Prepared by: Pramish Shakya Gurukul CA

CHAPTER-7 PRODUCT DECISIONS

Coverage:
1. Meaning of product
 Levels of product
 Types of products
2. Product life cycle
 Stages of Product life cycle
3. Process of new product development
4. Product line and product mix
 Product line
5. Product mix
6. Service product
 Types of service product
 Nature of service products
 Service marketing mix
7. Branding
 Meaning of branding
 Objectives of branding
 Reasons for and against branding
 Types of branding
 Features of good brand name
8. Packaging
 Meaning of packaging
 Levels of packaging
 Objectives of packaging
 Functions of Packaging
 Essentials of good packaging
9. Labeling
 Meaning of labeling
 Types of labels
10. Product scenario in Nepal
11. Exam questions

58
Prepared by: Pramish Shakya Gurukul CA

Introduction
The core of marketing is the product. Every marketer must have something to sell to the
customers in order to satisfy their need and earn profit. No marketing can exist without the
product. The success of any marketing depends upon the nature, quality and utility of the product
they sell.

Meaning of Product
Product is anything that has utility, can satisfy customer’s need and can be exchanged for money.
The product can be both tangible goods and intangible services. It can be tangible goods which
have physical properties such as food, clothes, furniture etc., it can be intangible services where
the product can be experienced and the benefit reaped but cannot be seen, touched or felt. The
product can be ideas and information, experiences such as adventure sports. The product can be
events such as dance music, art, movies, concerts etc. It can be people with special talents such
as movie stars, players, musicians and artists. Even places such as countries, places, cities can be
defined as products which provide the satisfaction through their natural beauties or development.
The product can be properties such as buildings, land etc. Organizations can also be termed as
product such as SONY, Toshiba, and Honda Etc. Information is another form of product where
information can be sold to buyers so that they can satisfy their need for knowledge.
Product is the utility that consumers look for to satisfy their need and are ready to pay for it.
The product includes the utility and satisfaction, the packaging it comes in, branding, labeling,
the warranty and guarantee provided, pre and post-sale services, and standardization and grading.
According to Philip Kotler, “A product is anything that can be offered to a market to satisfy a
want or need.”

According to William J. Stanton, “A product is a set of tangible and intangible attributes,

including packaging, color, price, quality and brand, plus the seller’s service and reputation.”
Products, be tangible or intangible, have their peculiar features, characteristics, size, color,
quality, variety and look. These features provide utilities and consumers get benefit from such
utilities.

59
Prepared by: Pramish Shakya Gurukul CA

Levels of product (The total product concept)

The product can be categorized and understood through five levels known as the levels of
product or the total product concept. Though the definition of product remains the same, it can be
defined and understood through following five levels.

1. Core product
Core product is the utility any consumer seeks for and the satisfaction received through that
utility. The product is not identified as specific brand but as the core utility the product bears.
This is the actual utility and benefits the consumer get from the product. The core utility such as
taste and energy from food, beauty from cosmetic products, service from hospitality firms are the
core products.

2. Actual product
Actual product is what consumers identify as a specific brand and the product a consumer buys.
This has features, design, quality, brand and packaging in case of tangible product. The product
has its specific identity and consumers purchase the brand they prefer. While the rice that
satisfies the hunger is core product, Hulas basmati rice is the actual product having its own
identity.

3. Augmented product
Augmented product is the total benefits and utilities the consumers get after they purchase the
product. This is the combination of the product, its benefits and utilities and the associated
services that comes with the actual product. This includes brand, packaging, pre and post-sale
services, discounts, extra items available with the purchase that comes along with the purchase of
the product. In short, augmented product means the total items and benefits that a consumer gets
with the purchase of the product.

4. Expected product
Expected product is what customers look for in the product. Every customer makes the purchase
with the expectation of the level of satisfaction they desire. If the product fails to satisfy the need
then the gap between the expectation and reality is created. The consumer seeks for products to
satisfy that gap. This sought out product is expected product.

5. Potential product
Potential product is the product that holds the prospective of satisfying the consumer’s needs.
This product holds the utility that can satisfy the consumer’s expectation. Potential products are
the potential benefits and features that can be introduced in the market in future and to which
consumers are interested into. 5G service in telecom market is the potential product.

60
Prepared by: Pramish Shakya Gurukul CA

Types of product
Products are of different types. On the basis of their features, the product can be tangible goods
or intangible services. However, in the market, the products can be primarily be categorized into
consumer products and industrial products.

1. Consumer products
Those products which are bought by the consumers for their own satisfaction or need are
consumer products. They are bought by end user consumers and do not go further down the
channel. Customers who buy the product consume it for their own benefit and need satisfaction.

The consumer goods or products can further be divided in three categories. They are:

a) Convenience products
Convenience products are the products which are purchased by the consumers frequently.
Consumers have very clear idea and knowledge about these products. They are well aware of the
price, quality, available brands and the level of satisfaction provided by the product. Consumers
do not invest much time while purchasing this type of product. They do not hesitate to switch
brand if they do not find their preferred brand immediately. They give less effort in planning,
searching and selecting the product. The brand awareness is high but the brand loyalty is very
low. These are purchased regularly and consumers show impulsive behavior towards these
products.

Marketers must know the kind of the product they are offering to the market. They should use
their marketing strategies according to the nature of the product. The marketer should follow
following strategies while dealing with convenience products:
 The product and brand should be frequently promoted in order to gain brand awareness
and brand loyalty.
 The consumers show impulsive behavior, therefore the packaging should be attractive so
as to attract the customers instantly.
 Low price strategy should be used in order to stay a step ahead of competitors.
 The distribution system should be well organized so that the product is available at the
right place at the right time.

b. Shopping goods
These are the type of goods which consumers buy occasionally or less frequently. Consumers
invest time and effort before purchasing such products as they have less information and idea
about the brands available, price of the product and the varieties available. The products are quite
expensive too. It is therefore, the customers search for the information and idea about the product
along with the perfect product. They plan the purchase, give effort in finding idea and product in
the market and take the purchase decision at the point of sale. The customers are less loyal
towards the brand and do not hesitate to choose a different brand if the product suits them.

61
Prepared by: Pramish Shakya Gurukul CA

Marketers must consider following points for shopping products:

 Product should be promoted to the customers so as to create a positive image of the brand
in consumer’s mind.
 Product should be available at major market locations so that customers can find their
products easily.
 Since the purchase decision is taken at the point of purchase, personal selling should be
initiated properly to influence the customers at buying our product.
 Price should be priced competitively in order to counter the competitors.
 Proper after sales services and warranty should be provided to gain customer’s
confidence towards our product.

c. Specialty goods
These are the products which the consumers seldom purchase. They are usually durable and high
priced products. Consumers spend substantial amount of time and effort while purchasing these
products. The consumers take the purchase decision before going to the market for actual
purchase. They plan the purchase and do not hesitate to wait for months and even years to get
their preferred product. The consumers are very much brand conscious and loyal to their
preferred brand. Products such as vehicles, buildings, luxury products etc. are specialty goods.

Marketers must consider the following points for specialty goods:

 The product should be unique having peculiar specifications from that of competitors.
 The product should deliver exclusive satisfaction and should be highly durable.
 A strong brand image should be created through product positioning, promotion and
product specifications.
 The product and brand should be presented as the synonym of reliability, durability,
luxury, comfort and image.
 The product can be priced high but the price should be reasonable to the image and
quality of the product.
 The product should be made available at exclusive outlets at the major market hubs.

d. Unsought products
These are the products which the customers do not look for on their own. Consumers are usually
unaware about the availability of the products or do not show any interest or buying intent even
if they know about the product. Consumers need to be highly persuaded through vigorous
promotional campaigns in order to sell these products. Since consumers show little interest in
these products, they do not care about the brand. Examples of unsought goods are insurance
policy, fire extinguishers, magazine subscription etc.

Marketers must consider following points for unsought products:

 Create consumer awareness towards the product through vigorous promotional campaign.
 Inform and motivate the consumers to use the product through personal selling
 Create awareness programs to encourage consumers to use the products.

62
Prepared by: Pramish Shakya Gurukul CA

2. Industrial Products
Products which are purchased in order to produce new product, purchased to resale the product
and products consumed to provide service to the consumers are industrial products. They are the
raw materials, machines and parts, tools and equipment etc. They are purchased to produce new
products and are not intended to be used for end consumption. Therefore the purchase volume is
large and is frequently purchased. Therefore the nature of the product and marketing
consideration is different than that of consumer products. The industrial products can be
categorized into following categories:

a) Materials and parts

These are the goods which are processed to produce final refined product. They actually become
the part of the final product. The demand for materials and parts is directly proportional to the
demand of the final product. These products may be raw materials such as mining products and
agricultural products and semi-finished products.

The marketing considerations for these types of goods are:

 The goods should be as per the standard as expected by the industrial consumer.
 The promotion of these goods should be conducted through personal selling where high
level meeting agree upon the price and terms and conditions.
 The goods should be delivered timely as per demand.
 There should be good relationship with the customers as they purchase the product
regularly for longer period of time.

b) Capital items
The goods such as buildings, plant and machineries, installations and other long lasting and
highly expensive goods are capital goods. They consume a huge amount of investment. These
goods are customized according to the need of the consumer and thus cannot be mass produced.
They are usually non-movable, highly expensive and long lasting. Customers pay huge attention
to the quality and utility of the product.

The marketing considerations for these types of goods are:

 They are unique products produced according to the need of the consumers. Therefore
much attention should be given towards the requirement of the customers.
 Since a huge amount of the consumer’s investment is required for these products,
consumers pay attention towards the quality and utility of the product. Therefore, price
does not play a competitive role. However the product must be provided to the consumer
in reasonable price.
 The reputation and reliability of the producer plays the role of branding. Consumers
prefer reliable producers with good market goodwill.
 The products should be promoted through highly skilled high level personal selling as the
dealing goes through rigorous negotiation.
 Advertising is necessary for mass produced goods which are required for multiple types
of industries. Eg. Loaders, generators etc.
 Good after sales services mechanism is required.

63
Prepared by: Pramish Shakya Gurukul CA

c) Supplies and services

These are the goods which are required for the production and operation of the goods but do not
become the part of final product. They are consumable products which are used during the
management and operation of the production process. They have very short life, low cost and
used by multiple organizations regardless of their nature of product. Therefore they are widely
promoted and distributed.
The marketing considerations for these types of goods are:
 These goods are distributed to the wide geographical area and longer channels of
distribution are used.
 Price plays an important role due to high competition.
 Both personal selling focused to organizations as well as mass advertising is used to
inform, persuade, motivate and lure the customers.
 No after-sales services required.
 Relationship marketing is used to capture market share as consumers need the product
throughout the year.
 Branding and packaging is not important but however good-will of the producer plays a
major role in creating relationship with the consumers.

Product Life Cycle

The products serving their utility in the market have specific life. They are introduced in the
market (born), their demand starts to rise in the market (growth), reach their highest potential
peak in demand (maturity) and then start their downfall as the consumers get better options with
time (decline). The product then eventually subsides from the market.
Every marketer must understand that fact that no matter how sophisticated and better product
they introduce in the market, the product will decline from the market at some point. It is
therefore the marketer must understand the life cycle of their product and design their marketing
strategy accordingly.

The life cycle of the product has following four major stages which every product go through.
1. The introduction stage
2. The growth stage
3. The maturity stage
4. The decline stage

1. The introduction stage

This is the first stage of the product life cycle where the product is introduced in the market. This
is like the birth of the product. The consumers are unaware about the product. They have none or
very little idea about the product. Consumers are reluctant to use the product as they have very
little knowledge and information about the product. Only few curious and innovator customers
try the product. The profit is negative in this stage as the sales are very slow and the investment
is very high. The competition is very low in case of innovative products, but in case of
substitution to existing products, the competition will be very high.

64
Prepared by: Pramish Shakya Gurukul CA

Marketing strategies to follow in this stage

This is very crucial stage where properly implemented marketing strategy gives a firm base of
market share to the product. The few marketing strategies are:
 Only few promising designs and variety of product should be introduced. The product
assortment can be increased according to the response of the market towards the product.
 Much care and focus should be given in promotion of the product. Heavy promotion
leads the way to the heart and mind of the consumers. The promotion should be
informative as well as persuasive. It is equally necessary to inform the consumers
regarding the product as to persuade and motivate the consumers to purchase and use the
product.
 The price should be according to the nature of the product. If the product is innovative
and there is no competition, the price of the product should be kept high so as to recover
the research and development cost. This is called skim the cream pricing method. If the
product is just a substitution to the similar products available in the market, then the price
should be charged fairly low in order to attract the consumers. This is market penetration
pricing method.
 In regards to the placement of the product, the product should be made available to the
most promising target market only. The supply of goods can be then increased to other
markets according to the response of the product.

2. The growth stage

This is the stage where the product has been in the market for a while and consumers are quite
comfortable with the product. In this stage, the sale of the product increase rapidly. As more and
more customers get the taste of the product and are satisfied from the product, they tend to use
the product more frequently and even suggest their friends and families to use the product. They
have adequate knowledge regarding the utility and use of the product. The product now is made
available in many markets and the market size keeps on expanding. The profit starts to rise as the
sales increases. The competition also rises as the competitors also have introduced similar
products in case of innovative products. In case of substitute products, the product stars to
compete with the existing products.

Marketing consideration in the growth stage:

 Multiple varieties of the product should now be introduced and sold in the market. The
quality is improved from its predecessor and multiple new models with added features
should be introduced in the market.
 Promotion should focus on persuasion and motivation of customers to use the product. As
customers already have the idea and information regarding the use and utility of the
product, such promotion should be minimized.

65
Prepared by: Pramish Shakya Gurukul CA

 In case of skim the cream pricing strategy, the price should be decreased in the growth
stage as our goal becomes to capture the market share. Also there are similar products
from the competitors. In case of market penetration pricing strategy, the price can now be
charged according to the market as the product has established its mark in the market.
Consumers are ready to pay little extra to our product as the product has already gained
the goodwill in the market.
 More markets should be explored in this stage. The product should be made available
throughout the market and more potential of the product sales should be achieved as the
sales keeps on growing rapidly in this stage.

3. The maturity stage

This is the stage where the sales growth rate starts to decrease. However the sales are at its
highest peak. Every type of consumer has been using our product in the market by this stage. The
profit is stable as the sales move in stable straight line. There is intense competition in the market
and competitors are trying their best to grab our market share.

The marketing consideration at the maturity stage

 This is the stage where the marketer has to defend the market share. The consumers have
been using our product and are not searching for something new. Therefore, product
differentiation should be done adding new features and designs. Also new brands should
be introduced so as to give that elite feeling to the consumers.
 The focus of promotion should be to develop the brand at the early stage of maturity
stage. It should focus to set the product as the brand they love and look for. During the
maturity stage, the promotion should work to reap the advantage of their branding,
introducing new brands under the set brand. The efforts should be to create brand loyal
customers who are willing to get connected with the brand.
 The pricing should be fairly low at this point as the sales are at its highest peak and so is
the competition.
 New markets should be approached so as to keep up the sales rate. Extensive distribution
channels should be developed with intense effort.

4. The decline stage

This is the downfall era of the product where the sales rate starts to decrease as the consumers
look for new products, switch to competitors or stops using the product as their marginal
satisfaction from the product decreases. The profit starts to fall along with the downfall in sales.
The marketer has to decide upon withdrawing the product form the market or bring out a new
product that has the potential to continue the journey

66
Prepared by: Pramish Shakya Gurukul CA

Marketing consideration during the decline stage

 Marketers can revise or upgrade their products with added benefits and satisfaction in
order to stay in the market. Least performing products and brands are withdrawn from the
market. Few products are produced for the exclusive loyal customers who still stick to
our brand.
 Promotion is done to remind the customers about the brand and product only. The
intensity of promotion is reduced as additional promotional effort fails to increase the
sales of the product.
 The price is set high as the production quantity is very low. The revenue fails to hold up
the cost of production. Therefore high price is set for loyal customers who are still into
our products.
 The target market is now reduced to market niche. The distribution channels are
redesigned and focused towards the market niche.

Process of new product development

An organization cannot rely on same product or products to sustain in the market forever. The
market demand keeps on changing according to the change in taste and preferences of the
consumers, technological developments, competition, other environmental factors etc. To be in
pace with the growing demands of the market and stay a step ahead of the competition,
businesses must bring new, innovative and upgraded products in the market.

New product development is the process where businesses research and development new
products or upgrade existing ones. Most of the established businesses have their own research
and development facility where they work to develop innovative, better and upgraded products to
satisfy immerging needs in the market thus fulfilling the gap between the expectation and reality
of the consumers.

According to Philip Kotler,” New products include products, improved products, modified
products and new brands that the firm develops.”

New products can be of three types:

1. Product innovation
2. Product modification
3. Product imitation

67
Prepared by: Pramish Shakya Gurukul CA

1. Product innovation

This is the process where the organization develops and produces an entirely new unique product
that can satisfy the need of the consumers. Marketers use their research and development facility
backed by their knowledge of the consumer’s expectations, bring an entirely new product or an
improved version of new product with never seen before features. However, product innovation
is costly and time consuming process and most of the time risky, as consumers may not accept
the product. The marketer must be well acquainted with their target group’s need and
expectations. Example: Introduction of I phone as smart phone in the mobile market.

2. Product modification

Another way of new product development is modifying their existing product line. Consumers
already know the brand and product but may get bored with the same taste and utility. Therefore
marketers can give them something new by modifying the product in terms of quality, utility,
function, features, look and benefits. This way, the consumers get new taste with the assurance
of their faith in the brand. Similarly, the product also gets to retain their customers’ loyalty.

Quality modification provides added dependability, durability and value to the product.
Similarly, functional modifications add up utility, features, and benefit from the product
providing additional satisfaction to the consumers. Example: New flavors added by wai wai.

3. Product imitations

Not all organizations and businesses have the ability to innovate and modify their product. Those
who cannot bring new changes or new products in the market rely on product imitation.
Organizations imitate or copy the product launched by their competitors and introduce similar
product with similar utilities in the market. They simply try to grab their competitor’s market
share. In the product life cycle, once the product is introduced, the technology and features are
exposed in the market. Other businesses copy the idea and technology and bring their own
version of similar products. Example: Cheetos from the US market becomes kurkure in Indian
market and Kurmure in Nepali market.

68
Prepared by: Pramish Shakya Gurukul CA

Process of New product development

The overall process of new product development can be explained in following seven steps.

1. Idea generation

The first step in new product development is generating the idea about the product to be
developed. There is no hard and fast rule behind generating the idea but a potential idea can be
generated from clear knowledge of market and consumers. This knowledge can be obtained from
experience, research and observation of the market and consumers. The idea for new product can
be generated through:

 Market research where different information regarding consumer taste and preferences,
market trends, fashion etc can be obtained via consumer survey, questionnaire, focus
group discussion, channel members and market observation.
 Potential attributes of the existing product which can be modified is listed and tested so
as to bring fine modified product.
 Creating compatibility of adding features with the product which can be carried by the
product.
 Clearly understanding the need, wants and problem situation of the consumers. The
existing product can be redesigned so that it can solve the consumer problems. A
thorough study of the product and its attributes gives clear idea about how the product
can be presented as the optimal solution to the consumers.
 Brainstorming. A group of experts can have a thorough brainstorming creating and
testing possibilities through their intelligence and creativity. The brainstorming can be
conducted either by notifying about the problem situation to the participants or without
notifying them and just presenting them a situation or case.

The sources of information for idea generation are the consumers themselves who keep on
demanding for new products that can satisfy their needs according to the change in the
environment and their lifestyle. The middlemen or channel members. Sales force and the
suppliers are the carriers of the information from the consumers to the marketers. They bridge
the communication between the producer and the consumers. The competitors have their own
way of understanding the market demand and consumers’ taste and preferences. Their strategies
also provide us idea about generating a new product. Similarly the holistic approach of
marketing relies on the employees working in the organization for valuable information, advice
and suggestions. They are also a good source of idea generation. In addition, the company can
obtain new ideas through talk programs, seminars, journals, reports etc too.

69
Prepared by: Pramish Shakya Gurukul CA

2. Idea screening

Once the idea has been generated, it needs to be observed and analyzed properly. Only those
ideas which are promising and have potential should be selected for execution. The ideas
generated should be screened in terms of feasibility and should be executable. The ideas can be
listed as promising idea which is highly functional and feasible, marginal ideas which are
moderate feasible and non-functional and non-feasible ideas are rejected.

3. Concept development and testing

After screening the idea, the selected ideas are presented for concept development. The ideas are
now elaborated to detailed concept that can answer what to produce and what to expect from the
product. A full work plan in case of service and detailed drawing, prototype or design in case of
tangible products is developed.

Such developed concept and prototype should be tested in terms of its feasibility regarding its
utility, concept clarity, consumer acceptance, consumer need satisfying ability, utility, price, cost
of production, profit margin, potential of repeated use from consumers etc are tested.

4. Market strategy and business analysis

Once the idea is conceptualized and tested, the market strategy and business analysis for the
proposed product is analyzed. The market strategy including target market selection, market mix
design, product positioning strategy, distribution channel design and selection, targeted market
share and total budget is decided. Similarly the business model is analyzed through computer
analysis; demand forecast, cost estimate and break even analysis to estimate cost, profit
projections etc. are analyzed.

5. Product development

The product now comes into reality. The conceptual idea now takes the shape of the actual
product. The functional prototype of the product is developed and tested from multiple
dimensions such as its performance, functionality, and behavior in different test conditions,
durability, efficiency and safety features. This prototype then leads to actual production of the
product to be offered in the market.

70
Prepared by: Pramish Shakya Gurukul CA

6. Test marketing

Once the product is ready with its utility, brand, packaging and standardization and grading
features, it is exposed to test marketing where the actual consumer’s review and response is
tested. The product is new in the market and consumers may have different response towards the
product. Their response leads the marketing strategy to be applied for the product. Consumers
respond differently according to their buying behavior. Therefore it is equally necessary to
understand this buying behavior as it is necessary to know their needs and wants. So the product
is introduced to a small market niche where the consumers’ response is recorded.

The product is bought by first time users who feel comfortable in taking the risk of using an
entirely new product in the market. They lead to their followers and repeated buyers. Eventually
the consumers become early adaptors to adaptors.

These tests can be conducted using different methods such as:

The sales wave research where the product is offered in the market without any price. This
motivates the consumers to taste the product. Then they are charged with some minimal price
after some time and the price of the product keeps on rising until its actual selling price reaches.
This multiple prices create multiple sales wave which are studied by the marketing experts to
understand the consumer’s purchase pattern.

Another method is simulated test marketing where the conditions are simulated as that of the
actual market and the participating consumers’ purchase pattern and their response towards the
product is recorded.

In controlled testing method, the conditions and environment are controlled and the sales results
and the participant’s behavior in each controlled situation are recorded.

Test market method selects few markets where they perform full promotion of the product and
their results are collected. The results are then compared with the results from other markets
where they perform none or very little promotion. The results are then studies to know the actual
behavior of the consumers and their rate of purchase and repeated purchase.

Using above tests the behavior of consumers related with their frequency of purchase are
recorded and tested. Their first purchase, first repeat, time between their first and repeated
purchase, the time they familiarize with the product and get used to it and their purchasing
frequency are recorded and tested.

71
Prepared by: Pramish Shakya Gurukul CA

7. Commercialization

After the successful performance in the test markets and after getting confident with the product,
the product now moves to the market in full scale. The product should be launched in the market
in proper time and place. The timing should be such that there is minimal competition in the
market. It is equally important to launch the product at right place where the target consumers
are highest and demand is plenty. A strong marketing mix strategy should be applied as per the
target market so that the products rule the market with a bang.

Product line and product mix

Organizations do not usually rely on a single product. They produce multiple products designed
and targeted towards large category of homogenous consumers having different needs. This
assortment of products allows the marketers to cater the entire market and hold their market
share. Thus product line is the set of closely related products having similar functions and
designed for consumers with differentiated needs. For example, fair and lovely produces fair and
lovely, fair and lovely night cream, day cream, moisturizer, fair and lovely teen etc. These
products provide similar utility designed for consumers with their own unique requirements.

Product line can be strategically used through line length, line modernization and line featuring.

a. Product line length

Product line length refers to the total number of products produced under a category, designed
and developed to cater consumers with different needs. The higher the number of product
assortments, longer the length of the product. Marketers use the length of product line to achieve
their marketing goals. Longer length allows them to achieve market share goals while shorter
length enables them to earn higher profit. However marketers expand and contract their product
line strategically to get cope with environmental challenges.

i. Line Expansion

Line expansion means adding new products in their product line so that they can widen their
target market and cater more consumers. The line can be expanded through:

 Line stretching: where they add up products with higher or lower price than their
existing products. Adding higher price products with added features and quality (Trade
up) attracts economically higher class consumers while adding lower priced products
(Trade down) serves economically lower class consumers.
 Line filling: Additional products within the existing price range are added with multiple
flavors.

72
Prepared by: Pramish Shakya Gurukul CA

ii. Line contraction

Under this strategy, least performing products are cut off from the production line shortening the
product line. The failing products which are dragging the profit level down are abandoned and
focus in given to performing products.

b. Line modernization

Line modernization refers to modifying the products in the product line along with the advanced
technology and quality so as to suit the modern styling and tastes. The products are updated with
better version of features, taste and designs.

c. Line featuring

Line featuring refers to introducing either high priced product to attract economically strong
consumers with specific needs or low priced products to attract price sensitive consumers.

Product mix is the set of all the products produced by the organization or business. It is not
necessary that a business produces homogeneous products. They produce multiple products with
different utility and features under their brand name. The products under the product mix can be
categorized under:

 Product width: The total number of product lines produced by the firm. For example:
chaudhary group produces food and snacks, hospitality service, medical service,
education service, housing, electronics etc. All these different product lines are their
product width.
 Product depth: is the number of items in each product line. Under CG’s product line
food and snacks, they have wai wai, kwiks cheese balls, chocolates, fruit juice etc.
 Product length: This is the sum total of all the individual products produced by the
organization. For eg. Wai wai, housing phases, hospitals all add up to the product length
of the CG Company.
 Product consistency refers to the inter relation among the products produced by the
company. If the organization produces different products related to food and beverages,
then we can say the products are closely related. If the organization produces multiple
products such as food and beverages, electronic items, housing and construction etc then
the products are remotely related and thus lower product consistency.

73
Prepared by: Pramish Shakya Gurukul CA

Service products

The overall products can be divided in to two categories, tangible goods and intangible services.
Their marketing strategies differ with their nature.

Services are intangible activities which provide satisfaction to the consumers and consumers are
ready to pay for such services. They can only be experienced and cannot be stored or transferred
from one place to another. The service products are of different types:

I. People based and equipment based

 People based services where the products are provided by skilled people such as doctors,
engineers, chef etc.
 Equipment based services where the service product is provided by automation and
machines such as ATMs, Massage chair etc.

II. Personal or business

 Personal services provided to the end consumers who consume for their own benefit such
as haircut, tailor service etc.
 Services provided to business to satisfy business needs such as consultancy, research etc.

III. Profit and non-profit services

 Services provided to earn profit such as banks, nursing homes etc.
 Services provided for social welfare and are not intended for profit are non-profit services
such as old age homes, orphanage, free clinics and hospitals etc.

IV. Client presence or absence

 Services that require the presence of client such as hair-cut, massage, checkup etc.
 Services that do not require the presence of the client such as laundry, tailor etc.

Nature of Service product

Service products possess following natures and features:

I. Services are intangible in nature and they do not possess any physical characteristics like
mass, weight, smell, taste etc.
II. The services cannot be separated from its producer. Therefore it should be consumed as
soon as it is being produced.
III. Services vary according to the service provider. The same service may have different
output and quality provided from different service provider.
IV. Services cannot be stored. They are highly perishable and thus should be consumed as
soon as they are produced.

74
Prepared by: Pramish Shakya Gurukul CA

Service marketing mix

Since the nature of service is different from that of the tangible products, the marketing mix for
service products is also different. While the marketing mix of tangible products consists of 4Ps,
the service marketing mix consists of 7Ps. They are:

1. Product

The service product is highly perishable, variable inseparable and intangible in nature. However,
the service product is designed and developed according to the need of its consumers. It has its
own brand and it is standardized and graded. The strategy remains the same for tangible and
intangible products except for the fact that services do not need packaging and labeling,

2. Pricing

The service is priced according to the demand and purchasing capacity of the target market. The
pricing strategies can be one price strategy where single price is set for all the services, flexible
pricing strategy where the price varies according to the location, service provider, discounts and
offers and competition based pricing where the price is set according to the competition.

3. Place mix

The service should be made available at the right place and at the right time. Since the producer
forwards the service immediately to the consumers, there is no need of channels of distribution.

4. Promotion mix

The services can be promoted in the manner the tangible goods are promoted. It can be promoted
through advertisement, sales promotion, personal selling etc.

5. People

The marketing of service mix is highly dependent on the people factor as the quality of the
product is directly related to the people who provide it. The strategy can be used through proper
motivation, training and skill development of the people who actually provide the service.

6. Physical evidence

Physical evidence plays the major role in the success of marketing strategy of service mix. It
gives the first hand impression to the consumers about how the service is going to be like? The
interior and outlook of the place where service is provided should be properly managed so as to
provide comfort and good impression to the consumers.

75
Prepared by: Pramish Shakya Gurukul CA

7. Process

Another important marketing mix is process in service marketing. How is the service delivered
insures the quality and the features of the product. For example, how the food is served in the
restaurant shows the quality and features of the utility they provide.

Branding

Brand is the identity of the product and the firm. Consumers identify their products according to
the brand. They like and dislike the products from this identity. Brand is anything that identifies
the product and differentiates it from other products in the market. The identification can be in
the form of a name, mark, logo, graphic design, color, sound, jingle, smell and taste. Anything
that identifies a product or firm is brand. The brand gives the idea about the product attributes,
image, value and benefits to the consumers. The brand not only carries the identity of the
product, but it also carries the consumer’s positive perceptions, expectations, experiences, beliefs
and review.

According to Philip Kotler,”A brand is a name, term, sign, symbol or design, or a combination of
them, intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors.”

Brand name is the word, letter or numbers identifying the product.

Brand mark is the symbol, design, sign, color or graphic design that identifies the product.

A trademark is the legally protected symbol or name used by the product as brand. It legally
denotes the brand.

Brand equity is the value added to the product by the goodwill earned by the brand to the
product. Highly appreciated brands have higher brand equity and are considered as assets.
Brands convey reputation, quality and promise to the consumers.

Objectives and importance of branding

Branding fulfills different objectives to the firm, consumers and the society as well. These
objectives also highlight the importance of branding. The objectives of branding are:

A. Branding objectives towards consumers:

 Consumers get to identify their preferred product through branding.
 A good brand is loyal towards its consumers and thus provides quality assurance to its
consumers.
 A well established brand gives prestige and status to its users.

76
Prepared by: Pramish Shakya Gurukul CA

B. Branding objectives towards organization:

 Branding allows the firm to advertise and promote their product. Since brand gives
identity to the product, the firm can specify the brand as their product and initiate
promotional schemes and advertise their product.
 Brand leads to brand loyalty where the consumers follow a specific brand. The
consumers do not wander to other products.
 Brand helps in positioning the product in the market. In fact the brand specifies the
product positioning. This allows the organization to have its own zone in the market and
avoids competition.
 Established brand enables the organization to introduce additional products under their
product line and product mix. They need not put their efforts to gain public trust again for
the newly introduced product.
 With branding, the marketing efforts are made lot easier and effective as they can direct
their efforts to the specific product.
 A well established brand carries the consumer’s positive perception, expectation, beliefs
experiences and reviews. This enhances the image of the product and adds up goodwill
value to the product.
 Brand provides legal protection against imitation, duplication and misuse of the product
image by others. A registered brand enjoys legal protection.

C. Branding objectives towards the society

 Brand is used to promote social events which benefit the society and the brand enjoys the
benefit of promotion.
 A well established brand ensures the protection of consumer rights. This boosts the brand
image and the society is insured of quality products.
 Well established brands are socially responsible. Therefore they take proper care of social
assets and environment. They utilize the social resources to their fullest and take ample
measures to prevent the environment.

Reasons for and against branding

Marketers use branding as strategic tool. The brand itself speaks louder for the product in the
market. However, some marketers choose not to brand their product for specific reasons. Below
are the reasons for and against branding.

Why brand the product?

 Brand gives identification to the product. It differentiates our product form that of
competitors and assures the consumers of our quality and utility.
 Branded products have consistent quality and utility. Branded products tend to get better
with time.

77
Prepared by: Pramish Shakya Gurukul CA

 Well established brands are added with prestige and status value. This enables the
product to have an upper hand in the competition.
 Branded products can easily be promoted in the market.
 Marketing efforts can be executed efficiently for branded products.
 Brand provides legal protection against copy, duplication and imitation.
 Brand highlights the socially responsible efforts made towards the society. Thus
enhancing the image and reputation of the brand.

Why not to brand the product?

 Branding incurs huge cost to promote the brand, establish the brand and maintain the
brand image. Smaller businesses cannot afford this cost.
 If the product cannot maintain the standard of their quality then there is no use of
branding.
 Some products cannot be branded due to their perishability in nature.
 Similar looking products cannot be branded such as farm products.
 Branding requires lots of legal formalities which require lots of cost and efforts.
 Some choose not to brand their product to avoid competition.

Types of branding

Brands can be classified into following bases:

1. On the basis of ownership

i. The brand owned by the manufacturer of the product is manufacturer brand. CG,
SONY, TOSHIBA etc. are manufacturer brand.
ii. Those who do not have strong brand rely on their product distributor’s brand. This
enables them to gain the popularity and image of their distributor. Bhatbhateni,
COSTCO, BIG BAZAR etc. are the examples of distributor brand.
iii. Some use brand owned by others by paying royalty and agreeing upon the terms of
conditions. Such brands are called licensed brand. HIMILAYAN JAVA outlets,
BAJEKO SEKUWA etc. are some examples of licensed brands.
2. On the basis of product line
 Individual brands are the brands which are given to every single individual product the
manufacturer produces. They are promoted separately. This creates individual
opportunities in the market and even if one brand fails, it does not affect other brands.
However, branding every product individually requires lots of cost and efforts. Each
product will require its own set of marketing mix strategy and even if the brand becomes
popular, the manufacturer does not gain from it.
 Family brand is the brand which is given to all the products produced by the firm. This
is cheaper as one marketing effort can benefit all the products under the same brand. The
manufacturer can get the benefit of market image through family brand. But there is the

78
Prepared by: Pramish Shakya Gurukul CA

risk to the brand image if any one of the product fails to perform in the market. The firm
needs to maintain their standard to all the products regardless of their product position in
the market.

Features of good brand name

Branding is a tricky job and it should be taken very seriously and conducted properly. The
success and failure of the product somehow depend upon the brand name given to the product.
There are some features that every brand name must have. They are:

 The brand name should be simple to read and interesting enough to remember.
Consumers prefer the brands that go easy in their tongue and brain.
 The brand name should be unique and distinctive from that of their consumers. Similar
brand names make the consumers confused and they might end up using our competitors’
product thinking that as of ours.
 The brand name should be adaptable to all the product mix. It should be usable to all
types of product the firm produces. SONY can be used for tv, music player, camera,
mobile phones, medical equipment etc. all at the same time without any confusion.
 The brand name should be able to define the product attribute, features and use.
 The brand name must be eligible for legal registration to insure legal protection.
 The brand name must be able to show the position of the product in the market. High
positioned products must have exquisite brand name.
 The meaning of the brand name should be appropriate in all languages. One word in one
language can have different vulgar or abusive meaning in other language. One must be
careful before choosing the name.

Packaging

The straight meaning of packaging is a container or wrapper that contains the product providing
the look and safety to the product. However in marketing, a well-designed packaging provides
not only the safety and look, but also acts as a silent sales person, promoting the product to the
consumers from the self of the outlet. Therefore it is also termed as the 5 th P in marketing mix.

According to Philip Kotler,” Packaging includes the activities of designing and producing the
container or wrapper for a product.”

Packaging can be of different types such as following:

 Packaging containing a unit of product. This is called unit packaging.

 Packaging containing multiple items in a single package. This is called family
packaging.
 Identical packaging used for all items in the product line called line packaging.

79
Prepared by: Pramish Shakya Gurukul CA

 Products having related utility are packaged together to give convenience to the
consumers. This is called banded packaging.
 Separate products are packaged according to their size and weight. This is called
multiple packaging.

Levels of packaging

The packaging has following levels:

 Primary packaging or first level packaging which is used to contain the product or wrap
the product.
 Secondary package which is used to contain multiple primarily packaged products to
provide extra safety. They are usually made up of plastic or cardboard.
 Shipping package which is used to store and transport the product. Large cardboard box
containing multiple secondarily packaged products used for extra safety during
transportation is the example of shipping package.

The materials used in the packaging are usually cheap and durable products which add safety to
the product with minimal addition to the cost of production. Usually plastic, cardboard, wood,
aluminum tins or cans, tetra packs etc are used as packaging materials.

Objectives of packaging

The main objectives of packaging are:

 Protection of the product form external elements. It protects the products form
adulteration, light, heat, moisture, handling hazards etc.
 Insure proper storing of the product. Enabling the middlemen to store the product easily.
 Provide information about the product from the label attached in the package.
 The outlook of the product helps to properly position the product in the market.
 The outlook and the label in the packaging act as silent sales person promoting the
product to the consumers from the store shelf.

Functions of packaging

The main functions of packaging are as follows:

 Packaging contains the product. It is used to contain or wrap the product according to the
physical condition of the product and its shape and size.
 Packaging protects the products form foreign elements and environmental forces. It
protects the product form heat, light, moisture and other foreign elements that can harm
the product.

80
Prepared by: Pramish Shakya Gurukul CA

 The label in the packaging provides the identification to the product. The function of
packaging is to provide identification of the product through the brand name, brand color,
brand and trade mark and information about the product.
 Packaging act as a silent sales person. An attractive package functions as an effective
promotional tool. Hence, another function of package is promotion of the product.
 Packaging differentiates the product form its competitive counterparts. Packaging
positions the product in the market helping the product to avoid direct competition from
its competitors. Marketers use this function of packaging to give a new look to the old
product.
 A well packaged product is easy to distribute and transport form one place to another. So
package functions as facilitator for distributing the product.

Essentials of good packaging

Packaging is a tricky process which the marketers use strategically. A well-defined and designed
packaging can give competitive advantage to the product in the market. There are few essential
qualities of packaging that defines a good packaging. They are as follows:

 The packaging should be attractive. It should be visible in the pool of products in the
store and attractive enough to grab consumer’s attention.
 The packaging should be convenient. It should allow the consumers to use, carry and
store the product easily.
 The materials used in the packaging should be economic and cost effective. It should not
add up extra cost to the product.
 It would be better if the packaging is made such that it can be reused after the purpose
with the product has been fulfilled. This not only attracts the consumers, but helps to
protect the environment form waste.
 The materials used in the packaging should be environment friendly. The materials
should be bio-degradable or recyclable. It should not add up waste that harms the
environment.
 The package should be able to communicate properly with the consumers. The
packaging should be able to answer all the queries to the consumers regarding the
product.

Labeling

Labeling or label in the product is present in the packaging of the product. The label provides all
the information about the product that is necessary to the consumers. The label identifies the
product through its brand, gives information about the product like what is it made up of? How
to use the product? Mention precautions to be taken while using the product if any, when and
where the product was produced and how to use the product? Etc.

81
Prepared by: Pramish Shakya Gurukul CA

The labeling in the product packaging act as silent promoter as it gives the vibrancy to the
outlook of the product. It makes the product more attractive, appealing and eye catching.

Types of label

The labels can be classified into following types:

1. Brand label where the brand of the product and or brand of the producer is specified.
2. Grade label where the grades hold by the quality of the product is specified.
3. Descriptive label where the overall description of the product is mentioned such as the
ingredients, date of manufacture, name of the manufacturer, best before date, batch
number etc.

Standardization and Grading

Standardization and grading is another part of the product which specifies the quality of the
product. They insures the guarantee towards they quality and functionality of the product.

Standardization means that all the units of the specific product produced are identical and are of
same quality, shape, size and utility and that there are no variations in any batch produced at any
time. It means that every unit of the specific product is identical and possesses same utility and
satisfaction. This insures the faith of consumers towards the product as they can predict and
expect the utility and satisfaction, thus increasing the market value.

There are certain products which cannot be created identically. Usually natural products cannot
be produced identically. In this case, to insure the level of utility and satisfaction they give, the
products are graded according to the homogeneity in their texture, shape, size, taste and utility.
Higher grades denote better product with higher consistency and so on.

82
Prepared by: Pramish Shakya Gurukul CA

Exam questions:

1. Point out the new product development process and explain test marketing. (5)
2. What is a new product? Explain the process of new product development. (2+3=5)
3. What is packaging? Explain the features of good packaging. (2+3=5)
4. What are the messages that the product life-cycle communicates to the marketers? (5)
5. Describe the role of product lifecycle in marketing decision making. (5)
6. What is a package and packaging? Explain briefly the essentials of a good package.
(2+3=5)
7. What is packaging? Explain its objectives. (2+3=5)
8. Describe briefly the steps of new product development process. (5)
9. Give the meaning of a product and explain the feature of industrial products. (2+3=5)
10. What is service product? Explain its distinct features. (2+3=5)
11. What is branding? Show your acquaintance with the terms brand name, brand mark and
trade mark. (2+3=5)
12. What is a new product for a marketing firm? Explain briefly the reasons for Product
failure in the market. (2+3=5)
13. What is packaging? Explain the essential features of a good packaging. (2+3=5)
14. What is product life-cycle in marketing? Explain the major contributions of product life-
cycle that a marketer must understand to make business successful and sustainable.
(2+3=5)
15. Briefly explain the following: (5×2=10)
a) Branding
b) Features of packaging
c) Labeling
d) Service product
e) Test marketing
f) Specialty product
g) Intangible product
h) Shopping Product
i) Types of label
j) Core Product
k) Product line

83