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Module 1: Productos y precios

    Study Reminders

    Welcome to this class, now we will look at an in depth version of this Product. What is aproduct? A product is anything which is; which is offered to the market for attentionacquisition or consumption. So, you can offer anything to a market for attentionacquisition or consumption, then it takes the name of the product. It can be physicalobjects, services, personalities, places, organizations, ideas all these coming this comingunder the realm products kindly note.Now, from product suppose when we move to a product item, what do we mean by that?When we say it is a product item it is a specific version of a product kindly note that, it isa specific version of a product. A product example could be take the example of atoothpaste.Now, you are getting. So, many advertisements about this toothpaste Sensodyne, thattoothpaste is a product which is offered for acquisition acquiring. You acquire thatproduct, then in that product itself you may you will have different items in that one ofthe Sensodynes can be only for repair of your teeth other could be to pay further
    attention to your cavities or pain all those types of things they come under differentproduct items.So, you are getting a product you are getting a product item and then all these productitems which are put together they become group of products which are closely relatedthey become what is called a product line. So, Sensodyne if you take that sametoothpaste, in the product line of Sensodyne you have three to four different productitems only.Sensodyne is a product which is offered for acquisition or acquiring in the market, thereare different product items coming in that. So, all these group of products which areclosely related they form what is called the product line. Group of products closelyrelated because of need satisfaction sold to same customer group, marketed through sametypes of outlets or fall within given price ranges.So, when you are looking at a product line you are looking at a group of products as Igave you this example of Sensodyne. So, you have different products coming in theunder the head Sensodyne only. So, you have to be clear which one you should take.Now what is a product mix a product mix is a composite of products offered for sale by abusiness unit or firm. Suppose a firm like Colgate it is in the business of makingtoothpaste it is also in other businesses as well.Take a firm like Hindustan lever, so many product lines coming from Hindustan leverwhether it is your toothpaste or whether it is some other this thing some soap powder orsoaps. So, many things are coming from the same company. Now when you are offeringall these products it may be coming from a business unit only of the company or from anumber of business units of the company or from the firm as a whole. So, you may get acomposite of products for sale by a business unit of a company or number of businessunits in the company or from the firm as a whole.So, what are the characteristics of a product mix it is characterized by width, what iswidth? How many product lines different product lines within the company offered firmto the market/ Second cat one is what is called the depth, that is the average number ofitems offered within each product line as I said Sensodyne product in that the items atleast you can count three to four of them very easily, product line is the toothpasteSensodyne. So, it is offered this whole product line is one product line you may have
    different product lines, say Colgate total can be one more product line some otherproduct line.So, Surf excel Matic can be one, in the excel matic itself you have a front load you havea top load powders differing for that front load for powders differing for the top loadwashing machines all those types of things. So, depth is the average number of itemsoffered within each product line. Third is what is called the consistency. What is thisconsistency? How closely related in end use how these products are closely related? Ifyou if you look at the examples which I gave you all these products are closely related inend use, they all come under the category of toothpaste only.The product is toothpaste Sensodyne is a tooth paste, the product item is the differentversions of that product one is rapid action can be and another is your cavity protection,third can be pain relief all those types of things. So, how closely related in end use whatis the type of production.Requests or requirements which it calls for then the distribution channels or in someother way how closely related these products are in producing to the market. That is theyare toothpastes are closely related in end use. So, the production lines more or less thesame, but for some small variations at some points which the companies can easilyaccommodate. Then the third one is whether the same distribution channels are beingused or some other method with similarities.So, a product mix is categorized by these three things; one is the width, width refers tohow many product lines within the company, depth refers to average number of itemsoffered within each product line, then consistency how closely related in end useproduction requirements distribution channels or in some other way.
    (Refer Slide Time: 09:15)
    Having all this that is product, product item, product line then the product mix, how canyou device a strategy to the marketplace? You can device that is a company can devicesix product mix strategies, it can say I am a full line all market specialist.So, for example, toothpaste suppose a company is doing let us say it can say I dopractically every type of toothpaste that you can think of in the marketplace, it is a fullline. You want only it is not something confined only to a specialist category you geteverything in this. Now, suppose it is not the case I want to confine myself as a marketspecialist. So, if you look at some of these fire extinguishers which are coming out whichyou used in many of the offices.Now, they are market specialist their job is to produce that particular fire extinguisheronly. Then what is the other strategy mixed strategy which can be adopted product mixedstrategy is product lines specialist. What is this product line specialist? He produces onlyone single product to all markets. So, the single product type to all markets there may besome variants a very good example of this is your Royal Enfield bikes.So, it is a single product company there may be variants. So, this Royal Enfield bikewhich you call bullet or some other this thing and which the youngsters are very fond ofbecause of the sound it gives when it starts and moves on the road. So, in the changedvehicle norms or the acts, it will also attract the; attract heavy fines as well suppose the
    bike gives lot of noise and somebody complaints. So, the youth is in difficulty for himdriving that bike was giving pleasure because of the sound it gives.So, when he goes near in your road and he gives an accelerator for that vehicle it produceto it produces a lot of sound. So, he gives he gets a different thrill out of that, but thatalso now attracts fine in the marketplace. The fourth product mix strategies what is calledthe limited product line specialist. He produces a the product lines, but it does notproduce the full product line he may produce only a few ok.So, the group of the that those types of companies which are producing this limitedproduct line. So, if you take some of these cements which are coming from ACCcements, it is very limited varieties of that product line you do not get a large number ofvarieties. So, ACC it is having it is own niche in a marketplace of cement. So, this thefifth one is what is called the specific product specialist.So, he has a specific product and he produces that specific product only he specializes inthat. A company producing fire extinguisher he produces only fire extinguishers he doesnot produce anything else. Similarly a company producing a particular type of electronicitem may be your specialized loudspeakers, it produces that only.So, these are the types of companies which specialize in a particular product and they putit in to the marketplace they have carved out a niche for themselves in the marketplace.Then last one is what is called a special situation specialist. What is this special situationspecialist? Sometimes none of the usual types of companies can handle a situation. Whatis an example for this?So, there was this war between Kuwait and Iran. So, when this war took place with thehelp of the United States Kuwait won the war, but what did the enemy do beforeretreating he put number of oil wells of Kuwait on fire. So, this oil wells of Kuwait,which is a main stay of the Kuwait economy it started raging that is fire started raging inthis oil wells.Kuwait did not know how to put out this oil fires. So, it went to US there is one companywhich company just recently folded up also, which specializes in putting out or dousingthis oil fires. And this company through the government of US said we will put out this
    oil fires. The question then was what would be the cost it wanted the 5 years of GDP ofKuwait to be given to them that is a huge cost to Kuwait.So, Kuwait started bargaining with US saying 5 years I will be without money. So,convince this company to reduce. So, it came down to four and I as newspapers put itcame down even further to a little less. But in the whole bargain more than three years ofGDP of Kuwait was wiped out in dousing this oil fires by this company. So, thiscompany became very rich in the whole process.So, this is these all what market is all about sometimes you make it very big thiscompany never expected that the oil wells of Kuwait will be put on fire by this retreatingenemy. It was put on fire it was an opportunity for this company to cash in on and itcrashed in very heavily.So, these are the different types of product mix strategies one could be full line allmarket, second is market specialist third is product line specialist single product type twoall markets, fourth is limited product line specialist, fifth is specific product specialistthird is special situation specialist.(Refer Slide Time: 17:33)
    Now, how do you device given all this, how do you device a sound product mix this isone of the questions which might a exercise the mind. A sound product mix the tag linefor the sound product mix is you must continuously add new products and continuously
    eliminate old products to be in a marketplace. Because markets are becomingcompetitive if you do not do it your competitor will do it.So, before he does it is better for you to do that is sometimes it may be a better for acompany to cannibalize it is own product. Example of this is the Windows 95 byMicrosoft basically nothing wrong with the Windows 95, when it was doing very wellMicrosoft cannibalized this product. So in fact, market wondered why this product wascannibalized by Microsoft. The answer given to that by the founder of Microsoft billgates was if I am not cannibalizing it myself somebody else will do this cannibalizationof Windows 95 he will come with a this thing.So, this is what characterizes the sound product mix that is keep on adding the newproducts and eliminating old products. In other words for an MSME is which is now inthe centre of the eye in the Indian situation to create jobs, what is this strategy come oninnovate continuously innovate. So, come out with the sound product mix. Thedimensions of this sound product mix are three one is sales growth, second is marketshare, third is profitability.So, taking these dimensions the sales growth market share and profitability a companyshould keep on changing it is product mix. So, come out with a sound product mix tokeep it is place in a marketplace. So, otherwise somebody else will push it aside andmore so when it is MSME.So you should be highly watchful, but we are looking at MSME is why because they canbe a very good vehicle for job creation and they can create a number of jobs. Similarly,your startups if you start ten star startups, if two or three become successful they couldbe a very good job creation for in the marketplace. Now, with all this product mixstrategies the sound products mix and all that now let us look at what is the what do youmean by the product life cycle. What is this product life cycle? Product life cycle is anattempt to recognize distinct stages in the sales history of the product.So, you trace the life of the product through the product life cycle which is this p whichis normally abbreviated as PLC. So, you trace the life of the product through PLC. So,this PLC has got four stages one is the development of stage, where you develop theproduct you conceived an idea and from that idea you came out with a product and when
    you came out with the product you found that there is already a similar product existingin the marketplace.Then what should you do should you go back withdraw through the shell no need theremaybe number of people who are coming out with similar products fair enough. Let thefirst person let him be the first person to introduce it in the marketplace, you take thesecond bite of the apple because a market share of hundred percent. Even if you take twoto three percent of that market share in a country like ours it is very good ok. Take thesecond bite of the apple it is good enough. Then the next stage is where the productestablishes itself in the marketplace and it starts registering sales.So, when in other words it grows in sales, during this growth stage what is the charactercharacteristic. The problem of getting to prefer his brand that is you must make theconsumer prefer for your brand, it calls for changes in marketing strategy and methods.So, how do you make him come to your brand?So, if you really look at it take the example of different types of food mixes which are ofwhich are in the marketplace, you go by different names you have an MTR food mixwith respect to bisibele bath or so many things like your rava idli or masala idli all those.So, there is very it is very stiff competition to this mixes from MTR from others it iscoming from Maiyas it is coming from other competitors also.Now, which is the stay for the company the brand of MTR is the stay for the company.So, whoever has used that MTR mix is likely to come back that is likely to be a seconduser of the product or a third user or a multiple times user of the same product for thesame company. So, this is what really calls for changes making your brand to bepreferred in a marketplace. The third stage is what is called maturity.So, you have introduced a mix in the marketplace first there was one competitor or twocompetitors, then when it when the market picks up for these things you find that thereare number of competitors this is what is happening in the same food mixes marketwhich your seen. There are number of competitors producing the same type of mix.So, a rava idli mix coming from different companies. Now, when the competitionbecomes intense in the as in the maturity stage, what happens sales is on par with thepopulation. So, you expected certain population to be preferring your brand that is that
    has come about. The problem of the company is to hold on to his distribution outlets andtry to secure even more; this is where the channels role become very important. So, youmust ensure that your brand of food mixes are available all the time you cannot just saythis is not available.So, when a consumer wanted rava idli mix, your shelves that is the shelves in big bazaarshould always be bring with stock for in reliance fresh of this rava idli mix. Suppose, it isnot there it then this whole this market will get diverted to other players. So, MTR is notavailable why not we go to this Maiyas or some other mix ok. There is the last stage ofthis PLC is decline. What is this decline? Comp the market has become what do you callstuffed with the large number of players, they are all fighting for a very small marketshare. In other words the capacity becomes too much over capacity over capacitybecomes endemic.Then what should the company do to survive the company many times tries outaggressively depressive tactics. So, whether it is mergers or acquisitions or buy out of onit is competitors all these things are tried out. An example of this is Tatas taking overconsolidated coffee wanted to be in the coffee business. So, found that to come with acoffee brand of it is own tough, then consolidated coffee from Coorg had made a mark.So, Tatas state with the brand name of Tatas if he take consolidated coffee it can come aTata coffee into the market place and it will find it is own feet in the marketplace whichhas what has happened now.
    (Refer Slide Time: 28:05)
    All these stages in the PLC that is a 4 different distinct stages in the history of theproduct, they assert 4 things, what is that? Products have a limited life, then differentchallenges to sellers at different stages. You have challengers coming in the first stagethat is when you introduced to the product when it is growing when it has matured aswell as when it is in decline also. So, somebody some of your competitors may wanted toget out of the marketplace immediately.So, these are all things which are very common in a marketplace. So, if you see in a citylike Bangalore so many new shops get opened after one week or the weeks the shops arenot there. So, if you have not frequented that road for two weeks, you may find that theshop used to visit two weeks before is not there and when you ask the neighbor he saysthat shop has got closed. So, this is also one of the features of this competition. So, all ofa sudden you may find that the competition has become so intense you may say I willwind up shop.So, rise and fall at different stages. So, in order to survive in this marketplace yourequires the help of strategic marketing. So, an intense competition and the firm’s lifebecomes strunk in order to elongate the firms life you require strategic marketing andexposure to strategic marketing, marketing strategies becomes highly critical. Requiredifferent marketing financial manufacturing and personal stay strategies in each stage oftheir product in each stage of their life cycle.
    So, this is what the managers or the firm should be doing, all this which I mentioned ispresented to you in two graphs. One is the graph of revenues stroke profit against time, ifyou see the profit is represented by the green line, the revenues is presented by the redline. What is that which we can see during the introduction stage you are not likely tomake profits for sometime.It starts making profits only from this line from this time onwards, there is a certain of fsometimes a substantial amount of time gets going or is spent in making the marketbecome aware of the product. Then you start registering profits and your profits growths,you kindly see that the profit does not peak in the maturity it speaks before the maturityonly.So, and then it starts coming down towards in the decline stage the profit almostbecomes 0. When it becomes zero there is no point in holding on to that product orproduct line. Similarly you look at the revenue line if you look at the revenue line, thecontrast between the profit one and the revenue line revenue maximizes during thematurity stage and then starts declining ok. So, whenever you are asked to draw adiagram of profit life cycle, you should give both the profits and the revenue curves. Youshould not just give the revenue curve then it does not it does not complete the picture.So, you should give the profit curve and you should also give the revenue curve. So, ifyou broadly look at this whole revenue curve it is in the form of an inverted s. Now, allthis is represented in one more diagram by the right side. So, this is called product lifecycle and adoption, where in the first stage you have got R and D, the second stage youintroduce the product, the third stage look at the growth of the product, fourth stage is amaturity, fifth is the decline.So, this stage one where you do this R and D, these are the people who are theinnovators;’ they are the people who are the innovators. The second stage is where youmake the market aware and people start using your product they are called early adoptersof your product. The third stage where if the product starts growing you find that yoursales are registering growth moving up constantly, that stage three is what is called theearly majority. Then this stage four where it is maturing what do you find in the stagefour you find that a large majority is using this product.
    So, you look at this when sometimes early majority comes in some people wait for thisearly majority to take roots they become late majority in the whole scenario. Then thisstage five is when the product is inclining declining some users might still like to tryyour product these are called laggards ok. So, a company should not wait till this stagefive to cannibalize the product. So, when it should be able to do it before only and saythis product is cannibalized. You find that happening with reference to electronicproducts very fast.So, you took a particular model and when you went when you go there one or two yearslater that model itself is not there. So, what is the; what is a consequence of that you mayfind spares not available. So, you had a diner or radio ok, it was very good, but now thatradio where after. So, many years gives problems let us say you won’t get a spare for thisdiner or radio and it used to be very sleek giving wonderful reception people used to loveit but.Now, no similarly the previous radio of coming from Remko which was taken over radioand electrical manufacturing company taken over by BHEL on the Mysore road inBangalore. It used to come out it is with it is wonderful brand of radios which were verygood they were a wall radios. The wall radios became transistor radios the transistorradios became very sleek and the market used to appreciate that different brand names.So, Remko went off came (Refer Time: 36:04) diner all the all those things are becomingextinct in the marketplace. So, you do not wait for the market to write your of you areright of, your product before the market rights of the rights of your product. So, this iswhat characterizes this.So, this is this figure is called product life cycle and adoption, the product life cycle hastwo curves to be represented one is a profit another is the revenue. And in the productlife cycle and adoption you look at five stages, the first stage where R and D has come inand you introduced to the product we stop here we continue in the next class.