PRODUCT PLANNING

&
DEVELOPMENT

What is Product?

A product is anything that can be offered to a market that might satisfy a

want or need

It is more than physical products; includes services, places, persons, and

ideas

To create successful new products, the company must: understand its

customers, markets and competitors

develop products that deliver superior value to customers.

Products go through life cycles

Product planning-involves making decisions about the production and

sale of a businesss products.

Definition of a product

Product could be defined as

Anyhting that can be offered to a market
for attention, acquisition, use or
consumption that might satisfy a want or
a need- Phillip Kotler.

Why do Products fail?

Doesnt match current company objectives

Overestimating market size
Poor marketing research
Obsolete
Lost its appeal
No longer profitable
Conflicts with other products in the same product line
Design problems
Excessive development costs
Incorrectly positioned, priced, or advertised
Competitive reaction

Product of Life cycle

1.
2.
3.
4.
5.

Development stage
Introductory stage
Growth stage
Maturity stage
Declining stage

PLC

Dev

Intro

Growth

Maturity

Decline
Sales

S
a
l
e
s

Profit

losse
s
Time

Product Development
Process
Product
Launch
Test
Marketing
Prototype
Development
Concept
Testing
Market research
and
Opportunity scan

Planning for New Products

Long term survival of many firms in the

competitive world depends on launching
new products successfully.
Planning for new products is an essential
and demanding strategic activity.
There could be many types of new
products

Types of
new
products
Innovative
Products

Replacem
ent
products

Imitative
Products

Innovative Products

These products are new to the world and new to the

company.
They are truly new to the customers and they provide
completely different alternatives to existing products
Eg.
Products based on Nano Technology
Computers

Replacement products

Although these products are new to customers

or even to the company, they are essentially
improvements or redesigns of existing
products
Digital phones replaced the analogues
Disposable racers replaced the old blade base
racers
Shaving foam and gels have replaced the
shaving soaps

Imitative Products
These products are new to the company and
not new to the market
Many products come in this form to the
market
One or few companies may come out with an
innovative or replacemnet products but many
will copy the technology and come out with
simillar products. They are called mee- too
products
Eg. After Mercedes Benze> Ford> GM>
Toyota> Nissan

Reasons for introducing new

products

To suit the changes in customers needs

To adopt new technological advances and
avoid obsolence
To match competition
Product Life Cycle Concept
To bring down the cost

Customer need analysis

. Information is required as to the

expectation of the customer and to what
extent the existing products meet that
expectation. Then the gap between the
two could be observed
Expectation

Level met by the product

SEGMENTATION,
TARGETING & POSITIONING

http://www.manishparihar.co.in/

Overview: Segmentation, Targeting & Positioning

Why do this?

Market Segmentation Principles

Segmentation Variables
Geographic
Demographic
Psychographic
Behavioral
Other (anything!)
No single best way to segment a market.
Often best to combine variables and identify
smaller, better-defined target groups.

Geographic Segmentation

Divide markets into different geographic

units.

Examples:
World Region or Country: North America, Western
Europe, European Union, Pacific Rim, Mexico, etc.
Country Region: Pacific, Mountain, East Coast, etc.
City or Metro Size: New York, San Francisco
Population Density: rural, suburban, urban
Climate: northern, southern, tropical, semitropical

Demographic
Segmentation

Use Differences in:

age, gender, family size, family life cycle,

income, occupation, education, race, and
religion

Most frequently used segmentation variable

Ease of measurement and high availability.

Psychographic
Segmentation
Psychographic
segmentation divides a
market into different
groups based on social
class, lifestyle, or
personality
characteristics.
People in the same demographic
classification
often have very different lifestyles and

Behavioral Segmentation

Occasion

Loyalty Status

Special promotions
& labels for
holidays.
Special products
for special
occasions.

Benefits Sought

Different segments
desire different
benefits from the
same products.

Nonusers, exusers, potential

users, first-time
users, regular
users.

Usage Rate

Light, medium,
heavy.

Evaluating Market
Segments

Segment Size and Growth

Potential

Sales, profitability and growth rates

Segment Structural
Attractiveness
Competition, substitute products,
buyers & supplier power, new
entrants (Porters Five Forces)

Company Objectives and

Resources
Core competencies
What business do we want to be
in?

Targeting Segments - Overview

Positioning
The place a product occupies in consumers
minds relative to competing products.

Positioning Example

eBays positioning:
No matter what it
is, you can find it
on eBay!

Positioning Strategy

Competitive advantages
Points of Parity
Points of Difference => Differentiation
Positioning results from differentiation and
competitive advantages.
Positioning may change over time.

Sources of Differentiation

Product Design
Quality
Additional Services
Image
People (Staff)
Price
Other

6-28

Choosing the Right Competitive

Advantages

The best competitive advantages are

Important
Distinctive
Superior
Communicable
Pre-emptive
Affordable (to company and
consumer)
Profitable

Moral: Avoid meaningless differentiation.

Channel Management
The process by which a producer or supplier
directs marketing activity by involving
and motivating parties comprising its channel of
distribution.
Channel management is a term that refers to the way that
a business or supplier of products uses various marketing
techniques and sales strategies to reach the widest possible
customer base. The channels are all of the various outlets
by which the product is marketed and sold to customers

Channel Management
Definition

an organized network or system

of agencies and institutions
performing activities
to link producers with users

Channel Management

Define training needs

Define promotion needs
Develop timing requirements and budget
Partner evaluation

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Channel Concept

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Develop a channel
communication plan #1

Awareness: active and good partner in

the security business

Interest: knowledge and motivating

Analyst briefing, web site, events, advertising,

e-Marketing
Product collateral, Slide presentation,
Demonstration

Preference: competitively strong

channel programs - attractive incentives

Marketing toolkits, Whitepapers

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Develop a channel
communication plan #2

Selection: good choice selecting us

Partner agreements, Marketing Development

Funds

Loyalty: deliver on the promise

Sales training

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Channel Management

Determine channel performance criteria

Cost per Transaction

Total Channel Expense/Number of Transactions

Channel Profitability Ratio

Total Expense/Total Revenue

Channel Capacity
Channel Selling Unit Capacity * Number of Units

Channel Productivity
Channel Selling Unit Productivity * Number of

Units * Rate per Unit

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Channel activities management

Prospect profiles
Qualification

Pre-sales
Post-sales

Marketi
ng

Sales

Suppor
t&

Service
s

Technical support
Issue
management

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Training
management

Channel Management
Focus
Goals

Policies

New accounts, order management

Products

Acquisition and retention

Up-sell, cross-sell

Sales and Marketing

Support partners needs

Stefanos Chrysanthakopoulos (schrysan@gmail.com)

Advertisement Definition

Advertising is a means of communication with

the users of a product or service. Advertisements
are messages paid for by those who send them
and are intended to inform or influence people
who receive them..

Scope of Advertising

Increase in ad functions
Ad for attracting and supporting
middlemen
Increase in commercial ads
Growth in media
Increase in industrialization
Increase in level of competition
Increase in readership and viewership

Objectives
1.

2.

3.

4.

5.

Describe the nature and types of

advertising.
Explain the major steps in developing an
advertising campaign.
Identify who is responsible for developing
advertising campaigns.
Recognize the tools used in public
relations.
Understand how public relations is used
and evaluated.

OBJECTIVESOFADVERTISING

InformativeadvertisingPromotionthatseekstodevelop
initialdemandforagood,service,organization,person,
place,idea,orcause.

PersuasiveadvertisingPromotionthatattemptsto
increasedemandforanexistinggood,service,organization,
person,place,idea,orcause.

ReminderadvertisingAdvertisingthatreinforces
previouspromotionalactivitybykeepingthenameofa
good,service,organization,person,place,idea,orcause
beforethepublic.

Advertiserscoordinateadvertisingobjectiveswiththe
productsstageintheproductlifecycle.

Functions of advertising

Primary functions
Secondary functions
Social functions

Primary functions

Creates demand
Announces for new product or service
Promotes new uses of the product
Informs about changes in product, price
placement
Helps in the usefulness of the product and
method of using it.
Announces special offers and schemes
Reminds users
Create brand preference
Helps to neutralize competitors advertising

Secondary functions

Helps to boost the morale of salesmen

and employees
Supports salesmen
Reaches customers left by salesmen
Helps to procure better employees
Announces location of dealers and
stockists and supports them

Social functions

Helps to improve standard of living

Crete awareness among rural places
Creates awareness about dangerous
diseases
Helps to circulate important government
notifications
Other social functions

SALES PROMOTION

What
What is
is Sales
Sales Promotion?
Promotion?

Masscommunicationtechniquethatoffersshorttermincentives
toencouragepurchaseorsalesofaproductorservice.

Marketingactivitiesotherthanpersonalselling,
advertising,andpublicitythatenhanceconsumer
purchasinganddealereffectiveness.

Goalisspeedingthesalesprocessandincreasingsales
volume.

Producebestresultswhencombinedwithotherother
marketingactivities,suchasadvertising.

Cannotovercomepoorbrandimages,product
deficiencies,orpoortrainingforsalespeople.

DEFINITION

Sales promotion includes incentiveoffering and interest-creating activities

which are generally short-term marketing
events other than advertising, personal
selling, publicity and direct marketing.
The purpose of sales promotion is to
stimulate, motivate and influence the
purchase andother desired behavioral
responses of the firms customers.

Scope of sales promotion

Sales
Sales promotion
promotion can
can be
be targeted
targeted at
at

Retailers
Retailers

Trade-oriented
Trade-oriented
sales
sales promotion
promotion

Consumers
Consumers

Consumer-oriented
Consumer-oriented
sales
sales promotion
promotion

Consumer-oriented sales promotion

Identify
Identify target
target audiences
audiences
Determine
Determine sales
sales promotion
promotion objectives
objectives
Obtain
Obtain trial
trial and
and repurchase
repurchase
Increase
Increase consumption
consumption
Target
Target aa specific
specific market
market segment
segment
Defend
Defend current
current customers
customers
Enhance
Enhance IMC
IMC and
and build
build brand
brand equity
equity

Set
Set measurable
measurable goals
goals

Trade-oriented sales promotion

Obtain
Obtain
distribution
distribution of
of
new
new products
products

Maintain
Maintain trade
trade
support
support for
for
existing
existing products
products

Trade
Trade
Oriented
Oriented
Build
Build retail
retail
inventories
inventories

Encourage
Encourage
retailers
retailers to
to
display
display
existing
existing brands
brands

The Role of Sales

Promotion

Sales Promotion:

Consists of media and non-media marketing

communications employed for a
predetermined, limited time to stimulate trial,
increase consumer demand, or improve
product availability.

Consumer Sales
Promotion:

Directed at Consumers

Trade Sales
Promotion:

Directed at Resellers

Consumer
Consumer Sales
Sales Promotion
Promotion
Objectives of Consumer Sales
Promotion:

Stimulate trial

Increase consumer inventory

and consumption

Encourage repurchase

Neutralize competitors

Increase sales of complementary

products

Stimulate impulse purchasing

Allow flexible pricing

Consumer
Consumer Sales
Sales Promotion
Promotion
Techniques
Techniques

Price Deals
Deals
Price
Coupons
Coupons
Rebates
Rebates
Cross-Promotions
Cross-Promotions
Contests,
Contests,
Sweepstakes,
Sweepstakes,
Games
Games
Premiums
Premiums
Sampling
Sampling
Advertising Specialties
Specialties
Advertising

TECHNIQUES OF SALES
PROMOTION
Sales

promotions can be directed to consumers, sales

employees, or other retailers. Sales and coupons are some of the
most common sales promotion tactics to stimulate interest and
encourage consumers to purchase products. Reward programs
focus on customer retention and repeat purchases, awarding
customers points, miles, or credits for purchases and future
redemptions. Besides price reduction and loyalty programs,
point-of-purchase displays are a common tactic used
by brands to prompt "impulse" customer purchases. For
example, chewing gum and candy are often placed next to the
register to increase sales of those products.

Other promotional tools include coupon booklets,

mobile couponing, on-shelf couponing, as well as
product signage and packaging, which are
strategically placed to encourage immediate
customer sales. For new marketing initiatives,
brands implement retail "mechanics" such as "Buy
One, Get One Free" Or "Three for Two" promotions
to encourage consumers to buy new market releases.

Rebate:
Under it in order to clear the excess
stock, products are offered at some
reduced price. For example, giving a
rebate by a car manufacturer to the tune
of 12,000/- for a limited period of time.

Discount:
Under this method, the customers are offered
products on less than the listed price. For example,
giving a discount of 30% on the sale of Liberty Shoes.
Similarly giving a discount of 50% + 40% by the
KOUTONS.
Refunds:
Under this method, some part of the price of an
article is refunded to the customer on showing proof of
purchase. For example, refunding an amount of 5/- on
showing the empty packet of the product priced 100/-.

Product Combination:
Under this method, along with the
main product some other product is offered to the
customer as a gift. The following are some of the
examples:
Quantity Gift:
Under this method, some extra quantity of the
main product is passed on as a gift to the customers. For
example, 25% extra toothpaste in a packet of 200 gm
tooth paste. Similarly, a free gift of one RICH LOOK
shirt on the purchase of two shirts.

Instant Draw and Assigned Gift:

Under this
method, a customer is asked to scratch a card on the
purchase of a product and the name of the product is
inscribed thereupon which is immediately offered to
the customer as a gift. For example, on buying a car
when the card is scratched such gifts are offered
TV, Refrigerator, Computer, Mixer, Dinner Set,
Wristwatch, T-shirt, Iron Press, etc.

Lucky Draw:
Under this method, the customers of a
particular product are offered gifts on a fixed date
and the winners are decided by the draw of lots.
While purchasing the product, the customers are
given a coupon with a specific number printed on it.
On the basis of this number alone the buyer claims
to have won the gift. For example, Buy a bathing
soap and get a gold coin offer can be used under
this method.

Usable Benefits:
Under this method, coupons are distributed among
the consumers on behalf of the producer. Coupon is a kind of
certificate telling that the product mentioned therein can be
obtained at special discount.
It means that if a customer has a coupon of some product he will
get the discount mentioned therein whenever he buys it.
Possession of a coupon motivates the consumer to buy the
product, even when he has no need of it.
Such coupons are published in newspapers and magazines. Some
companies distribute coupons among its shareholders. Sellers
collect the coupons from the customers and get the payment from
the company that issues the same.

Full Finance @ 0%:

Under this method, the
product is sold and money received in
installment at 0% rate of interest. The
seller determines the number of
installments in which the price of the
product will be recovered from the
customer. No interest is charged on these
installments.

Samples or Sampling:
Under this method, the producer
distributes free samples of his product among the
consumers. Sales representatives distribute these
samples from door-to-door.
This method is used mostly in case of products of
daily-use, e.g., Washing Powder, Tea, Toothpaste,
etc. Thus, the consumers willy-nilly make use of
free sample. If it satisfies them, they buy it and in
this way sales are increased.

Contests:
Some producers organize contests with a view
to popularizing their products. Consumers taking part in
the contest are asked to answer some very simple
questions on a form and forward the same to the
company. The blank form is made available to that
consumer who buys the product first.
Result is declared on the basis of all the forms received
by a particular date. Attractive prizes are given to the
winners of the contest. Such contests can be organized
in different ways.

OBJECTIVES OF SALES
PROMOTION

The main objective of sales promotion is to bring

about a change in the demand pattern of products and
services. Basically, sales promotion has three specific
objectives. First, it is meant to provide important
marketing information to the potential buyers.
The second objective is to convince and influence the
potential buyers through persuasive measures.
Thirdly, sales promotion is meant to act as a powerful
tool of competition. The specific objectives of sales
promotion are as follows:

MAIN OBJECTIVES

To introduce new products or services

To attract new customers
To induce existing customers to buy more
Helps the firm to remain competitive
To increase sales in off-seasons
To add to the stock of the dealers
Creating Interest
Building Product Awareness
Providing Information
Stimulating Demand
Reinforcing the Brand

To introduce new products or

services

Sales promotion is often used to motivate

prospective consumers to try new products and
services. Dealers are also induced to introduce new
products and services in the market. Usually, free
samples are provided through dealers during such
introduction. Similarly, discounts in cash or goods
may also be offered to dealers to stock new products
or deal with new services. Free samples, trade
discounts, cash discounts are basically sales
promotion measures.

To attract new customers

Sales promotion measures also play an

important role in attracting new
customers for an organization. Usually,
new customers are those persons that
are won away from other firms. Samples,
gifts, prizes, etc. are used to encourage
consumers to try a new brand or shift
their patronage to new dealers.

To induce existing customers to

buy more

Sales promotion devices are most often used to

induce the existing customers of a firm to buy more.
Product development, offering three products at the
cost of two, discount coupons, are some of the sales
promotion devices used by firms to motivate the
existing buyers to buy more of a specific product.

Helps the firm to remain

competitive

Most of the companies undertake sales

promotion activities in order to remain in the
competitive market. Therefore, in the modern
competitive world no firm can escape the
responsibility of undertaking sales promotion
activities.

To increase sales in off-seasons

Many products like air-coolers, fans, refrigerators,

air-conditioners, cold drinks, room heaters, etc. have
seasonal demand. Manufacturers and dealers dealing
with such type of goods make every effort to
maintain a stable demand throughout the year.
In other words, firms try to encourage the purchase
of such goods in off-seasons also. That is the main
reason behind discounts and off-season price
reductions of such items in the market during slack
seasons.

To add to the stock of the

dealers

Dealers like wholesalers and retailers usually deal

with a variety of goods. Their selling activity
becomes easier when the manufacturer supplements
their efforts by sales promotion measures. When a
product or service is well supported by sales
promotion, dealers are automatically induced to
have more of such items.

Creating Interest

Marketers find that sales promotions are very effective

in creating interest in a product. In fact, creating
interest is often considered the most important use of
sales promotion. In the retail industry an appealing
sales promotions can significantly increase customer
traffic to retail outlets. Internet marketers can use
similar approaches to bolster the number of website
visitors. Another important way to create interest is to
move customers to experience a product. Several sales
promotion techniques offer the opportunity for
customers to try products for free or at low cost.

Building Product
Awareness

Several sales promotion techniques are highly effective

in exposing customers to products for the first time and
can serve as key promotional components in the early
stages of new product introduction. Additionally, as
part of the effort to build product awareness, several
sales promotion techniques possess the added
advantage of capturing customer information at the
time of exposure to the promotion. In this way sales
promotion can act as an effective customer information
gathering tool (i.e., sales lead generation), which can
then be used as part of follow-up marketing efforts.

Providing Information

Generally sales promotion techniques are designed

to move customers to some action and are rarely
simply informational in nature. However, some
sales promotions do offer customers access to
product information. For instance, a promotion may
allow customers to try a fee-based online service for
free for several days. This free access may include
receiving product information via email.

Stimulating Demand

Next to building initial product awareness,

the most important use of sales promotion is
to build demand by convincing customers to
make a purchase. Special promotions,
especially those that lower the cost of
ownership to the customer (e.g., price
reduction), can be employed to stimulate
sales.

Reinforcing the Brand

Once customers have made a purchase sales

promotion can be used to both encourage additional
purchasing and also as a reward for purchase loyalty
(see loyalty programs below). Many companies,
including airlines and retail stores, reward good or
preferred customers with special promotions, such
as email special deals and surprise price
reductions at the cash register.

Pricing

A firm must set a price for the first time

when
It develops a new product
It introduces its regular product into a
new distribution channel or geographical
area
It enters bids on new contract work ( as
in Industrial Sale )

81

Pricing
A company must set its price in relation to
the value delivered and perceived by the
customer

82

Pricing

Higher
price

Lower
perceive
d value

Compan
y misses
potentia
l profits

83

Pricing

Lower price

Lower
perceived
value

Company
fails to
harvest
potential
profits

84

Price = Cost + Profit

85

Pricing policy (Factors )

Selecting the pricing objective

Determining demand
Estimating costs
Analyzing competitors costs, prices,
offers
Selecting a pricing method
Selecting the final price

86

The pricing objective

The company first decides where it wants
to position its market offering. The
objective could be : Survival
Maximize current profit
Maximize market share
Maximize market skimming
Product - quality leadership

87

Pricing methods

Markup pricing
Target return pricing
Perceived value pricing
Value pricing
Going rate pricing
Sealed bid pricing

88

Markupcan be expressed as a fixed

amount or as a percentage of the total
cost or sellingprice. Retailmarkupis
commonly calculated as the difference
between wholesalepriceand
retailprice, as a percentage of
wholesale. Other methods are also used.

Targetrate ofreturn pricingis

apricingmethod used almost
exclusively by market leaders or
monopolists. You start with a rate of
returnobjective, like 5% of invested
capital, or 10% of sales revenue. Then
you arrange yourpricestructure so as to
achieve thesetarget rates ofreturn.

Valuebasedpricing(alsovalueoptimizedpric
ing) is apricing strategy which
setspricesprimarily, but not exclusively,
on thevalue, perceivedor estimated, to
the customer rather than on the cost of
the product or historicalprices.

Going rate pricingis a common

practice with homogeneous products with
very little variation from one producer to
another, such as aluminum or steel.

Asealed-bidauction is a type of auction

process in which all bidders
simultaneously submitsealed bidsto
the auctioneer, so that no bidder knows
how much the other auction participants
havebid. The highest bidder is usually
declared the winner of
thebiddingprocess.