Business Marketing Module 4

FORMULATING PRODUCT PLANNING

WHAT IS AN INDUSTRIAL PRODUCT?

The industrial product is defined not only as a physical entity, but also as a

complex set of economic, technical and personal relationship between the

buyer and the seller.(Basic, enhanced and augmented properties ) Example: A company as a buyer of an industrial product can consider: Economic price Technical specifications of the product Legal If the supplier delays delivery Personal between the company and the suppliers Relationships

WHAT IS AN INDUSTRIAL PRODUCT?

Basic Properties includes generic product sought by customers. Ex

Bicycle used for transportation.

Enhanced Properties - generic product are enhanced by adding tangible properties like product features, styling and quality.

Augmented Properties includes intangible benefits like training, technical assistance, availability of spare parts, maintenance & repair service warranties etc Eg :Apple designed software prog for particular customer application, and offered training and product maintenance in mid 1980s.

Factors Demanding Change in product Strategy

The behaviour of the product life-cycle depends on the three factors over which management has little or no control. These are : Changing needs of customers warehouse (from 2 to 6 feet storing) Changes in technology tubeless tyres Changing Govt policies/laws LPG 1991, ban for wooden windows. PLC - The product life-cycle concept suggests that different marketing strategies are needed at different stages of the PLC. The PLC concepts also highlights the importance of long-term planning for a new product, including realization of competition and its impact on profits at later stages.

INDUSTRIAL PRODUCT LIFE CYCLE

INDUSTRIAL PRODUCT LIFE CYCLE FOR HIGH-TECH PRODUCT

INDUSTRIAL PRODUCT LIFE CYCLE FOR COMMODITY PRODUCT

APPLICATION OF PRODUCT LIFE-CYCLE THEORY TO MARKETING STRATEGIES

INTRODUCTION STAGE Some industrial products get accepted rapidly after introduction and others are accepted slowly. This depends upon changes in the users habits. For slowly accepted products the marketing strategy should concentrate on market development efforts. Ex type writers. For fast accepted products the marketing strategy should be evolved to meet intense competition. Electric calculators

APPLICATION OF PRODUCT LIFE-CYCLE THEORY TO MARKETING STRATEGIES

GROWTH STAGE

As the product enters the growth stage an industrial marketer should focus
the marketing strategy on three key areas: i. Improve product design to offer more benefits or product features to cover

wider segments of the market

ii. Improve distribution so that product availability to customers is strong

iii. Reduce the price as increased volume of production lowers the cost.

Ex LCD projectors price were reduced to less than 1,00,000. due to

increase in sales vol. If these strategies are ignored by an industrial marketer, competitors are encouraged to enter the market because of weak availability of product and good profitability due to high prices.

APPLICATION OF PRODUCT LIFE-CYCLE THEORY TO MARKETING STRATEGIES

MATURITY STAGE As the products enters the maturity stage, the number of competitors entering the market increase resulting in the decline in the growth of profits. The marketing strategy when a product is in maturity/saturation stage should be: i. Enter new markets ( from domestic market to exports) ii. Keep the existing customers satisfied iii. Cut marketing, production and other costs to maintain profit margins. Ex : ISO 9000 certification for quality. SAP v/s Sybase

APPLICATION OF PRODUCT LIFE-CYCLE THEORY TO MARKETING STRATEGIES

DECLINE STAGE In this stage, price competition is more severe, and concurrently the sales and profits decline. The strategy adopted by an industrial marketer is to either withdraw the product from the market or develop a substitute product for replacement or reduce marketing and other expenses substantially to make some profits. For industrial products, the decline tends to proceed rapidly since new technologies make established products obsolete. Ex, fiber optic telecom cables replacing jelly filled cables. Nissan & Renault

LOCATING INDUSTRIAL PRODUCTS IN THEIR LIFECYCLE

The product life cycles are not caused by time but depends on a number of factors like industry profits, rate of change in industry sales growth and the information about competitors. The steps involved in locating a product in its life are as follows: i. Develop a trend analysis for the past three to five years based on information to be collected for an industrial firm for a product, on quantity and value of sales, profits as a percentage of sales, market share, number of competitors and prices. ii. Analyse competitors market share, product performance, new product introduction, diversification or expansion plans. iii. Estimate and project sales and profits of the products over the next three to five years. iv. From the above analysis, fix the products position on its life cycle curve.

DEVELOPING PRODUCT STRATEGIES FOR EXISTING PRODUCTS

The various steps involved are: i. Evaluate the performance of all the existing products or product lines by using product evaluation matrix. ii. By using perceptual mapping technique, examine the relative strengths and weaknesses of the companys products in comparison to competitors products. iii. Based on the above analysis, decide the product strategies for the existing products, that is, which products should be continued, which products should be modified, which products/product lines should be dropped, and which new product items/product lines are to be added.

1. PRODUCT EVALUATION MATRIX

Company sales profitability Industry Sales Market Share Dominant Growth Average Marginal Dominant Average Marginal Dominant Average Marginal Dominant

DECLINE

STABLE
Below Target Above Target Target

GROWTH
Below Target Above Target Target

Below Target Above Target Target

Stable

Decline

2. PERCEPTUAL MAPPING TECHNIQUE

Perceptual mapping generates three important types of information that are highly useful in developing marketing strategy: i. The position of competing brands relative to one another. ii. The position of brands, or product options , with respect to their attributes, and iii. The position of product attributes compared to each other.

3. DECIDING PRODUCT STRATEGIES

Based on the two techniques- product evaluation matrix and perceptual mapping, the industrial marketer can now decide on one of the strategy options mentioned below: 1. 2. 3. 4. Maintain the product and its marketing strategy. Modify the product and/or change the marketing strategy. Eliminate the product/product line. Add new products/product lines. It is important to identify the causes of unsatisfactory product performance. The quantitative performance parameters such as sales, market share and profitability cannot indicate the causes of poor product performance.

NEW PRODUCT DEVELOPMENT

CLASSIFICATION OF NEW PRODUCTS a) Products that are innovative and new to the world. b) Products that are new to the company, but not new to the market. c) Revisions or improvements to the existing products in the existing markets. d) Addition to the existing product lines with additional markets e) Re-positioning existing products to the new market segments f) Products with substantial cost reductions without reduction in performance

NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION IDEA SCREENING CONCEPT DEVELOPMENT & TESTING

BUSINESS ANALYSIS
PRODUCT DEVELOPMENT MARKET TESTING COMMERCIALISATION

INNOVATION, COMPETITIVENESS AND TECHNOLOGY

Innovation implies not only creating new products, but also introducing new methods to improve any operations. Direct relationship exists between innovation and competitiveness. A company can increase or maintain a degree of differentiation from competitors through continuous innovation. Technological innovations create new products and services that are new to both the company and the market. Digital revolution has placed a new set of capabilities with companies as well as consumers.
Company capabilities Consumer capabilities

BREAK THROUGH AND INCREMENTAL INNOVATIONS

Breakthrough innovations, also called radical innovations, are big innovations that require intensive technology and/or applications development to create a new market.

HIGH-TECH MARKETING
Hi-tech includes a wide range of industries such as telecommunications, computers, software, biotech and consumer electronics. DIFFERENTIATING CHARACTERISTICS OF HIGH-TECH MARKETING High technological uncertainties High market uncertainty

HIGH TECHNOLOGICAL UNCERTAINTY

Will the product function as promised? SOURCES OF HIGH TECHNOLOGICAL UNCERTAINTIES Will the promised delivery be met? Will the supplier give high quality service? Will there be a risk of obsolescence? Will there be any side effects of the new product/service?

HIGH MARKET UNCERTAINTY

Which are the customer needs that new technology can meet?
SOURCES OF HIGH MARKET UNCERTAINTY How will needs change in future? Will the market accept technical standards? How fast will the innovation spread? What is the size of the potential market?

HIGH-TECH MARKETING
OTHER DIFFERENTIATING CHARACTERISTICS OF HIGHTECH MARKETING

High competitive volatility Short life of high-tech products High development cost

IMPACT OF TECHNOLOGY ADOPTION LIFE CYCLE

34%

34%

13.5% 2.5%

16%

TIME OF ADOPTION OF INNOVATIONS

UNIQUE NATURE OF HIGH TECH MARKETING STRATEGY

1. Target a niche market

2.
3. 4. 5. 6. 7.

Plan whole product properties

Develop partnerships Unique positioning strategy Integrated marketing communication strategy Multi-channel distribution strategy Skimming pricing strategy

MARKETING OF BUSINESS SERVICE

The services in industrial business markets can be classified into two groups: Product supported by services Pure services
Personal Computers Hotels for conferences Goods Transportation

a. b.

Materials & Components Pure Tangible product

Legal

Major Product with minor Service

Equal Parts Of Product & Service

Major Service With Minor product

Pure Intangible service

MARKETING STRATEGIES FOR BUSINESS SERVICES FIRMS

Company

Internal Marketing

External Marketing

Employees

Interactive Marketing

Customers

Three Types Of Marketing Business Service Firms

MARKETING STRATEGIES FOR BUSINESS SERVICES FIRMS

Segmenting and industrial target segments Service differentiation Service packages Service pricing Service promotion

Service distribution

PRODUCT AND SERVICE QUALITY

Meaning of Quality

Quality is a totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
DIMENSIONS USED FOR MEASURING SERVICE QUALITY
SERVICE DIMENSION Reliability Tangibles BRIEF DESCRIPTION Satisfying a promise Appearance of physical facilities and personnel Willingness & ability to provide prompt service Trust and confidence Treating customers as individuals EXAMPLES Promise delivery schedule met Brochures, experienced and qualified service providers Quick response to customers complaints Capable staff Adapting to the needs of individual customer

Responsiveness Assurance Empathy