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An ISO 9001:2008 Certified Organization
MS 63
PRODUCT MANAGEMENT
An ISO 9001:2008 Certified Organization
BLOCK 1
INTRODUCTION
© Copyright PCTI Group 2009 | | <document classification>
Objectives for product management
• Identify the various characteristics of products.
• Learn how companies build and manage product lines and mixes.
• Understand how companies make better brand decisions.
• Comprehend how packaging and labeling can be used as marketing tools.
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What is a Product?
• Goods
• Services
• Experiences
• Events
• Persons
• Places
• Properties
• Organizations
• Information
• Ideas
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The Product and Product Mix
• Potential customers judge product offerings according to three elements:– Product features and quality– Services mix and quality– Value-based prices
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The Product and Product Mix
• The customer value hierarchy:– Core benefit– Basic product– Expected product– Augmented product– Potential product
© Copyright PCTI Group 2009 | | <document classification>
The Product and Product Mix
ProductClassifications
• Durability and tangibility• Consumer goods• Industrial goods
• Nondurable– Tangible – Rapidly consumed– Example: Milk
• Durable– Tangible – Lasts a long time– Example: Oven
• Services– Intangible– Example: Tax preparation
© Copyright PCTI Group 2009 | | <document classification>
Consumer Products …Consumer Products … end users. end users.
Durable & Non Durable Consumer Durable & Non Durable Consumer ProductsProducts
Durable Durable goodsgoods
ServicesServices
Non durable Non durable goodsgoods
© Copyright PCTI Group 2009 | | <document classification>
Consumer Product Goods ClassificationConsumer Product Goods Classification
ConvenienceProducts Shopping
Products
SpecialtyProducts
Is based on Level of Effort expended
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CONVENIENCE GOODSCONVENIENCE GOODS
Convenience goods – consumers use minimal effort for frequently purchased low cost items
StaplesStaples - goods purchased on a regular basis (ex. milk, - goods purchased on a regular basis (ex. milk, eggs)eggs)
Emergency goodsEmergency goods - purchased when the need is urgent - purchased when the need is urgent (ex. umbrella, boots)(ex. umbrella, boots)
ImpulseImpulse purchases – no conscious pre planning purchases – no conscious pre planning
MILK
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Shopping ProductsShopping Products
Shopping goodsShopping goods - consumers make - consumers make a considerable effort to evaluate …a considerable effort to evaluate …
Consumers make product comparison(s), They seek information before purchase, they are not impulsive
Moderate substitutions are made Product’s last a considerable time
Monetary & social costs may be high
© Copyright PCTI Group 2009 | | <document classification>
Specialty ProductsSpecialty Products
Specialty goodsSpecialty goods - consumers make a significant - consumers make a significant effort to acquire the desired brand.effort to acquire the desired brand.
• infrequently (seldom) purchasedinfrequently (seldom) purchased
• relatively expensiverelatively expensive
• little or no substitutionlittle or no substitution
• High involvement, well informed consumersHigh involvement, well informed consumers
• High “visibility” to “others”High “visibility” to “others”
•
© Copyright PCTI Group 2009 | | <document classification>
Consumer Behavior Product Classification Consumer Behavior Product Classification Market Strategy Market Strategy
• Market Coverage Product Category
• Intensive DistributionIntensive Distribution (convenience)(convenience)
• Selective DistributionSelective Distribution (shopping) (shopping)
• Exclusive Distribution Exclusive Distribution (specialty) (specialty)
© Copyright PCTI Group 2009 | | <document classification>
PRODUCT MANAGEMENT DECISIONS
• Product Mix Decisions
• Product Innovation/Modernisation Decision
• Product Line Pruning/Product Elimination/Product Phasing Decisions
• New Product Decision/Diversification Decisions Branding and Packaging Decision
• Branding and Packaging Decision
• Product Mix Decisions
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PRODUCT MANAGER'S MANAGEMENT
SYSTEM SCOPE • Management Tasks • Marketing Decisions • Budget and Marketing Plans
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© Copyright PCTI Group 2009 | | <document classification>
Changing role of Product Manager
• Changes in the number and type of elements
• Changes in the number of product manager
• When changes occur in the resources or support services required for the marketing elements
An ISO 9001:2008 Certified Organization
BLOCK 2
MANAGING PRODUCTS
© Copyright PCTI Group 2009 | | <document classification>
The Product Mix
• A company’s assortment of product lines and individual offerings– Product Width--the number of product lines
offered.
– Product Length--the number of different products a firm sells.
– Product Depth--variations in each product that a firm markets in its mix.
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• Product Mix - the total group of products offered Product Mix - the total group of products offered consistencyconsistency: relatedness of items : relatedness of items
Product mixProduct mix
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Product lineProduct line
LAMPSLAMPS•TableTable•CeilingCeiling•TrackTrack•DeskDesk
Product Line - a group of closely related productsa group of closely related products
Product Line Decision
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Product Line Decision
Bases for product line extension
• Customer Segmentation
• Consumer Desires
• Pricing Breadth
• Excess capacity
• Short term gain
• Competitive intensity
• Trade pressure
© Copyright PCTI Group 2009 | | <document classification>
Disadvantages of Line Extension
• Weaker Line Logic • Lower Brand Loyalty • Underexploited Idea • Stagnant Category Demand • Poorer Trade Relations • More Competitor Opportunities • Increased Costs
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FACTORS INFLUENCING PRODUCT LINE
DECISIONS • Category Size • Market Growth • Product Life Cycle • Sales Cyclicity • Seasonality • Profits
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• Product Mix DecisionsProduct Mix Decisions – A firm may lengthen or widen its product mix– A Company may decide to add variations that
will attract new users– A product may be pruned or altered, and new
product may extend the product life cycle– Line extension: introduction of a new
product that is closely related to other products in the firm’s existing line
© Copyright PCTI Group 2009 | | <document classification>
The Product Life Cycle
• Product life cycleProduct life cycle: progression of products through introduction, growth, maturity, and decline stages
© Copyright PCTI Group 2009 | | <document classification>
Introduction Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awareness and trial
Create product awareness and trial
Offer a basic productOffer a basic product
Use cost-plus Use cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
AdvertisingAdvertising Build product awareness among early adopters and dealers
Build product awareness among early adopters and dealers
© Copyright PCTI Group 2009 | | <document classification>
Growth Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer product extensions, service, warranty
Offer product extensions, service, warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Build intensive distributionBuild intensive distribution
AdvertisingAdvertising Build awareness and interest in the mass market
Build awareness and interest in the mass market
© Copyright PCTI Group 2009 | | <document classification>
Maturity Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitors
Price to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress brand differences and benefits
© Copyright PCTI Group 2009 | | <document classification>
Decline Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profits
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outlets
Go selective: phase out unprofitable outlets
AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers
© Copyright PCTI Group 2009 | | <document classification>
Extending the Product Life Cycle
• Marketers usually try to expand each stage of the life cycle for their products as long as possible
• Product life cycles can stretch indefinitely as a result of decisions designed to:– Increase the frequency of use by current
customers– Increase the number of users for the product– Find new uses– Change package sizes, labels, or product quality
© Copyright PCTI Group 2009 | | <document classification>
Product Deletion Decisions
• Product lines must sometimes be pruned and marginal products eliminated
• This decision is typically faced during the late maturity and early declined stages of the product life cycle
• An unprofitable item may be continued in order to provide a complete line for customers
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Product Portfolio
A business portfolio is the collection of Strategic Business Units that make up a corporation. The optimal business portfolio is one that fits perfectly to the company's strengths and helps to exploit the most attractive industries or markets.
A Strategic Business Unit (SBU) can either be an entire mid-size company or a division of a large corporation, that formulates its own business level strategy and has separate objectives from the parent company.
© Copyright PCTI Group 2009 | | <document classification>
The aim of a portfolio analysis is: 1) Analyze its current business portfolio and decide
which SBU's should receive more or less investment, and
2) Develop growth strategies for adding new products and businesses to the portfolio
3) Decide which businesses or products should no longer be retained.
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BCG Matrix
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General Electric (or McKinsey) matrix uses market attractiveness as not merely the growth rate of sales of the product, but a a compound variable dependent on different factors influencing the future profitability of the business sector.
These different factors are either subjectively judged or objectively computed on the basis of certain weights, to arrive at the Market Attractiveness Index. The Index is thus based on a thorough environmental assessment influencing the sectoral profitabilities.
© Copyright PCTI Group 2009 | | <document classification>
PRODUCT PRICING
• FACTORS INFLUENCING THE PRICING DECISIONS
• Objective • Other Components of Marketing Mix • Product Life-Cycle • Skimming Pricing • Penetration Pricing • Costs• Fixed costs • Variable costs
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• Economies of Scale
TYPES OF PRICING
• Cost-Plus Pricing
• Target Profit Pricing
• Perceived Value Pricing
• Going Rate Pricing
• Bid Pricing
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DISCRIMINATORY PRICING
• Customer-Based
• Product-Based
• Place-Based
• Time-Based
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STRATEGIC SIGNIFICANCE OF PRICING
• Competitive Edge
• Optimizing Profits
• Increasing Captive Consumption
An ISO 9001:2008 Certified Organization
BLOCK 3
BRANDING & PACKAGING DECISION
© Copyright PCTI Group 2009 | | <document classification>
Branding Decisions
Branding is
• a process
• a tool
• a strategy
• an orientation • a brand could be a word, term-sign or symbol
that identifies and distinguishes one product from another
© Copyright PCTI Group 2009 | | <document classification>
Strategic Relevance of Branding
• Brand as a tool to segment the market • Brand starts-with an idea • Brand has an enduring value • Brand helps protect innovation • Brand sustains though product may die
• Brand a living memory
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Branding Policy Decisions
• Manufacturer Brand Policy • Family Branding • Independent Branding • Distributors Brand Policy • Mixed Brand Policy
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Brand Name Selection Process
• Step I- Preparing checkpoints for the different values to be contained in the name
• Step II-A faking a search for names
• Step III-Assigning differential ratings to the names formulated
• Step IV - Quadrivalent analysis for separating undesirable names from desirable ones and measuring the marketing potency of the different names
• Step V-The final choice
© Copyright PCTI Group 2009 | | <document classification>
How to Build a Brand?
• Inputs – Identification of key customer groups or segments. – Understanding customer expectations needs and
aspirations. – Assessing competitive offering including substitutes. – Building customer confidence by
• customizing the product. • establishing key image of the brand. • dealer support-easy availability and push. • innovative communication and promotion schemes, and elegant
packaging – Total brand management-both hardware and software
aspects.
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• Outcome – Market share – New customers attracted – Customer loyalty index – Increased profitability – Brand knowledge
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• Assessment – Continuous feedback from customers as well as trade
channels – Scientific inquiry into customer satisfaction
determining • who is the customer and profile of the target segment, • what constitutes customer satisfaction, designing the scale to
measure customer satisfaction, • measuring current levels of customer satisfaction, and • trend analysis and pointers for management of customer
satisfaction.
• Brand Strength
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Dimensions of Brand Image
• Appeal to reason
• Appeal to senses
• Appeal to emotion
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Consideration in Branding of a Commodity
• Offering sufficient value to the customer to induce change from a commodity to a branded option.
• Role and degree of consumer involvement in buying decision
• Segmenting the market, selecting a target segment and positioning of the product to match with the target segment characteristics.
• Communicating price-quality position offering sufficient turnover and long term growth.
• Setting and controlling distribution. • Selecting suitable packaging. • Channelising marketing investment
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Product Positioning
• The term product (brand) positioning refers to the place a product occupies in a given market
• Positioning Strategies
• Market Segmentation Considerations
• Market Segmentation Considerations
• Positioning for specific usage occasions
• Positioning for user category
• Positioning against another product
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• Product class dissociation
• Hybrid bases
• Tools for Positioning Decision Making • Attribute Rating Method
• Overall Similarity-based Method
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Positioning: Product Differentiation: Market Segmentation
• Positioning Creates Product Differentiation
• Product Differentiation Helps Positioning • When you talk to a group- it becomes a segment • Intensity increases with narrow targets- segmentation
and fragmentation • Same product can be positioned differently for
different segments • Rematching Product to position • You Need a New Position-when you invade into
another product category to expand your market.
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Brand Equity
• a brand as a name, term, sign, symbol, or design, or a combination of these, used to identify the product and services of a company.
• David Aaker specifies five levels of attitudes towards a brand.
1) No brand loyalty; due to price differential customer will switch brands
2) No reasons to switch the brand; consumers are overall satisfied
3) Customers are satisfied with the brand, and would incur cost by switching the brand
4) Customers relate themselves with the brand 5) Customers are devoted to the brand
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• brand equity as a set of assets (liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by product or service to a firm and/or that firm's customers.
• assets of a brand are brand name awareness, brand loyalty, perceived quality, and brand associations
© Copyright PCTI Group 2009 | | <document classification>
Brand Equity measurements
• Price premium• Customer satisfaction• Perceived quality• Popularity and leadership position• Brand value• Brand personality• Organisational association• Brand awareness• Market share• Market price and distribution coverage
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How Brand Equity is created
• Strength of brand association
• Favourable brand association
• Unique brand associations
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Building brand equity
1. Choice of brand elements that makeup the brand.
2. Developing and implementing marketing support programs.
3. Leveraging secondary associations by linking the brand to other entities
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Packaging Decision
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Functions of Packaging
• Protection• Differentiation• Packaging for promotion• Packaging for pricing• Packaging for convenience
© Copyright PCTI Group 2009 | | <document classification>
Packaging Strategies
• Changing the package
• Packaging the product line
• Reuse Packaging
• Mutiple Packaging
An ISO 9001:2008 Certified Organization
BLOCK 4
NEW PRODUCT DEVELOPMENT
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Organising for Product development
• New Product Development at the Corporate Level
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• New Product Development at the Divisional Level
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New Product Development at the Operating Level
1) New Product Development in Functional Department
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2) New Product Development Responsibility of Product
Manager
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Structural units for New product development
• New product department• New product committee• Ad hoc committee• Task force• Venture team
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Causes of New Product Failures• Overestimation of Market Size• Product Design Problems• Pro-Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or Advertised• Costs of Product Development• Competitive Actions To create successful new products, the company must:
– understand it’s customers, markets and competitors – develop products that deliver superior value to customers.– duct Incorrectly Positioned, Priced or Advertised
• Costs of Product Development• Competitive Actions To create successful new products, the company must:
– understand it’s customers, markets and competitors – develop products that deliver superior value to customers.
© Copyright PCTI Group 2009 | | <document classification>
New Product Development Process
• Idea Generation and Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development• Test Marketing• Commercialization
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New Product Development ProcessStep 1. Idea Generation
Internal sources• Top management
executives • Sales personnel• Production
department• Employee suggestion
system
External sources• Competitive products• Customers• Consultants• Advertising agencies• Distribution channel
© Copyright PCTI Group 2009 | | <document classification>
Methods of generating new product ideas
• Individual techniques• Attribute listing• Heuristic ideation
technique• Forced relationship• Transfer analysis
• Group techniques• Brainstorming• Focus group• Interviews• Synectics
© Copyright PCTI Group 2009 | | <document classification>
New Product Development ProcessStep 2. Idea Screening
• Process to spot good ideas and drop poor ones• It is an elimination technique• Reducing the large number of ideas into
profitable one• Criteria
• Market Size• Product Price• Development Time & Costs• Manufacturing Costs• Rate of Return
© Copyright PCTI Group 2009 | | <document classification>
New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas into Alternative
Product Concepts
1. Develop Product Ideas into Alternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One3. Choose the Best One
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New Product Development ProcessStep 4. Marketing Strategy Development• Marketing Strategy Statement Formulation
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
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New Product Development ProcessStep 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If Yes, Move to Product Development
If No, Eliminate Product Concept
If No, Eliminate Product Concept
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New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
An ISO 9001:2008 Certified Organization
BLOCK 5
IMPLEMENTING NEW PRODUCT DECISION
© Copyright PCTI Group 2009 | | <document classification>
Concept Development And Testing Concept generation mechanism• Problem based ideation
This approach emphasis on the needs and problems of stakeholders by systematically analyzing the internal documents of the company, interviews of the stakeholders , from group discussion and market research
• Attribute Based Ideation• This method employs forced change of all the
possible attributes of a product and attempts to discover innovative product
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Concept Testing
• It considers consumer acceptance
• Positive response leads to product development
• Negative response lead to either drop the product or reconsider with some modifications
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Test Designs Two types of tests are used for concept testing• Monadic test• Competitive test
Data Collection
Four kinds of data can be collected from the respondents
• Purchase intention measure• Product attribute diagnose• Product diagnostic information• Respondents profile information
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Physical Development of the product
• Product Architecture is the arrangement of the functional elements of a product into physical blocks
• It consists of sketches,function diagrams and proof of concept prototypes
• The purpose is to define the basic physical building blocks of the product
• A product can be thought of in functional as well as physical terms
• Physical elements are the parts, components and subassemblies
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Implications of Architecture
• Product change
-Upgradation
-Ad-ons
-Adaptation
-Wear and Tear
-Consumption
-Flexibility
-Reuse
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• Product variety
• Component Standardisation
• Product performance
• Manufacturability
• Management of product architecture development
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Industrial Designing in product development
• Industrial design is professional service of creating and developing concepts and specifications
• Goals to achieve wile developing new product• Utility• Appearance• Ease of maintenance• Low costs• communication
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Importance of Industrial design• Ergonomic needs
-ease of use
-ease of maintenance
-user of interactions
-novelty of user interaction needs
-safety in usage• Aesthetic Needs
-product differentiation
-pride of ownership,image and fashion
-motivation to industrial designers
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Process of industrial design development
• Generating information about customer needs
• Conceptualization
• Product concept refinement
• Concept screening and selection
• Developing control drawings
• Integrating different functions like engineering, manufacturing and vendors
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Product Prototyping
• Prototype is an approximation of the product along one or more dimensions of interest
Types of prototype
• Physical prototype
• Analytical prototype
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Uses of prototype
• Learning
• Communication
• Integration
• Milestones
• A prototype may reduce the risk of costly iterations
• It may restructure task dependencies
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Concurrent Engineering• The method to minimise time loss,
minimise unnecessary expenses and increase interdepartmental cooperation
• It is the systematic approach to the integrated, concurrent design of products and related processes including manufacturing and support
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Pre test marketing and Test marketing
• It is an expensive and time consuming process
• The attempt is to stimulate the key factors of an actual market condition of a new product introduction to act upon the potential consumer, in a controlled condition
• It reflects the current market competition situation
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Various models are used for the test marketing
• Assessor model
• Preference model
• Trial repeat model
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Test Marketing
• Generally it is used for the frequently purchased FMCG
Objectives are• To obtain the best estimates of sales volume
and market share • Marketing mix elements• Only opportunity to evaluate the entire marketing
strategy• It is like a dress rehearsal, time to streamline
manufacturing, selling and delivering the products to consumers
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Issues in Test marketing
• Designing Test market
• Duration of Test Marketing
• Design of experiments
• Data collection from test markets
• Store audits
• consumer survey
• Diary panel
• Analyzing test marketing data
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Product Launch
• It is the last step in new product development
Types of new product• New for the mankind• New for the country• New for the industry• New product in a product category• New product in product class• New product for the company
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The Marketing Plan
• Setting objectives for new products
• Situation analysis
• The market analysis it includes
• Market overview
• Segment overview
• Consumer overview
• Competition overview
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• Internal analysis is the assessment of the company’s resources with reference to the new product one should analyse
• The sales force
• Promotional set up
• Distribution system
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Selecting Target Market
• On the basis of
• Segment attractiveness
• Ease of access
• Degree of fit
• Competitive situation
• Relative advantage
• Profitability
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Pricing the new product
• Pricing strategies are
• Skimming pricing
• Penetration pricing
Factors affecting price
• Demand for the new product
• Costs
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Significance of Promotion
• Awareness
• Interest
• Evaluation
• Trial
• Adoption
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Promotion mix
• Advertising
• Publicity
• Sales promotion
• Personal selling
Budgeting for promotion
• Budgeting for Advertising
• Budgeting for sales promotion