Marketing Management

Unit 2

Product

A product is anything that is offered to a market to satisfy customer wants and needs. The
product includes both tangible and intangible items available for sale in the market. A
company sells a variety of products at a time. For example, PepsiCo sells hundred of products
under the product lines of beverages, food, and nutritional products. These product lines,
when combined are known as product mix.

Product Line

A product line is a group of closely related products with similar functions, customer groups,
outlets, and the same price ranges. For instance, the Nike product line includes Footwear,
Apparel, and Sports equipment, when all these product lines combine constitutes product
mix.

Product mix or product assortment is a set of the total number of product lines that a seller
offers in the market to its buyers. The company may have one or several product lines, and
each product line may have several products. When these product lines get together are
known as the product mix of the company. The product mix is an essential element of the
marketing mix because the other elements will work if there is a product or service to offer in
the market. It is known as the central part of all marketing activities.

Dimensions of Product mix

Width – Number of Product lines

Width or breath of the product mix means the total number of product lines that a company
offers to sell. For instance, if a company offers milk and yogurts, it indicates that it has two
lines. Similarly, a cosmetic company manufactures four different types of products – jewelry,
cosmetics, fashion, and household items. Its product mix width is 4.

Depth – Product Variation

Depth of a product mix means the total number of variations for each product a company
offers within. There may be different variations in the product e.g., size, flavor, taste, and
many other characteristics. Product Depth is another crucial aspect of the Product Mix. It
refers to the variations of a single product in a product line. Let's consider Coca-Cola, a
global leader in the beverage industry. Its product depth includes regular Coke, Diet Coke,
Coke Zero, and Cherry Coke.

Length – Total Products

The length of the product mix means total number of products within the company product
lines. For example, if a company has 10 product lines and each line has 3 products, then
length is (10×3) = 30. Length of the product mix refers to the total number of products in the
mix. If a company has 5 product lines and 10 products under each product lines, the length of
the mix will be 50 [5 x 10].

Product Mix Consistency

Product mix consistency is the close relationship between different product lines. The more
product variation means less product consistency. For example, a dairy company has two
product lines milk and yogurt. Both lines have the same users and distribution channels due
to low product variation and high product mix consistency. Take another example of Philips
Electronics with 7 product lines having high production mix variation and low consistency.
Product Consistency, the fourth component of the product mix, is about maintaining harmony
across the product lines in terms of usage, production, and distribution. A company like Tesla
maintains high Product Consistency by offering cutting-edge electric vehicles and related
energy solutions that align with its brand promise of sustainability and innovation. Consistent
product offerings enable businesses to build a strong brand image and ensure customer
loyalty.

Product mix refers to the total number of products of a company offer to sell. On the other
hand, product line refers to related products with similar users and functions. The Product
Mix, comprising five main components - Product Line, Product Width, Product Length,
Product Depth, and Product Consistency - is a strategic tool that allows companies to reach a
wider consumer base and optimize profits. To fully grasp the concept of the Product Mix, let's
employ an analogy. Think of a company's offerings as a wardrobe.

● The various types of clothes you have (like shirts, trousers, jackets) represent the
Product Line.

● The variety of clothing types (shirts, trousers, jackets, shoes) indicates the Product
Width.

● The total number of individual items is the Product Length.

● The different types of each clothing item (casual shirts, formal shirts, polo shirts)
signify Product Depth.

● The overall compatibility of these items reflects Product Consistency.

The product mix of a firm is crucial to understand as it exerts a profound impact on a

firm’s brand image. Maintaining high product width and depth diversifies a firm’s product
risk and reduces dependence on one product or product line. In regard to a firm expanding its
product mix:

● Expanding the width can provide a company with the ability to satisfy the needs or
demands of different consumers and diversify risk.

● Expanding the depth can provide the ability to readdress and better fulfill current
consumers.
 Product development

Product development refers to the comprehensive process of conceptualizing, designing, and

introducing a new product to the market. It encompasses various stages, starting from the
initial idea to the final launch, and often involves continuous improvement even after the
product has been released. The primary objective of product development is to fulfill
customer needs, address specific market demands, or solve existing problems.

What are the 4 major types of product development?

The realm of product development encompasses four primary types or categories:

1. New Product Development (NPD):

This category involves the conception and creation of entirely novel products that have not
previously existed within the market. This phase demands substantial innovation, diligent
research, and imaginative thinking to identify untapped opportunities and formulate products
that effectively address latent consumer needs.

2. Product Improvement or Enhancement:

Within this classification, existing products undergo modifications, refinements, or upgrades

to elevate their performance, features, or functionalities. These alterations can range from
incremental adjustments to more substantial overhauls, all aimed at maintaining the product's
competitiveness and aligning with evolving customer preferences.

3. Product Line Extension:

This category pertains to the introduction of fresh variations or editions of an

already-established product. Such extensions cater to diverse customer segments or
preferences, allowing companies to leverage the triumph of an existing product by
broadening its range without embarking on an entirely new creation process.

4. Product Diversification:
Diversification encompasses the expansion into novel markets or industries by offering
products that may differ from a company's current lineup. While this strategy carries
heightened risks, as it involves venturing into unfamiliar territories, it also holds the potential
to yield new revenue streams and foster overall business expansion.

These diverse strategies within product development empower companies to maintain their
competitiveness, fulfill customer requirements, and explore uncharted avenues for business
expansion. The selection of a particular strategy hinges on factors such as prevailing market
trends, consumer inclinations, technological innovations, and the overarching business
agenda of the company.

Difference between Product development and New Product development

You must be clear that product development and new product development are related
concepts, but they are not exactly the same. Let's explore the differences between the two:

Product Development:

● Product development is a comprehensive term that encompasses the entire process of

creating, designing, and enhancing products, regardless of whether they are entirely
new or existing products.

● It includes the development of both new products and the improvement of existing
ones, such as product line extensions, upgrades, or modifications.

● The product development process involves multiple stages, starting from ideation
and design to testing and eventual product launch.

● The primary objective of product development is to optimize and enhance products

to meet customer needs, increase market competitiveness, or address any
shortcomings in the existing product lineup.

New Product Development:

● New product development specifically focuses on creating entirely new products that
the company has not previously offered.

● It is a subset of product development and is exclusively concerned with bringing

novel products or services to the market.
 ● New product development presents unique challenges, as it requires starting from
scratch and involves higher levels of uncertainty and risk compared to improving
existing products.

● The main goal of new product development is to introduce innovative solutions to

meet emerging market demands, exploit new opportunities, and drive business
growth.

Stages of Product Development Process

The product development process typically involves the following key stages:

Stage 1 Idea Generation:

Innovative ideas for new products are brainstormed and explored during this stage. Sources
of inspiration may include customer feedback, market research, competitor analysis, and
internal creative sessions.

Stage 2 Idea Screening:

After generating numerous ideas, a screening process is applied to assess their viability,
market potential, technical feasibility, and alignment with the company's objectives. Only the
most promising ideas proceed to the next phase.

Stage 3 Concept Development and Testing:

Selected ideas are developed into tangible product concepts. These concepts are then tested
and refined through feedback from a target audience, ensuring that they resonate with
potential customers.

Stage 4 Business Analysis:

This stage involves thoroughly analysing the potential product's financial viability. Factors
such as production costs, pricing strategy, projected sales volume, and competitive landscape
are taken into consideration.

Stage 5 Product Development:

Once the concept is validated and felt financially viable, the actual product development
begins from there. Prototypes are created, and then repetitive testing and refinement occur to
meet the desired specifications and quality standards.

Stage 6 Testing and Validation:

The developed product undergoes rigorous testing to ensure compliance with safety
regulations, quality standards, and expected performance. This phase may involve alpha and
beta testing with selected users.

Stage 7 Commercialization:
After successful testing and validation, the product is ready for launch. Detailed marketing,
sales, and distribution strategies are executed to introduce the product to the target market
effectively.

Stage 8 Post-launch Monitoring and Improvement:

Following the product launch, ongoing monitoring and customer feedback collection are
crucial to identify any issues or areas for improvement. This valuable information guides
subsequent product updates or enhancements.

Product development is a complex and repetitive process. Successful companies emphasize

continuous innovation to remain competitive and adapt to evolving customer needs. The
precise steps involved in product development may vary depending on the industry, company
size, and the product's nature.

The New Product Development Process:

The new product development (NPD) process is an innovative and structured approach used
by businesses to conceive, create, and introduce novel products or services into the market.
This dynamic process encompasses several distinct stages, each meticulously designed to
ensure the ultimate success of the final product while aligning with the company's goals and
customer needs. While specific companies might have tailored variations of their NPD
process, the overarching stages typically include:

1. Ideation and Conceptualization:

The NPD journey commences with a burst of creativity, where cross-functional teams engage
in brainstorming sessions and idea-generation activities. These sessions draw inspiration from
multiple sources, including customer feedback, market trends, cutting-edge technologies, and
internal expertise. The goal is to foster a fertile ground for inventive concepts that hold the
potential to captivate the market.

2. Feasibility Analysis:

Once plenty of ideas emerge, the next step involves a stringent screening process. Each
concept undergoes a comprehensive evaluation against predefined criteria, such as market
demand, technological feasibility, cost considerations and alignment with the company's
vision. This analysis weeds out impractical or nonviable ideas, narrowing down the selection
to those with the most promise.

3. Concept Development and Prototyping:

The selected concepts move into the field of concrete product development. In this stage,
cross-functional teams collaborate to flesh out the chosen ideas into robust product concepts.
Detailed product specifications and prototypes are meticulously crafted, providing a tangible
representation of the envisioned offering. This step enables the company to evaluate the
practicality of the concept and refine it further, if necessary.
 4. Business Analysis:

The business analysis delves into financial projections, production costs, pricing strategies,
potential market share, and return on investment. A well-crafted business case serves as the
foundation for strategic decision-making, providing key stakeholders with the information
needed to move forward confidently.

5. Product Development and Testing:

With a green light from the business case, the focus shifts to the actual product development
phase. Engineers, designers, and developers collaborate to transform the refined product
concept into a fully functional prototype or market-ready offering. Rigorous testing is
conducted throughout this phase to identify and rectify any design flaws or functionality
issues.

6. Test Marketing and Iteration:

Prior to a full-scale launch, a select market segment is targeted for test marketing. This
controlled release allows the company to gather valuable customer feedback, understand user
experiences, and make any necessary adjustments before the product reaches a broader
audience. This iterative process helps refine the product, ensuring it meets and exceeds
customer expectations.

7. Commercialization and Launch:

With insights from test marketing and improvements, the product is finally ready for its grand
debut. Marketing strategies are executed to create buzz and generate demand, while
distribution channels are optimized to ensure widespread availability. This stage demands a
synchronized effort across departments to make the product's entry into the market seamless
and successful.

8. Post-launch Evaluation & Continuous Improvement:

Following the product's launch, the journey is far from over. Continuous evaluation is
essential to monitor its performance, gather customer feedback, and assess market reception.
This feedback loop helps identify areas of strength and areas for improvement, driving
ongoing innovation and refinement of the product. The new product development process
(NPD) is an intricate and iterative journey that demands innovation, strategic thinking, and
customer-centricity. Companies that embrace this process with vigour and adaptability are
well-positioned to delight their customers and thrive in the dynamic marketplace.

Product Differentiation

Product differentiation is a strategic approach that businesses use to distinguish their products
or services from those of their competitors. It involves creating unique features, benefits, or
attributes that set a company's offerings apart in the market. By leveraging product
differentiation effectively, businesses can increase their market potential, attract more
customers and ultimately achieve a competitive advantage.

One of the most common ways to differentiate a product is through its features. For example,
Apple's iPhone stands out from other smartphones due to its sleek design, user-friendly
interface, and innovative features like Face ID and Animoji. These unique features have
helped Apple attract a loyal customer base and maintain its position as a market leader.

Another approach to product differentiation is by focusing on the benefits or value that the
product provides to customers. Take Coca-Cola, for instance. While there are numerous cola
brands in the market, Coca-Cola has successfully differentiated itself by emphasizing the
refreshing taste, happiness and positive experiences associated with its brand. This emotional
appeal has enabled Coca-Cola to establish a strong brand identity and maintain customer
loyalty.

In addition to features and benefits, businesses can differentiate their products through
attributes such as quality, price, or customization options. For instance, luxury car
manufacturers like Mercedes-Benz and BMW differentiate their products by offering superior
build quality, advanced technology, and exceptional driving experiences.

Product differentiation includes conducting market research to understand customer needs

and preferences, analyzing competitors to identify gaps in the market, and developing a
unique value proposition that resonates with target customers. It is also important to
communicate and showcase the differentiated features or benefits of the product through
marketing channels, such as advertising.

Product differentiation is a crucial aspect of any successful marketing strategy. It involves

creating unique features, benefits, or attributes that set the product apart from competitors in
the market. By effectively differentiating the product, market potential for the product can be
increased and a larger customer base can be attracted.

Examples of Product Differentiation: Apple's iPhone: Apple has successfully differentiated

its iPhone from other smart phones by focusing on sleek design, user-friendly interface, and
seamless integration with other Apple products. This unique combination of features sets the
iPhone apart and appeals to a specific target market. Eg: Coca-Cola vs. Pepsi: Both
Coca-Cola and Pepsi offer similar carbonated beverages, but they differentiate themselves
through branding and taste. Coca-Cola positions itself as a timeless, classic brand, while
Pepsi focuses on a younger and more energetic image. These distinct brand personalities help
consumers make choices based on their preferences and values.

Implementing Product Differentiation:

Identifying the target market: Understanding the target audience's needs, preferences, and
issues is crucial for effective product differentiation. Conducting market
research and gathering customer feedback helps to gain insights into what sets the target
market apart.
Focusing on unique features and benefits:

Identifying aspects of the product that are different or superior to what competitors offer. It
includes highlighting these unique features in marketing messages to communicate the value
proposition to customers.

Creating a strong brand identity: A strong brand identity helps differentiate the product in the
market, develop a unique brand personality, messaging and visual elements that resonate with
the target market.

Continuous innovation: To maintain a competitive edge, it is essential to continuously

innovate and enhance the product. Regularly assessing market trends, customer feedback and
technological advancements help in identifying opportunities for improvement and
differentiation.

Example: Tesla: Tesla has successfully differentiated itself in the electric vehicle market by
focusing on cutting-edge technology, long-range capabilities and with an emphasis on
sustainability. By offering a unique driving experience and addressing environmental
concerns, Tesla has become a leader in the industry.

Airbnb: Airbnb disrupted the traditional hotel industry by offering a unique accommodation
experience. By leveraging the sharing economy, they differentiated themselves by providing a
wide range of accommodation options, personalized experiences and the ability to connect
with local hosts.

Product differentiation is essential for any business aiming to stand out in a crowded
marketplace. By identifying unique features, benefits or attributes companies can set their
products apart and communicate value proposition to customers and increase the market
potential.

Importance of Product Differentiation in the Market

Helps in gaining a Competitive advantage

Differentiating the product from others products in the market gives a competitive advantage.
By offering something unique and valuable, a company can attract a larger customer base and
stand out among its competitors. For example, Apple's iPhone differentiates itself from other
smart phones through its sleek design, user-friendly interface, and seamless integration with
other Apple products. This differentiation has allowed Apple to dominate the premium smart
phone market.

Assists in building brand loyalty

Product differentiation can help in building brand loyalty among customers. When customers
perceive the product as unique and superior, they are more likely to develop an emotional
connection with the brand. For instance, Coca-Cola has successfully differentiated its brand
through its secret formula, creating a loyal following that associates the brand with happiness
and nostalgia.
Commanding Premium Pricing

Differentiated products often command higher prices in the market. When customers perceive
the product to be more valuable or superior to others, they are willing to pay a premium for it.
For example, luxury brands like Rolex and Louis Vuitton differentiate themselves through
their craftsmanship, exclusivity and brand reputation, allowing them to charge significantly
higher prices than their competitors.

Product Differentiation Strategies

1. Differentiation through Product Features

This strategy involves adding new or improved features to a product to make it more
desirable to customers. For example, Apple differentiates its iPhones by incorporating
advanced technologies like facial recognition and augmented reality capabilities. By
constantly innovating and introducing new features, Apple maintains a competitive edge in
the smart phone market. When implementing this strategy, it is essential to conduct thorough
market research to identify customer needs and preferences. Understanding what features are
in demand can help business develop products that meet the expectations of their target
audience.

2. Differentiation through Quality:

Another effective product differentiation strategy is focusing on superior product quality. By

offering products that are perceived as higher in quality than competitors, businesses can
attract customers who value durability, reliability, and overall excellence. For instance, Rolex
differentiates its luxury watches by using high-quality materials, precise craftsmanship
and rigorous quality control measures. This emphasis on quality has allowed Rolex to
become a highly regarded and sought-after brand in the watch industry. To differentiate
through quality, businesses should invest in research and development, quality control
processes, and continuous improvement initiatives. Consistently delivering products that
exceed customer expectations will help build a reputation for excellence. Example: Woodland
shoes are quite durable.

3. Differentiation through Pricing:

Price differentiation is a strategy that involves setting prices at different levels to target
various customer segments. This strategy allows businesses to cater to different market
segments based on their willingness to pay. For example, luxury brands like Gucci and Louis
Vuitton differentiate their products through premium pricing, targeting customers who value
prestige and exclusivity. On the other hand, budget airlines like Ryanair differentiate
themselves by offering lower prices to attract price-sensitive travellers.When employing
pricing differentiation, it is crucial to consider factors such as production costs, target market
preferences, and competitor pricing. finding the right balance between pricing and perceived
value is key to successfully implementing this strategy. Example: Coca-Cola and PepsiCo
differentiate their products through pricing by offering various sizes and packaging options.
Customers can choose between single cans, bottles, or multipacks, catering to different
preferences and budgets.

4. Differentiation through Branding and Marketing:

Differentiating through branding and marketing involves creating a unique brand identity and
promoting it effectively to target customers. This strategy emphasizes the emotional
connection between the brand and the consumer, rather than focusing solely on the product
itself. Nike, for example, differentiates itself through its powerful branding campaigns that
inspire athletes and promote a sense of empowerment. By associating their brand with values
such as determination and achievement, Nike has successfully differentiated itself from
competitors. To differentiate through branding and marketing, businesses should invest
in market research to understand their target audience's preferences, values, and
aspirations. building a strong brand identity and consistently delivering on brand
promises will help create a unique position in the market. Apple's "Think Different"
campaign is an iconic example of successful differentiation through branding and marketing.
By celebrating the individuality and creativity of its customers, Apple positioned itself as a
brand that stands apart from its competitors. Product differentiation is essential for businesses
looking to increase their market potential. By employing strategies such as differentiation
through product features, quality, pricing, and branding/marketing, companies can effectively
set themselves apart from competitors and attract a larger customer base.

5. Unique Features and Functionality

Product differentiation can be done by incorporating unique features and functionality in

products. This can be achieved by offering innovative solutions to customer problems or
by introducing cutting-edge technology. For example, Apple's iPhone revolutionized the
smart phone industry with its touch screen interface and intuitive user experience. By
constantly introducing new features and functionalities, Apple has been able to maintain
its competitive edge and attract a loyal customer base.

6. Customization and Personalization

In a consumer-driven market, customization and personalization have become increasingly

important. By allowing customers to tailor products to their specific needs and preferences,
businesses can create a personalized experience that sets them apart from competitors.Nike's
NikeID program, for example, enables customers to design their own shoes by selecting
colors, materials and personalized details. This customization option not only enhances the
customer's sense of ownership but also differentiates Nike from other shoe brands.

7. Exceptional Customer service

When customers have a positive experience with a company, they are more likely to become
repeat buyers and recommend the brand to others. To ensure customer satisfaction, offering
free shipping and returns, 24/7 customer support and a generous return policy is how
companies can prioritize customer service.
 8. Packaging

Innovative and eye-catching packaging can capture consumers' attention and create a lasting
impression. Brands like Apple and Tiffany & Co. are known for their sleek and elegant
packaging, which adds value to their products and enhances the overall customer experience.

Implementing product differentiation techniques is essential for businesses aiming to increase

their market potential. By offering unique features and functionality, superior quality,
customization options, exceptional customer service, and effective branding and packaging,
companies can differentiate their products from competitors and attract a larger customer
base.

Determination of price - Pricing Strategy

The Pricing Strategy Matrix is a tool that’s used to determine the best price for a product or
service. A pricing strategy refers to the method businesses use to decide the right price for
their services or products.

Almost all organisations base their prices on the costs of production, labour, and marketing,
to which they then add a certain percentage to make a profit. The main factor here is
the COGS (Cost of Goods Sold).

Pricing strategies also take into account many business factors, such as turnover
targets, target audience, brand positioning, product features, and marketing SMART goals.

In addition, prices are influenced by external factors, such as consumer demand for a specific
product, competitor pricing, and the overall economic and market trends.

Price is part of the marketing mix, suppliers of products first have to look at the other aspects
of the marketing mix, before focusing on price.

Price formation with the Pricing Strategy Matrix

Determining the right price for a product requires more consideration than just adding the
costs of production. The real question when determining the right price is how much the
customer is willing to pay for the product.

That price doesn’t have a lot to do with costs, while it has everything to do with the value the
customers attach to the product or service.

In this case, playing with pricing is not something a producer can afford. However, if the
product is an advanced smart pressure cooker, then the customer is probably willing to spend
a little more. There’s less competition, so a well-made product that’s appreciated by the
consumer can be sold at a high price.

Finding out what a product or service is worth to consumers and basing the price on that is
called value-based pricing.

Price elasticity
Price elasticity is a measurement in economics that’s used to indicate how sensitive the
demand for a product is if the price were to change. Price elasticity is indicated as a
percentage change in the demand quantity for a product or service in response to a price
change of one per cent.

Products are said to be inelastic when consumers continue to buy a product when the price
goes up. Examples are cigarettes and petrol. If the product or service is elastic, that means the
price change does affect demand for it. Examples of those are train tickets (public transport)
and furniture.

Penetration pricing strategy

The quadrant on the bottom right in the Pricing Strategy Matrix represents penetration
pricing. Penetration pricing is used by companies who offer a new product or service at a
lower price after it’s first launched to get customers. The lower price will make it easier for a
product or service to penetrate the market. The result of this strategy is that customers will
leave the competition.

One example of such a strategy is an online news website that offers a one-month free trial
subscription.

Pros of penetration pricing

 ● Lowering the entry threshold

● Reduced or weakened competition

● Market dominance

Cons of penetration pricing

● Not very effective on competitors with strong branding

● Loss of customers when prices are raised

● Potentially triggering a pricing war

Price skimming strategy

Price skimming is shown in the bottom left of the price strategy matrix. This strategy
involves asking a high price from the consumer at the launch of a product or service. That
means the first group of customers pays a high price for the good or service. After a while,
the company lowers the prices in order to attract a different, more price-sensitive segment of
the market.

Price skimming is used when a new product or service is introduced. The goal is to get as
much revenue as possible. Once these financial targets have been achieved, the price is
lowered to appeal to more cost-conscious consumers.

Pros of price skimming

● High profit margin

● Quickly earn back production costs

● Distributors earn a big profit because of the high price, making them very engaged

● Create a temporary sense of high quality

Cons of price skimming

● Competitors will also lower prices

● Limited sales volume

● Frustrated early customers because of the high initial price

● Not cost efficient

Competitive/economy pricing strategy

The economy or competitive pricing strategy is shown in the top left of the Pricing Strategy
Matrix. This strategy involves basing the price of the product or service on the market. This
method is used by companies that sell similar products.
The competitive pricing strategy is used when a price for a product or service has reached a
balance. This often occurs when a product or service has been on the market for some time
already, and there are many similar products or services available.

Companies have three options for this method: undercut the competition’s price, equal the
competition’s price, or a higher price than the competition.

Pros of the economic pricing strategy

● Safe during times of economic instability

● Staying slightly below the competition’s price helps to gain a larger market share

Cons of the economic pricing strategy

● Smaller businesses might have trouble remaining profitable

● Customer loyalty has its limits in customers who are always looking for the best price

Premium pricing strategy

The final strategy from the matrix is premium pricing. This strategy refers to artificially
keeping prices elevated to encourage consumers’ positive perception, based solely on price.
Premium refers to a group of products or services that offer imagined or actual added value
compared to competitors.

The strategy relies on buyers assuming that a high price automatically means exceptional
quality. It’s used in segments where consumers are willing to pay a little more for a certain
product.

Pros of premium pricing

● Competitive edge through branding and reputation

● Increased brand awareness

● Higher profits

Cons of premium pricing

● High marketing costs

● Limited customer base

Pricing Strategy Matrix

The Pricing Strategy Matrix helps organisation to determine the correct pricing for their
products and services.
Many organisations base their prices on production and marketing costs, but there are other
options that might have different results. Pricing is part of the marketing mix, which makes it
an important consideration when launching a new product or service.

The Pricing Strategy Matrix shows the following for pricing strategies:

1. Penetration pricing strategy

This pricing strategy is used by organisations to appeal to part of the market by offering low
prices.

By asking low prices for their products, they can steal a lot of customers from the
competition. The downside of this strategy is that those new customers will leave when the
price is raised again.

2. Price skimming strategy

Price skimming is when an organisation only asks a high price at the introduction of a
product or service. There is a group of consumers who are willing to pay this high initial
price.

It’s a way for the organisation to quickly generate a lot of turnover and earn back the
manufacturing costs.

After a while, the organisation will lower the price to attract a different, more price-conscious
group of potential customers. A downside of this strategy is that many early customers will
become frustrated when they see how prices have dropped over time.

3. Competitive pricing strategy

The competitive or economy pricing strategy refers to determining the price based on supply
and demand.

This strategy is often used for products and services that have been on the market for a while,
and for which a lot of alternatives or substitutes are available.

Companies can choose to set prices below, exactly at, or slightly above the market price. This
is a relatively safe strategy, though it can make it difficult for smaller businesses to make a
profit.

4. Premium pricing strategy

The final strategy from the matrix is premium pricing. This strategy involves keeping prices
high without this actually being based on production or marketing costs.

Premium refers to a group of products that consumers don’t mind paying a little more for.
This can be the result of strong branding and marketing.

This is not a valid strategy for all organisations. One benefit of this strategy is high profit
margins. The major downside is high marketing costs.
 Product Differentiation

Product differentiation is a strategic approach that businesses use to distinguish

their products or services from those of their competitors. It involves creating unique
features, benefits, or attributes that set a company's offerings apart in the market.
By leveraging product differentiation effectively, businesses can increase their
market potential, attract more customers and ultimately achieve a competitive advantage.

One of the most common ways to differentiate a product is through its features. For example,
Apple's iPhone stands out from other smartphones due to its sleek design, user-friendly
interface, and innovative features like Face ID and Animoji. These unique features have
helped Apple attract a loyal customer base and maintain its position as a market leader.

Another approach to product differentiation is by focusing on the benefits or value that the
product provides to customers. Take Coca-Cola, for instance. While there are numerous cola
brands in the market, Coca-Cola has successfully differentiated itself by emphasizing the
refreshing taste, happiness and positive experiences associated with its brand. This emotional
appeal has enabled Coca-Cola to establish a strong brand identity and maintain customer
loyalty.

In addition to features and benefits, businesses can differentiate their products through
attributes such as quality, price, or customization options. For instance, luxury car
manufacturers like Mercedes-Benz and BMW differentiate their products by offering superior
build quality, advanced technology, and exceptional driving experiences.

Product differentiation includes conducting market research to understand customer needs

and preferences, analyzing competitors to identify gaps in the market, and developing a
unique value proposition that resonates with target customers. It is also important to
communicate and showcase the differentiated features or benefits of the product through
marketing channels, such as advertising.

Product differentiation is a crucial aspect of any successful marketing strategy. It

involves creating unique features, benefits, or attributes that set the product apart from
competitors in the market. By effectively differentiating the product, market potential for the
product can be increased and a larger customer base can be attracted.
Examples of Product Differentiation: Apple's iPhone: Apple has successfully differentiated
its iPhone from other smartphones by focusing on sleek design, user-friendly interface, and
seamless integration with other Apple products. This unique combination of features sets the
iPhone apart and appeals to a specific target market. Eg: Coca-Cola vs. Pepsi: Both
Coca-Cola and Pepsi offer similar carbonated beverages, but they differentiate themselves
through branding and taste. Coca-Cola positions itself as a timeless, classic brand, while
Pepsi focuses on a younger and more energetic image. These distinct brand personalities help
consumers make choices based on their preferences and values.

Implementing Product Differentiation:

Identifying the target market: Understanding the target audience's needs, preferences, and
issues is crucial for effective product differentiation. Conducting market
research and gathering customer feedback helps to gain insights into what sets the target
market apart.

Focusing on unique features or benefits: Identifying aspects of the product that are different
or superior to what competitors offer. It includes highlighting these unique features in
marketing messages to communicate the value proposition to customers.

Creating a strong brand identity: A strong brand identity helps differentiate the product in the
market, develop a unique brand personality, messaging and visual elements that resonate with
the target market.

Continuous innovation: To maintain a competitive edge, it is essential to continuously

innovate and enhance the product. Regularly assessing market trends, customer feedback and
technological advancements help in identifying opportunities for improvement and
differentiation.

Example: Tesla: Tesla has successfully differentiated itself in the electric vehicle market by
focusing on cutting-edge technology, long-range capabilities and with an emphasis on
sustainability. By offering a unique driving experience and addressing environmental
concerns, Tesla has become a leader in the industry.

Airbnb: Airbnb disrupted the traditional hotel industry by offering a unique accommodation
experience. By leveraging the sharing economy, they differentiated themselves by providing a
wide range of accommodation options, personalized experiences and the ability to connect
with local hosts.

Product differentiation is essential for any business aiming to stand out in a crowded
marketplace. By identifying unique features, benefits or attributes companies can set their
products apart and communicate value proposition to customers and increase the market
potential.

Importance of Product Differentiation in the Market

Helps in gaining a Competitive advantage

Differentiating the product from others products in the market gives a competitive advantage.
By offering something unique and valuable, a company can attract a larger customer base and
stand out among its competitors. For example, Apple's iPhone differentiates itself from other
smartphones through its sleek design, user-friendly interface, and seamless integration with
other Apple products. This differentiation has allowed Apple to dominate the premium
smartphone market.

Assists in building brand loyalty

Product differentiation can help in building brand loyalty among customers. When customers
perceive the product as unique and superior, they are more likely to develop an emotional
connection with the brand. For instance, Coca-Cola has successfully differentiated its brand
through its secret formula, creating a loyal following that associates the brand with happiness
and nostalgia.

Commanding Premium Pricing

Differentiated products often command higher prices in the market. When customers perceive
the product to be more valuable or superior to others, they are willing to pay a premium for it.
For example, luxury brands like Rolex and Louis Vuitton differentiate themselves through
their craftsmanship, exclusivity and brand reputation, allowing them to charge significantly
higher prices than their competitors.

Product Differentiation Strategies

1. Differentiation through Product Features

This strategy involves adding new or improved features to a product to make it more
desirable to customers. For example, Apple differentiates its iPhones by incorporating
advanced technologies like facial recognition and augmented reality capabilities. By
constantly innovating and introducing new features, Apple maintains a competitive
edge in the smartphone market. When implementing this strategy, it is essential to
conduct thorough market research to identify customer needs and preferences.
Understanding what features are in demand can help business develop products that
meet the expectations of their target audience.

2. Differentiation through Quality:

Another effective product differentiation strategy is focusing on superior product

quality. By offering products that are perceived as higher in quality than competitors,
businesses can attract customers who value durability, reliability, and overall
excellence. For instance, Rolex differentiates its luxury watches by using high-quality
materials, precise craftsmanship and rigorous quality control measures. This emphasis
on quality has allowed Rolex to become a highly regarded and sought-after brand in
the watch industry. To differentiate through quality, businesses should invest in
research and development, quality control processes, and continuous improvement
initiatives. Consistently delivering products that exceed customer expectations will
help build a reputation for excellence. Example: Woodland shoes are quite durable.

3. Differentiation through Pricing:

Price differentiation is a strategy that involves setting prices at different levels

to target various customer segments. This strategy allows businesses to cater to
different market segments based on their willingness to pay. For example, luxury
brands like Gucci and Louis Vuitton differentiate their products through premium
pricing, targeting customers who value prestige and exclusivity. On the other hand,
budget airlines like Ryanair differentiate themselves by offering lower prices to attract
price-sensitive travellers. When employing pricing differentiation, it is crucial to
consider factors such as production costs, target market preferences, and competitor
pricing. finding the right balance between pricing and perceived value is key to
successfully implementing this strategy. Example: Coca-Cola and PepsiCo
 differentiate their products through pricing by offering various sizes and packaging
options. Customers can choose between single cans, bottles, or multipacks, catering to
different preferences and budgets.

4. Differentiation through Branding and Marketing:

Differentiating through branding and marketing involves creating a unique brand

identity and promoting it effectively to target customers. This strategy emphasizes the
emotional connection between the brand and the consumer, rather than focusing
solely on the product itself. Nike, for example, differentiates itself through its
powerful branding campaigns that inspire athletes and promote a sense of
empowerment. By associating their brand with values such as determination and
achievement, Nike has successfully differentiated itself from competitors. To
differentiate through branding and marketing, businesses should invest in market
research to understand their target audience's preferences, values, and
aspirations. building a strong brand identity and consistently delivering on brand
promises will help create a unique position in the market. Apple's "Think Different"
campaign is an iconic example of successful differentiation through branding and
marketing. By celebrating the individuality and creativity of its customers, Apple
positioned itself as a brand that stands apart from its competitors. Product
differentiation is essential for businesses looking to increase their market potential. By
employing strategies such as differentiation through product features, quality, pricing,
and branding/marketing, companies can effectively set themselves apart from
competitors and attract a larger customer base.

5. Unique Features and Functionality

Product differentiation can be done by incorporating unique features and functionality

in products. This can be achieved by offering innovative solutions to
customer problems or by introducing cutting-edge technology. For example, Apple's
iPhone revolutionized the smartphone industry with its touchscreen interface
and intuitive user experience. By constantly introducing new features and
functionalities, Apple has been able to maintain its competitive edge and attract a
loyal customer base.
 6. Customization and Personalization

In a consumer-driven market, customization and personalization have become

increasingly important. By allowing customers to tailor products to their specific
needs and preferences, businesses can create a personalized experience that sets them
apart from competitors. Nike's NikeID program, for example, enables customers to
design their own shoes by selecting colors, materials and personalized details. This
customization option not only enhances the customer's sense of ownership but also
differentiates Nike from other shoe brands.

7. Exceptional Customer service

When customers have a positive experience with a company, they are more likely to
become repeat buyers and recommend the brand to others. To ensure customer
satisfaction, offering free shipping and returns, 24/7 customer support and a generous
return policy is how companies can prioritize customer service.

8. Packaging

Innovative and eye-catching packaging can capture consumers' attention and create a
lasting impression. Brands like Apple and Tiffany & Co. are known for their sleek and
elegant packaging, which adds value to their products and enhances the overall customer
experience.
Implementing product differentiation techniques is essential for businesses aiming to
increase their market potential. By offering unique features and functionality, superior
quality, customization options, exceptional customer service, and effective branding and
packaging, companies can differentiate their products from competitors and attract a
larger customer base.
Direct Marketing – Sales Pitch

Direct marketing can be a small fraction of mass marketing costs because it eliminates
the need for a middleman or an advertising agency. A sales pitch is a condensed sales
presentation where a salesperson explains the nature and benefits of their business, ideally in
less than one or two minutes. Sales pitches are often referred to as “elevator pitches” because
they should be able to be delivered within the time constraints of a single elevator ride. A
sales pitch addresses the following questions:

1. What's the problem you're solving?

2. What else is out there that addresses the problem?
3. What's the perfect world solution for your customer?
4. Who are you?
5. What value do you bring?
6. What's your proof?
7. What do you want the customer to do?
Direct marketing is a strategy to promote products and services directly to potential
buyers. Email, newsletters, postcards, pop-ups (jio stalls), digital ads, print ads, leaflets
brochures, pamphlets, social media DMs, mail-order catalogs, cold calling, SMS, mobile
marketing through apps, promotional flyers and coupons and door-to-door visits and
telemarketing are some direct marketing methods used to reach out to potential customers
and deliver promotional messages. Outbound marketing involves reaching out directly to a
target audience through email, text messages. Even though a direct marketing campaign
might reach millions of people at the same time, each instance of direct marketing should feel
like a one-on-one conversation between a brand and a potential customer.

Direct marketing establishes a personal relationship with the customer by first

allowing the customer to purchase the product directly from the manufacturer and then
communicating with the customer on a first-name basis. This type of marketing is
experiencing tremendous growth. Marketers are tired of the waste associated and expenses
incurred with mass marketing and customers want more personal attention. Also, modern
mechanisms for collecting and processing accurate mailing lists have greatly increased the
effectiveness of direct marketing. A modified type of direct marketing is represented by
companies that allow ordering of product by calling a toll-free number.

Cold calling is the solicitation of a potential customer who had no prior interaction
with a salesperson. A form of telemarketing, cold calling is one of the oldest and most
common forms of marketing. Warm calling is the solicitation of a customer who had
previously expressed interest in the company or product.

Mass marketing can be seen as an umbrella term that includes many different types of
marketing strategies and tactics. The main goal of mass marketing is to increase sales, brand
awareness, and customer satisfaction. Some examples include TV advertisements, billboards,
radio ads and newspapers, and magazines.
Examples of mass marketing include:
Media buying - Buying time on radio or TV stations, theatres and newspapers to promote a
product or service.
Product placement - Placing products in movies, television shows, video games, music
videos, and other entertainment media.
Public relations - Communicating with the media about your company's recent newsworthy
events and achievements (company press releases).
Covert Advertising basically involves placing the products within the films or television
programs in such a manner that the audience will not realize that the brand is using it as a
medium of promoting their respective products.
 Mass marketing is a marketing strategy in which a firm markets its products or
services to a large number of people simultaneously.

Mass marketing is distinguished from direct marketing in terms of the distance

between the manufacturer and the ultimate user of the product. Mass marketing is
characterized as having wide separation and indirect communication. A mass marketer, such
as Nike, has very little direct contact with its customers and must distribute its product
through various retail outlets alongside its competitors. Communication is impersonal, as
evidenced by its national television and print advertising campaigns, couponing, and
point-of-purchase displays. The success of mass marketing is contingent on the probability
that within the huge audience exposed to the marketing strategy there exist sufficient
potential customers interested in the product to make the strategy worthwhile.

Mass marketing is a simultaneous standardized marketing technique for a very large

target market that is communicated through mass media. Inbound marketing is mostly
focused on increasing brand awareness through mass-marketing tactics; therefore any
message that's intended to reach an entire marketplace could be considered inbound
marketing. Rather than pushing ads and messages onto consumers, inbound marketing is
designed to pique curiosity and engagement, and draw customers in. That's why it is known
as “pull marketing”.

The term, "guerilla marketing", refers to marketing techniques that involve an element
of surprise. The purpose of a guerilla marketing campaign is to catch the public's attention
unexpectedly or unconventionally. This usually involves interrupting someone who is going
about their daily routine. In today's market, guerilla marketing techniques often rely on digital
media and social media to accomplish their objectives. Guerilla marketing techniques can be
used in public places, in print and online. Their primary purpose is to capture the viewer's
attention in a creative and unexpected manner. Many guerilla marketing campaigns invite
audience interaction and encourage the public to share photos or videos online.

● Outdoor installations

● Indoor installations

● Flash mobs

● Integrated artwork

A well-known form of guerilla marketing is to place an eye-catching, temporary

object or piece of art in a high-traffic area. Outdoor guerilla marketing techniques thrive in
the world of social media. If someone takes a photo of an installation and shares it on their
social media profile, they will likely inspire others to visit the object and prompt discussion
about the product.

Indoor guerilla marketing occurs inside a busy building, such as an airport, train
station or shopping mall. Indoor installations are typically only available for a short period of
time and do not have to be weather-proof or durable, so they are more likely to involve
delicate art pieces and human actors. Examples of indoor installations include posters or
signs, interactive art projects and temporary additions to popular tourist attractions. Indoor
installations often invite photos and direct viewers to interact with the brand on social media.

Flash mobs are large groups of people that secretly organize and execute an
unexpected performance in a public place. They can happen in or out of doors and often take
place without the knowledge or permission of any authorities. The appeal of a flash mob is
the surprise that it causes the bystanders who happen to be nearby when it starts. Typically, a
brand will plant videographers around the event's location to capture quality footage of the
performance. Then, the video is uploaded online as a marketing and advertising tool. One of
the advantages of a flash mob is its potential to go viral online.

One of the most popular techniques for guerilla marketing is to post artwork or
stickers that cleverly connect with existing objects. You might see these on doors, fences,
cars, bus stops, billboards, windows, buses and other everyday items. Designing and
manufacturing integrated artwork requires considerable creativity and ingenuity. Examples of
integrated artwork include creative advertisements and brand campaigns.