturing facilities in Uttarpura, West Bengal, Hindustan Motors is geared for a
more contemporary version oftheAmbassador, with features catering to the needs of the present generation.
There is an improved MPFI engine with an easy cold start. It has smoother gears; and wider tyres. It is a five
speed gearbox. It has introduced a CNG/LPG fuel version. The Ambassador IS2 can run on both CNGILPG
and petrol.
Today, almost 6 lac Ambassadors are on the Indian roads.
Issues
How Ambassador can become a car for individual buyers?
312
Product Management
CASE 17
GLUCOSE-D-POWDER
Chemical Name:
Dextrose monohydrate
Use:
Therapeutic and rehydration
Target audience:
Convalescing patients, growing children and sportspersons.
Distribution:
Chemist shops, general stores and groceries 50 per cent sales are accounted for
by chemists.
Manufacturing:
Dextrose manufacturers get it as a by-product by hydrolysis of starch. There are

4-5 organisations who supply the bulk product to marketers who repack the
product in smaller packages and sell it.
Market:
15000 tons (ORG Retail Audit, 1999). Growth rate 3.5 per cent. Rural market
grows by 9 per cent. Organisations - Foodworld, Foodcorp and Real. Brands
Glucoenergy, Energee and Glucose D respectively. Market shares 65 per cent,
8.5 per cent and 6.5 per cent, respectively. Glaxo brand Glucon-D has been taken
over by Heinz. Heinz has also purchased more Glaxo brands such as com plan
and Nycil Glucon-D sachets have been launched in September 2004 to tap the
rural and lower middle class market. It has also introduced Glucon-D in a slipper.
Glucon-D is making a transition from being a serious rejuvenator drink to a hip
fun drink.
Rest of the market:
Small players (20 per cent). These small players sell the product under the generic
name. They are growing at a rate of 14 per cent. The strategy of local brands is to
push the product on the counter by offering higher trade margins and by enabling
the trade to price cut the MRP due to such high margins. Their packages contain
less weight and are deceptively similar to organised market products.
Issues
Market is assaulted by products of unorgansied markets, putting pressure on profits. Can the companies
in the organised sector also adopt the push strategy? Can different margin structures be practised in different
markets? But if such a differential is exercised, what about the cross-border flow of goods from higher margin
areas to lower margin areas? Can there be two marketing programmes - each of different price point, and
each having its own trade terms and distribution channel? Can these companies tie up with a major
pharmaceutical company for distribution and marketing since the bulk shares are accounted for by chemists?
Case studies
313
CASElS
VICKS V APORUB
Lunsford Richardson was the pharmacist who shifted to Greensboro, North Carolina in 1890.
He found that his children keptfalling ill and developed a salve containing menthol, eucalyptus oil, camphor,
cedar leaf oil, nutmeg oil and thymol to treat them. When the experiment proved successful, he decided to
market the salve under the name of his brother-in-law Dr. Joseph Vicks, partly because he was a respected
physician and partly because his name was short enough to fit on the labels pasted on the jars. Thus came
into existence Vicks Vaporub.
Intitial Name:
Vicks Magic Group Pneumonia Salve
Trade mark:
Red triangle. Blue and Green Jar

(came much later)
Brand:
Vicks Vaporub (1912)
Early Marketer:
Smith Richardson (Son of Lunsford)
Introduced in India:
1951
Marketers:
Vicks Products Inc. earlier.

Richardson Hindustan later. Proctor and
Gamble now.
Positioning options:
As a balm
As a rub for colds.
Indian option:
As a rub for colds, for a childs' cold

especially.
Sales:
Seasonal in winter all over.

Seasonal in monsoon too in India.
Pack:
5 gm pack puts it within the reach of

millions.
Brand Extension:
Inhalers
Cough Drops
Mouth Freshners
Cough Syrup
Vickc; Hot Sip
Sales:
80 million packs a year.

The largest selling medicine in the country.
Issues
Compare Vicks with other pain balms like Zandu and Arnritanjan.
Note: Amritanjan is 113-year-old brand (2006). Its recent ads use the tag-line 'Amritanjan. Sardard Gayab.'
The ads focus on consumers who prefer an active life and do not wish to be held back by pain.
314
Product Management
CASE 19
VICKS ACTION 500
It was introduced in India in 1979, 25 years ago. Today, the caplets enjoy a market share of 50% in
anti-cold tablets category. To begin with, people from south and west of India preferred balms, but North
Indians liked quick solution to their cold problems. These days, however, the consumption of Vicks Action
500 is much more in west and south, and account for two third of its sales. Vicks Action 500 is India's first
advertised OTC medicine whereas other anti-cold tablets were all doctor-prescribed. It was launched as onedose medication (the norm being two-dose then). It was coloured yellow, rather than white. Its brand name
signified 'one's getting back into action'.
The numeral 500 was chosen to make it register in the minds of the rural folks.
The first account managers were 0 & M. The pilot ad with the words 'Haan Bhai Haan' was conceived.
The first ad cast Dheeraj Kumar. Tiku Talsania was next in line. These days, Ketki is doing the job.
Though Action 500 was given the status of a remedy to be taken at night on the lines of Nyquil in the
US, the attempt did not succeed. Even blister-pack did not click.
Coldarin, the nearest competitor, has a market share of 14%. P & G wants it to become universally
available even outside drug stores. P & G also wants to penetrate the market in the North.
Issues
Discuss how cold remedies can be marketed.
Case studies
315
CASE 20
NEWDALDA
Brand Name
The Dalda story begins in early 1930s when it was imported by the Dutch
trading company Dada. The then Hindustan Vanaspati Manufacturing
Company (today's Unilever) wanted to manufacture vanaspati locally, the
Dutch trader insisted on the new owners to retain the name. Lever on its parst
added letter '1', and the Dalda was born. It was the second ever brand to have
an ad film in India (1939).
Sept 2003
Hindustan Lever sold its Dalda brand to US-based Bunge Ltd., which
specializes in agri-business (2003). Bunge now wants to relaunch and
revitalize the brand. The company sent a team to contact customers to 442
towns across India.
Plans
The product, packaging, distribution and promotion will be reworked.

HLL manufactured Dalda in a decentralized manner in 13 units spread across
the country to save on the state excise tax. Bunge will restrict Dalda manufacturing to just four units, out of which three are owned by it. This may result in
increased excise out flow but will give greater control to Bunge.
Target audience
Mothers in the Hindi-speaking belt of UP and MP where its usage is more.
Health Platform
Some fat is necessary especially for growing children.
Competitors
Sunflower, Gagan, Rath and smaller regional players.
2004
The brand is on track showing a growth rate of 12 per cent in an otherwise

stagnant vanaspati market. Bunge has now launched its own brand of refined
oils across India under the Dalda brand.
2006
It accounts for 15 per cent of the 0.3 millions tonne branded vanaspati market
(the entire market is 1.3 million tonnes). Bunge targets to achieve a 25 per cent
market share by 2010.
2007
Dalda brand oil, a blend of soya beans and palm oil, will be sold in mini packs
priced at Rs. 5 and Rs. 10. Edible oil market is 1.35 crore tons in volume or
Rs. 75000 crore in value. Close to 70 per cent of the market is catered to by
loose oil. Bunge is aiming to convert some of the loose oil users to branded
oil through these small packs. The target segments are students and labourers
earning daily wages.
Core Values
Trust and affordability
Ad spend (2007-08)
Rs. 15 crore
Issues
Dalda was first marketed successfully by a tag-line 'mamata ki kasauti par khara'. What do you think
should be the marketing strategy today?
316
Product Management
CASE 21
KEL VINATOR'S: THE COOLEST ONE
Videocon has acquired Kelvinator in 2005 and has put it under Kitchen Appliances ofIndia. Kelvinator
brand is extended to microwaves and ACs Kelvinator has a 43 year history in India (2006).
In 1962, Z.R. Irani brought Kelvinator to India. It was owned by American Motors in the US. After
Irani's death, J.R. Desai became the licensee in India. Kelvinator refrigerators were introduced in India in
1963. In 1994, Desai sold Kelvinatorto Whirlpool.l..aterthe brand moved from Whirlpool to Electrolux which
launched the brand again in 1997. Electrolux sold fridges under two brand names - Kelvinator and
Electrolux. Electrolux acquired Maharaja Appliances, Allwyn and Voltas too. Electrolux Kelvinator became
a subsidiary of Electrolux. Thus, it became a multibrand company. As this approach was not working, the
company decided to revert to Electrolux brand in 2002 and introduced a frost -free refrigerator. Consumers
switched over to LG, Godrej and Samsung, and Kelvinator was left out in the cold. In 2005, Kelvinator
changed hands, and is now a videocon brand. Under the license agreement with A.B. Electrolux (ABE), it
will now distribute and/or market, products under Electrolux Kelvinator and Allwyn brands in India and other
SAARC countries.
Issues
Will Kelvinator be able to restore the lost ground? What is your opinion about the brand equity of
Kelvinator? How can they work on distribution? Will the cute little Penguin ready to take off?
Case studies
317
CASE 22
EMAMI
Kolkata-based public limited company.
Promoted by R.S. Agarwal and R.S. Goenka in 1974.
Initial capital: 20000
Shares held by the promoters
95.79 per cent
Growth rate
43 per cent in 2000-2001
Turnover
Rs. 700 crores
First products
Talcum powder and vanishing cream. Packaging in

plastic distinguished these products.
Pricing
15 per cent higher than those of the competition.
Brand Portfolio
22 Brands. Skin-care, hair-care, dental care and men's

grooming products. Several OTC and life-style enhancing products.
2001
Himani Sona Chandi Chyawanprash was introduced.

Priced 20 per cent higher than other brands. Market
share 20 per cent.
1986
Emami introduced Naturally Fair to compete

with Lever's Fair and Lovely.
2003
Naturally Fair relaunched, as Pearls Intensive Fairn

Cream 5 per cent share of Rs. 700 crore fairness cream
market
Biggest Brand (1982)
Boroplus anti-septic cream competes with Boroline of

G.D. Pharma. It is perfumed antiseptic cream popular in
the north and east. It has 62 per cent share of the Rs. 240
crores antiseptic market. In 2001, a small package of
Boroplus was introduced.
2000
Mentho-plus, ~ pain balm was introduced in 9 gms and

11 gms pack. In 2001, a 1 gm pack was introduced.
Market share of 5 per cent.
Madhuri Dixit Range
A range of seven products where Madhuri has planned

the products and included her beauty tips in the product
profile, Promotional campaign of Rs. 15 crores launched.
Export Revenue
Potential export market
Rs. 10 crores Exported to over 50 countries including

Gulf, North America, Europe and Africa Separate cell
for exports.
West Asia, Nepal, Russia.
318
Product Management
Skin-lightening Cream for Men
Distribution
Recent Promotions
Fire and Handsome hit a turnover of Rs. 50 crore in

2006 and sales are expected to grow 20-25% in the
coming year.
Wide penetrative, all-encompassing distribution

strategy. Market divided into Five resions, served by
four mother depots. Additional 25 depots along
with C & F agents. 2200 direct distributors who
serviced 900 distributors for rural coverage. Retail
outlets where products are available - 4 lacs.
Sona Chandi Chyavanprash and Navratra hair oil.
Navratana's sales crossed Rs. 100 crores in 2006.
Issues
Cosmetics follow the route of product endorsement. What do you think about this strategy?
Case studies
319
CASE 23
TATASUMO
Sumo is considered a boxy and roomy Sports Utility Vehicle (SUV) mainly used by commercial
operators to ferry people from place to place to earn it if the refrain of 'Sumo karke jayenge' whenever a group
makes its travel plans.
Sumo Victa is being repositioned by breaking with this association. It links the brand to Sumo owner's
personality which is
individualistic
no non-sense
honest-to-good
Sumo in the process becomes a reflection of this personality. No-frills and no-nonsense vehicle. The
emphasis is 'what you drive is what you are' which in Hindi becomes 'Sumo Victa. Ap ki Pehchan.' Everyday
she roes continue to drive their Sumos.
Sumo wants to move away from the functional benefit approach. Victa is an improvement over
.previous Sumo offerings.
Initially Sumo competed with the Trekker (HM), Town and Country (Bajaj Tempo), the Gypsy (Maruti)
and the Jeep (M & M). Later came Armada and the Armada Grand from M & M. Sumo ruled with a sales
of 4000 units per month.
In 2000, Toyota Qualis from TKM was an instant hit in urban markets. M & M launched Bolero. In
2002, Scorpio from Mahindra entered the market settling at a sales of around 2000 units per month. Sumo
sells around 2300 units per month. Its sales have dipped to 19 per cent - a far cry from the heady days when
it had a share of 40 per cent plus share in the mid-nineties.
Sumo braved the assault of Qualis and Scorpio. Later came Cheverolet Tavera.
The consumers want more refined and visually appealing Multi-Utility-Vehicles (MUVs).
Sumo wants to retain the commercial market, but would like to enter the growing personal segment.
Victa's communication of putting forward practical down-to-earth people owning the vehicle that embodies
these values is a change of brand communication. Whether this can traverse the distance between
commercial and personal segment is the question. Some feel Sumo has to build on its strengths of people
moverrather than attempting to move to the personal segment. Perhaps, repositiodng may help the Sumo
cross the basic threshold of acceptance - the low-end of SUV buyer.
This may be a tactical device. Though this seems to be a 'lip-stick job' right now, it may usher in a new
flagship MUV brand in future from Tata Motors.
Issues
Sumo is trying to change its image. Comment on this.
320
Product Management
CASE 24
BAJAJCHETAK
Agency : Lowe
Brief
: To communicate the benefit of wondergear technology that makes changing gears
effortless.Bajaj being the leader in the geared segment wanted to focus on geared scooter against high-growth
gearless scooter segment.
Communication Strategy
Demo of wondergear that would be memorable

Chetak to be given a fresher, more youthful and aspirational image.
Media: 1V commercial supported by print and outdoor.

Commercial duration
: 30 seconds
Theme
: Humour
Core proposition
: Scooters are dependable means of transport.
Story
: A young man, left arm in a cast. Struggles to do personal chores. Calls out
brother for help. Elder brother helps him button up his shirt, fasten his belt
and even tie his shoe-laces. Brothers ride the scooter to leave. Elder brother
forgets somethings and leaves.
Younger brother's plastered hand raised is mistaken by the pretty-girl next,
door as wave. She waves back. Our helpless young man is confidence
personified.
He zooms across the town, girl seated behind him, using his plastered arm
and wrist to change gears.
VO
: Bajaj Chalana ab Bayen Haathaka Khe!.

Commercial ends with a shot of elder brother perched on a wicker gate.
Tag tine: Inspiring confidence.
Issues
Comment on the execution of the Bajaj Chetak ad. How does it differ from the emotional connect ads
so far?
Case studies
321
CASE 25
MCDONALD'S
McDonald's was established by Richard and Maurice McDonald, two brothers form New Hampshire,
US who came to make a career in Hollywood and ended up as owners of a drive-in restaurant in San
Bernardino, 55 miles of Los Angelas. They sold the first franchise to Raymond Kroe, a milkshake machine
salesman, and the first link was set up at Des Plaines, Illinois in 1955.
McDonald's serves 50 million customers everyday in 31000 restaurants in 120 countries. Interbrand
puts a value of $ 25 billion on McDonald's brand. Its logo of Golden Arches is most widely recognised symbol.
McDonald came to Incfiil twelve years ago (1996). It has friendly, informal, hassle-free ambience, and is
conducive to fun-making for the kids. McDonald's in its advertising in India targets the Indian father, a
decision-maker in his own right. Its new positioning is that caring dads take the families to McDonald's to
have a great time. It is a welcome and affordable family restaurant committed to values of quality, fun and
excitement. It wants to strike an emotional bond with the family. It has the latestfood processing technology
and supply chain in place. It is aiming to set up a chain of 100 restaurants. It has currently 111 restaurants.
It wants to register its presence in South. It wants the consumers to the concept of drive-through restaurant.
It wants to set up such restaurants on high ways. It wants to be price competitive by setting up more outlets.
It evaluates Indian food habits and introduces innovative new products. Product launches happen every year,
but menu vision is outlined every three years. There are separate kitchens both for the vegetarian and nonvegetarian preparations.
McDonald is not so strong with adults. Of course, as children, they wentto McDonald's. But as adults,
they want an alternative. McDonald has to adopt a different communication strategy, menu development
and store design to penetrate this segment. McDonald has to create a comfort and familiarity zone for kids,
famlies and even the single adult.
The message should be focussed. As people grow up, McDonald has to grow up too with them. The
brand must be reinvigorated. It has to be made contemporary.lt has to fight the perception that it is an
expensive eating out option. It has to be made an affordable brand. It introduced products priced at Rs. 20
to bringa large pool of customers to its restaurants. They rang a campaign of 'I'm loving it' to build the brand.
In some countries, the brand is a symbolic target for protest against globalisation, exploitation and
animal abuse. A leader has to pay the price. It is a brand available in over 100 countries patronised by 46
million people everyday. Many issues that touch the lives of these people are related to the brand. But still
people want McDonald to overcome these challenges. McDonald's brand values are universal e.g., quality,
service, family, caring for children, Ronald McDonald.
McDonald will no longer remain confined to prime time TV. It is going to partner with music and
entertainment world to react to the young adults. They might sponsor sports.
McDonald will concentrate on core menu and new products that contribute to the image of the brand.
e.g., salad lunch. It has introduced in the US one-dollar menu successfully.
McDonald has good opportunity in drive-through outlets, desserts and snacks. People should visit
McDonald more often. It should be open sssswhen people wantto eat out. It should give what people want
to eat out. The business has to be totally consumer-driven. People should consider McDonald as an
alternative after seeing a movie. It should become a favourite place and way to eat.
The health-conscious population needs quality products. The product must be associated with physical
activity e.g., sports. People must be educated about healthy food.
322
Product Management
McDonald's Distribution Logistics
It sources its products from local firms. Lettuce comes from Talegaon, near Pune, Nainital, Delhi and
Ooty. Cheese somes from Dynamix Dairy Industries in Baramati, Maharashtra; buns from Cremica at
Phillaur in Punjab and Mrs. Bector and Sons Khopoli near Mumbai, and chicken and vegetable patties, pies
and pizza puffs from Vista Processed Foods, Taloja, also near Mumbai and HUL's Best Foods Division,
Thane. Most of the raw materials are sourced from the north and the west, as majority of outlets are located
here.
Getting the raw materials to the retail outlets is a challenge. They had to develop the concept of a cold
chain. They worked for six years to set up a supply chain before opening their first restaurant. The supply
chain has been designed to ensure assured supply of safe products at lowest cost, the best value and consistent
qualtiy.
TrikayaAgriculture Pvt. Ltd. is a major supplier of iceberg lettuce. The vegetable is grown in Talegaon
using drip irrigation. Lettuce is 90 per cent water. It is important to transport the leaves within half an hour
of harvesting to a pre-chiller where, temperature is about 1DC, in order to remove the field heat between 25
and 34C. Here they are vaccum-cooled and sent to another cold room where they are packed and
transported in refrigerated trucks to a distribution centre; where the temperature ranges between 1 and 4C,
and from there it is sent to the retail outlets. Tracking devices in the trucks monitor the tempratures at all times
and quality checks at various points ensure the quality.
The trucks transport the raw materials to a distribution centre from where they are sent to the retail
outlet.A distribution centre must have whatever a store needs. It should be in a postion to deliver at a short
notice. Each truck has three degrees of refrigeration - a freezer section for meats, a cold refrigerator section
for vegetables and a non-refrigerated section for paper cups, napkins and plastic cutlery. The operations are
computerized and ERP software has been installed. They know what is selling and where. Accordingly, they
place their orders with the producers. The idea is to keep inventory levels to the minimum. Radhakrishna
Foodland operates the distribution centres in Mumbai and Delhi.
McDonald of late is not showing healthy financial results. Though the brand still has amazing equity,
efforts are needed to bring back the old magic. Even in 2003, it is eighth in the Interbrand list and is valued
at $ 24.70 billion (2003). Perhaps, McDonald over emphasised the growth of restaurants, rather than the
customer base. Many customers grew out of McDonald's. Maybe, the brand has lost relevance for the
contemporary teenagers. McDonald has started closing many outlets, and has revamped a good many
number of outlets. They are trying to attract health-conscious customers by changing the menu e.g.,
introducing salads and sandwiches. The core essence of the brand is 'fun and youthful spirit, quality and
cleanliness.'
McDonald's target segment is people eating out, and this is a growing segment. The fastest growth is
in the segment of informal casual eating. McDonald is an eating experience. McDonald especially appeals
to children. It is a destination brand. (People express a desire to go to McDonald). Since children are
accompanied by families, McDonald is very strong for families too.
McDonald's India is a wholly owned company managed by AmitJatia's Hard Castle Restaurants Pvt.
Ltd. and spearheads operations in the western and southern parts of the country. In the north, the restaurants
are wholly owned and managed by Vikram Bakshi's Connaught Plaza Pvt. Ltd. Thus, India has twoJV partners;
who have invested Rs.1100 crore so far, and propose to invest Rs.400 crore more in the next few years.
Issues
Commenton the product development process of McDonald's . What is the brand image of McDonald?
Does it need any change?
Case studies
323
CASE 26
ICE HOTEL, CANADA

Hotel de Glace at Quebec, 230 kms. from Montreal in Canada is made of ice blocks. It is situated at
Duchesnay on the shores of Lake St. Joseph; province of Quebec. It is constructed from 12000 tons of ice
tightly packed snow and 400 tons of ice, all beautifullly sculpted, yet architecturally sound. Inside illuminaiton
uses fibre optics because conventional electricity produces heat. Insunlightthe 2700 square meter hotel shines
like a jewel. It first opened in 2000. The hotel is built anew every year. In December, it takes 35 workers to
complete the project in 5-7 weeks. In April, the season ends, and the whole structure is tom down. Because
of the insulating properties of ice, the inside temperature always remains between -4 and- 6 Celsius, no matter
how cold it gets outside. Sometimes down to - 43 Celsius. Actually, mostpoeple feel warm once inside their
cocoon sleeping-bag some two minutes away from the ice-hotel, there is a conventional facility that is not
built with ice and where the usual comforts of a traditional hotel are available. Guests can shift here if they
do not feel warm at the ice hotel.
The first ice hotel was built in Jukkasjarvi, Sweden in 1990. The Canadian hotel is inspired by this
Swedish hotel. The tariff for one night stay including dinner and breakfast is Can $ 538 for two (Rs. 16150).
This also includes a shift to the conventional hotel if one so wishes.
Issues
It is a new experience to stay at an ice hotel. Can it be sold on the basis of 'feel the experience'?
Product Management
324
CASE 27
NETWORKING
Nike does not manufacture shoes and clothes. Rather, it has a network of sub-contractors in China,
South Korea, Taiwan and Thailand who develop products. Nike spends time in R&D, and puts the inputs
into the manufacturing processes of the sub-contractors. Nike even allows its sub-contractors to work for
competitors. The lessons learnt by the sub-contractor while doing so ultimately benefits Nike. Nike has great
flexibility in changing its product mix quickly to respond to the changing market. Otherfirms which depend
on networking for their products are Harley Davidson, Benetton and parts of Motorola. Networks have their
own fautls. They may become stale. The customisation they do may be counterpdouctive. Innovation may
suffer. Networks may make the firm resemble an old-style vertically integrated firm. Networks function well
if the core firm transfers technological advances quickly from one subcontractor to another. Networking may
make the core firm complacent, and blinkered. It may not remain open to new ideas. Resources are not
relocated quickly. There should be a flexible relationship between the core firm and its network. A supplier
in a network can avoid over-dependence on the core firm by setting a limit on the assets a supplier should
dedicate to the core firm.
Issues
Discuss the pros and cons of networking.
Case studies
325
CASE 28
ROLLS ROYCE*
A hot favourite of the rich and powerful.
Luxury incarnate.
Fredrick Henry Royce, a poor apprentice in railway works company and two electrical firms set up
his own firm. He was self-taught.
Charles Stewart Rolls, from a rich family, was educated at Eton and Cambridge. He loved cars.
He started seIling them. He found Royce car was too good. He tied up with Royce for seIling the
cars that he produced provided that the cars bear the brand name Rolls Royce.
The oldest Rolls Royce car made over 100 years ago is still running! It is the fourth produced by
Charles Rolls and Henry Royce, a 1904 10 HP open-top, and it was sold to a British collector for
a record -breaking $7 .22 million at an auction in London in Dec. 2007.
Rolls Royce cars entered races.

Only 20000 Rolls were available before the war. 20 per cent were with Indian royalty.
Rolls Royce Corniche powered by 6750 cc V8 empire costs 250000. It is the costliest model.
Silver Searph limousine sells at 159000. It is 5.4 m long and weighs 2.3 tonnes
Both the mdoels have a top speed of 140 mph or 225 kmph.
Issues
Rajnish had fondness for Rolls Royces. Even Indian royalty was a big buyer for them . What motivates
a person to go in for such a pricey car?
*Based on Rolls Royce and the Indian Princes by Murud Ali Baid (Roli)
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Product Management
CASE 29
HORLICKS
Horlicks was born in 1873 in the US. Two Chicago-based brothers James and William Horlick first
patented the malt-based milk drink as baby food. While the exact date of its Indian launch is not known,
some of its commercials date back to the early 1900s. It is currently owned by GSK Consumer Healthcare
Ltc!. in India.
The health food drink (HFD) market is declining. The consumers have evolved over a period oftime.
Horlicks continually needs to change to remain relevant. The entire category ofHFD is worth Rs. 1100 crore.
It is stagnant or declining. Horlicks alongwith Boost, Maltova and Viva make up over 85 per cent of GSK's
sale; and the rest comes from its OTC products Crocin and Eno.
Horlicks has crossed Rs. 100 price mark for its 500 gms pack by hiking the price. This has affected its
sale in the price sensitive market of the South and East where it really sells. The company feels the price hike
was inevitable considering the rising input costs.
GSK's over-relies upon one major brand (Horlicks) and one product segment (HFD). It makes it
vulnerable.
GSK has not been able to expand the market. It should have a strategy of how to stimuatle out-ofhome consumption. GSK has fOlmed a team to build out-of-home consumption. There are options of
vending machines and ready-to-drink aseptic packs.
Horlicks has repositioned itself as children's brand. The brand is made more relevant and modem. It
has been relaunched in three new flavours-chocolate, honey and vanilla. The brand now directly talks with
children, instead of mothers. Its positioning is now 'nutrition with fun'. Too much emphasis on health alone
gave it a pharma connotation.
In the late 90s, due to launch of Aquafresh-the tooth-paste brand, Horlicks was neglected. Horlicks
now relies more upon the kid's power over their parents to pull sales.
Horlicks contains ingredients like malted barley, wheat flour and evaporataed milk. The brand was
pioneered by James Horlicks, a chemist, who worked for a company that manufactured dried infant food.
He later established J. and W. Horlicks of Chicago together with his brother. Since in 1870s babies fell sick
due to consumption of sour milk in the absence of refrigeration, James and Williams formula came handy
to save the day. In 1906, James set up a company in Britain called Horlicks Malted Milk Company. Later,
the brand was sold to Smithkline Beecham, now known as Glaxo Smithkline (GSK) for 250 million.
It is the flagship brand of * Smith Kline Consumer Healthcarse (GSKCH). It is a 135 year old brand.
It was at No.1 0 position in the Brand Equity Survey of India's MostTrusted Brand in 2001, but has slipped
to No. 16 in 2002. Horlicks contributes almost 75 per cent to the total revenues-that is close to Rs. 800
crores. Horlicks ranks amongst the most cherished and valued brands in India today. (Brand Equity, 2003).
It holds 58% of the Rs. 1900 crore health food drinks market. It is currently a Rs. 1000 crore brand in India.
The brand was extended to biscuits in 1994. Its promotion in 1998 was based on 'smart nutrient' story. In
2003, apart from being nOUrishing, it emphasized taste too. In 2005, it has been made a children's brand
that makes them 'taller, stronger and sharper" . Horlicks Lite was launched followed by revamping of Junior
Horlicks in 2006.
For over 80 years, this brand has stayed in India by its consistency as 'the great nourisher' positioned
as a health food which restores energy, good spirits, thereby ensuring success. Its advertiSing shows people
who are successful; though there were initial failures.
Horlicks is available in vanilla, toffee, elaichi and chocolate variants.
Case studies
327
Headline
They all said I was to blame
Copy
The fault was mine for losing my job, complained the

family.
But now could I help it when I felt so tired and depressed
all the time.
Man
In a few weeks, my tiredness has gone. I felt fit and

enthusiastic ... ready to tackle my own new job!
Amitabh Featured in a series of radio ads in the 60s and
70s.
Multi-ad Campaign (1965)
Qver-worked office-goer
Tired housewife
Woman facing mid-life blues
Girl who studied for exams.
They all discovered Horlicks.
Horlicks was positioned as an adult restorative drinks.
Product setting
Fp.mily atmosphere
Product stands for
Mother/wife's love and caring for the family (1969).
Stress on tradition
Give them 80-year-old tradition (60s)
Horlicks' mother and family
Suchitra
Her two children
Doctor's recommendation
Permanent fixture since 70's. The Medical credentials

were reinforced through a doctor's rational voice. The
position of Horlicks shifted to 'the great nourisher' in
70s. 'Doctor proves a point' (1988)
Snatches from real life (80's)
Pilot son returning home. Horlicks helped him achieve

ambition. Grandfather amusing grandchildren. Working women, shouldn't she be having Horlicks too?
During the 80s Horlicks created one of the most popular
1V campaigns with its 'Why Do I Drink Horlicks?'
commercial. It was one of the early instances of slice-oflife advertising.
Late 80s
Extra-calcium factor
Moon Moon Sen and her daughters Riya and Raima
endorsed the brand in 80s. Former World Chess Champion Vishwanathan Anand also endorsed the brand.
Packaging
Jar could be used.
1990s
Horlicks-pulse of the family.

Ghar Ghar Ki Jaan. As Operation Flood unfolded, the
raison detre for buying the brand became weaker.
Horlicks remained relevant by extending its appeal to
larger segments.
The times are turbulent.
328
Product Management
This Millennium
The absolute sales declined.

The brand is not perceived as 'modern and contemporary.'
A relaunch was initiated in July 2003.
Children were targeted directly for the first time. Product was
improved - new flavours, new packaging. Children thought Horlicks
to be old-fashioned. Mothers were no longer authoritarian figures.
Forcing Horlicks on kids. They liked to be seen as friends.
Horlicks was advertised through 'Pran ChonchoI' Campaign
estbalishing Horlicks as integral part of spirited live-wire children.
An engaging fun-loving perosnality replaced the serious,
do-good, earnest persona of the past.
Issues
Can you trace the development of a health drink from the idea stage to its commercial launching?
Case studies
329
CASE 30
LIFEBUOY (LIFE SUST AINER)

Born in 1884 in UK.
Launched in India in 1895 when the country was in the grip of a plague epidemic. It celebrated its hundredth
year in India in 2005.
Satisfies the Indian consumer's need to have a no-nonsense health bath.
Appearance
Boxy red 150 gm. cake in a plain red-and-white wrapper.
Odour
Phenolic
Effect
Germ-killer
Position
Hygiene position in consumer minds.
Market Share
It has 18% market share in the bathing soaps category worth Rs. 6000 crore
Manufacturing in India started in 1935

Meant for rural masses.
Distribution was built-up.
Rural promotion started in 1950's
Rural promotion strengthened in 1960's.
Bathing was portrayed as a key constituent of health.
ViUage-to-village vans to distribute the product by day.
Screening of open air films by night.
Direct contact efforts at rural health centres and schools.
Objectives: Reach all settlements with 2500 inhabitants or more.
Outdoor ads.
Powerful radio jingle
Tandurasti ki raksha karta hai. .. (Lintas)
Sports ads . Contact with plenty of dirt. A soap that cleaned a sportsperson.
Urban audiences: Footballers had a Lifebuoy bath, after a field game. Kabaddi players for rural audiences.
Trade push
Pull created by promotion
Penetrative pricing
75 gm. pack for price sensitive in 1987.
Competition: NirmaBoy (1990)
Now branded as Nirma Bath was considered a downmarket soap by urban consumer.
Perfumed variant Lifebuoy Personal (1987). It failed to make a mark. Withdrawn after 4 years.
1991:
Lifebuoy Plus muffle bad smells through tri-chloro-carbonalide (TeC)

Successful in popular segment perceived as male brand.
1993:
Liquid Lifebuoy in dispenserpre-empted the entry of Dettolliquid used to eliminate germs in people's
hands, especially children's.
To attract housewife.
Less menacing colour smell food . Provide some skin care ointment core benefit.
Product Management
330
1995:
Lifebuoy Gold White soap in a white wrapper.
2002 :
It moved from a hard soap to a mild soap that delivered superior bathing experience. Packaging
changed from rugged-looking to softer pinkish colour. It was made a family soap.
Rs. 6.50 for 25 gm.
Lifebuoy Plus Double Action Rs. 9 .25 for 100 gm.

Trichlosan was added to prevent regrowth of germs killed by TCC.
They have introduced Lifebuoy Sking Guard, Liifebuoy Natural, and Lifebuoy Yuvi soaps.
It has 112 years of existence in India, and has constantly reinvigorated itself. In the last five years, it
has touched 100 million Indians across 44,000 villages. Though the brand has not used the endorsement
route, it exceptionally used Yuvraj Singh, a cricketer to promote it recently.
It is 100 years old brand. It was traditionally seen as a worker's soap. It has now adopted a family
orientation. It has also put a variant called Lifebuoy Clear Skin targeted at teenaged girls. From sweaty
football players to nubile nymphets, it has come a long way.
Its Koi Dar Nahin idea is well-thought-outshift in pirection to attract urban audiences. Formerly, itwas
sold on health proposition by targeting adult male through the sports syntax - the raucous footballers
joyously singing Tandurasti Ki Raksha Karta hai Lifebuoy. By late 90's the brand slowed down. A lac!< of
innovation affected the brand. The consumer behavior also changed, with the woman becoming a purchase
decision mal<er. The brand must be contemporized. The brand communication was addressed to the woman
of the house and the health of her family. But Lever seems to have introduced far too many variants. The
brand has been extended to talc. Life buoy green taps the natural segment. Lifeuoy Gold is anti-acne soap.
Its handwash has been re-introduced.
Case studies
331
CASE 31
AIRLINES - ALL THE SAME
Though most airlines have more or less identical services, they spend a lot on advertising. Inspite of
whatever claims they make in adverting, one domestic airline is no better than the other.
The air-crafts are all the same - either Boeings 737s or Airbuses 320s. The seats are supplied by a
few vendors and they are more or less the same. Taj, Oberoi or Ambassador are the caterers who operate
flight kitchens. Their menu has little variations. The food is prepared hours before.
The inflight announcements either by cockpit or cabin crew are not exciting. The expatriate pilots are
poor communicators. The accents are phoney. The PAsystems are not upto the mark. There are far too many
announcements and sometimes they are irrelevant, e.g., announcements about life jackets when the
domestic flights rarely fly over the sea.
Airlines passengers not just want transportation. They are paying thousands to experience the journey
itself.
Issues
How can airlines improve their product offering?
* Based on Vir Sanghvi's write-up in Lounge, at. July 28, 2007.
332
Product Management
CASE 32
TECHNOLOGICALADVANCES
Let us take an overview of the few prominent technologies that affect us and world around us.
Computer Technology
Computer technology was pioneered in the 40's of the previous century. Pascal (France), Babbage
(England) and Hollerith (US) are prominent scientist of this period. The following table illustrates the forerunners ofthe present-day computer.
Device
Automatic Sequence Controlled Calculator
Description
Used by US navy to solve complex technical problems
(ASCC)
Electronic Numerical Integrator and
Used electronic tubes.
Computer (ENIAC) Mid-1940's
Weighted 30 tons. Occupied 15000 sq. ft.

Used electronic pulses generated at 1 lac per second.
Performed 5000 additions per second
Had 10000 vacuum tubes.
Half-a-million soldered connecting.
Consumed great energy
Generated too much heat.
Lacked stored programme capability.
Selective Sequence Electronic Calculator
Lesser in size, speed and capacity than ENIAO.
(SSEC) IBM, 1948
First electronic computer with a stored programme.

Put to test in 1950.
Given 'Problem Hippo' involving millions of calculations. It took
150 hours for the machine to save the problem.
It was a milestone in those days.
Very Large Scale Integration (VLSI)
Silicon chips - memory chip and logic chip. Incredible amount

of circuit packed into very small circuit boards. Logic chip also
called microprocessor is also an example of VLSI. This gave rise
to inexpensive computers capable of not only number cruching
but processing data to generate information.
Buses, rings and stars
In a bus network, the various devices or stations are linked to a

length of cable (the bus) with cable taps. Signals originating from
one stations are passed along the bus in both directions till they
reach every other station in the network.
Ring network is circular pattern of repeaters joined by cables. a
station originates a signal into the ring via a repeater.
The repeater then passes the signal around the ring, thus reaching
other stations in the network.
Star network consists of a central hub, typically a CPU of a
computer, with stations radiating from it and connected directly
to it.
Case studies
333
Allocation of access is by time sharing technique of time diversion

of multiple access (TDMA)
Artificial Intelligence (AI)
Human brain receives information through senses, relates it to

previously retained data and either stores for future recall or
discards it.
Computer are taught to recapture sight and sound stimuli in the
form of images and voice.
Computers are integral part of robots.
They are programmed to carry on limited conversations, play
chess, translate languages, fly jet planes and diagnose medically.
They fall short of real intelligence. they fail to recognise the context.
Harnessing Technology
Technology should not create a syndrome - here is a solution, and now let us find a problem. On
balance, technology has been harnessed to benefit mankind. There is a constant search for new drugs.
Computers are used to find a fit of the molecules to the cell receptors before actually producing and testing
them. Simulation can be used not only for flights, but also for training surgeons in microsurgery. Physically
challenged persons can be educated with the help of computers. Computers can be used to communicate
by patients of cerebral palsy and such otherneurological problems. Writings can be converted into sound by
a synthesizerfor the help of the blind. Satellites are used for weatherforecasting. Missile technology can be
putto non-military applications. Computers have changed the office environment. Manufacturing is getting
automated.
In conclusion, it will not be out of place, to quote from Lewis Carroll's "Allice in Wonderland":
Alice to Cheshire Cat: "Would you tell me please which way I ought to go from hee?"
"That depends a good deal on where you want to get to "said the Cat.
"I don't much care where" said Alice.
"Then it doesn't matter which way you go", said the Cat.
"So long as I get somewhere" Alice added as an explanation.
"Oh you are sure to do that," said the Cat. "If you only walk long enough."
Can we, as responsible citizens of the Global Village afford to follow Alice?
Issues
How the evolving technology affect product management?
334
Product Management
CASE 33
CHANDAMAMA: CHILDREN'S MAGAZINE
Most Popular Characters
Vikram and Vetal
Year of Launch
1947 in Chennai. It is a 60 year old brand.
Launched by
B. Nagi Reddy, Chakrapani
Sales (1998)
5 lac copies in 13 languages
Closure
Closed shutters in 1998 due to labour problem.
Resumed Operations
In 1999, with a new set of owners. The Reddy's stake had been
reduced to 40%. Morgan Stanley, Karvy, and others held the rest.
Buyout
In 2007, Geodesic acquired 94% stake for Rs. 10.2 crore. Walt
Disney is also a partner. The Reddy family owns a miniscule
amount.
Content rich publication
Chandamama is sitting on a treasure trove of content, with rights

to 25 characters and a library of 16000 stories.
Challenge
To make the brand relevant for21,t century India. Subramanian,

CEO expects a triple-digit growth (he took the magazine from 1
lac to 3 lac circulation in three months).
New Platforms
Multiple platforms, though print would be the core. Books and

comics business would be developed. Content would be avail
-able on mobile, radio, on-line, movies and TV serials. It will be
a mix of on-line and off-line.
Tag line
One safe place for your child.
Issues
How can Chandamama be revitalized?
Case studies
335
CASE 34
TOOTH PASTE MARKET
Total Oral Care Market
It consist of tooth paste, tooth powder and tooth brush.
Value of Oral Care Market

(Jan-Dec, 2007)
Rs. 4014 crore
Value of Toothpaste Market

(Jan-Dec, 2007)
Rs. 2732 Crore
Market share of Tooth Pastes in the total

Oral Care Market
68%
Tooth Brush
17%
Tooth Powders
15%
Segments of Paste Market
Economy segment Popular segment, Premium segment
Penetration of Oral Care Market
80%
Tooth Paste Penetration
50%
Growth on account of
Consumer shift (from non-users to users). Shift in rural markets

from tooth powders to tooth pastes. Overall increase in demand.
Price increases. Earlier, the shift was from datun to tooth powder
to tooth paste but now it is a direct leap from datun to tooth paste.
Developing the night brushing habit.
Major Players
HUL whose market share is below 30%. Pepsodent is their

leading brand with a 12.5% market share. Colgate's share is
36.6%. Dabur's share is 10.12%. There are smaller brands like
Anchor, Ajanta and the like.
Gel Market
Close-Up of Unilever is growing but the gel market is not very

large. Colgate in this segment grows at the rate the market grows.
Downgrading
Consumers may shift from premium brands to economy brands

to use the savings for other personal care products like hair dyes.
Low priced products account for 25% of the market.
Brand Promotion
Tooth pastes are sold as family brands. There is generally one

tooth paste for the entire family. The salient features used to sell
the pastes are germicidal properties, whitening of the teeth, a z
strengthening of the teeth, and freshness of breath.
Issues
Discuss how smaller tooth paste brands show the larger teeth.
336
Product Management
CASE 35
FORD MODELT
100 Years
On 27th Sept 2008, 100 years have elapsed since the Model
T was introduced by Ford.
Model T
People's car. Car that put America on wheels.
1903
Ford had put various models of cars such as Model A, E, F, R etc.

However, Model T was acknowledged as the best car of the 20th
century.
Production
Production of Model Tcontinued ti111927. There were 1.5 crore

Model T cars on roads.
20's
Market share of Model T was 50 per cent plus.
Other Names
Tin Lizzie, Metal Horse.
Colour
It was black.
Specification
Weight 51/2 quintals. 20 H.P engine. 70 km speed/hour. 9 kms per

litre average.
First Production
Wicket Avenue Plant, Detroit. In October, 1908 only 11 cars were

produced. The figure rose month by month. Production was
shifted to Highland Park, Detroit. Moving Assembly Line was
used for the first time. It was inspired by Chicago abbotoir.
Production time got reduced to 1.5 hours per car; and reduced
even further.
Cost
$850 in 1909 (against average price of other cars of $20003000.) By 1913, the price came down to $550. An average
worker could afford the car by putting in four months' earning.
1925
Model T's popularity declined. Ford could not assess the change
in likings of the customers. Customers became aware of amenities
and colours. They did not want a stereotype model.
1927
The last Model T was produced. There are many fan clubs of
model T in the US even today.
Contribution
Moving Assembly Line concept. Mass production concept. This

led to Just-in-Time, Toyota Production system and Lean Manufacturing.
Detroit
It became the auto capital of the world in the 20th century.
Issues
Mode T's case is relevantin the context ofTata Motors Nano Project in India. Nano is the 2151 century's
tribute to the 20lh century's Model T. Kindly discuss the potential of the sub-$2500 car Nano.
Case studies
337
CASE 36
ROYAL ENFIELD MOTORS

Company
Formerly called Enfield India
Rechristened
Royal Enfield Motors
Aagship Brand
Bullet
Acquisition
Eicher group acquired Enfield India in 1994.
Brand's Presence
50-year old brand.
Competitors
Japanese Bikes. Most 100 cc, 125 cc bikes are for commuting. The
gear shift is to the left.
Bullet
Bullet is not for commuting. It is for passion biking and leisure.
Target Audience
Niche brand growing steadily. Burgeoning youth segment.
GearShift
Bullet has the gear shift to the right, and has not been changed
keeping in mind the sensitivity of ardent Bullet users. To woo
customers comfortable with the left gearshift, Royal Enfield
introduced a new model, Thunderbird.
Models
Bullet Machismo 500, Bullet Electra, Thunderbird.
Features
Quality, Ease of start, Disc brakes, Fit-and-finish.
Distribution
Creation of Royal Enfield brand stores in metros and minimetros.
Brand position
Passion for biking.
Sales (2007-08)
38,548 units.
Growth
18%
Targeted growth
20%
Exports (2007-08)
2600 units.
Issues
How can the company hold its own against the onslaught of the Japanese bikes?
338
Product Management
CASE 37
FORD MODELT
100 Years
On 27th Sept 2008, 100 Years Love elapsed since the Model T
was introduced by Ford.
ModelT
People's car. Car that put America on wheels.
1930
etc.
Ford had put Various models of cars such as Model A, E, F, R

However, Model T was acknowledged as the best car of the 20th
Century.
Production
Production of Model T Continued til11927. There were 1.5 Crore

Model T ears on roads.
20's
Market Share of Model Twas 50 Per cent plus.
Other Names
Tin Lizzie Metal Horse.
Colour
In was black.
Specification
litre
Weight 51/2 quintals. 20 H.P. entire 70 km speed/hour 9kms. Per

average.
First Production
Wicket Avenue Plant, Detroit In October, 1908 only 11 ears

were produced, The figure rose month by month. Production
was shifted to Highland Park, Detroit. Moving Assembly line
was used for the First time. It was inspired by Chicago abbotoir
Production time got reduced. To 1.5 hours per car; and
reduced even further.
Cast
worker could
$ 850 in 1909 (against average price of other cars of $ 20003000. By 1913, the price came down to $ 550 An average
afford the car by putting in four months' earnings.
1925
in
and
Model T's Popularity declined. Ford could not assess the change
likings of the customers. Customer become aware of amenities
colours. They did not They did not want a stereotype model.
1927
Model
The last Model T was Produced. There are many fan clubs of
T in the vs even today.
Contributors
Moving Assembly Line concept. Mass Production concept. This

led to Just-in-Time , Toyota Production system and Lean
manufacturing.
Detroit
It become the auto capital of the world in the 20th century.
Issues
Mode T's case is relevant in the context of Tata Motor's Nano Project in India. Nano is the 21 st
century's Model T. Kindly discuss the potential of the sub-12500 car Nano.
Case studies
339
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PRODUCT

B.Com. (Hons.), D.Pharma, M.B.A.

Revised Edition: 2009

Mrs. Meena Pandey

Kundanlal Chandak Industrial Estate, Ghat Road,

No. 85/50,Bazullah Road, T. Nagar,

First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth,

C-43, Sector - C, Ali Gunj, Lucknow - 226 024.

39/104 A, Lakshmi Apartment. Karikkamuri Cross Rd.,

Product: Basic Concepts

Marketing Environment for Product and Brand Management

Product Market Strategies for Leaders, Challengers, Followers

Product Life Cycle and Market Evolution

New Products: Planning and Development

The Creative Spark

Designing the Offer

Pricing the Offer

Concept and Product Testing

Budgeting for Products

The Anatomy of a Brand

Brand Culture and Brand Retuals

Product and Brand Failures

"This page is Intentionally Left Blank"

PRODUCT: BASIC CONCEPTS

PRODUCT SERVICES AND AFTER-SALES-SERVICE

Fig. 1.1 Components of a Product

Product: Basic Concepts

Fig. 1.2 Scope of Product Management

brand equity and measure it.

Product: Basic Concepts

Product: Basic Concepts

Product Line Length

(iu) By filling the gap at the low-end, new competition is avoided.

Managing New Product Opportunities

Fig. 1.3 Classification of Opportunities

Product: Basic Concepts

Fig. 1.4 Marketing Plan

Total Customer Value

! Customer Derived value!

Total Customer Cost

Fig. 1.6 Value Creation

Product: Basic Concepts

Industrialisation of Personalized Service

Fig. 1.7 A Typical Business System

New Product Development

Here there is interface of technical, marketing and finance people with a

Sales and Promotion

Covers applications, installation and maintenance. Some services are

Product: Basic Concepts

Fig. 1.B Business System as a Value Chain

COMMUNICATE THE VALUE

PROVIDE THE VALUE

CHOOSE THE VALUE

Procure---.. Produce ~ Price - . Sell

Promote --.- Distribute----+- Provide

Product: Basic Concepts

Identify the Value

Create the Value

Communicate the Value

In the value-delivery model, values are chosen, created and communicated.

Product: Basic Concepts

Marketing Environment for Product and Brand Management

We shall now consider the tremendous potential of the Asian market.

Marketing Environment for Product and Brand Management