Product decisions

Unit 6
A product is anything that can be offered to market for
attention, acquisition, use or consumption and that
might satisfy wants or needs. – Philip Kotler
A product is a set of tangible and intangible attributes
including packaging, color, price, quality and brand
plus the seller’s service and reputation. – William J.
Stanton
Features
Tangible and intangible
Need satisfaction
Exchange value
Related attributes
Core of marketing mix
Levels of product
1. Core product: It is a core benefit and the essential utility
attached with a product. Buyers purchase a product for the
benefits and satisfaction attached with the product. For e.g.
woman buys beauty through cosmetics.
2. Basic product: It is a conversion of core benefits into actual
product for e.g. some chemicals are combined to produce face
creams, lipsticks, shampoos etc that provide beauty.
3. Expected product: It includes a set of attributes and
conditions buyers normally expect in a product. It is built over
the core benefits and basic product. It has five attributes:
quality level, features, design, brand name and packaging. For
e.g. Dell computers, Ponds face cream, Sunsilk shampoo etc.
4. Augmented product: It is the sum of benefits a
buyer receives or experiences in obtaining a product
that is physical object, benefits and the whole range
of services attached with the product. It include
delivery, warranty, credit, advice and instructions. It
provides a complete solution to the buyer’s problem.
5. Potential product: It includes all possible
augmentations and transformations the product may
undergo in future. For e.g. benefits getting after
maturity of insurance policy.
Classification of Products
1. Consumer products 2. Industrial products
 Convenience products  Raw materials
 Shopping products  Fabricating materials
 Specialty products and parts
 Unsought products  Installations
 Accessory equipments
 Supplies and services
Types and features of consumers products
1. Convenience products: are consumer products that a
customer usually buys frequently, immediately, and with a
minimum of comparison and buying efforts.
Features:
Daily needs for the consumers
Generally branded
Needed to buy frequently
Relatively low per unit price
Very short life and are less durable
Purchased at minimum time and efforts
Consumers have sufficient knowledge about the product
Marketing considerations for convenience
products
Long channel of distribution is required
Responsibility of advertisement is entirely to
producers
Product should be attractively placed in retail outlets
These products should be given brand name or trade
mark
Should be packaged in a attractive way
Low profit margin strategy should be taken by
producer
2. Shopping products
 Shopping products are consumer goods that requires proper
comparison on different bases like suitability, quality, price and style
etc during purchase. Generally involve more time, cost, and efforts
from the consumer. For e.g. refrigerator, computer, modern furniture,
television, clothing etc. are shopping products.
Features:
 More time and effort are needed to buy
 Comparatively more durable than convenience product
 Customers may or may not have knowledge about product
 Bought again only after long period of time
 Even after purchase plan, buying can be postponed
 Purchased only after proper comparison in terms of quality, price, size,
design etc.
Marketing considerations
Distribution channel: short as far as possible
Role of retailer: plays important role as channel
member to show and sell products
Profit margin: high profit margin strategy
Responsibility of advertising: advertising
responsibility is ultimately with producer but partly
advertisements and personal selling remains with
retailers
Packaging: not that important for shopping products
3. Specialty products
Specialty products are consumer products with unique
characteristics or brand identification for which a significant
group of buyers is willing to make a special purchase effort. For
e.g. sports cars, high priced electronic equipments, designers’
wearing, diamond jewelry etc.
Features:
Time and effort: special time and effort is required
Comparison: do not compare with substitute products
Brand: branded, and customers give special priority
Buying frequency: purchased occasionally
Features: have unique features and not comparable with others
Marketing Considerations
Packaging: Need not to give importance to packaging
for specialty products by marketer.
Promotion: Producers and resellers should jointly
make efforts for promotion activities.
Profit margin: High profit margin strategy should be
implemented.
Branding: It is quite important to sell specialty
products.
Channel of distribution: It should be short.
4. Unsought products
Unsought products are consumer products that customer either
does not know about or know about but does not normally think of
buying. It includes products like fire extinguishers, stamps, life
insurance, encyclopedia, new innovations, etc.
Features:
Buying plan: Customers do not make buying plan for unsought
products. Aggressive advertising and personal selling attract for
buying.
Nature: Products are different in nature and prices are also
different.
Branding: It is not that important but for some products it may be
required.
Knowledge: Customers may or may not have knowledge about the
product.
Marketing Considerations
Awareness: Consumers should be made aware about
the product and its benefits.
Packaging: It should be appropriate for the product
and necessary.
Price: It is generally high because the product is new
in most of the cases.
Promotion: Advertising and personal selling play
important role.
Direct marketing is done by manufacturer to create
demand.
Types and features of industrial
products
Industrial products(also known as business products)
are those products, which are bought by individuals or
organizations for further processing or for use in
conducting a business, or for resell purpose. They are
not bought for personal use.
1. Raw Materials
The raw materials are the basic materials that have not
been processed yet, and from which the final products
are produced. They are in the form in which they are
found in nature without anything done to them. It has
two categories:
a. Farm raw materials: such as sugarcane, wheat, barley,
corn, paddy, cotton, tobacco. Fruits, livestock,
vegetables, etc.
b. Natural raw materials: such as gold, silver, iron ore,
copper, coal, crude petroleum, herbs, fish, lumber, etc.
Features
Frequently purchased
Very short life span
Low per unit price
Supply is limited, especially natural raw materials
Marketing considerations
Brand: Importance should be given to quality of raw
material than to the brand name.
Distribution Channel: Direct distribution channel
Advertisement: Not required
After sales service: Not needed
Contract: Long term contract should be done for
supplying raw materials
2. Fabricating materials and parts
Fabricating materials and parts are those industrial
materials which are already in finished form but alone
cannot be used, when it become a part of another
finished good then it can be used. It consists of
component materials like iron, yarn, cement, wires, etc
and component parts like small motors, tires, batteries
etc.
Features
Fabricating materials and parts undergo further
processing for final products.
The life span depends on the life of final product.
Relatively low per unit price.
Usually purchased in large quantities.
Buying decision is based on price and services
provided by the seller.
Frequently purchased item
Marketing Considerations
Branding and advertising: Considered less important
but personal selling and public relation plays
important role.
Contracts: Long term
Distribution channel: Short or direct as far as possible.
After sales service: May be required as per nature of
product.
Price: Competitive pricing strategy.
3. Installations
Installation is a major capital item. It consists of major
purchases such as buildings (factories, offices) and fixed
equipments (generators, press, large computer system,
lift, elevator etc.). In the lack of these installations, raw
materials can not be converted into finished goods.
Features:
High per unit price
Need not to be bought frequently
Are major, expensive and long lasting products
Reputation of brand and supplier is important
Marketing considerations
Branding: Brand and trade mark is important
Distribution: Direct as far as possible
After sales service: Required
Promotion: Personal selling is quite important
Knowledge: Supplier should have extensive knowledge
about the product to convince buyers
4. Accessory equipment
Accessory equipments are the industrial products which does
not become a part of the finished goods, but plays an important
role on the operation of organization. It includes portable
factory equipments and tools such as hand tools, lifts, trucks etc.
and office equipments such as computers, fax machines,
photocopy machines, tables, chairs etc.
Features:
Helps in production process and not a part of finished goods
Per unit price is lower than installations
Shorter life than installations
Medium purchase frequency
Low purchase quantity
Marketing considerations
Distribution: Long distribution channel
Brand: Branding is necessary
Promotion: Advertising is important
After sales service: Required
Contract: Average contract duration
5. Supplies and Services
These products help in operation without becoming part
of the finished goods. It include operating supplies such
as coal, paper, pencils, lubricants, fuel etc. and repair
and maintenance items such as nails, paint, brooms etc.
Features:
Are not the part of finished products.
Very low per unit price
Relatively short life span
No time and effort needed to purchase
Frequently purchased item
Marketing considerations
Distribution: Distributed through intermediaries
Contract: Short contract duration
After sales service: Rarely provided
Promotion: Not important
Brand: More focus towards regular and timely supply
not the brand
Product Life Cycle
Product life cycle is the cycle through which every
product goes from introduction to withdrawal or
eventual demise.
“Product life cycle is an attempt to recognize distinct
stages in the sales history of the product” – Philip
Kotler
“A product life cycle consists of the aggregate demand
over an extended period of time for all brands
comprising a generic product category” – William J.
Stanton
 Product Life Cycle
Introduction Growth Maturity Decline

Sales
Sales Volume

Profit

Break Even
Loss Life of Product
1. Introduction stage
It is the first stage of product life cycle where a product is
launched into the market in a full-scale marketing
program.
Features:
High cost: because of too much expenses required for
promotion of product
High price
Slow sales growth rate
Low profit margin
No competitors
Need of promotion
Implication of marketing strategies
Product: are new in market. The product mix is small.
Products are one or very few and relatively
undifferentiated.
Price: is generally high. Price skimming strategy for high
profit margin is adopted.
Promotional activities are aimed at building brand
awareness. Free samples or trial incentives may be
directed towards early adopters.
Place or distribution is selective and scattered. After
selecting the distribution channel, proper strategy
should be adopted to enter suitable market.
2. Growth stage
It is the second stage where company’s sales and
profits starts increasing and competition also begin to
increase.
Features:
High sales
High profits
Large number of competitors
Lower price
Loyal customers
Implication of marketing strategies
Product: is accepted in market. Maintaining the existing
quality, improvements in quality, and adding new
product features policy is adopted.
Price: is maintained or may increase as company gets
high demand at low competition or it may be reduced to
grasp more customers.
Promotion: is increased when acceptability of product
increases, more efforts are made for brand preference
and loyalty towards product.
Place: or distribution channels are added for intensive
distribution in order to meet increasing demand.
3. Maturity stage
It is the third stage of PLC where the product reach at its
maximum height that is product becomes able to generate
highest possible sales volume. At this stage companies may
revise price, add new features to their products, and enter new
market segments so that they can prolong the maturity stage.
Features:
Slowdown in sales growth rate
Stable profits
Price war
Low price
High promotional expenses
Implication of marketing strategies
Product modification are made and features are added
in order to differentiate the product from competing
products that may have been introduced.
Price is reduced in order to face keen competition. It
attracts thee price conscious segment and retains the
existing customers.
Promotion is done in order to create product
differentiation and loyalty. Incentives are also offered to
attract more customers.
Place or new distribution channels are added and
incentives are offered to intermediaries.
4. Decline stage
It is the final stage where sales drop, change in trends, the
product is no longer useful, price wars continue, and several
products are withdrawn from the market. It may be due to
market saturation, technical obsolescence or changed in
customer taste. The company should reduce the cost and find
new use of product and continue offering the product to loyal
niche until zero profit.
Features:
Decline sales
Decline profit
Decline competition
Decline customers
Implication of marketing strategies
Products are reduced from product line. Weak brands
are withdrawn from the market.
Prices are lowered to stock clearance of discontinued
products but prices of products are increased of strong
brand to cover cost of production.
Promotion expenditures are lowered and aimed at
reinforcing the brand image for continued products.
Place or distribution becomes more selective in the
declining stage.
New product development
New products include original products, improved
products, modified products and new brands that the
firm develops through its own research and
development efforts. – Philip Kotler
New product development is a creation, innovation,
utility enhancement or continuous improvement of
earlier features of an existing product or developing an
entirely new kind of product to satisfy the
requirements of its consumers.
Process of new product development
1st step: Idea generation
Internal source
External source
2nd step: Idea screening: Ideas can be of three types:
Prominent ideas, Marginal ideas, Reject ideas
Following questions should be answered:
a. Is it necessary to produce it?
b. Can the existing plant and machinery produce it?
c. Can the existing marketing network sell it?
d. When can it bring break even?
3rd step: Business analysis: It consists of:
Demand analysis: what will be the demand of new
product?
Competitor analysis: are there any competitors of the
new product?
Costs analysis: what will be the cost of new product?
Profitability analysis: whether the new product is
commercially profitable or not?
4th step: Product development: Translating product idea
into a technically and commercially feasible physical
product. It encompasses product design, packaging,
branding, labeling etc.
5th step: Test marketing: is the testing sample product
within a specific market segment.
6th step: Commercialization: process of introducing new
product in the target market segment; full fledged
promotion and distribution. It needs decisions related
to Timing, Place, Market Segment, and Strategy
7th step: Feedback: It must answer following questions:
Is the new product accepted by the consumers?
Are the demand, sales and profits high?
Are the consumers satisfied with the after sales
service?
Branding Decision
Branding is a process of creating a unique name, term, design,
symbol, or any other feature to the products that helps to identify
manufacturer of the product.
A brand is the name, symbol, mark, word design or combination
of them which is intended to identify products or services of
producers or sellers and to differentiate from those of competitors.
A brand name consists of words, letters or numbers that can be
easily vocalized. For e.g. Apple, Samsung, 7 11, 555.
A brand mark is the part of the brand that appears in the form of
symbol or design which can be recognized easily but cannot be
pronounced. For e.g. mark of Pepsi
A trade mark is a brand or part of brand that is given legal
protection.
Objectives of branding
To differentiate a firm’s products from those of competitors
To make convenience in shopping
Brands refer the prestige of the manufacturers, sellers; and
also give prestige to the consumers when they use popular
brands
To legally protect the company
To identify the exact market for their products
To assure regular satisfaction to the customers
To maintain constant quality of the products and thus win
the confidence of the target market; because brand may be
a symbol of quality
To reduce price comparisons because it is hard to compare
prices on two items with different product features
Types of brands
1. Individual brand: (also known as multi-brand) is the
marketing strategy of giving unique brand name for
each product for e.g. Bottler’s Nepal’s products Coke,
Fanta, Sprite etc.
2. Family brand: (also known as umbrella brand) is a
marketing strategy of giving one brand name for all
products of a manufacturer. For e.g. Tata, Samsung,
Sony, Hulas etc. Individual brand name comes with
family names such as Tata bus, Tata salt, Tata tea,
Samsung television, Samsung mobile etc.
3. Manufacturer’s brand: (also known as national brand) is
created by producer. The marketing effort of a manufacturer's
brand is to attract customers loyalty to the manufacturer’s
name. For e.g. Samsung, Sony, Philips, Apple etc.
4. Middlemen’s brand: (also known as distributor’s brand) is
created by middlemen. This brand name is owned by a retailer,
wholesaler, or other distributor rather than producer.
5. Licensed brand: (originally manufacturer’s brand) is used as
franchise by taking authority or license from franchisor. For
e.g. Mcdonald, KFC, Pizza Hut etc.
Reasons for not branding
1. Increase in price
2. Low quality
3. Perishable products
4. Homogenous products
5. Legal procedures
6. Unwilling to assume responsibility
Concept of Brand Equity
“Brand equity consists of differential attributes
underpinning a brand which gives increased value to the
firm’s product or service.” – Chernatony and McDonald
“Brand equity is a set of brand assets and liabilities linked
to a brand, its name and symbol add to or subtract from the
value provided by a product or services to a firm and/or to
that firm’s customers.” – David Aakar
Brand equity indicates to those attributes and association,
which make the brands difference from one another, or
which make branded products superior to others.
Brand Value to the Customers
A good brand provides following value/advantages to
customers:
i. Good or strong brands are the package of information and
helps customers in information processing i.e.,
interpreting, processing, and storing information about
products and brands.
ii. Good brands enhance customer’s confidence in the
purchase decision by removing confusion regarding
product selection; because they perceive a strong or good
brand as the symbol of quality.
iii. Good brands provide customers usage satisfaction, which
the unbranded or unpopular brands cannot provide it to
customers; because strong brands assure customers for
product performance.
Brand Value to the Marketers
A good brand provides following values to marketers:
i. It is an asset that yields adequate revenue to the company for a
longer period.
ii. It makes a firm’s marketing programs more effective and efficient.
iii. It allows a firm to have greater customer loyalty.
iv. It allows a firm to charge premium price to its products because
customers become ready to pay high price for good brand.
v. It provides greater opportunities for growth to the firm within a
limited time period.
vi. It provides competitive advantage to the firm.
vii. It adds promotional value to the firm and makes marketing
communication more effective.
viii. It is a good source of achieving leverage in distribution channels
because trade partners give priority in distributing strong brands
than others.
ix. It allows additional brand extension opportunities.
Packaging Decision
Packaging is the activity of designing and producing
the container or wrapper for products. – Philip Kotler
Packing may be defined as all the activities involved in
designing and producing the container or wrapper for
a product. – William J. Stanton
Levels of packaging
Primary package: holds the actual product like bottle
containing after shave lotion, tube containing
toothpaste
Secondary package: contains the primary package, for
e.g. card board package for one toothpaste tube, plastic
package for 1 dozen biscuits; removed while using
product
Shipping package: used to store and transport the
product, for e.g. card board box containing 1 dozen
toothpaste tube; removed when retailers receive the
product
Requirements of packaging
1. Containment
2. Protection
3. Identification
4. Dependable/Reliable
5. Convenience
6. Attractiveness
7. Communicative
8. Economic
9. Eco-friendly
Functions of Packaging
 Protect goods from external damages due to mishandling, external
shocks or adverse climatic conditions.
 Disseminate adequate information to the customers and other
concerned parties.
 Differentiate firm’s products from those of competitors.
 Facilitate storage of goods. Packaged goods can be stored for a long time
compared to non-packaged.
 Facilitate self-service due to convenient handling.
 Meet consumer affluence, because they are willing to pay a little more for
their convenience, attractive looking, prestige of better packaging etc.
 To build up company’s image and reputation, because attractive,
protective and informative packaging may build up company’s image
and reputation.
Product line and mix strategies
Product line strategies: Product line is a group of
closely related products. They perform similar
function. They are sold to the same customer group.
They are marketed through the same channels. They
fall within given price ranges. The strategies are:
1. Product line length strategy: It includes total items in
a product line. Product line length decisions involve
line expansion and line contraction.
a. Line expansion strategy: New items are added in the
product line. Two methods are followed:
i. Line stretching strategy: Product line is lengthened
beyond the current price range through:
• Trading-Up(Upward stretch): Adding a higher price
item to the line to enhance image
• Trading-Down(Downward stretch): Adding a lower
price item to the line to cater price sensitive customers
ii. Line filling strategy: More items are added within the
current price range to discourage competition or make
profit.
b. Line contraction strategy: Product line is reduced by
dropping items. Items with poor sales are dropped.
2. Line modernization strategy: Organizations
modernize their product lines to cope with changing
technology, increasing competition and changing
customer preferences.
3. Line featuring strategy: It involves featuring one or
two low-priced or high-priced items to attract a
specific group of customers. Low-priced for price
sensitive customers and high-priced for prestige
seekers.
Product mix strategies
a. Product width strategy: It refers to the number of product
lines the company dealing with.
b. Product depth strategy: It refers to the number of product
items in a product line.
c. Product length strategy: It refers to total number of product
items the company dealing with in its overall product mix.
d. Product consistency strategy: It refers to how closely related
the various product lines are.
The strategies for product mix is concerned with adding or
dropping particular product item or line in respective
strategies as per requirements.
Service Product
“Service is an identifiable, intangible activity that is
the main object of transaction designed to provide
want satisfaction to customers.” – William J. Stanton
“ A service is any act or performance that one party can
offer to another that is essentially intangible and does
not result in the ownership of anything.” – Philip
Kotler
Service products are intangible (can not be seen,
tested, felt, heard or smelled before purchase),
inseparable (cannot be separated from their
providers), perishable (cannot be stored for later sale
or use), and variable (quality of service depends on
who provides them and when, where, and how).
Features:
Intangibility
Inseparability
Perishable
Variability
Types of services
Person related services: Services of teachers, doctors,
lawyers, technical persons, counselors, etc.
Equipment related services: Services of lifting
machine, vending machine, television, computer, and
other equipments.
Profits related services: Service of bank, nursing
home, private hospitals, private schools etc.
Non-profit related services: Service of government
hospitals, government schools, universities, social
organizations etc.
Marketing strategies for service product
1. Marketing mix strategy
Service product strategy
Service price strategy
Service promotion strategy
Service place strategy
2. Service profit chain strategy

Satisfied and Satisfied and Healthy

Internal Service Greater
Productive Loyal Profits and
Quality Service Value
Employees Customers Growth
3. Service differentiation strategy: How do you differentiate your
services from that of the competition? Its easier in products where
the variables are tangibles but pretty different in case of services. The
main factors that can be used to differentiate are:
a. Make ordering goods ease: Refers to how easy it is for you to place
an order with the company.
b. Quick service delivery: Related to how well the product or service
is delivered to the customer, covering speed, accuracy and
customer care.
c. Good installation service: Refers to the work done to make a
product operational in its planned location.
d. Customer training: Refers to how the customer’s employees are
trained to use the vendor’s equipment properly and efficiently.
e. Customer consulting: Refers to data, information system and
advising services that the seller offers to buyers.
f. Helping service quality: Describes the service program for helping
customers keep purchasing products in good working order.
4. Service quality strategy: is a measure of how well a
delivered service matches the customer expectations.
The outcome of using quality practices are:
• Understanding and improving of operational
processes
• Identifying problems quickly and systematically
• Establishing valid and reliable service performance
measures
• Measuring customer satisfaction and other
performance outcomes
5. Service productivity strategy: is related to how
effectively input resources are transformed into value
for customers.
Management of People, Physical
Evidences and Processes
1. People: Service product is by the people and for the
people which encompasses:
Service personnel: A marketer should always make his
service personnel customer oriented and for this
purpose, the marketer needs to motivate service
personnel by providing them better facilities, sales
orientations and trainings time-to-time.
Customer: A marketer should always try to establish good
relationship with the customers; he should treat them
as the good friends because shift of an existing
customer may cause a huge loss for the company.
2. Physical evidence: It consists of:
• Maintaining good office-room conditions
• Better office furnishings
• Attractive office layouts
• Provision of customer complaint box
• Lighting and ventilation system in the rooms
• Appropriate office sizes
• Adequate physical facilities in the office rooms such as
heater, fans, stationeries, etc
• Provision of waiting rooms for customers associated with
entertainment such as television
• Association of many other services that the customers
demand in the course of time
3. Processes: The general principle is that the service delivery
process should be short and simple. It consists of two major
aspects:
• Degree of customer contact: Marketers should try to contact
customers time-to-time even after the products are sold. This is
because, marketers need to understand the customer’s reaction
over the company’s services and that makes customers loyal.
• Quality control standards: Most customers prefer to buy
products or services from those companies, which are capable to
maintain and upgrade standards of the product or services.
Quality can be maintained not only on products, but also on
production process, information processing and purchase of
quality raw materials.