product decisions

9/29/2015

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PRODUCT DECISIONS

Product

9/29/2015 [email protected]

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A product is anything that can offered to market for

attention, acquisition, use, consumption that might

satisfy a want or need.

A bundle of attributes, offering for use/consumption

by the final customer.

Everything the purchaser gets in exchange for his

money.

Product Levels The Customer Value Hierarchy


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Core Product


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Indicate core benefit or service

Explains what the buyer really buys

Basic step in designing products

Defines problem solving benefits/ services that

consumers seek

Standardization of technology does not lead to

much of difference from competing firms

Basic Product


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At this level, the core benefit is turned into a basic

product.

Unbranded, plainly packaged, less expensive

Expected Product


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Expected/ formal/ tangible product

Represents basic requirements, a customer finds essential to buy a product

Attributes & conditions required by the customers identified-built into products

Includes brand name, features, design, packaging, quality level, styling, styling, attributes, instructions manual

As inter-firm rivalry intensifies, differentiation on basis of formal product ceases

Marketer searches for a possible differentiation

Augmented product


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Marketer prepares an augmented product that

exceeds customer expectations.

Intangible component of the product along with

formal & core components

Product built by adding consumer services &

benefits

These are added intangibles looked for when

technology fails to differentiate

Potential product


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Future product

Includes all possible improvements under given

technological, economical, competitive conditions

Helps to attract & retain customers

These offerings differ from one market to another

because of varying competitive conditions

Driving force- to retain competitive advantage.

NIVEA Product Levels


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Product concept


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Developed by Theodore Levitt

Product refers to augmented product or aggregate

of satisfactions that a user obtains.

Three dimensions

Managerial Dimension

Consumer Dimension

Social Dimension

Managerial Dimension


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Physical attributes of a product which distinguish it

from other products

Related product features such as brand name,

package, product life cycle, safety components etc.

Related product services such as delivery,

installation, maintenance and repairs, warranty etc.

Consumer Dimension


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Bundle of utilities consisting of product features and accompanying services.

Purchase to satisfy needs and expectations.

Repurchase only if satisfied.

Bundle of satisfaction of needs.

Three dimensional:

Tangible product ( Basic/Expected)

Extended Product (Augmented)

Generic Product (Core)

Social Dimension


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Products should fulfil the expectation of social welfare and social interests.

Salutary products and desirable products.

Best utilisation of available limited resources.

Safety to consumers using the product.

Long run satisfaction and welfare of consumers.

Improving the quality of consumers life.

Concern for better environment.

Durability, quality, and reasonable price.

Product Classification


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Durability & Tangibility

Nondurable goods

Durable goods

Services

Use

Consumer Goods

Convenience

Shopping

Specialty

Unsought

Industrial Goods

Materials and parts

Capital items

Supplies/business services

Convenience Product


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Bought frequently, immediately with minimum

comparison and buying effort.

Are low priced

Available in many locations

FMCG

Shopping Product


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Characteristically compared on the basis of

suitability, quality, price and style while selection

and purchase.

Distributed through fewer outlets.

Expend time and effort to select right product.

Durable Goods.

Specialty Products


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Has unique characteristics or brand identification

for which a significant group of buyer is willing to

make a special purchase effort.

People travel even long distances to buy them.

No comparison is involved in buying.

Distribution is limited.

Unsought Product


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Consumer either does not know about/ knows about

but does not normally think of buying it.

Require a lot of advertising, personal selling and

marketing efforts.

Materials and Parts


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Raw materials & parts:

Farm products (wheat, cotton, livestock, fruits,

vegetables)

Natural products (fish, wood, crude oils, iron ore)

Manufactured materials & parts:

Component materials (iron yarn, cement, wires)

Component parts (small motors, tires, castings)

Capital items


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Aid in buyers production or operations

Installations:

Major purchases (factories, offices)

Fixed equipment (generators, elevators)

Accessory equipment:

Portable factory equipments and tools (hand tools, lift

trucks)

Office equipments (computers, fax machines, desks)

Supplies/ Business Services


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Supplies

Operating supplies (Lubricants, coal, paper, pencil)

Repair and maintenance (paint, nails, brooms)

Services

Maintenance and repair services (window clearing,

computer repair)

Business advisory services ( legal, management,

consulting, advertising)

Product Policy


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Policies adopted by the firm to bring the prospective buyers closer to the product.

Sets the objectives to be achieved.

Policy regarding new product or for retaining existing product.

Consideration of product mix.

Changes in demand for existing products.

Product elimination and Ne product Development Decisions

Product policy of the competitors.

Formed in Three Levels:

Product Mix

Product Item

Product Line

Product Mix


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List of All the products offered for sale by a

company.

Composite of products offered for sale by a firm or

business.

Product portfolio/ Product range/ Product

assortment.

Four Dimensions: Length, Breadth, Depth and

Consistency


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Length : Total number of items in the product mix of

the company.

Width : Number of different product lines carries

by the company.

Depth : Assortment of size, colour and models

offered in each item of a product line.

Consistency : It refers to the relationship of various

product line either in their end use, production

requirement, distribution channel or other way.


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Factors influencing Product Mix


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Changes in demand

Change in population

Change in consumers Income

Change in consumer Behaviour

Marketing influences

Production efficiencies

Financial influences

Use of waste

Competitors Strategy

Profitability

Product Item


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A specific version of a product that has a separate

designation in the sellers list.

Specific model, brand or size of a product that a

company sells.

Product Line


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A group of products that are closely related

because they satisfy a class of needs, are used

together, are sold to the same customer groups, are

marketed through the same type of outlets or fall

within a given price range.

A group of closely related products or product

items that are physically similar or are intended for

a similar market.

Factors Affecting Product Line Decision


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Consumers Preferences

Strategies and tactics of competitors

Firms cost Structure

Change in demand

Buying habits and patterns

Marketing influences

Production efficiencies

Company objectives

Line modernisation

Product specialisation

Product Mix Alteration


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Product Modification

Product Elimination

Product line Modification

Product line Contraction/ Simplification

Product Line Expansion/ Diversification

Changing Models or Styles of Existing product

Quality Variations

Trading Up

Trading Down

Product Life Cycle


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The stages through which a product passes.

The period during which a product lives in the

market.

Theodore Levitt in 1965

Premises


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The products have limited life.

Sales of products pass through distinct stages, each

posing different challenges to the seller.

Profits rise and fall at different stages.

Products require different strategies in each stage

of life cycle.


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Introduction Stage

Sales

Costs

Profits

Marketing Objectives

Product

Price

Low sales

High cost per customer

Negative

Create product awareness and trial

Offer a basic product

Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early adopters and dealers

Growth Stage

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Sales

Costs

Profits


Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer product extensions, service, warranty

Price to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the mass market

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Maturity Stage


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Sales

Costs

Profits


Product

Price

Peak sales

Low cost per customer

High profits Maximize profit while defending

market share

Diversify brand and models

Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

Decline Stage


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Sales

Costs

Profits


Product

Price

Declining sales

Low cost per customer

Declining profits

Reduce expenditure and milk the brand

Phase out weak items

Cut price

Distribution Go selective: phase out unprofitable

outlets

Advertising Reduce to level needed to retain hard-core loyal customers

Factors affecting PLC


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Rate of technological changes.

Rate of market acceptance.

Position of competitive entry.

Patent protection.

Economic forces

Risk bearing capacity

Customers attitude

Government policy

Uses of PLC


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Helps in planning new products.

Enables the firm to estimate the earnings in different stages of PLC.

Helps in determining the cost of product development.

Enables marketers to prepare appropriate marketing programmes and look for innovations or new markets.

Helps in allocation of resources among different products.

Helps in setting prices.

Helps in making plans regarding improvement, modification and elimination of products at different stages.

Helps in product differentiation decision.

Helps in sales promotion and marketing control.

Limitations of Life Cycle model


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It is impossible to determine the particular stage in which a product is.

The determination of length of each stage in the life cycle is a complicated process.

It is not necessary that all stages can be applicable to every product.

Product life cycle alone can not be a device for marketing success.

Some products remain in market without being outdated.

PLC does not consider the PEST factors.

New Products Development


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Enhancing Product Mix.

Involve a number of decisions.

Concerned with development and commercialisation

of new products according to product planning.

Stages in New Product Development


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Exploration (Generating Product Ideas)

Screening

Business Analysis

Development

Testing

Commercialisation

Exploration


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Determining the product fields of interest to the

company

Establishing a programme for planned idea

generation

Collecting ideas through an organised work

Internal and External Sources of ideas

Screening of Ideas


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Ideas scrutinised to eliminate those inconsistent with

product policies and objectives of the firm.

Expanding each idea into full product concept.

Collecting facts and opinions to decide whether the

product idea could be converted into a business

proposition.

Assessing each idea for its potential value to the

company.

Business Analysis


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Further study on each idea in a detailed manner.

Determining the desirable market features for the

product and its feasibility.

Developing specifications and establishing a

definite programme for the product.

Product Development/Technical Development


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Idea is converted into a product that is producible

and demonstrable.

Decide whether a product should be developed on

a commercial scale or not.

Establishing development project for each product.

Building the product with changed specifications if

any.

Laboratory evaluation and realising the product for

testing.

Testing


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Concept Testing

Kind of research in which the product idea is screened

before any money, time or labour are committed to

making the prototype products.

Product Testing

Test whether the product performs as expected.

Test Marketing

Post-launching survey

Commercialisation


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Submitting to the market and commence lifecycle.

Completing final plans for product and marketing.

Initiating coordinated production and selling

programmes.

Checking results at regular intervals.

Forms of New Product Introduction


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Facelift: small changes in the product; Rest of marketing mix remains the same.

Inconspicuous Technological Substitution: Technology changes, but not promoted.

Remerchandising: Change in Marketing Mix elements except Product.

Relaunch: All elements of marketing mix change.

Conspicuous Technological Substitution: New Technology, consumers are encouraged to try new product.

Intangible Repositioning: Basic Product same, but target market and other elements change.

Tangible repositioning: Product and Target market are changed.

Innovation: Fundamental Changes in technology of the product.

Product Failure


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Defects in the product

Design of Product

Higher price

Introduced Untimely

Wrong selection of channel of distribution

Inefficient and insufficient marketing efforts

Ignorance of consumer preferences

Higher cost of production

Keen competition

How to Overcome


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Identify and ensure a potential market

Make the product suitable for the market

Satisfy consumer needs and wants

Taking effective promotion and demand creation

activities

Selecting Good system of distribution

Select a product which keeps the image of the

company

Brand


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Name, Term, Symbol or design, or a combination of

them which is intended to identify the goods or

services of one seller and to differentiate them from

those of competitors.

Brandr to burn (Norwegian)

Symbol of trust, warmth, value and loyalty.

Brand Name


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Combination of words used to identify a product

and to differentiate it from other rival products.

Brand Mark

Part of the brand which appears in the form of a

symbol, design or distinctive colouring or lettering.

Could be recognised only by sight and may not be

pronounceable.

Branding


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Management process by which a product is

branded.

Include giving a brand name, designing brand

mark, establishing and popularising it.

Trade Mark


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Registered brand names or brand marks.

A brand or part of a brand that is given legal

protection because it is capable of exclusive

appropriation.

Trade Name

Name of business, preferably the name of the

organisation.

Functions of Branding


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Helps in product identification and gives distinctiveness to a product.

Indirectly denotes quality or standard of a product.

Eliminates imitation of a product.

Ensures legal right on the product.

Helps in advertising and packaging.

Helps to create and sustain brand loyalty to particular products.

Helps in price differentiation of products.

Types of Brands


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Manufacturers brands:

National Brands- Same brand for the nation

Regional Brands- Brand for particular region

Advertising Brands- Brands stressing symbols

Blanket brands or Single Brands or Family Brands- One brand name for all the products of the manufacturer

Multiple Brands or Individual Brands- Brand name given for each variety of product

Distributers brands:

Private, Dealer, Store or House Brand

Essentials or Characteristics of a Good Brand


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Word selected must be simple and easy to

pronounce.

Should be memorable.

Must be attractive to the eyes and pleasing to ears.

Better to provide necessary suggestion about

products benefits.

Should be appropriate and suitable for the product.

Should be distinctive from other brands.

Advantages of Brand Names


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To the Manufacturers

To identify and differentiate product from competing products.

Saves advertisement cost if the brand name is popular.

Creates confidence and goodwill.

Widens the market for the product.

Helps in introduction of new product.

To the Consumers

Easy identification of the product.

Assures certain quality.

Unvarying price.


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To the Distributors

Popular brands ease selling and lead to large sales.

Helps in advertising and sales promotion programmes.

Find out quick moving products.

Reduces price flexibility and thus reduce risks.

No need of special selling efforts. Reduces cost of

distribution.

Arguments against/ Limitations


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Brand monopoly

Huge expense

Brand names do not always assure quality

Brand loyalty discourage new products

Create confusion among consumers

Unfair competition

Higher prices for branded products

Brand Loyalty


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A favourable attitude and consistent purchase of a

particular brand.

Strong attachment of a buyer to a brand.

Three levels

Brand Recognition

Brand Preference

Brand Insistence

Determinants of Brand/ Consumer Loyalty


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People

Product and Service Delivery

Product Plan

Product Features

Price

Policies and procedures

Promotion and advertising

Brand Equity


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Value associated with a brand

A set of assets and liabilities linked to a brands

name and symbol that add to or subtract from the

value provided by a product or service to a firm

and/or that firms customers.

Brand Rejuvenation

Elements of Brand Equity


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Brand awareness- measures how many consumers in

the market are familiar with the brand

Perceived Quality or Perceived Value- relationship

between a products benefits and its costs

Brand Associations- mental links that consumers

make between a brand and its key product

attributes

Brand Loyalty

Packing and Packaging


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Packing:

The process of covering, wrapping or crating the goods

into a package.

Done for the purpose of delivering the articles to the

consumer or for the purpose of transport.

Packaging:

General group of activities in a product planning which

involve designing and producing the container or

wrapper for the product.

Functions of Package


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To assemble and arrange the contents in the desired form.

Product differentiation.

To protect the contents from production to final use.

Provide suitable product mix including sizes, weights, prices, grades and packages.

To facilitate retailers functions.

To facilitate transporting, storing and warehouse handling.

To enable the display of contents.

To encourage repurchases.

To help in complying with legal requirements.

To provide opportunity and space for advertising.

Objectives


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Protection from various kinds of damages

Damage by mechanical handling

Product loss

Pilferage

Contamination by dirt or dust

Moisture gain and loss

Chemical change

Insect attack


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Convenience

Storage convenience

Convenience in use

Economy

Prevent loss in quantity and thus monetary loss

Provides opportunity for re-use

Creates an opportunity to communicate with customers


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Promotion

Self service

Consumer difference

Integrated Branding

Innovational opportunity

Kinds of Packaging


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Family Packaging

Products of a manufacturer packed in an identical

manner

Re use packaging

Multiple Packaging

Placing several units in one container

Requisites of a good Package


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Should suit the product

Protect the contents

Meet the requirement of different segments of

consumers

Must be attractive

Must be durable

Problems in packaging


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Cost of packaging

Appearance

Kinds of designs

Convenience

Re-use purpose

Advantages


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To the Marketer

Protects from damage

Promotes product

Provides information

Facilitate storage and transportation

Helps in branding

Enhances goodwill

Acts as silent salesman


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To middlemen

Facilitate transportation and storage

Easy display

Keeps product fresh and clean

Self advertising

Advantage to Consumer

Convenient handling

Less possibility of adulteration

Information regarding use and upkeep

Easy identification

Labelling


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Informative tag, wrapper or seal attached to a

product or products package

Part of a product which carries a verbal information

about the product

Packaged Commodities (Regulation)Order 1975

Functions


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Helps in identification of the product

Stresses the standard and other special features of the product

Enables the manufacturer to give clear instructions to the consumer

Price is recorded, registered and maintained

Ensure standard /quality

Establish contact between manufacturer and consumer

Kinds of labels


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Brand labels

Grade Labels

Descriptive Labels

Informative Labels

Advantages of labelling


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Social service to consumers

Avoids price variations

Helps advertising activity

Helps the consumers to assess superiority of product

Provides guarantee for the standard of the product

Disadvantages


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No use for illiterate persons

Increases cost of the product

Effective only when the standardisation is

compulsory

Discarding certain products by consumer by

comparing with others

Marketing Myopia


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Theodore Levitt- Marketing myopia 1960

Main reason for failure of large business firms is Lack of foresight.

Short sighted, narrow minded view of marketing.

Occurs when the marketer focuses on the product rather than customers requirements.

Marketing Myopia is narrow minded approach to a marketing situation where only short-range goals are considered or Where the marketing focuses on only one aspect out of many possible marketing attributes


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Causes


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Narrow minded approach to marketing

situation where only short ranged goals are

considered.

Product oriented rather than customer oriented.

Stepchild treatment to marketing.

Selling focuses on needs of the seller, marketing on the

needs of the buyer.

Excessive focus on Research and Development.

How to Prevent?


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Customer Orientation

Focus on Marketing

Look for future opportunities

Retention of existing customers

product decisions

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