Management Science II
Dr. S.Bharadwaj
MODULE 1
Products And Product Differentiation
Agenda
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Classification of products
•
Levels of a product
•
Product Differentiation
•
Product Life Cycle
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Summary
Classification of Products
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How can products be classified?
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On what bases?
Classification of Products
On the basis of nature of product
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Goods Vs Services
On the basis of type of consumer
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Tangible Vs. Intangible
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consumer Product Vs. Industrial (Business to Business Product) e.g.
soap Vs. Printing Press
On the basis of durability of goods
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Durable Vs. Non-Durable
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TV Set Vs. Toothpaste
1
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
Shopping Habits Classification
They can also be classified on the basis of shopping habits
• Convenience goods, shopping goods, specialty goods and
unsought goods
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Let us have a look at these
Convenience goods
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Fairly Inexpensive Goods and services that consumers buy
frequently, quickly, and with a minimum of effort
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Further divided into staples, impulse goods and emergency goods
Shopping Habits Classification
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Staples: These include goods that consumers buy on a regular
basis
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Examples would be bread, rice, atta, toothpaste and so on
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If you are a marketer of staples, what should you do?
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Availability is important: hence distribution strength is a great
advantage
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Build the TOMA factor
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Inertia is there, and hence TOMA maybe important
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Sales promos and advertising important too
Then we have Impulse goods
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Goods that consumers pick up without planning, on a sudden urge
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What does one do as a Marketer?
2
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
Shopping Habits Classification
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Availability is important here too, no doubt about it
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Display is key
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Hence, chocolate always kept in the front
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Wrigley’s has attractive storage
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POP material important
Attractive packaging
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Sexy model on cover of magazines
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Building hedonic nature of product through advertising helps too
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Then we have emergency goods
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What are these and what are the marketing implications?
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These are goods that one would not normally need, but due to
some sudden circumstances, need desperately e.g. umbrella when
it rains, medicine when you are sick
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What are some marketing implications?
Preempt the need
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Duckback should offer deals now on raincoats
Can charge a premium when it rains
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However, poor relationship marketing
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Auto drivers are notorious for this
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Govt can also come down hard on you if you do this e.g.
Vegetables in SARS-hit Singapore
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Of course, availability is important
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Shopping goods are those that are bought relatively infrequently,
consumers put in some time and effort for these
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Examples would be clothing, furniture, TV
3
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
•
What are some marketing implications?
Advertising is very important, as is promotion, availability less so
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Building brand image is key
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Consumers may go to a different store if favourite brand is not there
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You are less dependent on the dealer here
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Need to have variety, features and models to suit different tastes
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Nallis for instance has thousands of designs
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Then we have specialty goods that are Goods and Services
Consumers value and see as unique, so they are willing to expend
considerable time and effort when purchasing them
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Examples would be luxury cars, fancy accessories like Louis
Vuitton and pens like Mont Blanc
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What do you do if you are Loius Vuitton
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Need to have a high price
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And quality to match
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Need to have plenty of brand building activities like advertising
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Should not be available everywhere
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Hence, exclusive distribution the norm
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Ambience, shopping experience, décor, music all need to
have class e.g. 5-star hotel
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Unsought goods are those that consumers are unaware of,
have not thought of buying or find that they need to solve an
unexpected problem (usually serious)
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Examples would be when death occurs in family and life
insurance
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Really new products
4
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
What are the implications?
Shopping Goods Classification
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Consumer education is key
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When cell phones came along, RPG Cellular spent whopping
amounts on ad
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Insurance companies spend a lot on personal selling
Levels of a Product
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One can strip a product down to its core, much like an onion, layer by
layer
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Consider the case of a car
Core Benefit
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the need that is satisfied by the product
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Transportation
Basic or Generic Product
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the fundamental element(s) that make(s) the product what it is
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here, the body, the chassis, the engine
Expected Product
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the basic product alone is not enough
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consumers expect some features
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a trunk, a dashboard
Augmented Product
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Certain Features that go beyond customer expectations
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for example, high power and high mileage
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similar to customer delight
5
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
•
today’s augmented product will become tomorrow’s expected
product e.g. airbags
Potential Product
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all possible enhancements a marketer can add to value package
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futuristic in nature
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computerized directions, cars running on water
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One should never rest on one’s laurels
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At the same time, one must be consumer-centric
Product Differentiation
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What is product differentiation, anyone?
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Creating a value package that is better/different
than competition’s in a way that is meaningful to the customer
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how is your product different ?
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The key phrase is “meaningful to the customer”
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A black toothpaste would be different but absurd!
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What is the need for differentiation?
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Different consumers have different tastes, same old will not do
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Consumers like to switch too
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Consumers like to be unique
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Novel stimuli are more noticed
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A white person here would be instantly noticed
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Need to stand apart from the crowd
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Else, will be a “me-too” product
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So how can one differentiate a product?
6
Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
Differentiation Through Quality
• Quality is the extent to which product meets customer needs and
wants
• Can be either Performance, Conformance, Durability or Style
Differentiation Through Performance Quality
• Example Procter & Gamble
• Tide, Crest, Ivory
• sheer performance sets them apart
• Maruti 800 to some extent
Product Differentiation - Methods
Differentiation Through Conformance
• Zero Defect Quality, Standardization
• McDonald’s
• Japanese Cars
• Sundaram Fasteners
Differentiation Through Durability
• Godrej bureaus for instance
• Volvo trucks
Differentiation Through Style/Status
• Designer wear
• Rolex watches
• Mercedes Benz
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Indian Institute of Technology Madras
Management Science II
Dr. S.Bharadwaj
Differentiation Through Price
• Indian software companies for instance
Differentiation Through Channel Management
• Examples would Dell and Amazon
Differentiation Through Mass Customization
• Example would be National Bicycle Co in Japan, Dell Computers
Differentiation Through Innovation
• Sony, Apple, 3M
• And so on
Product Life Cycle
All products have 4 phases
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Introduction
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Growth
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Maturity
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Decline
One must keep the maturity period going as long as possible
8
Indian Institute of Technology Madras