Product management

Conceptual Framework

What is a marketing offer?

All physical products contain a service however

all services may not contain physical products

Information

Persons

(CMIE)

Events
Goods

Ideas

Places

(software codes)

Services
Properties
(stocks / bonds)

Experience
(Walt Disney)

Low

High

Intangibility

Levels of the product

Augmented
product
Expected
product

Generic
product
Core
product

Degrees of
product
differentiation

Components of the marketing offer

Value

Valuebased
based
Value
prices
prices

Price

Value of
the
marketing
offer
Products
Products
features & quality
features & quality

Services Mix
Services Mix
& quality
& quality

illustrative

Product hierarchy for Insurance Products

Brands like
Prudential, Peerless
etc..
Product type : A group of items within a product line
that share one of several possible forms of the product.
Example: term life for Life insurance .

Product line: A group of products within a

product class that are closely relatedInsurance products only

Product class: A group of products within the

product family with functional coherence.
Example: financial instruments only.

Product family: All the product classes that can

satisfy a core need with reasonable effectiveness
(savings instruments, Insurance, Bank lockers etc..)

Need family: The core need that

underlies the existence of a
product family. Example: security

Abstract

Evolution

Concrete

HLL perspective

Product assortment

Product dynamics

Breadth

Length

Depth

Number
Number of
of

Total
Total number
number
of
of items
items the
the
company
company
carries
carries

Number
Number of
of
versions
versions
offered
offered of
of
each
each product
product
in
in the
the line
line

Closeness
Closeness of
of
end
end use,
use,

HLL:
Toothpaste
has close-up
as a brand
with Blue and
Red variants

HLL:
Detergent
manufacturing
process is the
same for all
brands

different
different
product
product lines
lines

HLL:
Detergents,

HLL:
Detergents

cosmetics,
Toiletries,

category, Surf

Food etc..

& Wheel

Consistency

production
production
etc.
etc.

The new breed of winners

How does the product portfolio look?

Business growth for the

portfolio

Low to Average Growth

High Return
Profit Maximizers

High Growth

Value Capturers

Returns to
Investment

Stalled Businesses
Low to Average
Return

Empty Revenue Growth

Strategy

Planning for growth

Markets
Existing

Existing

New

Market
penetration

Market
development

Product
development

Diversified
growth

Products

New

As a product manager there are several options one can look at to augment size of
business

The product life cycle

A typical flow

Sales and
Profits (Rs)
Sales

Profits

Introduction

Growth

Maturity

Product
Development

Time
Losses/
Investments (Rs)

Decline

Portfolio Analysis for a FMCG company

20

Cosmetics

18

Perfumes

Cosmetics

16

Market Growth @

14
12

Beauty clinics

10

Perfumes

Body deodorants

Beauty
clinics

6
Hair grooming

Body deodorants

Hair grooming

Soaps
10x

2.5x

Soaps
2x

1.5x

1x

0.4x

0.3x

0.2x

Relative Market
Share

2008

2005

0.1x

Some critical product line decisions

Upward stretch

Price

Strategy

Why upward Stretch ?

1. Growth (volume)
2. Value Growth (higher ROI)
3. Blocking the higher end
segments (preemptive strategy)

Line filling
Why Line filling ?
1. The company may close all price
points for competitive entry
2. The company may capture buyers
with marginal price sensitivity

Downward stretch
Why Down market Stretch ?

Value in the product

1. The company may notice strong

growth opportunities
2. The company may wish to tie up
lower-end competitors who might
otherwise try to move up-market
3. The company may find that the
middle market is stagnating or
declining

What are new products?

New-to-theworld
products
(Iridium)

Additions to existing
product lines
(Extending length of
the line thro
variants)

Re-positioning
(Liril)

New product lines

which are new to
company
(Diversification)
Reliance Power

Improvements and
revisions of
existing products
(Product upgradesLaptops)

New Product Strategy is in three parts

Product Effectiveness

Growth for the firm occurs through product

Innovation

Imitation

Improvement

Imitation

Maxima Watch

Anchor
Toothpaste

Innovation

Improvement

Titan Flip

Time

New products adoption is affected by the rate of innovation and the rate of imitation

Box and Arrow Model for new product diffusion

Fixed
Population Size

Innovators
(Buyers)

Innovators
Influence
Imitators

Imitators
(Buyers)

Timing of Purchases by
Imitators

Timing of Purchases by
Innovators

Pattern of Sales Growth

of New Product

Graphical Model

dxt = (a + bx )(N x )
t
t
dt

Cumulative Sales
of a Product
Fixed
Population Size

Time

xt

Total number of people who

have adopted product by time t

Population size

a,b

Constants to be determined.
The actual path of the curve will
depend on these constants

Trial / Repeat Model

Target Population (N)

Aware?

50%
Available?

80%
Try?

40%
Repeat?

50%
Market Share

8%

Rates of activity that

decide market share

Model Diagnostics

Trial rate
Low

High

High

Improve to
Prospect

Dominate

Shape up or
Ship out

Introspect to
Improve

Repeat

Low

Trial Dynamics

Market fact
You never get
everyone to try

100%

% Population
Trying (Trial)

Time

X Repeat Dynamics

100%

% Repeaters
Among Triers
(Repeat)

Note late triers

often do not become
regular users

Time

= Share Dynamics!

100%
Market share movement over
time

Share =
(Trial x Repeat)

Time

Market testing the brand offer

A simple estimation of the market adoption and trial rate

A model or trial and repeat or replacement sales

Target Market ( # TM)

Product Class Buyers ( # PCB)

Potential Triers ( # PT)

The part of the market

to whom the market plan
is directed

The group of buyers who are

expected to buy the
firms product

The group of buyers who like

the firms product and will try it
given the knowledge and
availability # PT = P X # PCB
where P is the % of PCB

Cumulative Trial Rate ( CTR t )

Triers ( # Tt )

Maximum No. of Triers ( # Tmax )

At any point in time or

cumulative level of market
spending the number of
people that has tried the
product

The largest number of

buyers who
make a trial purchase
of the product

The % of people in # PCB who

have tried the product by the

t
CTRt = P X (At, Dt)
end of period

Cumulative trial rate is

function of product
preference, awareness At
and distribution Dt

#Tt = CTRt X # PCB

# indicates number of individuals

t subscript indicates the time period

Division of the target market

#TM

100
#PCB

Target
market

Product class
buyers

100

Offers lost
purchasers (OLP)
# OLP = (1-P) X PCB

100

#PT
Potential Triers
# PT = P X # PCB

100
#Tmax

#T = {a + bP *(A,D)} *BASE

P share can be computed on any BASE

when used to compute # T . It could be
either
#TM, #PCB,#PT or #Tmax

Time or Cum.
market spent
A = Share of adequately aware
D = Share of distribution support
P = share of buyers who prefer the product
over competing products

The break up of the variables in the trial rate estimation and cumulative trial rate

#Tt = CTRt X # PCB

Cumulative
Trial rate

CTRt = P X (At, Dt)

CTR max = P X A max X D max

Time

Advertising
Min

Max

ITRt

Max

Lost
opportunity

Max index of
Trial rates

Distribution
Min

CTRt - CTRt - 1

ITRt = Incremental Trial Rate

CTRt = Cumulative Trial rate at t

Min index of
Trial rates

Lost
opportunity

CTRt - 1 = Cumulative Trial rate at t - 1 period

Sustainable product competitiveness, branding and more

Frame work for analysis : Comparative analysis of quality and price

Kenichi Ohmae Mind of the strategist

Product Change Options after Competitive Teardown- Kenichi Ohmae

No excuse

Closer examination
Expensive

Inferior quality

Cover it up

Superior quality

Cheaper

Leave it alone

How Do You Best Obtain a Sustainable Competitive Advantage?

Achieve differentiation in the product

delivery attributes:
Price, Quality, Aesthetics,
Functionality, Availability, Consumer
Awareness, Visibility, Service

The basis of differentiation

Reputation for Quality

Positioning Gaps:

Customer Service / Product

Support
Name Recognition thro
Corporate branding

Product Reputation,
Consumer Awareness

Achieve differentiation on the key buying

attributes:
Laptop configuration is a critical attribute
Others are marginal as : Battery Life, Bag ,
length of chord on adapter etc.

Creating reputation

Branding

A brand is name, term, sign, symbol or design or a combination of them used to signal
value and differentiate offerings

Corporate brands

Product brands

Tata,
Fevicol from

L&T etc

Pidilite
Umbrella brands

Single brands

Multi brands

Lux, Dove , Liril

all brands of soap
from Hindustan Lever

Park Avenue for

personal
grooming products

Compelling reasons to brand ...

Short term
performance
orientation

Difficulty
Difficulty in
in
differentiation
differentiation

Mature
Mature market
market
(Price
key
(Price key variable)
variable)

More
More sophisticated
sophisticated
&
&
increasing
increasing
competition
competition

Brand differentiation can happen anywhere on these parameters

Monopoly products

High
uniqueness

(Intel)

Jointly optimized
products Banking ,
Insurance

Product uniqueness

CRM based products

Local hotels /food &
drink joints

Low
uniqueness

Hig
h

Low

Customer relationship management

(Service levels)

Some typical product organizations...

Vertical product organizations

Product
Manager
Assistant
Product
manager

Triangular product
organizations

Product
Assistant

Product
Manager

Research
Manager

Communication
Manager

Some typical product organizations...

Common Pool

Horizontal product
management team

Research
manager

Communication
manager

Sales manager

Distribution
manager

Finance
manager

Du Ponts Model

Marketing manager

Specialized

Consumers
Home
furnishings
Nylon

Dacron

Product
manager

Products

Orlon

Rayon

Mens
wear

Womens
wear

Typical tasks of the Product / Brand Managers

- Developing a long-range competitive strategy for the product

- Preparing an annual marketing plan and sales forecast.
- Working with advertising and merchandising agencies to develop copy programs and
campaigns.
- Stimulating support of the product among the sales force.(Championing the product)
- Gathering continuous intelligence on the product's performance customer
and dealer attitudes etc.(Market research)
- Initiating product improvements to meet changing market needs

Case study of Kool Aid a soft drink

Strategic areas

New uses or user segments: Can Kool-Aid be made to appeal teenagers, young adult singles, young adult parents,
and so on?
Innovative product differentiation: Can Kool-Aid be made in different versions such as low calorie or super-sweet?
Add new product lines: Can Kool-Aid name be used to launch a new soft-drink line?
Stimulate nonusers: Can elderly people be persuaded to try Kool-Aid?
Stimulate light users: Can children be reminded to drink Kool-Aid daily?
Increase amount used on each occasion: Can more Kool-Aid be put in each package at a higher price?
Close existing product and price gaps: Should new sizes of Kool-Aid be introduced?
Create new product-line elements: Should Kool-Aid introduce new flavors?
Expand distribution coverage: Can Kool-Aid distribution coverage be expanded to Middle East and the Far East?
Expand distribution intensity: Can the percentage of convenience stores in West India that carry Kool-Aid be
increased from 70 to 90 percent?
Expand distribution exposure: Can offers to the trade win more space for Kool-Aid?
Penetrate substitutes positions: Can consumers be convinced that Kool-Aid is better than any other soft drinks?
Penetrate direct competitors position(s): Can consumers of any other brands be convinced to switch to Kool-Aid?

End of Deck

Product Strategies
Start of Deck 2

Product Strategies

The product strategies recognized are as follows:

Product-positioning strategy

Product-repositioning strategy

Product-overlap strategy

Product-scope strategy

Product-design strategy

Product-elimination strategy

New-product strategy

Diversification strategy

Product Strategies

Product strategies specify market needs that may be served by

different product offerings .

Product strategies deal with such matters as number and

diversity of products, product innovations, product scope, and
product design.

Product-positioning strategy

Conceptual

The term positioning refers to

Procedure
The desired position for a product

placing a brand in that part of

may be determined using the

the market where it will

following procedure

receive a favorable reception

Analyze product attributes

compared to competing

Examine the distribution of

these attributes among different

products

Positioning tells what the

market segments

product stands for, what it is,

and how customers should
evaluate it.

Determine the optimal position

for the product

Chose an overall position for

the product

Product-positioning strategy

Six
Six different
different approaches
approaches to
to positioning
positioning are
are .. ..
By
By attribute
attribute (monotone
(monotone -- Speed
Speed // Petrol
Petrol consumption
consumption // non
non monotonemonotone- colour
colour of
of car
car ))
By
By price/quality
price/quality equation
equation (Value
(Value for
for moneymoney- MUL
MUL 800)
800)
With
With respect
respect to
to application
application (( Iodex
Iodex for
for pull
pull // sprain
sprain // joint
joint pain)
pain)
By
By product
product user
user (Crayon
(Crayon pens
pens from
from Camlin
Camlin for
for Kids)
Kids)
With
With respect
respect to
to product
product class
class (Blue
(Blue tooth
tooth enabled
enabled mobile
mobile phones
phones as
as non
non Wi-Fi
Wi-Fi phones)
phones)
With
With respect
respect to
to aa competitor
competitor (Pepsi
(Pepsi v/s
v/s Coke)
Coke)

Product-positioning strategy

Positioning multiple brands

Positioning a single brand

Associate with a core segment in

a market where it can play a
dominant role
To seek entry into competitors
segment
- Dove the single skin brand

To seek growth by offering varied

products in different segments

To avoid competitive threats to a

single brand

Possibility of cannibalism
- Nokia phones in same product range

Product-repositioning strategy

Single scallop curve

Existing users

Sales
Repositioning
Blip

Repositioning

New users

Time

Can be required if:

Consumer preferences change (Liril over time)

Promising opportunities discovered (Dettol for 4 uses)

Mistake made in original positioning (Contessa repositioned 3 times in 2 years)

Product-overlap strategy

Price

Surfmatic

Surf excel

Refers to a situation where a

company decides to compete
against its own brand.
Product overlap
Surf

Perceived Quality
(Value)
Market expansion and better coverage are clear benefits for the marketer
to pursue a over lap strategy

Product-overlap strategy

Competing brands

The surf range of

detergents from HLL

Ways to operationalize
the strategy

Retailer brands
competing with
manufacturer brands

Private labeling

- Shoppers Stop
competing with
Stop with other
apparel wear

Product scope Strategy

Three types of Strategy

Single Product

Example

Protinex from Pfizer

is the only
health drink sold
by the company

Advantages

Operational
effectiveness
(scale economics)

Disadvantages

High risk
May not be effective
for growth

Multi product

Product system

Soaps from HLL

Gillette owns the

entire category of
shaving systems

Risk spread and

Monopolization of

cross subsidization

the market

May lack scale

Over spread in
single category may
increase risk

economics

Product-Design Strategy

s Value to buyer t

Type

Example

Standard
Products

Standard
Products With
Modifications

Customized
Products

No change in
basic offering

Basic offering with

additions

No predetermined
basic offering

Car

Toyota Qualis with

add -on
on the basic model

Car
Dilip Chabaria

MUL 800

Product-Elimination Strategy

Strategy

Activity

Harvesting

- Reduce advertising
expenditure
- Low key sales promotion
- Reduce the price and dump
- E.g. Godrej Type writers

Line simplification

Prune low sales models yet

maintain the product line
- M&M pruning Armada from
the SUV category

Total
Disinvestment

Pull out from business and

release cash and resources
for other portfolios
- L&T from cement

Why eliminate products?

Low profitability
Stagnant or decline in sales
volume
Obsolescence
(Technology failures - PUF for refrigerators)

Poor fit with the business units

strength

New Product Strategy

Improvement / Modification

Experience Curve Concept

(New product launch history &
learnings)
(3 M corporation - 25/4 rule)

Reasons for modification.

Maturity Stage.
4Ps employed by competitors are
more effective.

Types of strategies:
Improvement/Modification.
Innovation.

Frame work for analysis:

Comparative analysis of
quality and price.

Expensive

No excuse

Inferior

Closer examination

Superior

Cover it up

Leave it alone

Cheaper
Product Change Options
after Competitive Teardown- Kenichi Ohmae

Typical product areas for discussion

Product Newness

1. New to the world world product

2. Additions to existing product lines

Product
Newness

3. New product lines

4. Improvements in revisions of existing product
5. Repositioning
6. Cost reductions

Booze, Allen Hamilton - Product definitions for newness

Product Innovation

Degree of emphasis on innovation

Stages in product development

Idea generation.

Screening

Business analysis

Prototype

Test marketing

Commercialization

Market Opportunities
Low
Technical opportunities

Moderate

Heavy

High

Selective

Moderate

Low

High

Limited
support

R&D Effort Portfolio

Opportunity assessment is a continuous exercise in growth

New product development process and delivery

Sales

Time

Product
development
Quality function
deployment
Alpha testing
(Lab test)
Beta testing
( Simulated
market condition
tests)

Market
testing

Estimate trial
First repeat
purchase,
Adoption, and
purchase
frequency

Commercialization

Product launch

The Adoption Process For New Products

The speed of information affects the rate of adoption for the new product.

Rate of Adoption Depends on..

Rate of Adoption = (product attributes, advertising, retail penetration / investment, price)

Innovation Diffusion will be quicker if, the product ...

Has Strong Relative advantage.

Has high degree of Compatibility.
Can be tried on a limited basis.
Is observable.
Is not complex.

Parafitt & Collins model on market share prediction on new product / brand
launch

Illustrative
Illustrative

Share of new brand = T x R x B where . . .

T = Projected
percentage of triers of
the new brand

If 34 percent of the potential market tries this

new product and
25 percent of the triers repurchase it,
and they buy neither more nor less than other
brands in the product class (1.0) then ...

R = Projected percentage
of those who tried and
will repurchase the brand

B = Buying -level index of

repeat purchase of the new
brand, compared with an index
of 1.0 (Neutral Index ) for the
product class average

Share = (0.34) X (0.25) X (1.0) = 0.085

or
or say
say the
the share
share for
for the
the new
new product
product will
will
settle
settle at
at 8.5
8.5 percent.
percent.

Growth through diversification strategy

Expansion unable to meet set objectives

Excess cash
Diversification has better payoff than
expansion

Markets
Existing

Factors that drive Diversification

New
Concentric Diversification

Existing

Competency exist in one of the two

major fields. (technical or marketing)
New set of customers.
Commonality between products
should be analyzed.

Products

ICICI bank and I Sec (Common thread

: Financial Products)

New

Horizontal Diversification
Technologically unrelated.

Conglomerate Diversification

Focuses on existing customer

segment.

No relationship in business

Limitation: Increases dependence on

the same market segment

Improves stability and flexibility of the firm.

- Hero cycles into Hero Mobikes

- Wipro in IT from Electricals & Consumer

products

End of Deck 2