MARKETING MANAGEMENT

BBA-205 SEMESTER-III

UNIT-II

Prepared By: Ms Neha Munjal

2.1 Meaning of Product

A product may be defined as bundle of utilities consisting of various product features and
accompanying services.

A product is:

Anything that is capable of satisfying customer needs

This definition therefore includes both:

Physical products e.g. trainers, games consoles, DVD players, take-away pizzas
Services e.g. dental treatment, accountancy, insurance, holidays, music downloads

There are many definitions of product by different authors.

1 A product is a set of tangible and intangible attributes, which may include packaging, color,
price, quality, brand and sellers services and reputations.

2 Product is a service that provides the benefit of a comfortable night rest at a reasonable price.

3 Product is a place that provides sun and sand, relaxation, romance, cross cultural experiences
and other benefits.

2.2 Classification of product:

Products or goods are basically of two types.

(1). Consumer goods

(2). Industrial goods.

(1). Consumer goods:-

Consumer products are produced for personal consumption by households. There are four types
of consumer goods.

(a). Convenience goods:-

Goods that the consumer usually purchase frequently, immediately, and with the minimum of
effort in comparison and buying for most buyers, convenience goods include many food items,
inexpensive candy, drugs like aspirin and tooth paste, hardware items such as light bulbs and
batteries. Convenience goods have low price an are not greatly affected by fad and fashion. A
manufacturer prepares these products to distribute it widely and rapidly.

(b) Shopping goods:-

A tangible product for which a consumer wants to compare quality, price and perhaps style in
several stores before making a purchase is known as shopping goods. Examples of shopping are
furniture, automobiles, major appliance etc. The process of searching and comparing continues
as long as consumer feels satisfaction. The shopping goods can be divided into homogeneous
and heterogeneous goods. The homogeneous goods are similar in quality but different in price.
The heterogeneous products are different in quality and prices.

(c) Specialty goods:-

A tangible product for which a customer give preference to a strong brand and he wants to
expend substantial time and effort in locating the desire brand is called a specialty good.
Examples of specialty goods are mens suits, stereo sound equipment, health foods, photograph
equipment, new automobiles and certain home appliances. The specialty goods do no involve the
buyers making comparisons, the buyer only invest time to reach the dealers carrying the wanted
products.

(d) Unsought goods:-

An unsought good is a new product from which a consumer is not aware. More people are
unaware of interactive movies. An electric car might be an unsought good for most people,
because they are unaware of it. Bathroom tissue made strictly from cotton fiber would seem to be
an unsought good. A firm faces a very difficult, perhaps impossible advertising when trying to
market unsought goods. Marketers market unsought goods by placing ads on bus-stop benches or
in church buildings.

(2). Industrial goods/Business goods:-

Industrial products are purchased to produce other products or for use in a firms operations.
Industrial products are purchased on the basis of organizations goals and objectives.
On the basis of their uses and characteristics, industrial or business products can be classified
into seven categories.

a).Raw material:-
Raw materials are the basic materials that actually become part of the product. They are provided
form mines, forests, oceans, farms and recycled solid wastes.

b).Fabricating Materials and parts/Capital items:-

Major equipment includes large tools and machines used for production purposes. Examples are
rather, cranes, Stamping machines.

c). Accessory Equipment:-

Accessory equipment does not become part of the final product but is used in production or
office activities. Examples include, hand tools, type writers, fractional horse power motors etc.
Accessory equipments are less expensive than capital items.

d).Component Parts:-
Component parts become a part if the physical product and either are finished items ready for
assembly or are products that enter the finished product completely with no further change in
form, as when small motors are put into vacuum cleaners and tires are added on automobiles.
Spark plugs, tires, clocks and switches are all component parts of the automobile.

e).Process material:-
Process materials are used directly in the production of other products. Unlike component parts,
however process materials are not identifiable process materials are further fabricated. For
example, Pig iron is made into steal and Yarn is woven into cloth.

f).Supplies:-
Supplies facilitate productions, but they do not become part of the finished product. Paper,
pencils, oils, cleaning agents and paints are examples.

g).Industrial Services:-
Industrial services include maintenance and repair services. (e.g.; window cleaning,
typewriter repair) and business advisory services. (e.g.; legal, management, consulting,
advertising, marketing research services). These services can be obtained internally as well as
externally.
2.3 Levels of Product

five product levels

core benefit of the product
generic product
expected product
augmented product
potential product

source: Kotler, marketing management

provenmodels

According to Philip Kotler, who is an economist and a marketing guru, a product is more than a
tangible thing. A product meets the needs of a consumer and in addition to a tangible value this
product also has an abstract value. For this reason Kotler states that there are five product levels
that can be identified and developed.

In order to shape this abstract value, Kotler uses five product levels in which a product is located
or seen from the perception of the consumer. These five product levels indicate the value that
consumers attach to a product. The customer will only be satisfied when the specified value is
identical or higher than the expected value.

1. Core Product

This is the basic product and the focus is on the purpose for which the product is intended. For
example, a warm coat will protect you from the cold and the rain.

2. Generic Product

This represents all the qualities of the product. For a warm coat this is about fit, material, rain
repellent ability, high-quality fasteners, etc.

3. Expected Product
This is about all aspects the consumer expects to get when they purchase a product. That coat
should be really warm and protect from the weather and the wind and be comfortable when
riding a bicycle.

4. Augmented Product

This refers to all additional factors which sets the product apart from that of the competition.
And this particularly involves brand identity and image. Is that warm coat in style, its color
trendy and made by a well-known fashion brand? But also factors like service, warranty and
good value for money play a major role in this.

5. Potential Product

This is about augmentations and transformations that the product may undergo in the future. For
example, a warm coat that is made of a fabric that is as thin as paper and therefore light as a
feather that allows rain to automatically slide down.

2.4 Product MIX

Product mix or product assortment refers to the number of product lines that an organization
offers to its customers. Product line is a group of related products manufactured or marketed by a
single company. Such products function in similar manner, sold to the same customer group,
sold through the same type of outlets, and fall within a same price range.

Product mix consists of various product lines that an organization offers, an organization may
have just one product line in its product mix and it may also have multiple product lines. These
product lines may be fairly similar or totally different, for example - Dish washing detergent
liquid and Powder are two similar product lines, and both are used for cleaning and based on
same technology; whereas Deodorants and Laundry are totally different product lines.

An organizations product mix has following four dimensions:-

1. Width,
2. Length,
3. Depth, and
4. Consistency.

Width
The width of an organizations product mix pertains to the number of product lines that the
organization is offering. For example, Hindustan Uni Lever offers wide width of its home care,
personal care and beverage products. Width of HUL product mix includes Personal wash,
Laundry, Skin care, Hair care, Oral care, Deodorants, Tea, and Coffee.

Length
The length of an organizations product mix pertains to the total number of products or items in
the product mix. As in the given diagram of Hindustan Uni Lever product mix, there are 23
products; hence, the length of product mix is 23.

Depth
The depth of an organizations product mix pertains to the total number of variants of each
product offered in the line. Variants include size, color, flavors, and other distinguishing
characteristics. For example, Close-up, brand of HUL is available in three formations and in
three sizes. Hence, the depth of Close-up brand is 3*3 = 9.

Consistency
The consistency of an organizations product mix refers to how closely relate the various product
lines are in use, production, distribution, or in any other manner.

2.5 Product-Mix Strategy: -

Manufacturers we several major strategies in managing their product mix.

1) Expansion of product mix: -

A firm may decide to expand its present mix by increase the number of lines or the depth with in
the lines. Now lines may be related or unrelated to the present products. The company may also
increase the number of items in its product mix.

2) Contraction of product mix: -

Another product strategy is to thin out the product mix, either by eliminating entire line
or by simplifying the assortment with in a line. The shift from fat and long lines to thin and short
lines, is designed to eliminate low-profit products and to get more profit from fewer products.
There are many examples of product mix contraction, sometimes involving will known firms.
For example, Unilever, and English, Dutch firm decided to produce more than 1000 brands from
its total set of about 1600. The company wants to concentrate its marketing resources on the 400
or so remaining brands including Lipton teas, Lever soap that generate 90% of annual revenues.

3) Alteration of existing product: -

In spite of developing a complete new product, management should take a fresh look at
the companys existing products. Often, improving and established product can be more
profitable and less risky than developing a completely new one.
For material goods, especially, redesigning is often the key to products, renaissance
packaging has been a very popular area for product alteration, particularly in consumer products.

4) Positioning the product: -

Positioning of product in the market is a major determinant of company profits. A product
position is the image that the product projects in relation to competitive product and to other
products marketed by the same company. Marketing executives can choose from a variety of
positioning strategies. These strategies can be grouped into following six categories:
a). positioning in relation to a competitor: - Position is directly against the competition.
b). positioning by product attribute: - The company associates its product with some product
features.
c). positioning by price and quality: - To position on high price, high quality or low price, low
quality basis.
d). Positioning in relation to product use.
e). Positioning in relation to a target market: - (Market Segmentation)
f). Positioning in relation to product class: - (Associating the Product) a class of product

5) Trading up & trading down: -

As product strategies, trading up and trading down involves, essentially, an expansion of the
product line and a change in product positioning. Trading up means adding a higher priced
prestige product to a line in the hope of increasing the sales of existing lower priced products.
A company is said to be trading down when it adds a lower priced item to its line of prestige
products. The company wants to sale its products rapidly.

2.6 Factors influencing product mix

The fundamental reason for changing product line, i.e., adding or eliminating products, is the
change in market demand.

Change in demand occurs due to the following factors:

a) Population increase.
b) Changes in the level of income of buyers.
c) Changes in consumer behavior.
In India, there is an ever increasing rate in the growth of population. This naturally adds to the
number of buyers leading to a quantitative change in the volume of production. The
developmental programmes of the Government ensure increase in income enabling the
consumers to spend more. This also adds to the stream of demand qualitatively and
quantitatively. In India 'Rural markets' are evolved mainly due to this reason. The consumer
behavior is a continuous source of reasons that invite changes in product planning. The other
reasons could be narrated as follows:

1. Marketing influences.
2. Production influences.
3. Financial influences.

All these arise out of internal economies of a firm. As long as the profit motive is the criterion
for the existence of a firm, changes in production mix are inevitable.

2.7 Product Innovation

In a highly competitive environment, where number of players exist and vie for a share of the
market, the introduction of new product and service offerings becomes crucial for existence and
long term survival; thus, marketers are always on the move towards introduction of new product
and service offerings that would help meet the evolving needs and wants of the consumer
segment(s). The products that are offered may be slightly different from the existing alternatives,
some may be highly different, and some totally new. They all fall under the purview of what is
referred to as an innovation, and the product and services, referred to as innovative products
and services.

2.7.1 Varying perspectives to defining Innovation:

The term innovation has been described with varying perspectives and orientations, viz.,
firmoriented, product-oriented, market-oriented, and consumer-oriented. Let us discuss each one
of these:

a) Firm-oriented: As per this approach, a product or service offering is regarded as new, if the
company starts manufacturing or marketing it for the first time. In other words, the firm
orientation treats the newness in terms of the companys perspective.

b) Product-oriented: A product and service offering is regarded as an innovation, if the

product changes in terms of form, attributes, features, and overall benefits; such changes have a
twofold connotation, one, in terms of technology, and two, in terms of consumption usage and
behavioral patterns.
.
c) Market-oriented: The market-oriented approach views innovation purely from a marketers
perspective, in the sense that a product is regarded as new, depending on how much exposure
the consumers have about the new product or service offering, and the total sales penetration
that has occurred in the specified short period of time.

d) Consumer-oriented: The consumer-oriented approach to defining innovation, is a favored

approach over others, especially in consumer behavior research, and more specifically in
research related to diffusion of innovation, and adoption; the reason is that the concept of
newness or innovation is dealt through focus on consumer, and his/her reaction towards the
new product and service offering, in terms of acceptance and rejection. As per this approach, any
product is regarded as new, if the consumer believes it to be so; it is purely based on the
consumers perception of the newness of the product, rather than on technological changes that
the product embodies.

Amidst the varying perspectives and orientations, the approach(es) that receives wide attention
are the market-oriented and the consumer-oriented approaches to studying iinovation.

2.7.2 Classification of New Product Innovations:

Robertson has classified the new products and innovations into three categories, viz., continuous
innovations, dynamically continuous innovations, and discontinuous innovations.

a) Continuous innovations: A continuous innovation is one that entails modification over an

existing product; it is illustrative of little technological change, but requires no behavioral change
on the part of the consumer for product usage, consumption and resultant experiences.
Example: all line extensions, or product variants (new form, size, flavor etc.); For example,
various flavors of Amul Chocolate are line extensions of the original Amul Milk Chocolate.
Other examples: laser printers replacing earlier versions; a change from VCDs to DVDs was
illustrative of better technology, better picture quality.

b) Dynamically continuous innovations: An innovation is regarded as dynamically continuous,

when it includes some technological change in the product, but requires no behavioral change on
the part of the consumer for product usage, consumption and resultant experiences.The
technological change is brought either to increase efficiency, or provide greater value to the
consumer.
Example: the walkman giving way to the portable CD player, or the semi-automatic washing
machine giving way to the fully automatic one.

c) Discontinuous innovations: On a continuum, they fall as most radical; they are truly
innovative in the sense that they are technologically superior, and also require considerable
behavioral change within consumers with respect to purchase and usage patterns. The technology
used to manufacture the new product is different from the one that produced the original or
already existing product; and, the consumer has to adopt a new purchase, usage and consumption
pattern to use it.
Example, the telephone giving way to the mobile phone, or the 3G and GPRS providing email
access while on move as against email access on the computer/laptop.

2.8 Product Diffusion Process

Diffusion is defined as a macro process that deals with the spread of a new product or service
offering amongst the potential market; it relates to the acceptance/rejection of an innovation by
the segment(s). Diffusion of Innovation is defined as a process by which an innovation spreads
amongst and gets the absorbed/accepted or assimilated by the market.
Schiffman defines diffusion, as the process by which the acceptance of an innovation (a new
product, new service, new idea, or new practice) is spread by communication (mass media, sales
people, or informal conversations) to members of a social system (a target market) over a period
of time. The definition comprises four basic elements of the diffusion process:

- Innovation: the term innovation refers to the newness of the product/service offering.

- Channels of communication: this includes

i) Marketing communication that takes place between the marketer and the potential market,
or the target segment; it could be personal (salesperson and consumer) or impersonal (via print or
audio visual media).
ii) Interpersonal communication that takes place between the consumers themselves or within
members of the target segment(s); it could be word of mouth communication within consumers
or through an opinion leader.

- Social system: this refers to the social setting in which the diffusion takes place; it actually
refers to the market segment(s) or the target market(s). The definition and scope of the social
system depends on the product and service in question, its usefulness and its very basis for
existence. In a way, it reflects the target market(s) for whom the product and service is designed,
and within what segment(s), it would be diffused. For example, for a new herbal anti-wrinkle
cream, the social system would be confined to ladies who are in their late 40s.

- Time: time is an important factor in the diffusion of innovation, as it determines the pace of
adoption and resultant assimilation of the innovative offering.

2.8.1 The rate of adoption and the identification of adopter categories:

Rate of adoption: The rate of adoption refers to the period that it is taken for a new product or
service to be accepted by the target market(s). It is a measure of how long it takes a new product
or service offering to be adopted by the members of the target market. With global advances in
all respects, be it socio-economic, political, cultural and technological, the rate of adoption is
getting faster. The marketer also aims at a rapid acceptance of his innovative offering, so that he
can gain maximum advantage as a first-mover; thus he designs his marketing mix as per the
needs of the segment(s), across international cultures and communities.

Adopter categories: This refers to a classification scheme amongst members of the target
segment(s), which illustrates where one consumer stands in relation to another consumer with
respect to time, that has lapsed between the introduction of the new product and service and the
adoption by a consumer(s).

Rogers has proposed a classification of adopters, according to which consumers can be divided
into five categories based on the time taken by them to adopt a product. These five adopter
categories are innovators, early adopters, early majority, late majority, and laggards. Based on
research, it has been observed that the five categories when plotted on a graph, lead to a bell-
shaped normal distribution curve (See Figure). The five categories are explained as follows:
a) Innovators: Innovators comprise 2.5 percent of the target market(s) adopters; they are those
consumers who are the first to go and purchase a new product or service offering. They
purchase the new product and service offering not because they possess a need, but because they
desire new ideas and concepts, and seek product and service innovations. They are high on self-
confidence, and are always eager to try out new products/services. They have access to
information about such new offerings, and are quick to purchase; one, because they have the
interest and inclination to buy the new; and two, because they have the purchasing power and
the access. It is important to mention here, that innovators are not generic; they are in most
cases specific to a product and service type.

b) Early adopters: The next 13.5 percent of the target market(s) adopters are called early
adopters. These are those consumers who purchase the new product and service offering not
because they are fascinated towards the new, but because they possess a need. They generally
tend to have some idea on the product/service category, and after gathering some more
information about the product and or brand, they go in for purchase. Early adopters rely on group
norms and also turn out to be good opinion leaders, and could be easy targets for the marketer.

c) Early majority: The early majority is similar to the early adopter in the sense that they buy the
product/service offering because they possess a need and want to fulfill it; however, they are not
as quick as the early adopters and take longer to enter into purchase. This is because unlike the
earlier two categories, the early majority does not have much interest in the product/service
category. Thus, the consumers that fall into this category have to collect information, evaluate it,
deliberate carefully and then take a decision; thus, the process takes longer. The early majority
make up the next 34 percent of the adopters.

d) Late majority: The next 34 percent of the adopters are referred to as the late majority. They
are referred to as late, because i) members of their social class, reference group and peer group
have already made the purchase; and the social influence is strong, and ii) they themselves have
evaluated the new product and or service and are ready to buy it. They have a need, and after
careful thought and deliberation as well as with social influence and pressure, the late majority
makes the purchase. By nature they are skeptical and confirm to social pressure. Interpersonal
communication has a major role to play.

e) Laggards: The laggards are the last to adopt a new product or service offering, and as such
make up the last 16 percent of the target market. They are slow in buying the innovative offering
because, i) they are uninvolved with the product and service; ii) they do not possess much
information; iii) they remain uninfluenced by social pressure, and social ties are not very strong;
iv) they believe in making routine purchases and prefer to buy the familiar, than the
unfamiliar.
2.9 Product Life Cycle(PLC)
Every product passes through a number of stages, namely introduction, growth, maturity and
decline. These stages are collectively referred to as Product life cycle.
A product life cycle consists of the aggregate demand over an extended period of time for all
brands comprising a generic product category. A product life cycle can be graphed by plotting
aggregate sales volume for a product category over a time, usually years. It is also worthwhile to
accompany the sales volume curve with the corresponding profit curve for the product category.
As shown in the figure
In this typical life cycle the profit curve for most new product is negative, satisfying a loss,
through much of introductory stages. In the later part of growth stage, the profit curve starts to
decline while the sales volume is still rising. Profit declines because the companies in an industry
usually must increase their advertising and selling efforts or cut their prices to sustain sales
growth in the face of intensifying competition during the maturity stage.

The product life cycle consist of four stages

1) Introduction:-
During introduction stage, sometimes called pioneering stage, a product is launched into the
market in a full scale of marketing program. It has gone through product development, including
idea screening, prototype, and market test. The entire product may be new, such as the zipper,
the video cassette recorder, etc for a new product there is very little competition. However, if the
product has tremendous promise, numerous companies may enter into the industry early on. That
has occurred with digital TV, introduced in 1988. Introduction is the most risky and expensive
stage because substantial dollars must be spent not only to develop the product but also to seek
consumer acceptance of the offering.
During the introduction stage, the primary goal is to establish a market and build primary
demand for the product class. The following are some of the marketing mix strategies of the
introduction stage:

Product - one or few products, relatively undifferentiated

Price - Generally high, assuming a skim pricing strategy for a high profit margin as the
early adopters buy the product and the firm seeks to recoup development costs quickly. In
some cases a penetration pricing strategy is used and introductory prices are set low to
gain market share rapidly.
Distribution - Distribution is selective and scattered as the firm commences
implementation of the distribution plan.
Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives
may be directed toward early adopters. The introductory promotion also is intended to
convince potential resellers to carry the product.

2) Growth:-

In the growth stage on market acceptance stage, sales and profit rise frequently at a rapid rate.
Competitors enter the market, often in large number if the profit outlook is particularly attractive.
Mostly as a result of competition profit start to decline nears the end of the growth stage. As a
part of firms efforts to build sales and in turn, market share, prices typically decline gradually
during this stage. The only thin that matters is if the exponential growth of your market is faster
then the exponential decline of your prices During the growth stage, the goal is to gain
consumer preference and increase sales. The marketing mix strategies may be modified as
follows:

Product - New product features and packaging options; improvement of product quality.
Price - Maintained at a high level if demand is high, or reduced to capture additional
customers.
Distribution - Distribution becomes more intensive. Trade discounts are minimal if
resellers show a strong interest in the product.
Promotion - Increased advertising to build brand preference.

3) Maturity:-

During the first part of the maturity stag, sales continue to increase, but at a decreasing rate. The
primary reason is increase in price competition. Some firms extends their product lines with new
models, other come up with a new improved version of their primary brand. During the later part
of this stage marginal producers those with high cost or no differentiate advantage drop out to the
market. They do so because the lack sufficient customers or profit. During the maturity stage, the
primary goal is to maintain market share and extend the product life cycle. Marketing mix
strategies may include:
 Product - Modifications are made and features are added in order to differentiate the
product from competing products that may have been introduced.
Price - Possible price reductions in response to competition while avoiding a price war.
Distribution - New distribution channels and incentives to resellers in order to avoid
losing shelf space.
Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get
competitors' customers to switch.

4) Decline:-
For most products a decline stage, as gauged by sales volume for the total category is inevitable
for one of the following reason.
A better or less expensive product is developed to fill the same need.
The need for product disappears, often because of other product development.
People simply grow tired of a product so disappear from the market.

During the decline phase, the firm generally has three options:

Maintain the product in hopes that competitors will exit. Reduce costs and find new uses
for the product.
Harvest it, reducing marketing support and coasting along until no more profit can be
made.
Discontinue the product when no more profit can be made or there is a successor product.

The marketing mix strategies are as follows:

Product - The number of products in the product line may be reduced. Rejuvenate
surviving products to make them look new again.
Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may
be maintained for continued products serving a niche market.
Distribution - Distribution becomes more selective. Channels that no longer are profitable
are phased out.
Promotion - Expenditures are lower and aimed at reinforcing the brand image for
continued products.

2.9.1 Limitations of the Product Life Cycle Concept

The term "life cycle" implies a well-defined life cycle as observed in living organisms,
but products do not have such a predictable life and the specific life cycle curves
followed by different products vary substantially. Consequently, the life cycle concept is
not well-suited for the forecasting of product sales. Furthermore, critics have argued that
the product life cycle may become self-fulfilling. For example, if sales peak and then
decline, managers may conclude that the product is in the decline phase and therefore cut
the advertising budget, thus precipitating a further decline.
 Nonetheless, the product life cycle concept helps marketing managers to plan alternate
marketing strategies to address the challenges that their products are likely to face. It also
is useful for monitoring sales results over time and comparing them to those of products
having a similar life cycle.

2.10 New Product Development

What is Product Development?

Product Development includes a number of decisions, namely, what to manufacture or buy,
how to have its packaging, how to fix its price and how to sell it.

What is New Product Development?

New Product Development consists of creation of new ideas, their evaluation in terms of
sales potential and profitability, production facilities, resources available, designing and
production testing and marketing of the product.

Stages in New Product Development

The function of planning and developing new products involves eight stages:

1).Idea generation:-
The new product Development process starts with the search for ideas. New product ideas
comes through interacting with various group of people , such as customer, scientists,
competitors , employees and top management. Companies can also find good ideas by
searching competitors products and services. From this they can find out what the
customers likes and dislike about competitors products. They can buy their competitors
products, take them apart and build better ones. Many companies also encourage employees
particularly those on production line to come forth with ideas, often offering cash reward
for good suggestion. New product ideas also come from inventors, university and
commercial laboratories, advertising agencies. As the ideas start to flow, one will sprat
another, and within a short time hundred of new ideas may be brought to surface.

2) Idea screening: -
Idea screening is second stage in new product development once a large pool of ideas has
been generated by whatever their means, their number have to be pruned to manageable
level. In screening ideas the company must avoid two types of error.
Drop error: - Occurs when the company dismisses an otherwise good idea.
Go error: - Mean adoption of poor ideas
The purpose of screening is to drop poor ideas as early as possible. Many companies require
their executives to write up new product on a standard form that can be received by a new
product committee. The write up describes product idea, target market and competition. It
makes some rough estimate of market size, product price, development cost and rate of
return.

3) Concept development and testing: -

A product idea is possible product the company might offer to the market. A product
concept is an elaborated version of ideas expressed in a meaningful consumer terms.
Throughout the stages of idea generation and screening, the developers are only with the
product idea, general concept of what product might be.
Concept development involves many questions:
i) Who will buy the new product?
ii) What is the primary benefit of new product?
iii) Under what circumstances, the new product may be used?
Concept testing:-
Concept testing involves presenting the product concept to appropriate target consumers
and getting their reactions.

4) Marketing Strategy: -
Following the successful concept test, the new product manager will develop a preliminary
marketing strategy plan for introducing the new product into market. The plan consists of
three parts. The first part describes the target market size, structure and behavior, the
planned product positioning and sales, market share, profit goals sought in the first few
years.
The second part outlines the planned price, distribution strategy and marketing budget for
first year.
The third part of marketing strategy plan describes the long run sales and profit goals and
marketing strategy overtime.

5) Business Analysis: -
The next step in new product development is business analysis. The market must project
costs, profit and return on investment for the new product if it were placed in market.
Business analysis is not a short process; it is a detailed realistic projection of both maximum
and minimum sales and their impact on economy or company. For some products such as
another candy bar, marketers can use existing sales data to guide themselves. But with a
product, for which sales data does not exist, only estimation can be used.

6) Product Development: -
If the result of business analysis is favorable then a prototype of the product is developed. In
development stage, the idea is given in a concrete or tangible form. Up to now, the product
has existed only a word description, a drawing or a prototype. This step involves a large
investment. The company will determine whether the product idea can be translated into a
technically and commercially feasible product.

7) Test marketing: -
After management is satisfied with functional and psychological performance, the product
is ready to be dressed up with a brand name and packaging and put into a market test.
Test marketing involves how large the market is and how consumers and dealers react to
handling, using and repurchasing the product.
The amount of test marketing is influenced by investment cost and risk on one hand and
time pressure and research cost on the other.
8) Commercialization: -
As the company goes ahead with commercialization, it will face its largest costs to date.
The company will have to contract for manufacturing facility. Another major cost is
marketing
Example:-
To introduce a major new consumer packaged good into the national market, the company
may have to spend b/w $20 million and $80 million in advertising and promotion in the first
year. In the introduction of new food products, marketing expenditures typically represents
57% of sales during the first year