Product diffusion

Dr. Anu Gupta

• Product diffusion, at its core, is the process of
acceptance of a particular service or product by the target
market, being a part of the general market share as a
result. It's about the initial communication that starts
when the customers hear about a product, give it a try
themselves, and share their experiences
Several theories exemplify the mechanics of diffusion. They are as follows:

• The two-step hypothesis

• This theory consists of information and acceptance flows
through media, first to opinion leaders, then to the
general audience.
• The trickle-down effect
• This one explains how products tend to be a bit expensive
at first, and as a result, they are only accessible to the
wealthy target audience. However, as time passes, they
become less expensive and are become reachable by more
people.
 The Everett Rogers Diffusion of Innovations
Theory

• This theory suggests that there are five categories of product adopters
for any product category. And they are:
• Innovators - extroverts, highly educated, multiple sources, they are
under the largest influence
• Early Adopters - social leaders, educated, popular, potential adopters
• Early Majority - lots of social contacts, deliberate
• Late Majority - has traditional ideas, doubtful, lower socio-economic
status
• Laggards - Highly skeptical, main direct influences are mostly friends
The Everett Rogers Adoption Curve -also referred
to as the product diffusion curve.(5 stages of
product diffusion)
• a theory that demonstrates how individuals and large groups get adapted to
new ideas and innovations. It also makes us understand the characteristics of
innovations, as well.
• If we take the patterns we learned from the Rogers diffusion of innovation
framework; we can say the way to customer engagement goes through the five
essential steps of technology adoption:
• Knowledge.
• Knowledge leads to awareness. And when this notion becomes repetitive, it
increases the likelihood of customer engagement. The tools that can help you
with this stage are usually search marketing and, of course, social networks to
create a social influence as well.
• Persuasion.
• Naturally, as you start advertising your unique advantages and benefits, the
likelihood of increasing your customers' interest will significantly rise. It's basic
marketing science.
• Decision.
• This part is a bit tricky since the actual buying commitments may happen under
unpredictable circumstances; you could step up your marketing strategies by
paying extra attention to your advertising at this point.
• Implementation.
• After the sale is closed, your new customer will need excellent communication and
24/7 support from your teams to stick around for a long time.
• Confirmation.
• This is the part where the diffusion of innovation pattern is, let's say, handled here.
It's where your subscriber keeps on an ideal form of communication either directly
or through online reviews, and shares opinions about how well the whole diffusion
process works out. Providing great customer service, is for sure, the key ingredient
to continued engagement.
 product life cycle
• The product life cycle is the progression of a product or
service from ideation to completion.
• Utilizing a product life cycle can help you make informed
decisions, increase company profitability, and improve
customer satisfaction.
• The concept was developed by German economist
Theodore Levitt, who published his Product Life Cycle
model in the Harvard Business Review in 1965.
• Marketers use the product life cycle to customize messaging for
each stage, using market research to guide their efforts. The
maturity of a product in the PLC allows marketing teams to
determine what marketing efforts they
should focus on and how they should promote a product. This
results in better strategy and enhanced product marketing efforts.
• Managers use the product life cycle to make strategic decisions
about pricing, expansion into new markets, packaging design,
and more. The product life cycle helps to align company strategy
with a product’s current stage of development. Managers use
this alignment to pinpoint new opportunities and improve the
market performance of a product over its lifetime.
 4 stages of product life cycle

• Introduction
• Growth
• Maturity
• Decline
 1. Introduction Stage

• When a product first launches, sales will typically be low and grow slowly.
In this stage, company profit is small (if any) as the product is new and
untested. The introduction stage requires significant marketing efforts, as
customers may be unwilling or unlikely to test the product. There are no
benefits from economies of scale, as production capacity is not
maximized.
• The underlying goal in the introduction stage is to gain widespread
product recognition and stimulate trials of the product by consumers.
Marketing efforts should be focused on the customer base of innovators –
those most likely to buy a new product. There are two price-setting
strategies in the introduction stage:
• Price skimming: Charging an initially high price and
gradually reducing (“skimming”) the price as the market
grows.
• Price penetration: Establishing a low price to quickly
enter the marketplace and capture market share, before
increasing prices relative to market growth.
 2. Growth Stage

• If the product continues to thrive and meet market needs, the product
will enter the growth stage. In the growth stage, sales revenue usually
grows exponentially from the take-off point. Economies of scale are
realized as sales revenues increase faster than costs and production
reaches capacity.
• Competition in the growth stage is often fierce, as competitors introduce
similar products. In the growth stage, the market grows, competition
intensifies, sales rise, and the number of customers increases.
Price undercutting in the growth stage tends to be rare, as companies in
this stage can increase their sales by attracting new customers to their
product offerings.
 3. Maturity Stage

• Eventually, the market grows to capacity, and sales growth of the product
declines. In this stage, price undercutting and increased promotional efforts are
common as companies try to capture customers from competitors. Due to fierce
competition, weaker competitors will eventually exit the marketplace – the
shake-out. The strongest players in the market remain to saturate and dominate
the stable market.
• The biggest challenge in the maturity stage is trying to maintain profitability
and prevent sales from declining. Retaining customer brand loyalty is key in the
maturity stage. In addition, to re-innovate itself, companies typically employ
strategies such as market development, product development, or marketing
innovation to ensure that the product remains successful and stays in the
maturity stage.
 4. Decline Stage

• In the decline stage, sales of the product start to fall and profitability decreases.
This is primarily due to the market entry of other innovative or substitute
products that satisfy customer needs better than the current product. There are
several strategies that can be employed in the decline stage, for example:
• Reduce marketing efforts and attempt to maximize the life of the product for as
long as possible (called milking or harvesting).
• Slowly reducing distribution channels and pulling the product from
underperforming geographic areas. Such a strategy allows the company to pull
the product out and attempt to introduce a replacement product.
• Selling the product to a niche operator or subcontractor. This allows the
company to dispose of a low-profit product while retaining loyal customers.
 Product Mix Strategy

• A product mix strategy is a method used by companies to effectively

manage their product offerings in order to meet customer needs,
maximize sales, and achieve business goals. It involves making strategic
decisions about the range of products to offer, their pricing, positioning,
and promotion, as well as the allocation of resources to different product
lines.
• A well-defined product mix strategy helps a company to create a
balanced and diverse product portfolio that caters to different customer
segments and market segments. It ensures that the company is not overly
reliant on a single product or product line, reducing the risk of revenue
loss in case of market fluctuations or changes in customer preferences.
 Product Mix Strategy Examples

• Product Line Extension: This strategy involves introducing new

variations or versions of existing products to expand the product
line. For example, a smartphone company may introduce different
models with varying features and price points to cater to different
customer segments.
• Product Line Pruning: This strategy involves eliminating
underperforming or obsolete products from the product mix. It
helps the company to focus its resources on high-demand and
profitable products, improving overall profitability and efficiency.
• Product Line Filling: This strategy involves adding new
products to fill gaps in the existing product line. For
example, a clothing retailer may introduce new
accessories or footwear to complement its existing
apparel offerings.
• Product Line Modernization: This strategy involves
updating or upgrading existing products to keep up with
changing customer preferences and technological
advancements. For instance, a car manufacturer may
introduce hybrid or electric versions of its existing models
to cater to the growing demand for eco-friendly vehicles.
 Product Line vs. Product Mix

• While product line and product mix are related concepts,

they have distinct meanings. A product line refers to a
group of related products offered by a company, such as
different models of smartphones or different flavors of soft
drinks. On the other hand, a product mix refers to the
entire range of products offered by a company, including
all its product lines.
 Packaging as a Marketing Tool

• As we know first impressions go a very long way in how

people perceive anything. This is the same idea that
companies implement via their packaging. The outer
appearance of the product (the package) is the first thing
a potential customer will see, and so it can be a great
marketing tool for the product.
• In fact, the package of a product serves multiple practical purposes as well. Let us
take a look at some of the uses and functions that it serves.(requirement of good
packaging)
• Protection: The first and the most obvious use of packaging is protection. It
physically protects the goods from damage that may be caused due to
environmental factors. It is the protection against breaking, moisture, dust,
temperature changes etc.
• Information Transmission: Packaging and labelling are essential tools to inform
the customer about the product. They relay important information about
directions for use, storage instructions, ingredients, warnings, helpline
information and any government required warnings.
• Convenience: Goods have to be transported, distributed, stored and warehoused
during their journey from production to consumption. Packaging will make the
process of handling goods more convenient for all parties involved.
• Security: To ensure that there is no tampering with the goods packaging is
crucial. The package of a product will secure the goods from any foreign elements
or alterations. High-quality packages will reduce the risk of any pilferage.
 Difference between labelling
and packaging
• Labelling involves displaying essential details like the
product name, ingredients, usage instructions, and legal
information, ensuring compliance with regulations. On the
other hand, packaging primarily concerns the material
aspect, such as using plastic, glass, metal, or paper to
encase the product physically.
 Role of labelling in packaging
• A label needs to comply with the Competition and
Consumer Act 2010 (CCA). This Act is required to give
information to consumers, such as:
• The mandatory consumer product information
standards under the CCA
• Industry specific regulations, such as the Food
Standards Code
• Labels required by customs for some imported
products under the Commerce (Trade Descriptions) Act.
• Importance of labeling and packaging
• Another main purpose of the use of labeling and packaging is to exaggerate
the product. A marketer needs to grab the attention of a viewer to purchase
the product. Labeling and packaging should be able to beautify a product to
add to its visual appeal.
• This can instantly grab a viewer’s attention towards a product. You can
arouse interest in the mind of a customer towards a product through an
attractively designed label. It is essential to use a good quality material for
the sticker.
• Importance:
• The role of packaging and labeling has become quite significant as it
helps to grab the attention of the audience.
• Labelling and packaging can be used by marketers to encourage
potential buyers to purchase the product.
• Packaging is also used for convenience and information transmission.
Packages and labels communicate how to use, transport, recycle or dispose
of the package or product.
 Pricing Decision

• Pricing is a process to determine what manufactures

receive in exchange of the product. Pricing depends on
various factors like manufacturing cost, raw material cost,
profit margin etc.
 Factors Influencing Pricing
• Internal Factors
• The following are the factors that influence the increase and
decrease in the price of a product internally −
• Marketing objectives of company
• Consumer’s expectation from company by past pricing
• Product features
• Position of product in product cycle
• Rate of product using pattern of demand
• Production and advertisement cost
• Uniqueness of the product
• Production line composition of the company
• Price elasticity as per sales of product
• External Factors
• The following are the external factors that have an impact
on the increase and decrease in the price of a product −
• Open or closed market
• Consumer behavior for given product
• Major customer negotiation
• Variation in the price of supplies
• Market opponent product pricing
• Consideration of social condition
• Price restricted as per any governing authority
 4 Types of Pricing Strategies
• 1. Value-based pricing
• One of the most common pricing strategies is value-based pricing. With this
strategy, you price your products or services based on their perceived value
to your customers. This means that you consider things like the quality of
your product, the customer service you provide, and the reputation of your
business when setting your prices. In this case, you can use
pricing software for retail to determine the right price for your products.
• Value-based pricing is considered an effective pricing strategy because it
aligns with the perceived value of the product and customer expectations.
• The main benefit of value-based pricing is that it allows you to charge more
for your products or services if they offer more value to your customers. This
can help you increase your profits and grow your business. It can also help
you attract high-quality customers willing to pay more for a product they
perceive as high quality.
• 2. Competition-based pricing
• Another common pricing strategy is competition-based pricing. This means
setting your prices based on your competitors’ prices for their products or
services. For instance, if you sell products in a highly competitive market,
you may need to lower your prices to attract customers.
• A competitive pricing strategy is essential in saturated markets where
minor price differences can influence consumer purchasing decisions. This
can help grow your business by winning market share from your
competitors. Hence, it can help you to stay competitive in your industry, and
it can also help you to attract price-sensitive customers.
• 3. Cost-plus pricing
• Another option is cost-plus pricing. With this strategy, you price your
products or services based on the production costs you incur to
produce them, plus a markup. For example, if it costs you $50 to
create a product, you may add a markup of 50% to determine the
selling price of $75.
• Most entrepreneurs use this pricing strategy when they are starting
because it is simple to calculate. You need to know your costs and
then add a reasonable profit margin. This can help you to be more
profitable and grow your business.
• 4. Dynamic pricing
• Finally, dynamic pricing is based on factors, including the time of day, the demand for
your products or services, and the competition. Dynamic pricing is a flexible pricing
model that adjusts prices based on various factors such as time of day, demand, and
competition.
• The time of day is a common factor used in dynamic pricing. For example, you may
charge more for your products or services during peak times, such as weekends or
holidays.
• This can help you to maximize your profits and take advantage of periods when there
is high demand. Another factor that is often used in dynamic pricing is competitive.
With this strategy, you may lower your prices when there is more competition in the
market.
 New product pricing:Price
Skimming & Penetration pricing

• Price Skimming :- If you set your prices as high as the

market will possibly tolerate and then lower them over
time, you'll be using the price skimming strategy. The goal
is to skim the top off the market and the lower prices to
reach everyone else. With the right product it can work,
but you should be very cautious using it.
• Penetration pricing:- In highly competitive markets, it
can be hard for new companies to get a foothold. One way
some companies attempt to push new products is by
offering prices that are much lower than the competition.
This is penetration pricing. While it may get you
customers and decent sales volume, you'll need a lot of
them and you'll need them to be very loyal to stick around
when the price increases in the future.