UNIT- II

PRODUCT DECISIONS

What is a Product?
For Kotler, the definition of a product goes way beyond being a physical object or a service.
He defines a product as anything that can meet a need or a want. This means that even a retail
store or a customer service representative is considered a product.

The model considers that products are a means to an end to meet the various needs of
customers. The model is based on there being three ways in which customers attach value to
a product:

 Customer Need: the lack of a basic requirement.

 Customer Want: a specific requirement for a product or service to meet a need.
 Customer Demand: a set of wants plus the desire and ability to pay to have them satisfied.

Customers will choose a product based on their perceived value of it. The customer is
satisfied if the product‟s actual value meets or exceeds their expectations. If the product‟s
actual value falls below their expectations they will be dissatisfied.

What are the Five Product Levels?

1) Core product or core benefit

At the base level the utility that you are providing with the product, forms the core product or
the core service. The core product of a book is information. It is not the book itself. The book
is selling the information in it. The core product of a restaurant is offering food. It is not the
building of the restaurant or the service in itself. The core product is the food.
The more important the utility or the benefit you provide, the more likelihood that the
customer needs your product. Unfortunately, it is also likely that your sector will have a lot of
competition when the core product is a common product. The more unique the core product
(engineering), the lesser the players in the market and lesser the competition. This is where,
understanding the other five product types can help you as a marketer, as the other product
levels can help you differentiate your product.

2) Basic product

If we talk about restaurants, there are various types of restaurants. Some are 3 star, some 4
star, some 5 star and even 7 stars are found in this world. However, the basic level of a
restaurant is the one found in your locality, offering basic food. If a hotel, wanted to turn its
core product (rest and food) into a basic product, then the building of the hotel, the type of
bed, the type of food, all together form the basic product.

3) Expected product

Continuing the above example, if i were to say that you are going to a 5 star hotel, will you
only expect a bed, and normal food? No. You will expect a lot more. Your expectation is
built on the fact that the hotel is a 5 star hotel. As the brand grows in reputation, you have to
take care of the expectations of the consumer. Daikin, which is a world renowned air
conditioning brand, is expected to have world class service for its air conditioners. If it does
not deliver on this expected product, then it will affect the basic product (air conditioner) as
well.

4) Augmented product

A BMW or a Mercedes is an augmented product. When people were bored of normal cars
and passenger cars offered by the likes of Volkswagen, General electric or others, there
entered a new range of premium sports and luxury cars like the BMW, the Mercedes or Audi.
These products saw beyond the expectations of the customers and went on to provide
“Exceeds customer satisfaction”. This basically means that where you expected normal seats,
these seats had warmers installed. The interiors were fantastic and were designed by high end
fashion designers. The pickup and handling were excellent.

Although the price was more, the product designers of BMW, Audi or Mercedes gave the
consumers what they wished for. They gave them something which was far beyond an
expected product. They gave them luxury on four wheels. The augmented product is the
desire of the customer, which you convert to reality. A 5 star restaurant, giving a fantastic
four course meal, with the relaxation and the ambiance of your life, is serving as an
augmented product.

5) Potential product

Each and every company explores the potential of the products they already have in the
market. A best example of Potential product is the rivalry between Facebook and Google for
virtual reality. Where Facebook has Occulus rift for gaming, Google has google glass for day
to day usage. Each of them is progressing forward to dominate in the potential product –
Virtual reality.

Mark Zuckerberg strongly believes that there will come a time when we won‟t need to buy a
television. We will buy a virtual reality glasses, and we can watch all the channels for a
month for some determined costs. We won‟t need the television to deliver the movies or the
programs to us. Many such products have become obsolete because of potential products
which were the future.

Five Product Levels Example: Coca-Cola

It can be easy to see how the Five Product Levels apply to the hotel industry, but what about
a company like Coca-Cola?

Let‟s examine what each level might be for this company:

1. Core Benefit

The core benefit of Coca-Cola is to quench a thirst.

2. Generic Product
The generic product is a burnt vanilla smelling, black, carbonated, and sweetened fizzy drink.

3. Expected Product
The expected product is that the customer‟s Coca-Cola is cold. If this isn‟t the case then
expectations won‟t be met and the drink will not taste its best in the mind of the customer.

4. Augmented Product
Coca-Cola‟s augmented product is that it offers Diet-Coke. How does Coca-Cola exceed
customers‟ expectations with this product? By offering all the great taste of Coca-Cola, but
with zero calories.

5. Potential Product
One way in which Coca-Cola delights customers is by running competitions. The prizes in
these competitions are often things that, “money can‟t buy”, such as celebrity experiences. To
continue to delight customers over time the competition prizes change frequently.
PRODUCT MIX
Product mix, also known as product assortment or product portfolio, refers to the complete
set of products and/or services offered by a firm. A product mix consists of product lines,
which are associated items that consumers tend to use together or think of as similar products
or services.

Dimensions of a Product Mix

#1 Width

Width, also known as breadth, refers to the number of product lines offered by a company.
For example, Kellogg‟s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and
breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.

#2 Length

Length refers to the total number of products in a firm‟s product mix. For example, consider a
car company with two car product lines (3-series and 5-series). Within each product line
series are three types of cars. In this example, the product length of the company would be 6.

#3 Depth

Depth refers to the number of variations within a product line. For example, continuing with
the car company example above, a 3-series product line may offer several variations such as
coupe, sedan, truck, and convertible. In such a case, the depth of the 3-series product line
would be 4.

#4 Consistency

Consistency refers to how closely related product lines are to each other. It is in reference to
their use, production, and distribution channels. The consistency of a product mix is
advantageous for firms attempting to position themselves as a niche producer or distributor.
In addition, consistency aids with ensuring a firm‟s brand image is synonymous with the
product or service itself.

Example of a Product Mix

Let us take a look at a simple product mix example of Coca-Cola. For simplicity, assume that
Coca-Cola oversees two product lines: soft drinks and juice (Minute Maid). Products
classified as soft drinks are Coca-Cola, Fanta, Sprite, Diet Coke, Coke Zero, and products
classified as Minute Maid juice are Guava, Orange, Mango, and Mixed Fruit.

The product (mix) consistency of Coca-Cola would be high, as all products within the
product line fall under beverage. In addition, production and distribution channels remain
similar for each product. The product mix of Coca-Cola in the simplified example would be
illustrated as follows:
Importance of a Product Mix

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. With that being said,
unnecessary or non-value adding product width diversification can hurt a brand‟s image. For
example, if Apple were to expand its product line to include refrigerators, it would likely
have a negative impact on their brand image with consumers.

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 Mix Strategies

1. Expansion of Product Mix:
Expansion of product mix implies increasing the number of product lines. New lines may be
related or unrelated to the present products. For example, Bajaj Company adds car (unrelated
expansion) in its product mix or may add new varieties in two wheelers and three wheelers.
When company finds it difficult to stand in market with existing product lines, it may decide
to expand its product mix.

For example, Hindustan Unilever Limited has various products in its product mix such
as:
(1) Toilet soaps, detergent cakes, washing powders, etc.

(2) Cosmetic products,

(3) Edible items,

(4) Shaving creams and blades,

If company adds soft drink as a new product line, it is the example of expansion of product
mix.

2. Contraction of Product Mix:

Sometimes, a company contracts its product mix. Contraction consists of dropping or
eliminating one or more product lines or product items. Here, fat product lines are made thin.
Some models or varieties, which are not profitable, are eliminated. This strategy results into
more profits from fewer products. If Hindustan Unilever Limited decides to eliminate
particular brand of toilet shop from the toilet shop product line, it is example of contraction.
3. Deepening Product Mix Depth:
Here, a company will not add new product lines, but expands one or more excising product
lines. Here, some product lines become fat from thin. For example, Hindustan Unilever
Limited offering ten varieties in its editable items decides to add four more varieties.

4. Alteration or Changes in Existing Products:

Instead of developing completely a new product, marketer may improve one or more
established products. Improvement or alteration can be more profitable and less risky
compared to completely a new product. For example, Maruti Udyog Limited decides to
improve fuel efficiency of existing models. Modification is in forms of improvement of
qualities or features or both.

5. Developing New Uses of Existing Products:

This product mix strategy concerns with finding and communicating new uses of products.
No attempts are made to disturb product lines and product items. It is possible in terms of
more occasions, more quantity at a time, or more varied uses of existing product. For
example, Coca Cola may convince to use its soft drink along with lunch.

6. Trading Up:
Trading up consists of adding the high-price-prestige products in its existing product line.
The new product is intended to strengthen the prestige and goodwill of the company. New
prestigious product increases popularity of company and improves image in the mind of
customers. By trading up product mix strategy, demand of its cheap and ordinary products
can be encouraged.

7. Trading Down:
The trading down product mix strategy is quite opposite to trading up strategy. A company
producing and selling costly, prestigious, and premium quality products decides to add lower-
priced items in its costly and prestigious product lines.

Those who cannot afford the original high-priced products can buy less expensive products of
the same company. Trading down strategy leads to attract price-sensitive customers.
Consumers can buy the high status products of famous company at a low price.

8. Product Differentiation:
This is a unique product mix strategy. This strategy involves no change in price, qualities,
features, or varieties. In short, products are not undergone any change. Product differentiation
involves establishing superiority of products over the competitors.

By using rigorous advertising, effective salesmanship, strong sales promotion techniques,

and/or publicity, the company tries to convince consumers that its products can offer more
benefits, services, and superior performance. Company can communicate the people the
distinct benefits of its products.
 BRANDING
Almost every concern wants to name its products. These names given are brand names.
Branding plays more role than a mere name. It is because; brands name is quite different
from ordinary name.

A brand is a symbol, a mark, a name that acts as a means of communication which brings
about an identity of a given product. Brand is product image, brand is quality of product;
brand is value; it is personality.

It is nothing but naming the product; and naming product is like naming a child. Parents
know that the success and happiness of their children is primarily dependent on the
development of their character, intelligence and capacity and not on their name. But they,
nonetheless, take care in naming their children for the identification.

Products are children of manufacturers, unlike human children; products are not brought into
world by accident. There is conscious decision to give birth. Once a product takes birth, it
needs an identity and that is brand; and recognizing it as branding.

„Product differentiation‟ is the note-worthy feature of manufactured goods; one such device
of product differentiation is branding the products. A brand is a symbol, a mark, a name, that
acts as a means of communication which brings about an identity of the product. Brand is the
quality of a product. Brand is the value.

The aims of branding are to give personality to the product, to make its existence known to
the public; to create preference for the branded product; to control the price of commodities;
to impress about product performance. For instance, „Tore Nylex‟ Sarees, „Terene‟ mark on
Synthetic fibre cloth, Baby of Murphy, Dog of His Master‟s Voice, 501 Bar Soap, Club of
Arvind Mills, are the instances of brands or trade-marks. There is a slight difference between
a „brand‟ and a „trade mark‟. „Trade mark‟ is a legalized or registered brand. Such
legalization avoids imitation by rivals. For instance. Parley “Gluco” is a trade mark, which
cannot be imitated under Names and Emblems Act in India.

While branding, the dealer or the producer must select such a mark, or name or symbol that is
easy to remember, appealing to eyes, ears, and brain. It must be short, sweet and attractive.
For instance, the Honey Dew Cigarettes are having a trade mark of „black elephant‟ on
yellow packet which is popular as „Pivala Hatt‟ even amongst millions of illiterate people of
India. Same is the case with „Murphy Baby‟ or „Yellow Thread‟ of „Sinner Beedies‟.

BRANDING STRATEGIES
When it comes to brand development, there are four main brand approaches, as shown in the
following diagram.
As you can see, this diagram is a matrix built around the two attributes of existing/new
product category and existing/new brand name. This then determines one of the four boxes,
namely:

 Product line extension

 Multi-brand
 Brand extension
 New brand

Please note that the top axis refers to the product category – that is, a set of products – not an
individual product. Therefore, if Toyota was to introduce a new car, then that would still be
considered to be an existing product, because they already offer and market cars.

Product line extension

A product line extension is introducing a new product – that is similar to what the company
already offers (that is, within an existing product line/category) that is targeting an existing
market by using the current brand name.
This is a very common approach in marketing. This is because the existing brand name has a
customer following, and new products/variations will tend to be relatively well received by
these loyal customers.
We frequently see this approach with product sold through supermarkets channels, where you
variations of tastes/flavours and packaging sizes have some appeal with the marketplace.

Multi brand
A variation of the product line extension above, is to run a multiple brand strategy within the
same market. As you can see from the matrix, a multi-brand strategy involves having more
than one brand competing in the same product category.
Again this is a relatively common approach for large companies. For example, a
manufacturer of frozen vegetables may have multiple brands – that to the consumer appeared
to compete against each other – but have the same corporate ownership.
The main reasons for this is that these brands can have different positioning in the market,
dominate the overall shelf space, and reduce opportunities for competitors to enter the market
or to win market share.
The disadvantage of this multi brand strategy (as opposed to a product line extension
strategy) is the cost and time of developing a new brand name successfully in the
marketplace.

Brand extension
A brand extension involves broadening the market‟s understanding of the brand. This is
achieved by offering more products (of a different nature/category) under the existing brand
name.
PACKAGING
Packaging is the other side of the product identification. Traditionally, the function of
packaging was to protect goods. However, it is a promotional tool and the major image
builder contributing to the product success. It is a point of sale display that develops a
favourable consumer appeal.

„Packing‟ is a process that speaks of company‟s ability to contain economically man made or
natural products for shipment, storage, sale or final use. It comprises the activities of
wrapping or creating the product for performing the marketing functions more easily and
economically.

In simple words, packing is the act of housing the product in the packages or containers like
tins, cans, bags, jars, bottles, boxes, kegs, casks, and the like. A „package‟ is a wrapper or a
container in which a product is enclosed, encased, housed or sealed.

„Packaging‟ on the other hand, deals with activities of planning and designing of different
means of packing the products. What are clothes to human-beings, so are the packages for the
products.

Objectives of Packaging:
Packaging is a market and marketing necessity, at-least five objectives can be identified so
far as product packaging is concerned. These are product protection, product identification,
product convenience, product profit generation and product promotion.

These points can be outlined as given below:

1. Product protection:
The primary objective of packaging is protection of products or contents. It is the package
that keeps the contents fresh, clean and un-spoilt by using moisture proof, vermin-proof and
damage resistant materials.

It is powerful weapon to avoid shop-lifting, stealing in shops. This protection is given to the
products from their birth till their death. Thus, product is protected against the possible theft,
pilferage, leakage, spilling, breakage, contamination, deterioration, evaporation and so on.

2. Product identification:
The products available in a shop on shelves must be distinguishable for easy identification.
One brand is to be compared and distinguished from another. Next to brand names,
packaging is another easy and convenient method to identify the products of different
producers or marketers.

It is obvious that the packaging of one product is very much different from another. Thus, it
becomes a means of easy identification. The size, the colour combinations, the graphics used
in each package are unique that can be easily remembered and recalled.

3. Product convenience:
A packaging aims at providing maximum convenience to the purchasers, producers and
distributors alike. A nicely designed product package facilitates product shipping, storage,
stocking, handling and display on the part of producers and distributors. It is caused by
product density.
Good packaging facilitates the ease of product use by consumers. The best examples of this
kind are: tear-tape, poring spouts, squeeze bottles, aerosol cans, flip-tops pull- tubes,
wrappers and the like. They increase consumer convenience to a great extent.

4. Product promotion:
Product package is a powerful promotional tool. Packaging performs good many advertising
functions.

At-least four are emphasized:

(a) Self advertising package design has supreme significance as it attracts consumers.

(b) Point of purchase display when we talk of display the two possibilities are „window‟ and
„counter‟ where the first does the work of attracting the consumers or prospects to „get in‟
and the second one gives the comparison of „competitive products‟ for consumer choice.

(c) Media of advertising the general appearance and the selling features created by the
packaging techniques decide the product success and

(d) Product publicity free advertising is done through package-insert or flap advertising.

5. Product profit generation:

Adequate and proper packaging can be the cause for generating increased profits to the
producers and distributors. Because of product density created by good packaging, it reduces
costs in storage, transportation and handling.

Further, the wastes that are common in marketing process can be minimized, if not
eradicated. Further, sound packaging is an effective tool of sale-promotion. All these factors
are bound to contribute towards profit maximization with reduced costs and improved
efficiency.

Types of Packages:

Primary packaging holds a single retail unit of a product. For example, a bottle of Coke, a bag
of M&Ms, or a ream of printer paper (five hundred sheets) are all examples of primary
packages. Primary packaging can be used to protect and promote products and get the
attention of consumers. Primary packaging can also be used to demonstrate the proper use of
an offering, provide instructions on how to assemble the product, or any other needed
information. If warning or nutrition labels are required, they must be on the primary
packaging. Primary packaging can be bundled together as well. Consumers can buy bottles of
Coke sold in six-packs or cans of Coke in twelve-packs, for example.

Secondary packaging holds a single wholesale unit of a product. A case of M&M bags is an
example, as are cartons of reams of paper. Secondary packaging is designed more for retailers
than consumers. It does not have to carry warning or nutrition labels but is still likely to have
brand marks and labels. Secondary packaging further protects the individual products during
shipping.

Tertiary packaging is packaging designed specifically for shipping and efficiently handling
large quantities. When a Coca-Cola bottler ships cases of Cokes to a grocery store, they are
stacked on pallets (wooden platforms) and then wrapped in plastic. Pallets can be easily
moved by a forklift truck and can even be moved within the grocery store by a small forklift.

LABELLING
Labelling is another significant means of product identification like branding and packaging.
Labelling the act of attaching or tagging labels. A label is anything may be a piece of paper,
printed statement, imprinted metal, leather which is either a part of a package or attached to
it, indicating value of contents of price of product name and place of producers.

It carries verbal information about the product, producer or such useful information to be
beneficial to the user. Thus, a label is an informative tag, wrapper or seal attached to a
product or product‟s package.

The Purposes of Labelling:

1. To bring home the product features:
A label goes on describing the product specialties which makes the product a quick-mover. It
gives its correct use. Thus, bottle containing poison, if not labelled, it fails to tell about its
contents. Wrong labelling does more harm than no labelling at all.

2. To facilitate the exchange process:

As good many competitive products are available in a given product range, label helps in
avoiding the unwanted confusion. This is of special importance in case of drugs and
chemicals where even spelling mistakes prove fatal to the users. That is why; druggists and
chemists are having qualified pharmacists in the pharmacies.

3. To encourage self-service:
A lable is a strong sales tool that encourages self-service operations. If the customers are
supplied with necessary information of the contents of the package or the container, as its
contents, weight, use, price, taxes, and instructions and so on, consumers can pick the
package of their choice from shop shelves. Thus, labelling has a special role to play in self-
selling units.

A label may be descriptive, informative or grade designating or a combination of these. A

„descriptive‟ label describes the contents of the package or the ingredients of the product.
Thus, a descriptive label on a cane of pineapple describes the contents by size, weight,
number of slices, syrup cups and the number of servings.

An „informative‟ label includes detailed description with emphasis on how the product is
made? How to use it? How to care for it? In order to drive maximum satisfaction. A „grade‟
label designates customary or regulated standards. Thus, a pack of ghee or honey might have
„Ag-mark‟ grading, certificates as A, B, or C.

4. Product related services:

Generally, a product is surrounded by various services that make it easier for the consumer to
use, pay for and maintain the product, in addition to its branding, packing and labelling.
These include the product support services, credit granted guarantees and warrantees given
and after-sale services extended. Following is the brief outline of these points.
(a) Product support services:
A product support service is any service that helps the consumers to use the product, thus, a
furniture store may hint on interior decoration, a short course may be given on how to use
camera or a copier or a computer or a washing machine or a vacuum cleaner. These include
installation services and demonstrations in case of items like heaters, air-conditioners or other
mechanical devices.

(b) Product credit service:

Credit is the breath of modern marketing and it occurs at all levels. Thus, manufacturers grant
credit to distributors and dealers and directly to buyers; wholesalers to retailers and retailers
to consumers.

Instalment and hire-purchase schemes are quite common these days. Commercial banks are
granting liberal credit to encourage „book now and pay later‟ schemes. Stiff competition and
high profit margin encourage the business units to grant credit on liberal terms under different
plans to suit the individual needs.

(c) Product guarantees and warrantees:

Giving a product guarantees and warrantees has been a common thing these days. A
guarantee is a general policy of a manufacturer in respect of defective products. It is a
promotional device of making broad promises that may or may not be legally binding.

A warranty is the assumption of responsibility by the manufacturer and his distributor for the
clear title, quality, character and suitability for intended use of products sold.

Thus, warranty is more specific undertaking for repairing or replacing the merchandise. In
both the cases, a definite period is stipulated for replacement of parts and damages can be
claimed provided the conditions of warranty are fulfilled. Thus, any refrigerator company
giving five or seven year warranty or guarantee for its heart the compressor is doing so only
with stabilized electric power and not otherwise.