Chapter 5: Product Management

By
By
Dinkisa
DinkisaK.K.
(PhD,
(PhD,Assistant
Assistantprofessor
professor))

1
Designing Products, Brands, Packaging and
Service.  
 At the end of this chapter learner could be able to:
 Identify different classes of consumer and Industrial
products
 Explain Various product decisions
 Distinguish different strategies used in designing products
 Differentiate stages in new product development

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 What is a Product?
 Anything that can be offered to a market for attention,
acquisition, use or consumption.
 Satisfies a want or a need.
 Includes:
 Physical Products
 Services
 Persons
 Places
 Organizations
 Ideas
 Combinations of the above

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Product?
 Product is any thing that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or need.
 Products include more than just tangible goods.
 Broadly defined, products include physical objects, services,
events, persons, places, organizations, ideas, or mixes of these
entities.
 Thus through this chapter, we use the term product broadly to
include any or all of these entities.
 Services are a form of product that consists of activities, benefits, or
satisfactions offered for sale that are essentially intangible and do not result in
the ownership of anything.

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 Products, Services, and Experiences.
 Product planers need to think about products and services on their levels.

Each level adds more customer value.
1. The most basic level is the core benefit which addresses the

question what is the buyer really buying? When designing products,

marketers must first define the core, problem solving benefits or
services that consumers seek.
2. product planners must turn the core benefit in to actual product.

They need to develop product and service features, design, a quality

level, a brand name and packaging.
3. Finally product planers must build an augmented product around

the core benefit and actual product by offering additional consumer

services and benefits

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 Levels of Product Augmented
Augmented
Product
Product

Installation

Packaging
Brand Features
Name Core
Core
Benefit After-
Delivery Benefit Sale
& Credit or
or Service
Quality Service
Service Design
Level

Warranty

Actual
Actual Core
Core
Product
Product Product
Product
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 Product and Service Classifications
Products can be classified in to 3 groups according to their durability,
tangibility.
None durable goods are consumer goods that normally consumed in one or few
uses.
Ex. Soap, beer, salt and etc.
 They are tangible product

Durable – consumer goods that are used often an extended period of time that

normally survive many uses.

Ex refrigerators, auto mobiles and etc.
 They are tangible product

Services – are activity benefit or satisfactions that are offered such as haircut,

maintenance and the likes.

 They are intangible product

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 Based on the types of consumers that use the products
and services fall into two groups
A. Consumer Products:
Products - are products and services bought by
final consumers for personal consumption.
B. Industrial Products:- Are those bought by individual and
organizations for further processing or for use in
conducting business.
 Thus, the distinction between consumer goods and
industrial goods is based on the purpose for which the
product is purchased.

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 Marketers usually further classify consumer products and
services based on how consumers go about buying them.
 Classified by shopping habits:
 Convenience goods
 Shopping goods
 Specialty goods
 Unsought goods

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 Marketing Convenience Shopping Specialty unsought
Considerations goods
Customer Frequent Less frequent Strong brand Little product
buying behavior purchase, little purchase much preference, 4% awareness
planning, little planning and loyalty, special knowledge (or,
comparison or shopping effort purchase effort, if aware little or
shopping comparison of little even negative
effort, low brands on price comparison of interest)
customer quality style brands, low
involvement price sensitivity
Price Low price Higher price Higher price Varies

Distribution Widespread Selective Exclusive Varies

distribution, distribution in distribution in
convenient fewer outlets only one or a
locations few outlets per
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market area.
 Marketing convenience Shopping Specialty unsought
Considerations goods

Promotion Mass Advertising More carefully Aggressive

promotion by and personal targeted advts and
the producer selling by promotion by personal
both producer both producer selling by
and sellers and resellers producer and
reseller
Examples Tooth paste, Major Luxury goods, Life insurance
magazines appliances such as Rolex red cross
laundry televisions, watches or blood
detergent furniture, fine crystal donations
clothing

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 The Product and Product Mix
 Materials and parts
Product  Farm products
Natural products
Classifications


 Component materials
 Component parts
 Capital items
 Industrial goods  Installations
 Equipment
 Supplies and business
services
 Maintenance and repair
 Advisory services

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 Different Demand States and Their Respective Marketing
Tasks

a) Negative Demand
 This is a type of demand in which a major part of the market dislikes
the product and may even pay a price to avoid it. Included in this
category are vaccinations, dental work, vasectomies, and gallbladder
operations etc.
 Marketing Task
 Conversational Marketing: the marketing task is to analyze why the
market dislikes the product and whether a marketing program
consisting of product redesign, lower prices, and more positive
promotion can change beliefs and attitudes.
b) No Demand
 This is a demand situation when the target consumers may be
unaware or uninterested in the product.
 Farmers may not be interested in new farming methods, and college students
may not be interested in foreign language courses.

 Marketing Task
 The marketing task is to find ways to connect the benefits of the
product with people’s natural needs and interests. The marketer
should strive to convince that consumption of such products eases
the user’s day-to-day life.
c) Latent (Hidden) Demand
 Consumers may share a strong need that cannot be satisfied by any
existing product.
 There is a strong demand for harmless cigarettes, safer
neighborhoods, better schools, and more fuel efficient cars.

 Marketing Task
 The appropriate marketing task is to measure the size of the market
and develop goods and services to satisfy the demand.
 d) Declining Demand
 Every organization, sooner or later, faces declining demand for one or
more of its products.

 private colleges have seen applications fall; airliners have

seen declining demand in passengers or cargos etc.
 
 Marketing Task
 The marketer must analyze the causes of the decline and determine
whether demand can be re-stimulated by new target markets, and by
changing product features, or by more effective communication styles. The
marketing task is then generally to reverse declining demand through
creative remarketing.
e) Irregular Demand
•Many organizations face demand that varies on a seasonal, daily, or
even hourly basis.
• Consider the demand of woolen and fur made clothes during a
hot season,
• the demand of mass transit equipment's in an airline during peak
travel hours etc.
• Museums are under visited on weekdays,
 
Marketing Task
•Synchro marketing: Is to find ways to alter the pattern of
demand through flexible pricing, promotion, and other
incentives.
f) Full Demand
 when they are pleased with their volume of business. It is a
demand situation where the actual demand is fairly equal or
at least proportional to what the firm can assume with its
existing resources.

 
 Marketing Task
 The marketing task is to maintain the current level of demand in the
face of changing consumer preferences and increasing competition.
g) Unwholesome Demand
•It is not a matter of disliking a products by customers, rather than it
should be disliking.
•Unwholesome products will attract organized efforts to discourage
their consumption.
• Anti campaigns have been conducted against cigarettes, alcohol,
hard drugs, handguns, X-rated movies, and large families.
 
Marketing Task
The marketing task is to get people who like something to give it up, obey
the rules of some established agencies, using fear messages (e.g.
Cigarettes are dangerous for health, Cigarettes are dangerous for
pregnant women etc.) and reduce availability.
Product and Service Decisions

 Marketers make product and services decisions at

three levels: individual product decisions, product line
decisions, and product mix decisions. We discuss
each in turn

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Individual Product Decisions

Product
Product Attributes
Attributes

Branding
Branding

Packaging
Packaging

Labeling
Labeling

Product
Product Support
Support Services
Services
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Product Attribute Decisions

Quality
Quality Features
Features

Design
Design

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Product and service attributes
 Developing a product or service involves defining the
benefits that it will offer.
 These benefits are communicated and delivered by product
attributes such as quality, features and style and design.
 Product quality is one of the marketer’s major positioning
tools.
 The ability of a product to perform its functions, it
includes the products over all durability, reliability,
precision, ease of operation and repair, and other valued
attributes.

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Cont’d …
 Product quality has two dimensions level and consistency.
 In developing a product, the marketer must first choose a
quality level that will support the product’s position in the
target market.
 Beyond quality level, high also can mean high levels of
quality consistency.
 Here, product quality means conformance quality –
freedom from defects and consistency in delivering a
targeted level of performance.

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 Product features: A product can be offered with varying
features.
 The company can create higher level models by adding
more features.
 Features are a competitive tool for differentiating the
company’s product from competitor’s products.
 Being the first producer to introduce a needed and valued
new feature is one of the most effective ways to compete.

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 Cont’d …
 Product style and design – Another way to add customer value is
through distinctive product style and design.
 Style simply describes the appearance of a product. Styles can be eye –
catching or yawn producing.
 A sensational style may grab attention and producer pleasing

aesthetics, but it does not necessarily make the product perform

better.
 Unlike style, design is more than skin deep it goes to the very heart of a
product.
 Good design contributes to a product’s usefulness as well as to its looks.
 Good design begins with a deep understanding of customer needs.
 More than simply creating product or service attributes, it involves

shaping the customers product or service experience.

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Branding
 The AMA definition of a brand:
“A name, term, sign, symbol, or design, or a
combination of these, intended to identify
the goods or services of one seller or group
of sellers and to differentiate them from
the competition.”

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Branding
 The most distinctive skill of professional marketers is their
ability to build and manage their brands.
 Consumers view a brand as an important part of a product,
and branding can add value to a product. It helps buyers in
many ways.

 Brand names help consumers identify products that might

benefit them it also tell the buyer something about product
quality.

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A brand can deliver up to 5 levels of meaning.
1. Attributes – a brand first brings to mind certain product attributes eg.
Mercedes suggests such attributes well engineered, well built, high prestige fast and
high resell value.

2. Benefits – customers do not buy attribute, they buy benefits therefore attributes
must be translated in to functional and emotional benefits.
Eg. The attribute durable could be translated in to the functional benefit.

3. Values – a brand also says something abut the buyers values. Thus Mercedes
buyers value high performance, safety and prestige.

4. Personality – a brand also projects personality consumers might visualize Mercedes

automobile as being wealth middle aged business executives.
5. Users
6. Culture

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 Brand Decisions
 Brand identity decisions include:
 Name
 Logo
 Colors
 Tagline
 Symbol
 Consumer experiences create brand
bonding, brand advertising does not.

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 Brand Decisions
 Marketers should attempt to create or
facilitate awareness, acceptability,
preference, and loyalty among
consumers.
 Valuable and powerful brands enjoy high
levels of brand loyalty.

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 Brand Decisions
Key Challenges  Advantages of
branding:
 Facilitates order
 To brand or not processing
 Trademark protection
 Aids in segmentation
 Enhances corporate
image
 Branded goods are
desired by retailers and
distributors

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 Brand Decisions
Key Challenges  Options include:
 Manufacturer
 Brand sponsor (national) brand
 Distributor (reseller,
store, house,
private) brand
 Licensing the brand
name

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 Brand Decisions
Key Challenges  Strong brand names:
 Suggest benefits
 Suggest product
 Brand name qualities
 Are easy to say,
recognize, and
remember
 Are distinctive
 Should not carry poor
meanings in other
languages

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Brand Name Selection
 The brand name should be carefully choosing a good
name which can add greatly to a product success.
 It should suggest something about the products benefit and
quality. (suggest product qualities or benefits)
 It should be easy to pronounce, recognize and remember.
 The brand should be a translated easily in to foreign
language. (lack poor foreign language meanings)
 The brand should be distinctive. (are distinctive, but easy
to pronounce and remember)
 It should be capable of registration and legal protection. A
brand name cannot be registered if it infringes on existing
brand names.

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 Brand strategy
1. Line extensions:
Existing brand names extended to new forms, sizes, and
flavors of an existing product category.
2. Brand extensions
Existing brand names extended to new product categories.
3. Multi-brands:
New brand names introduced in the same product
category.
4. New brands:
New brand names in new product categories.

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 Brand Strategy

Product Category
Existing New
Brand Name

Existing Line Brand

Extension Extension

New
New Multibrands
Brands

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 Brand Decisions
Key Challenges  A brand report card
can be used to audit a
brand’s strengths and
 Brand repositioning weaknesses.
 Changes in
preferences or the
presence of a new
competitor may
indicate a need for
brand repositioning.

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Packaging
 Packaging: Includes the activities of designing and
producing the container or wrapper for a product.
 The package may include the products primary
container (the bottle or tube holding) and secondary
package that is thrown away when a product is to be
used.
 Packaging decisions were based primary on cost and
production factors.

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Packaging
 Developing an effective package:
 Determine the packaging concept
 Determine key package elements
 Testing:
 Engineering tests
 Visual tests
 Dealer tests
 Consumer tests

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Cont’d
 Traditionally, the primary function of the package
was to contain and protect the product.

 In recent times. However, numerous factors have

made packaging an important marketing tool.
 Increased competition and clutter on retail store
shelves means that packages must now perform
many sales tasks – from attracting attention, to
describing the product, to making the sale.

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Cont’d
 Companies are realizing the power of good packaging
to create instant consumer recognition of the
company or brand.
 In this highly competitive environment the package
may be the seller’s last chance to influence buyers.
 Innovative packaging can give a company an
advantage over competitors.
 In contrast poorly designed packages can cause
headaches for consumers and lost sales for the
company.

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Labeling
 Labeling: Labels may range from simple tags attached to
products to complex graphics that are part of the package. They
perform several functions.
 At the very least, the label might also describe several things

about the product that made it, where it was made, when it
was made, its contents, how it is to be used, and how to use
it safely.
 Finally the label might promote the product through attractive

graphics.
 Labeling has been affected in recent times by unit pricing

(stating the price per unit of stand is measure), Open daring

(stating the expected shelf life of the product) and nutritional
labeling (stating the nutritional values in the product)

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Labeling
 Labeling functions:
 Identifies the product or brand
 May identify product grade
 May describe the product
 May promote the product
 Legal restrictions impact packaging for
many products.

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Product Support Services
 A company’s offer usually includes some support services,
which can be a minor or a major part of the total offering.

How?
 Step 1. Survey customers to determine satisfaction with
current services and any desired new services.
 Step 2. Assess costs of providing desired services.
 Step 3. Develop a package of services to delight customers
and yield profits.

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 Characteristics
Characteristicsof
of Services
Services

Intangibility Can’t be seen, tasted, felt, heard,

Intangibility or smelled before purchase.

Inseparability
Inseparability Can’t be separated from service
providers.
Variability
Variability Quality depends on who provides
them and when, where and how.
Perishability
Perishability Can’t be stored for later sale or use.

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Marketing Strategies for Service Firms
 Managing Service Differentiation
 Develop offer, delivery and image with competitive

advantages.
 Managing Service Quality
 Empower employees

 Become “Customer obsessed”

 Develop high service quality standards

 Watch service performance closely

 Managing Service Productivity

 Train current or new employees

 Increase quantity by decreasing quality

 Utilize technology

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 Product-Line Decisions
 Product-Line Analysis
 Product-Line Length
 Product-Line Modernization, Featuring

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Product Line Decisions
 Beyond decisions about individual products and
services, product strategy also calls for building a
product line.
 A product line is a group of products that are
closely related because:
 they function in a similar manner,
 are sold to the same customer groups
 are marketed through the same types of outlets, or fall
within given price ranges

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 The Product and Product Mix
 A product mix (assortment) is the set of all product lines and
items that particular seller offer for a sell.
A company product mix has 4 important dimensions:
 The width – number of different product lines the company

carries.
 The length of the product – total number of items the

companies carry.
 Depth – refers to the number of versions offered of each

product in the line.

 The consistency – refers to how closely relate the various

product lines are in end use, production requirements

distribution channel or in some other ways.

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 Product
ProductLine
LineDecisions
Decisions

Product
Product Line
LineLength
Length
Number
Numberof
ofItems
Itemsin
inthe
theProduct
ProductLine
Line

Stretching Filling
Lengthen beyond Lengthen within
current range current range

Downward

Upward
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 Product
ProductMix
MixDecisions
Decisions
Width
Width -- number
number
of
of different
different
product
product lines
lines

Length
Length -- total
total Product
Product MixMix --
Consistency

number
number of of items
items all
all the
the product
product
within
within the
the lines
lines lines
lines offered
offered

Depth
Depth -- number
number of of
versions
versions of
of each
each
product
product

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New product developments strategy.

 A firm can obtain new products in two ways

acquisition by buying a whole company, patent of
license to produce some one else’s product.

 The other is through new product development in the

company’s own research and development.

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New Product development

 Products that are really innovative- truly

unique.
 Replacements for existing products that are
significantly different from the existing goods.
 Imitative products that are new to a
particular company but not new to the
market.

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Importance of Product innovation

 The Justification of a Firms Existence

 Maximum Use of Resources.
 Product is a Basic Profit Determinant
 New Products are Essential for Growth

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 New Product Development Process
 idea generation & screening
 concept development and testing
 marketing strategy development
 business analysis
 product development
 market testing
 commercialization

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 1. Idea generation:
 the systematic search for new product Ideas Company typically has
to generate many ideas in order to find a few good ones.

 Major sources are internal idea sources (through formal

research and development it can pick of the brains of its
executives, scientists, engineers, manufacturing staff and sales
people).

 And external idea sources (ideas come from watching and

listening to customers. The company can analyze customer
questions and complaints to find new products that better solve
customer problems).

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2. Idea Screening
 Screening new product ideas in order to sport good
ideas and drop poor ones as soon as possible.
Product development costs rise greatly in later stages
the company wants to go ahead only with the
product ideas that will turn into profitable products.

 This is based on target market competition, markets

size, product price, development time and costs,
manufacturing costs and rate of return

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3. Concept Development and Testing.

An attractive idea must be developed in to a product concept. It is

important to distinguish between a products that the company can
see itself offering to the market.

A product concept is a detailed version of the idea stated in

meaningful consumer terms. A product idea is an idea for a
possible product that the company can see it self offering to the
market. Concept testing new product concepts with a group of
target consumers to find out if the concepts have strong consumer
appeal.

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4. Marketing strategy development.

 Designing an initial marketing strategy for a new product

based on the product concept.

 These are describes the target market; the planned

product positioning; and the sales, market share, and
profit goals for the first few years.

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5. Business analysis:
are views of the sales, costs, and profit projections for a
new product to find out whether these factors satisfy
the company’s objectives.
To estimate sales, the company might look at the sales

history of similar products and conduct surveys of

market opinion. It can then estimate minimum and
maximum sales to assess the range or risk.

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6. Product Development:
 developing the product concept into a physical product in order
to insure that the product idea can be turned into a workable
product.
 The R & D dept will develop and test one or more physical
versions of the product concept.

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7. Test Marketing:
The stage of new product development in which the
product and marketing program are tested in more realistic
market settings.

Test marketing gives the marketer experience with

marketing the product before going to the great expense of
full introduction.
It lets the company test the product and its entire

marketing program positioning strategy, advertising,

distribution, pricing, branding and packaging and budget
levels.

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8. Commercialization:
 Introducing a new product into the market. The
company launching a new product must decide on
timing, where to launch full nation or international
market.

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Cont’d
 Challenges in creating new products
 idea shortage; fragmented markets
 social & governmental constraints; cost
 capital shortage; need for speed; short PLC

 Why new products fail

 overestimated demand; poor design
 poor marketing execution; high development costs
 strong competitive reaction

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Product Life Cycle and its Management

 Products are created, they live and then they die.

This link is called the product life cycle.
 The length of duration in the product life cycle is not
the same for all products.
 The basic product life cycle consists of four major
stages: introduction, growth, maturity, and decline.
 Let alone the product life cycle as a whole, a single
stage may also be different for different products.

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Cont…
 However, regardless of the type of product, the
product life cycle is applicable in all new products.
 Factors, which affect the length of a product life
cycle include customer preferences, seasons,
technological changes, competition, and the
rate of acceptance of consumers for new ideas.

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Sales and Profit Life Cycles

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PLC cont....
 Introduction-
 slow sales growth, high cost (marketing

expenses), net losses, limited distribution outlet

and absence of competition
 Growth-
 rapid sales and profit rise.

 attract competitors
 distribution outlets are increased

 Profit decrease at the end

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Cont…
 Maturity
 sales continue to increase but at a decreasing rate.

 While sales are leveling, profits are declining.

 It is marked by stiffening competition accompanied by

increased marketing expenses used to defend the

product against fierce price competition.
 Competitors heavily promote their brands using subtle

differences because supply exceeds demand making

demand simulation essential.
 Introduction of a new product is expected.

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Cont…
 Decline
 Sales reduction

 Profit decline more than ever

 Consumers Shift to other newly introduced

products
 Withdrawal of competitors

 Promotional expenditures drop off

 Cost control becomes an important marketing tool

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 Thank you for your
attention!

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