PART 3 LESSON 4

MANAGING PRODUCTS AND SERVICES

Lesson4
Managing Products and Services
Product Management
It manages the product development and marketing throughout the product life cycle of the
organization. It carefully and continually monitors the four Ps of the marketing mix (Product,
Place, Price and Promotion). It maximizes the sales revenue, market share and profit growth.
Product Planning and product marketing are two different aspects but some organization
perceives it as one and henceforth it is named as Product Management.
Product Planning identifies the market needs in producing a product
Product marketing is delivering the product to the customers through proper distribution
channel, effective sales promotion and advertisement campaign.
Product Attributes
Attributes refer to an object characteristics or quality. It helps to identify a particular object by its
inherent characteristics. Product Attributes refers to the properties/characteristics of the product. It
relates to the cost, size, and color, tangible and intangible features of the product.
Tangible Product Attributes refer to the physical color, packaging etc.
Intangible Product Attributes refer to the style, quality, strength etc.
Brand Attributes
They are the functional associations assigned to a brand. Brand Attributes have different relevance
to different segments. They are the best identification to a brand.
Example:
Effective advertisement and promotional strategies differentiating form that of its competitors.
Differentiation approach to customer in respect of Brand identification
Branding
Brand
It is a collection of symbols, associations to a product or service. It is a trademark or a distinctive
identity to the product. Brand creates an image in the minds of the customer about the product.
Companys profitability can be enhanced if the brand has occupied a lasting position in the minds
of the customer. Strong brand image brings in potential and loyal customers to the company.
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Brand helps to
Deliver the message clearly
Maintain loyalty with customers
Increases credibility of the company
Brings in better and future prospects
Branding:
It creates a differentiated presence about the product in the minds of the consumer by assigning to
a product its identity through trademark or logo or name. Branding develops a bond with the
customers. They are convinced with the product as branding points out the differentiated feature
or benefit about it form that of the competitors.
Branding helps in
Binding relationship with the customer. Attractive branding retains customers
through powerful differentiation and positioning.
Strategy to selected group of customers. Eg. Mercedes Benz branded specifically
to high class people.
It focuses on emotional and visual elements which easily attracts customers.
It delivers the brand through powerful distributors and strong communication
channels.
Brand Equity
It is the value added to the brand based on consumer perception and recognition about the product
or service. It is created through marketing campaigns and effective promotion. Brand equity is a
unique and intangible value added to the product.
Example: Coco Cola brand has created an intangible value endowed in the minds of the
customers.
Brand Equity can be measured in three perspectives:
+ Functional Brand Equity
+ Brand Extensions
+ Customer Based Brand Equity
Functional Brand Equity:
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Consumers may be willing to pay a premium amount to a branded product when compared with
an unbranded one. Therefore consumers value brand as an important perspective. Functional
brand equity is measured with respect to promotional and advertising costs.
Brand Extensions:
Manufactures of the product goes in for producing related product to a powerful and successful
brand. Strength of the parent brand has a greater reflection in the related products of the same
brand.
Example: Coco Cola manufactures mineral water Kinley
Customer based Brand Equity:
It is when customers have strong knowledge about the brand through effective advertising and
promotion. Customer based brand equity is positive and negative. Positive brand equity occurs
when customers react favorably to the product in the market. Negative brand equity occurs when
they are less favorable to the product branded in the market. It leads to customer brand loyalty and
good perceived quality about the product.
Brand equity helps the marketing researcher to develop good knowledge about the brand in the
minds of the consumer, as brand is the most valuable assets of the company.
Branding Strategies
It is the development of new brand elements to the existing or new products or services. Branding
helps to make the product stand unique from that of competitors. Strong and effective branding
strategy brings in loyal customers. Successful branding enables brand equity. Brand equity is the
values added to the product by making the customer pay a premium amount to the branded
product.
When developing a branding strategy the company should
1. Determine its Competitive Positioning Strategy. Competitive Positioning Strategy is
differentiating the product form the market offering. It mainly concentrates on
differentiation and positioning. These strategies should be properly adopted in order to
differentiate it form its competitors.
2. Features and benefits of the product should be listed and the benefits pertaining to
particular segment should be scrutinized.
3. The brand should be designed with attractive color, fonts, logos and promotional message
pertaining to segments
Proper branding strategies create effective communication about the product to prospect
customers.
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Types of Brand:
1. Manufacturer Brand:
The brand name is that of the manufactures and not a private brand name. Customers may be
attracted towards the manufacturer brand name. It is owned by the producer. Eg. Clothes
Merchants
2. Own Label Brands
Brand may be owned by retailer and not a manufacturer. They produce goods to the retailer on a
contract basis under the brand name of the retailer. It is also called as private brands.
Example: Nike does not product their goods. They go to different factory outlets to manufactures
the products under their brand name.
3. Corporate Branding:
Companys name may be used as the brand name. This helps the customer to accept new products
introduced by the corporate under the company brand name. It attempts to greater leverage in
respect of brand recognition. It maintains lasting potential and loyal customers who are much
familiar about the company product.
Example: Pepsi
4. Individual Branding:
It is the strategy of giving each product a different brand name under the same product family.
Uniqueness of the product is identified through individual branding thereby facilitating greater
positioning process.
Example: Unilever products product goods under different brand names such as Dove, Rin, Surf,
Axe, Lux etc.
5. Family Branding:
Single brand name is used for all products under the same product family. New product
acceptance is easily possible without expecting customer preference as it is produced under the
same brand name. It induces the producer to produce goods with higher quality equal to the goods
produced earlier. It brings in new customers and they turn out to be potential customers in the
long run.
Example: Amul milk, butter, milk powder, chocolates and ice creams.
6. Premium Brand:
Brand demand a premium price for quality. Cost is more than the normal cost category and it is
due to its perceived high quality and price
Example: Apple phones and computers.
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7. Functional Brand:
Brand mainly targets the functional attributes and benefits about the product.
Example: Olay Cream targets mainly as an anti aging element.
Ariel Washing Powder superior performance in washing
8. Symbolic Brand:
Brand targets on the symbolic and emotional aspects of the products.
Example: Insurance Companies attract the emotional aspects of the customers through various
policies for children.
Product Line and Product Mix Decisions
Product Line:
They are the group of product produced which satisfies similar needs. Products are priced at
different ranges. It is related but vary in size, color, features and benefits.
Example: Car manufacturer producing cars according to various segments
Camera manufacturer producing different types of cameras with different price ranges respect to
features.
Product Line Length
It is the number of products produced in the same product line. Companies seeking high market
share and growth extend their product line by producing related products. Companies seeking
high profitability produce selective products. Product line induces up selling making customers
to move upward in their purchases. Example: Car manufactures produce cars from low range to
highest range. It also induces cross selling. Example: Harpic produces toilet cleaner along with
the brush. Product in then same product line can be lengthened by
Line filling and Line Stretching
Line Stretching:
It is the introduction of new products in the product line. Line stretching may be
Downward Stretching
Upward Stretching
Two Way Stretching
Downward Stretching:
Introducing low priced product in the same product line. It is done in order to attract the
competitors in the middle market from moving upward.
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Example: Tata launches Tata Nano in small car segment.
Upward Stretching:
Introducing high priced products in the same product line. Upward Stretching is adopted by
companies in order to have greater market growth and market share.
Example: General Motors launching Hummer Luxurious Car
Two Way Stretching
Introducing high price and low price products in the same product line.
Example: Tata Motors are in the two way stretching by launching Nano to lower segments and
Tata Safari to higher segments.
Line Filling:
Products of same price are added in the same product line. It is done in order to make the
competitors run away from the market. Excess production capacity and inventory are utilized to
produce more and more products.
Product Line Strategies
Strategy formulated for different products in the same product line. Products in different segment
are developed based on a strategic decision such as:
+ Strategy encompasses to have a long term focus in the product.
+ It encourages effective product development
+ Helps to concentrated on critical decisions
+ Products at different segments are clearly and effectively focused
+ It formulates clear plan for the releasing of products in the same product line based
on prioritization
+ Covers the primary market segments
Effective and efficient planning of the products encourages company to produce more and more
products in the same product category.
Product Mix:
It is the combination of the products and services offered by the organization. Product mix
consists of product line and individual products. Diversification of products is possible through
product mix by targeting various segments. Firms deal with multi products in case of product mix
and concentrate on upper, middle and lower level segments.
Example: Reliance Industries into Petrol, Mobile, Footwear and Vegetable Shops
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Product Mix Strategies
1. Positioning the Product:
Proper positioning strategies to be adopted considering the competitors, price, quality and the
target people.
2. Expanding the Product Mix
Line Extensions:
Producing products of related category in the same product line
Mix Extensions:
Producing related products under the same brand name
Example: Ariel producing soap and washing powder
Producing different products under different brand name
Example: ITC into Vivel Shampoo
Producing unrelated products under same brand name
Example: Reliance into Reliance Footwear
Producing related products under different brand name
Example: Procter & Gamble into Pantene Shampoo
3. Alteration of Existing Products:
Companies in order to attract customers they alter the existing products with new design, color
and package.
4. Contraction:
Eliminate the products form the product line which is unprofitable.
Product Line and Mix Extensions:
Product Line is producing related products in the same category with different price ranges.
Product Line decisions is considered by
1. Increasing the number of products in the product line
2. Attract customers by Line Stretching through Upward Stretching (producing high
priced products ), Downward Stretching (producing low priced products) and Two
Way Stretching (targeting both upper and middle segments by producing low and
high priced products.)
3. Producing more products in the same product line at same price so as to utilize the
excess capacity and inventory. It is done mainly to run away the competitors.
4. Adding or deleting products based on profitability of the products in the product
mix.
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5. Deciding upon the allocation of resources with respect to the marketing strategies.
Product Mix is combination of related and individual products offered by the organization.
It is the responsibility of the top management in taking decisions related to Product Mix.
They include:
1. Positioning and Repositioning:
Positioning the product in the minds of the consumers and repositioning the
existing product depending upon changing market environment.
2. Addition or deletion of new or existing products
3. Analyzing the effects of addition or deletion of products in the product mix.
4. Focusing on product extension.
5. Forecasting the contingent happening in the effects of the product mix.
Decision with respect of product line and mix relies purely with the product management. It is
based on the strategy formulation. Changes in the product also include changes in the target
market, advertising, distribution and promotional campaigns.
Product Development
It is bringing in new product/ service to the organization. Company can develop or add new
product. It can be done by acquisition or joint venture or by its own.
Company can either
Develop new product
Add new products to the existing line
Improve the existing products
Companies adopt new product development mostly by developing the existing products.
Environment that we work in require continuous innovation. In order to meet the requirement the
companies go in for producing new products or developing existing products. They
commercialize new products with the strategic formulation. It is used to increase their market
share.
Process in New Product Development
1. Idea Generation
2. Idea Screening
3. Concept Development and Testing
4. Business Analysis
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5. Product Development and Marketing Mix
6. Market Testing
7. Commercialization
1. Idea Generation:
The first step in the process of new product development is to generate ideas..Opportunity for new
product can be had by discovering the needs and wants of the unmet customers. Ideas can also be
got through existing customers because their tastes and preferences are not stable. There are
various sources through which ideas can be generated.
Ideas can be generated by interacting with customers, competitors and other top members from
the management. Customer Survey plays a major role in idea generation. Ideas can also be
generated from fact to face interview, discussions etc.
2. Idea Screening
The next step is Idea Screening. The generated ideas form various sources are sent to the idea
manager. Ideas are received by the idea committee. It drops the ideas that might be vague and
picks the ideas that are essential for the product development. There are times at which good ideas
are dropped and poor ideas are picked leading to a market failure by the company. It mainly
covers the target market, product competition, market size, growth and market share. Idea
committee review the ideas against certain criteria as
Value of the product
Whether the product is feasible to produce
Does it meet the customer need?
Will the customer be benefitted?
Will the product be profitable?
3. Concept Development and Testing
The product concept developed should have the detail such as
4How the customer will be benefitted from the product
4Consumers reaction to the product
4Positioning of brand to the customers
4Cost incurred to product he product
Based on the above criteria the concept may be developed. Once the concept is developed the
next it is tested
Testing can be done by presenting the ideas to few customers in the target segment and observing
their reaction.
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Concepts are presented to customers using customers. Virtual reality can be used to test the
product concepts. They use sensory programs to test the virtual reality.
4. Business Analysis
After the product concept is developed the management prepares the sales and cost analyzes to
determine whether it satisfies the companys objectives. Sales are estimated based on the number
of purchase by the customer. Sales estimation is on first time sales, repeat sales and regular sales.
Company estimates the cost and profit by having a thorough analysis with the R&D,
manufacturing, finance and sales department. Organization determines whether the product
developed fits into the overall mission and vision. Results can be obtained by having internal
research, market study, and customer survey and competitor analysis.
5. Product Development and Testing
Once the concept and ideas are passed through the business analysis the company directs the
research and development team of the organization to develop the product. Product models is first
produced and given to the customers. In concept testing the customer are tested only with the
product ideas but in product development testing they are tested with real products. The testing
can be Alpha and Beta testing. Alpha testing is the testing done within the organization. Beta
testing is testing done by delivering the product to the customers.
Testing can be done by giving samples to customers at retail stores or other distribution channels.
If the consumers react favorably towards the product it presumes the marketer to develop the
product. If the consumer reacts unfavorably then the marketer looks in for adjustments or
modifications to be done in the developed product
6. Market Testing
After the product is presented to the customer for testing the next step based on the results
obtained form product test is dressing up of the product with brand name, design, logo and
package. The product is then presented to the market and the retailers. They study the customer
perception and liking towards the product.
Market testing helps to gather information about buyers, retailer and dealers.. It may be of
Consumer Goods
Business Goods
Consumer Goods:
Consumers are tested in respect of satisfaction and repeat purchase. It is done by:
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o Sales Wave Research: Products are offered to the consumers before packaging
or labeling at free of cost for three to five times. Product tested depending upon
the repeat purchase the consumers make towards the free unlabelled product.
o Controlled Test Marketing: Organization engages few retail stores to display
the product for a fee. It takes control of a shelf in the retail stores through
displays, promotional campaigns etc. Customer attractiveness towards the
products is observed through electronic cameras.
o Test Markets: The product is sent to various places and delivered in the market
for test. Effective advertising and promotional campaign is adopted to promote
the product in such cities.
Business Goods
Alpha testing is undergone within the organization. Consumers observation and preferences is
observed through vendors. They test the product by introducing at trade shows thereby observing
the perception and interest of the buyers towards the product.
7. Commercialization:
Product is ready to be introduced in the market after undergoing alpha and beta testing. Marketer
should adopt a huge advertising strategy. Product should be introduced at right time, choosing the
perfect target segment and through effective distribution. Introduction of the product can be done
through detailed study of the elements in the marketing mix.
Product Life Cycle
Product Life Cycle is the
entire life of the product. It
passes
through
various
stages
Introducti
on
Growth
Matur
ity
D
ecline
Product Life Cycle
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When the product passes through various stages in the life cycle the marketing mix elements also
changes according to the dynamic environment and opportunities.
Introduction Stage
The product is newly developed and introduced in the market.
Introduction cost is high
Low sales volume
High advertisement and promotion costs
No profit
At this stage organization adopts skimming strategy by entering into the market with a high price
and lowering the price later.
Growth Stage
Newly introduced product slowly grows in the market. At this stage
Sales is high
Profit increases
Product Awareness is high
Cost reduction
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Market share is maximized
At this stage following strategies can be adopted
+ Increase the product quality
+ Identify new distribution channels
+ Entering new market segments
+ Lower price to attract new buyers
+ Expand the promotional campaign
Maturity Stage
Product creates a lasting image in the minds of the consumer. It denotes the product is at
maturity.
Sales is high
Market Saturation
Advertisement expenditure is reduced
Competition increases
Differentiation and diversification is essential
Strategies adopted at this stage are
+ Market Modification: Product can be expanded in the market by converting non
users to be customers to the product and entering new market segments.
+ Product Modification: Improve the product through its quality, package, design and
other additional features.
Decline Stage:
Once the product reaches its maturity level it slowly declines from its growth
Sales volume declines
Profit saturates
Customer shift to new products
Price declines
Strategies adopted may be
+ Increase the investment of the firm through diversification
+ Decrease the investment of the firm by dropping unprofitable segment
Marketing Strategies for Service Firms
Service is doing any act or performance to another person or third party with non physical
goods resulting in non ownership of service.
Service Marketing:
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It is the marketing of intangible goods. Service marketing includes 3 more Ps form the normal
marketing mix elements. They are
Product is the intangible service provided on a large scale.
Price is the amount customer pays for the service
Place is the location from where the goods or service can be produced or
consumed
Promotion is the communicable message consisting of product features/attributes
differentiable form its competitors
People include employees who deliver the service. Service employees should be
given adequate training to deliver the service to the customer. Service Companys
reputation is judged purely on the basis of the employers who deliver the service.
Physical Evidence: Tangible evidence for the delivery of the service. Example:
Restaurants, Textile Shops.
Procedure followed in delivering the service. It ensures service quality, flexible
market offering and better service at lower costs.
Characteristics of Service Marketing:
4Intangibility: Service cannot be seen or felt. Customers may not be able to see the
service provided to them therefore they seek best customer service quality.
4Inseparability: Service is produced and consumed at the same time. They are
inseparable.
4Perishability: It cannot be stored as in the case of inventory for physical goods. They
are consumed simultaneously.
4Heterogeneity: Service is unique. They are not similar. Service cannot be repeated to
customers. They are heterogeneous. Service persons are to be trained to provide
better and quality service.
4Lack of Ownership: Service cannot be owned as tangible goods. There is no transfer
of ownership with respect to service.
Service marketing analyzes the 7 Ps of the service marketing mix. It is more
complicated than managing products because measurement of service is more difficult
compared to products.
Strategies for Service Firms:
They are
1. Managing the Differentiation
2. Managing the Service Quality
3. Managing Productivity
1. Managing the Differentiation:
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Differentiation is any additional feature/benefit that differentiates the products from its
competitors. Service marketing offers primary service to the customers. It can go in for secondary
service by offering additional features along with the main service. It can be offered only after
considering customer credibility towards the additional feature or service. Delivery of the service
should be reliable and innovative. Image is to be created to make the service clearly
distinguishable from its competitors.
2. Managing the Service Quality
Service deals with intangible goods. Customers tend to be loyal to a particular service provider
purely based on the quality of service provided. Perceived service of the customer should meet the
expected service by the service provider. Unsuccessful service delivery happen
- When consumer expectations and management perception is different.
- Perceived service of the customers does not meet the expected service.
- Service quality expected does not go by the service delivery.
Therefore the service provided should meet the following determinants of service quality for
successful service delivery such as
4Reliability
4Assurance
4Empathy
4Responsiveness
3. Managing the Productivity
Productivity of the service can be improved by
Effective training to the service provider
Quality of the service can be improved
Service can be made more effective
Service can be made more productive by making customers access to the
service
Pricing Strategy
Pricing is one among the four Ps in the marketing mix. Pricing is the sum fixed in exchange for
any goods or service. Firms price their products keeping in mind the market, competition and the
market share analysis. Market demand and competition are the two major components involved in
the fixation of price.
Pricing Objective:
Companies choose the pricing objective based on their business and financial goals. The primary
objective is.
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Profit maximization: maximize the profit considering the costs and revenue. They
maximize the profit margin of the product.
Revenue maximization: Revenue is maximized through sales. Objective of revenue
maximization is related to the goals and growing strategy of the market share.
Profit Margin Maximization: The profit margin of per unit product is maximized.
Quantity Maximization: The number of units sold is maximized in order to decrease the
long term costs.
Quality Leadership: Objective is to position the product as a leader in quality.
Survival: Goal is to select the price that minimizes the cost and retains the product in the
market.
Status Quo: Maintain the prices in line with the competitors so as to avoid price war.
Partial Cost Recovery: Companies provide the product at a superior quality but at low
price. This is because the organization has various sources to generate income.
Factors affecting Pricing Decisions
Internal Factors: Markets have to consider the internal factors when setting the price. Internal
factors are the factors that can be controlled by the company and can be altered. They are
+ Marketing Objectives: Marketer sets the marketing decisions based on the overall
company objective. Price is influenced by the following company objectives:
Market Share: Pricing decisions in respect of share is for new and existing
products. For new products the company sets low price in the beginning in
order to gain market share. In case of existing products they retain the market
share.
Profit maximization: Marketer set the price for the product in order to
maximize the profit.
Market Share Leader: They lower the price of the product in order to become a
leader in the market share.
+ Marketing Strategy: Marketing mix considers price as one of the main marketing
element. It will be effective only when all the elements of the marketing mix work
together effectively. Price should be fixed considering the quality, competitors and
market share.
Cost is the important determinant in setting price. Marketer set price only after
considering all the costs associated in manufacturing the product. Consumer
normally pays for the product at a price higher than its manufacturing costs. It
covers both fixed and variable costs.
Fixed Costs: These are the cost that is not affected by changes in the
level of production.
Variable Costs: They are the cost that is directly related to the
changes in the volume of production and distribution of products.
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External Factors:
They are the factors which cannot be controlled and altered by the organization.
4 Market Demand and Elasticity: Marketer should determine the effects of
the price over the demand in the market. Changes in the price of the
product responsive to the changes in the demand are called as Elasticity of
Demand. It may be elastic, inelastic and unit elastic.
Elastic Demand: Changes in the price of the product have larger
proportionate changes in the demand. Increase in price lowers the revenue.
Inelastic demand: Changes the price of the product have a smaller
proportionate change in the demand. Increase in the price raises total revenue
Unitary Demand: Changes in the price of the product have an equal change
in the demand. There is no change in the revenue.
4 Distribution Channels and Customer Expectation: The channels through
which the marketer delivers the product should be properly selected. The
channel members do expect something which they receive from the
percentage of the final selling of the product. Customer expectations should
be met. They value the products much more than price.
4 Competitors Cost and Price: Marketer should consider the competitors
product price while setting the price.
4 Government Regulation: They set price ceilings while setting price.
Marketer should also consider other local regulations and tariffs while
determining the price.
Pricing Strategy should be evaluated considering
1. Identify the pricing strategy:
Marketer should first determine whether the product is priced based on the
following pricing methods:
Cost Based Pricing: The products are priced based on adding an amount if
profit percentage to the manufacturing or production costs. It covers all the
costs (including fixed and variable) in producing the product. Cost based
pricing determines the desired level of profit by
Cost + Profit Percentage = Selling Price]
Market Based Pricing: Prices are fixed based on the market and customer
analysis. It can be
4 Market Skimming: Entering the market by fixing high price at the
initial stage and then moving to a low price.
4 Market Penetration: In order to gain customer and huge market share
companies penetrate into the market with low price.
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4 Psychological Pricing: Setting prices based on the psychological impact
of the customer.
4 Discount Pricing: Price reduction offered to customer based on seasons.
Competition Based Pricing: Setting prices based on the pricing strategy
adopted by the competitors. Companies analyze the competitors products and
set price equal to or higher or lower compared to them
Demand Based Pricing: Pricing done based on the value the customer perceive
about the product and not on costs.
2. The marketer after identifying the pricing strategy evaluates it based on the customer
acceptance towards price, as whether it will increase the volume of sales.
3. The fixed price should be communicated to other employees in the organization.
Brainstorming session should be conducted to allow them to generate ideas on price
fixation.
After considering the above steps in pricing strategies the product enters into the market in
any one of the following determinants for price fixation.
Strategies for pricing are:
Price Skimming: They charge high price for the products when they enter the
market. Consumers to these types of pricing tend to pay more based on the value
of the products and services. It attracts new competitors to the product. Example:
Rolex Company with brand new watches at higher price.
Premium Pricing: Price charged usually high. They are mainly for luxurious
products and it has greater advantage. It creates an impression in the minds of the
consumer that high priced product have a greater value and reputation.
Penetration Pricing: Marketers enter into the market by charging a low price during
their entrants and then increase the price further based on the product demand and
movement in the market.
Loss Leader Pricing: It is priced based on the psychological impact of the
customer. Goods priced at $189.99 that $190 attracts customers based on the
emotional aspects.
Economy Pricing: They are low priced products. Cost is kept at a minimum level.
Example: Soaps, Detergents
Product Line Pricing: Fixing a single price for all products in the same product
line.
Optional Product Pricing: Marketer charge extra for the options provided along
with the product. They increase the overall price of the product. Example:
Charging extra for windows seat in aeroplanes.
Captive Product Pricing: Marketers charge a premium price for the product which
complements each other. They are the types of products which cannot be used
without the main product. Example: Camera Film Rolls
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Product Bundle Pricing: Several products are combined in one package and sold to
the customer. Example: Books along with the CDs
Promotional Pricing: Pricing done mainly to promote the product. Example: Offer
based as Buy 3 gets one free.
Geographical Pricing: Prices charged based on various geographical areas.
Price discrimination: Setting prices according to different target segments and
different classes of customers. Example: Airline charging prices based on
Economy Class and Business Class.
Value Pricing: Offering price depending upon the value of the product considering
the economic conditions.
New Product Pricing Strategies:
It is much suitable for new entrants. When new products enter into the market company usually
charge low price compared to the other products. It helps to capture large market share.
Transparent Pricing method is adopted to compare new products with other products in order to
understand that they are priced low when compared to large companies.
New Product Pricing Strategies are formulated through the following steps:
They develop the strategy considering the market analysis
The marketing mix 4 Ps in respect of new product is determined
Calculate the demand for the product by analyzing the economic factors.
Calculate the cost occurred for the product and adopt the pricing methods
based on competition or market or cost
There are two Pricing Strategies adopted for New Product Pricing
Market Penetration: New products enter the market with low price. They adopt this pricing
strategy in order to gain market share. Companies use price penetration when competitors
produce similar or related products.
Market Skimming: Companies charge high price initially and reduce the price later. This
pricing strategy is adopted when the quality of the product is high and also when
competitors cannot enter the market.
Product Mix Pricing Strategy
Product mix is the combination of all products. It includes products both in the same product line
and individual products.
Product Mix Pricing Strategies are:
+ Product Line Pricing
+ Optional Product Pricing
+ Captive Product Pricing
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+ By Product Pricing
+ Product Bundle Pricing
Product Line Pricing: Single price is fixed for all products in the same product line.
Optional Product Pricing: Companies charge extra for the option produced with the
product. It will increase the overall price of the product. Example: Record Player sold
along with the purchase of the car.
Captive Product Pricing: Companies charge a premium price for the products that
complement each other. They cannot be used without the main product. Example:
Computers used with Softwares.
By Product Pricing: Products produced in the manufacturer of some other products. It is
the by product of the main product.
Product Bundle Pricing: Products are combined in a package and sole to the customer.
Promotional Mix and Distribution Strategy:
Promotional Mix:
Combination of ingredients that is essential to promote the product. There are four main aspects
of Promotional Mix:
Advertising
Sales Promotion
Personal Selling
Direct Marketing
Public Relation
Promotional Mix Strategies
Push and Pull Strategy
Push Strategy: Company uses sales force and trade promotion to push the product to the
customer. The wholesaler, retailer uses effective promotion to push the product through
proper distribution channels. This strategy is applicable in case of new product when
consumers are not aware of it.
Pull Strategy: Manufacturer uses consumer sales promotion to create a demand for the
product. In this type of strategy consumer will ask for the products to retailers and then the
demand is moved to the manufacturer. Pull Strategy is used with brand that has gained high
brand loyalty and customer involvement in choosing the product.
Distribution:
It is the delivery of the product to customer through various distribution channels. Distribution
channels may be through agent, intermediaries, distributors and retailers.
Distribution Strategies:
There are three common strategies for distribution. They are:
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Intensive Distribution: Distribution at mass level covering all retail outlets. They
usually relate to low priced products. Example: Confectionaries. This strategy
increase sales and makes consumers easily aware of the product.
Selective Distribution: Select distribution area to sell their products. Example:
Television, Cameras. As this strategy is adopted on selected outlets it leads to
better market coverage. The products are sold at retail outlets by providing the
necessary service to customers.
Exclusive Distribution: Distribution relates to only one outlet. This strategy is
adopted for products of high price and quality. Example: Mercedes Benz available
only at Benz showroom. It develops the product image, customer loyalty and
maximum control over service.
Advertising
It is form of communication attempting customer to purchase the product. It is a paid form of non
personal presentation of the product or service to the customer. They are designed mainly to
influence the purchase behavior of the customer. They are an effective promotional tool to attract
customers. Advertising may be in the form of television, banner ads, text ads or through Internet.
It is mainly focused on
- Reach: How the message is reached to different customers.
- Frequency: Number of times the advertising message is delivered to the customer.
- Impact: Value of exposure of the advertisement.
- Timing: The time desired to run the advertisement campaign considering the customer
leisure and interest.
Objectives of Advertising:
Trial: It is to encourage customers to purchase the product after a trial purchase.
Trial purchase prompts for repeat purchase.
Switchback: Old customers may be got back through introduction of additional
features and reduction in price.
Continuity: Maintaining existing customers by inducing them to continually use
the product.
Brand Switching: Inducing customers to switch form competitor brand to their
own brand. This can be done by comparing their product in respect of price and
quality.
Types of Advertising:
1. Advertising can be done through media. It includes newspaper, radio, billboards,
stickers, pamphlets, television etc. Media advertising is more effective tool
compared to other forms.
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Television is the generally accepted form of advertising. Promotion of the
product through such media brings in more customers. Advertisement may
be repeatedly telecasted in TV and Radio thereby creating a long lasting
image in the minds of the consumers.
Billboards are sign boards located at important locations of the cities. They
should be attractive and catchy. People when they halt at traffic signals get
attracted to these billboards and the product displayed.
Newspapers: Products are displayed with attractive colors and size.
Reading newspapers is habitual inducing attraction towards ads.
2. Celebrity Advertising: Advertising campaigns for the product is done through
celebrities. Endorsement of products is done through celebrities fame, name and
image. Consumers perceive this product on the perception that the celebrity by
whom the product is promoted is a regular user to the product.
3. Persuasive Advertising: It is done after the products have been introduced to the
customer. Company charge high price because of the customer perceived quality
about the product.
4. Institutional Advertising: Advertising is done to promote the image, name of the
company rather than a product. It is done as a public awareness to improve their
image among the public.
5. Covert Advertising: Advertising the product or brand in entertainment or a movie
Product is used by the Heros and heroines throughout the movie.
6. Informational Advertising: They are used in respect of new products. When new
products are introduced in the market advertising may be informational pointing
out the usage and benefits of the product.
7. Direct Mail Advertising: Advertisement is sent through direct mail to the
customers. They are more selective and speed compared to other forms of
advertisement.
8. Product Advertisement: Advertising a specific product during a particular
commercial or TV show.
9. Point of Purchase Advertising: The products are displayed at a place near the
product. Enable the customer to make the purchase at the point o display.
10. Comparative Advertising: It is done by comparing the product with that of the
competitors. Careful measures are to be taken to deliver correct and meaningful
messages during comparison.
Sales Promotion:
Sales Promotion is one of the aspects of marketing mix. It consists of techniques and tools in
order to stimulate the purchase of the product. They persuade the customer to respond to market
activity in the form of sales promotion. Sales promotion is the implied message in the form of
contest coupons given along with the advertisement.
Sales Promotion tools are
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Consumer Sales Promotion
Trade Sales Promotion
Business Sales Force Promotion
Objective of Sales Promotion:
Sales Promotion creates brand awareness among the product. It helps in capturing
customer information about the product at the time of purchase.
It mainly targets brand switchers. They are effective tool for customer who looks for
low priced products better than the competitors.
Sales Promotion is delivering the message to customers about the product though
contest, coupons and rebates. It creates customer interest towards the product.
Stimulates customer demand through price reduction and discounts.
Consumer Sales Promotion
Consumer Sales Promotion are designed mainly for customer. They result in purchase. Consumer
Sales Promotion techniques is through offering low priced product or additional feature to the
product. It creates brand awareness and customer loyalty.
Types of Consumer Sales Promotion:
1. Coupons: It is a purchase price saving or incentive offered to the consumer.
Consumers are much aware about the offer and it is accompanied with products,
magazines etc.
2. Samples: Offering of product to consumer as a sample. It is delivered at door steps
or at retail shops.
3. Free Product: Inviting customers to buy products. Example Buy 3 and get one free.
4. Premiums: It is a type of incentive given to the consumer during purchase. It
consists of a fee or prize or reduction in the price of the product.
5. Frequency Programs: Conducting Programs to loyal consumers in order to
motivate their intensity in purchasing the product.
6. Rebates: Offered with the intention of lowering the cost of the product. Rebate is
offered at the point of purchase. They are given to customers in submission of
customer identification.
7. Contests/Sweepstakes: Contest is customers are asked to perform certain activity
which is judged by panel of members. Sweepstakes is customer names are drawn
at random and prizes are given without asking any activity to perform.
8. Demonstration: Benefits are available to customers by the marketer demonstrating
of how to use the product. It may be in person or through video.
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Trade Sales Promotion:
Trade Sales Promotion is aimed at retailers, wholesalers and distributors who distribute the
product to the ultimate consumer. It helps to have control over inventory and expansion of retail
stores.
1. Point of Purchase: Products are displayed in retail store. They are done in order to
promote a particular brand or product. Retail stores develop racks or places to
display the product. Based on the number of point of purchases the marketers
lower per unit cost of the products to the retailers.
2. Trade Shows: Organizing trade shows at central location of the city. Manufacturers
display the products at trade shows and attract large number of potential buyers.
3. Allowances: Offering done on the basis of a agreeable feature to the product.
4. Push money: Retailers receive extra commission during the sale of a particular
product or service.
Business to Business Sales Promotion:
They are the promotional techniques used to move customers to action. The techniques
used include price reduction, free products and trade shows.
Public Relation:
It is the act of creating relationship with the public through the use of various distribution
channels. The image of the product is publicized through public relation. It helps to create a
rapport with the employees, investors and customers.
Public Relation helps to
Build goodwill among customers.
Manage threat from various sources.
Closely watches and monitors public view about the product.
Public relation Tools:
The tools for conveying the messages to the public may be through
4 New Releases
4 Media Releases
4 Seminars
4 Emails
4 Special Events
4 Employee Relation
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4 Trade Shows
4 Surveys
Advantages of Public Relation
Offer more credibility. Consumers have a wider perception about the product when
they read it on a newspaper or other media compared to advertising.
Result obtained through public relation helps to generate a valuable sales lead.
Public Relation helps in building brand image of the product.
Cost is much less when compared to other promotional tools.
Disadvantages of Public Relation
Message conveyance to the public may not be clear. Marketers do not have a direct
control over the delivery of the message. It may not be precise as designed by the
marketer.
Public relation mainly through newspapers is fading due to latest technologies.
There is a danger of miscommunication and mismanagement between the Public
Relation and the marketing department of the message is not properly delivered.
Personal Selling
Personal Selling is the use of face to face communication between the buyer and the seller. It
builds a lasting relationship. Value of the personal selling by the seller is through sale of the
product for the buyer it is valued through the internet.
It is initiated by:
a. Identify the prospects for the product. It can be done through surveys.
b. Meeting customers by fixing appointment. Surprising them by providing accurate
information about them form databases.
c. Listing the features and benefits of the products.
d. Careful handling of objections and queries raised by the customers,
e. Close the sale deal based on the valuable and effective skills of the salesperson.
Advantages of Personal Selling
It is a direct communication channel with the customer. Seller delivers the message
and receives the feedback immediately.
Customer Interaction builds lasting relationship.
Wider scope of reach to customers.
It is a greater source of information.
Customer perception towards the product is observed.
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Disadvantages of Personal Selling
Personal Selling become ineffective due to bad behavior of certain sales person
towards customers.
Cost is too high.
It requires high level of training to sales persons.
Direct Marketing:
Sending message directly to consumers. It helps to measure positive responses. Direct marketing
includes television, magazines, newspapers, mail, email, radios and billboards. Responses from
direct marketing can be measured and tracked.
Types of Direct Marketing
1. Direct mail: Sending mail to all Postal customers. It is one of low budget medium
marketing. It is also called as junk mail. Direct mail may contain advertising
message, catalogs or membership card. Mail is formatted and sorted to handle the
cost incurred effectively.
2. Face to Face Selling: Marketing of the products through fact to face contact.
3. Internet Marketing: Marketing of the product to internet users. Advertising
messages can be sent through E-mail to the internet users. It covers all the
segments irrespective of geographical locations. It is more flexible, responsive and
potential when compared to other types of marketing.
4. Catalogs: Products offered by the organization are featured in paper form called as
catalogs. They are sent to the customers. Order is placed based on the product and
their price displayed in the catalog.
5. Telemarketing: Organization appoints trained tele callers to list out the services and
products offered by them to the people. They collect the data from various data
sources and contacted through phone. It is gaining popularity in recent days.
6. Direct marketing through television: Advertisements are aired on television.
Responses can be had through telephone based on the toll free numbers displayed
during advertisement.
Advantages of Direct Marketing
It can be measured through direct responses.
Intermediaries are eliminated.
Disadvantages of Direct Marketing
Segmentation is not relevant by targeting wrong products to wrong segments.
Cost incurred in respect of catalogs and pamphlets is high.
Marketing Communication Mix
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Marketing Mix is the combination of advertising, sales promotion, public relation, personal
selling and direct marketing to attain the marketing and advertising objectives.
1. Advertising: It the paid form of non personal ideas by the sponsor to the public. It
may be through television, radio, banners and billboards. It is designed mainly to
influence the purchase behavior of the consumers.
2. Sales Promotion: It is the techniques and tools used to induce customers to
purchase a product or service. Incentives are provided to retailers who encourage a
particular sale or service of the product. Sales Promotion may be 1) Consumers in
the form of Coupons, rebates and to 2) Traders in the form of trade shows and
allowances.
3. Public Relation: Relationship with Consumers by publicizing the products. It is
done through the use of various distribution channels. It builds good relation with
customers.
4. Personal Selling: Face to Face communication between the buyer and the seller.
Emotions and perception is observed directly.
5. Direct Marketing: Direct communication with individuals through mail, television,
internet and face to face contact. Consumer responsiveness is measured.
Marketing communication is effective only when the message is delivered to the consumer as
perceived by the marketer.
Effective Communication can be developed by:
1. Target Audience to be communicated is identified. Message to be delivered is
prepared
2. Communication objective is to be identified. It should be identified on the basis of
Awareness
Liking
Purchase
Knowledge
3. Message and object identified should be delivered in the following appeal
Rational Appeal: It is based on the self interest of the consumer.
Emotional Appeal: Targets the positive and negative feelings.
4. Media through which the message is to be delivered is selected.
5. The final stage in effective communication is the feedback received from the
consumer based on the message.
Setting the Overall Communication Mix
+ Advertising
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Marketing communication through advertising has a wider reach without any
geographical limitation. Brand is clearly and effectively dramatized and conveyed to the audience.
It builds brand and boost sales. Advertising message is considered legitimate by the consumer.
+ Sales Promotion
Promotional tools are effective through coupons, rebates, prizes and premiums.
Communication through sales promotion boosts up sales and stimulates quick responses.
+ Public Relation
Company goodwill and reputation is dramatized. It earns more credibility and
wider reach than other forms of communication.
+ Personal Selling
Relationship oriented. It builds effective rapport with the clients and makes the
buyers more attentive. It encourages feedback.
+ Direct Marketing:
Done through various forms such as internet, telephone and face to face contact. It
makes the customer interactive, induced and customized and act immediately to the product.
Distribution Channels
It is one of the elements in the promotional mix. It is the possible way of distributing the products
to the wholesalers, retailers and various other distributors. It is the mechanism through which the
products are delivered directly or through intermediaries.
Distribution Channels may be:
+ Wholesalers: Stock the products form various manufacturers. They serve as a link
between manufacturer and retailer
+ Marketing Intermediaries: They operate between wholesaler and retailer. They are
also called as middlemen.
+ Retailers: They deal directly with the customers.
+ Distributors and dealers: They receive the products directly form the producer and
sells it to the end users. They mostly deal with after sales service.
+ Franchises: Business is operated independently in exchange for a fee or share in
the turnover of the organization.
Distribution channels have various levels
4 Zero level channel in which there is no intermediaries. Products are delivered
directly to the consumers.
4 One level channel is it consist one intermediary, one retailer between the
manufacturer and the consumer.
4 Two levels is there are two intermediaries manufacturer- wholesaler-retailer-
consumer
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Distribution channel decision should be based on
* Channel membership through
Intensive distribution: Selling convenient products to various outlets
Selective distribution: Stocks are distributed to selective outlets
Exclusive distribution: Stocks are distributed exclusively to one outlet.
* Channel Motivation
Motivating the employees and distributors in distribution channel is difficult. The
most usual form of motivation is offering incentive so they push the product more than their
competitors.
* Monitoring the distribution channel
It can be monitored through direct sales force and using sales agents for smaller
prospects.
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