MODULE 4

PRODUCT AND PRICING

Topics to be covered
Product & Pricing - 18 Hrs
Product mix – Product Life Cycle – New product development –
Branding & Packing – Meaning – Types – Advantages and disadvantages
Pricing - Objective of pricing – Factors influencing pricing decisions –
Methods of pricing and pricing strategies.
WHAT IS A PRODUCT???
What are your thoughts when you see these
products?
WHAT MADE IT
SUCCESSFUL??
 GOPRO: BE A HERO

What made it successful?

➢ Product itself, affordability, light weight, easy wearable, stunning HD camera quality, waterproof, drop proof
➢ Creates an emotional connect between the story teller and the audience
➢ High customer engagement
➢ Capture, creation, broadcast, recognition
➢ GOPRO: BE A HERO
 So, Gopro reveals their quest
towards creating customer
relationships rather than just
offering a product. Marketers must
build and manage products and
brands that connect with customers
WHAT IS A PRODUCT?
According to Kotler,” A product is anything that can be offered to a market for
attention, acquisition, use or consumption that might satisfy a want or a need. It
includes physical objectives, services, persons, places, organization and idea.”

Marketing mix (4ps) planning begins with building an offering (product, service,
experience) this offering is the basis of building customer relationships
WHAT IS A PRODUCT?
According to Kotler,” A product is anything that can be offered to a market for
attention, acquisition, use or consumption that might satisfy a want or a need. It
includes physical objectives, services, persons, places, organization and idea.”

Marketing mix (4ps) planning begins with building an offering (product, service,
experience) this offering is the basis of building customer relationships
 PRODUCT PLANNING
It is the process of determining the line of products that can secure maximum profits from
prospective markets. It includes:

1. Screening, development and commercialization of new products

2. The modification of existing lines

3. The discontinuation of unprofitable items.

The managerial decision centers around deciding the type of product the company should develop
and sell, so that the product serves as an instrument of achieving market objectives. It also involves
observing the products behavior and deciding whether a product should be continued, abandoned
or re-positioned.
In developing a product, a product-planner needs to think about the product on three levels.

The most fundamental level is the ‘core or generic product’, which answers the question, “What is the buyer
really buying? “. Every product is really the packaging of a problem-solving service. Marketeers must discover
the needs behind each product and sell benefits not features.

The core products stands at the center of the total product as illustrated in the diagram below:
LEVELS OF PRODUCTS & SERVICES
➢Each level adds more customer value
➢Basic is the core customer value, which address the question what is
the customer really buying – the utility of the product
➢Marketers should convert the core customer value into an actual
product along with it features, brand name, design, quality, packing,
quality level etc.
➢ finally they should also concentrate on Augmented Product which
revolves around the core benefit which offers additional benefits
 CORE
CUSTOMER FEATURES, BRAND AFTER SALES SERVICE,
VALUE – NAME, DESIGN, WARRANTY,PRODUCT
ACTUAL QUALITY, PACKING, SUPPORT,DELIVERY AND
PRODUCT QUALITY LEVEL ETC. CREDIT
 Door delivery, Service
SCOOTER CC, mileage, colour, reminders, free service for
(conveyance) Suzuki access 125, certain months, insurance,
quality etc. support from the store, EMI
options,
FILL IN THIS TAKING AN EXAMPLE
 PRODUCT DIFFERENTIATION
• There are two broad strategic routes open to any firm to meet competition in the market place-
the PRICE ROUTE and the NON-PRICE ROUTE

• Those who take the non price route depend mainly on ‘Product’ as the number one weapon.
They make all possible efforts to endow their product brand with uniqueness and distinction. The
technique employed by them to render their product brands distinct and different from the
competing brand is termed product differentiation.
• Product differentiation helps the firm fight on a non price plank.

• Local attribute that will draw differential responses

A company can differentiate its product on the basis of:

➢Product differentiation

➢Service differentiation
 NEW PRODUCT DEVELOPMENT STRATEGY

▪ A firm can obtain new products in two ways either one is through acquisition
or firm’s own new product
▪ New products mean – Whole new product, product improvements, product
modifications and new lines that companies venture into
▪ It acts like a key source of growth for the companies and it solves solutions to
the problems of the customers
▪ It is a risky decision.
▪ To create successful new products a company must understand its consumers,
markets, competitors so that they can deliver superior value
 NEW PRODUCT DEVELOPMENT PROCESS

CONCEPT MARKETING
IDEA
IDEA SCREENING DEVELOPMENT & STRATEGY
GENERATION
TESTING DEVELOPMENT

BUSINESS PRODUCT
TEST MARKETING
ANALYSIS DEVELOPMENT COMMERCIALIZATION
 IDEA GENERATION

The systematic search for new ideas

▪ Internal sources – R&D, intrapreneurial skills, employees, engineers, manufacturing
staff etc
▪ Customers
▪ Competitors
▪ Distributors and suppliers
▪ Other sources – Advt agencies, market research firms, seminars, magazines, shows,
websites, university and commercial laboratories
▪ Crowd sourcing – inviting broad communities of people – into product innovation
process
▪ NEED IN THE MARKET – SOLVE THE PROBLEM
 IDEA SCREENING

• Screening new product ideas to spot good ones and drop ones as soon as possible
• In the screening stage the company must avoid two types of errors. A DROP error & A
GO error
• Cost will go high on succeeding stages – screening is a must – so that you can go ahead
with profitable products
• R-W-W Strategy (Real, Win, Worth doing?)
 CONCEPT DEVELOPMENT & TESTING

▪ Concept development : The marketeers task is to develop a product into some alternative product
concepts, evaluate their relative attractiveness to customer and choose the best one.
▪ Product Concept – A detailed version of the new product idea stated in meaningful consumer
terms
▪ For example an automobile manufacturer may have a “product idea “of an electric car that can
go as fast as 100 km/ hr and as far as 100 km before it needs to be re-changed. The manufacturer
estimates that the electric cars operating costs would be half of that of a conventional car. This
“product idea “may be converted into the following product concepts“.
▪ Concept 1 An inexpensive medium sized car designed as all-purpose family car.
▪ Concept 2 A medium cost sporty car appealing to young people.
▪ Concept 3 An inexpensive small sized car appealing to those who want basic transportation and
low fuel cost.
Concept Testing – example

• At this stage a group of target consumers are selected and presented with an elaborate version of each concept.

• A word on picture description is given or prototype of the car may be shown

Consumers are asked to react to the concept by answering questions such as

• Do you find the claims about an electric car believable?

• What improvements can you suggest in the various features of an electric car?

• What would be involved in a possible purchase decision?

• What do you think the price of the car should be?

• Would you buy an electric car (definitely, probably, probably not, definitely not)? Suppose 10 % of the consumers
said definitely and 5% said probably the company would project these figures to the corresponding population size
of this target group to estimate sales volume.
 MARKETING STRATEGY DEVELOPMENT

▪ Designing an initial marketing strategy for a new product based on the product concept
▪ Out of the various product concepts one concept may be more viable and well received in the
testing stage is next step is to develop a marketing strategy – come up with a strategy to introduce
the new product to the market
▪ The market strategy statements consist of three parts.
o The first part describes sales, market share and profit goals in the first few years.
o The second part of the marketing strategy statement would outline the planned price, distribution
strategy and advertising budget.
o The third part of the market strategy statement describes the long run sales, profit goals and
marketing mix strategy
 BUSINESS ANALYSIS

▪ Once product concept and strategy is set it can evaluate the business attractiveness of the
proposal
▪ Business Analysis involves - review of sales, costs and profit projections for a new product to find
out whether these factors satisfy the company’s objectives
▪ To do this co. can look into sales of similar products, tastes and preferences, market survey
▪ Sales forecast should be prepared then estimated cost and profit including R&D, marketing,
operations, accounting and finance costs
 PRODUCT DEVELOPMENT STAGE

Product Development - The product concept must now be developed into a physical product. The R&D
department will develop one or more physical versions of the product which must satisfy the following
criteria:
▪ It must embody the very attributes described in the product concept.
▪ The prototype must perform safely under normal use and conditions
▪ The prototype must be produced according to the budgeted manufacturing costs.

When the prototypes are ready they must be tested. Functional test are conducted under laboratory and
field conditions to make sure that the product performs safely and effectively. Consumer tests involve
asking consumers to test drive the car and rate the car and its attributes.
 MARKET TESTING

▪ Market testing :The basic purpose of market testing is to test the product in real market situations.
It helps the company to test the entire marketing programme for the product i.e. product
positioning, advertising, pricing, branding and packaging.
▪ The company can learn how consumers and dealers will react to handling, using and repurchasing
the potential problems and make more reliable sales and profit forecasts
 COMMERCIALIZATION

Market testing gives the management enough information to make the final decision about
whether to launch the new product. In launching a new product the company must make four
decisions
▪ Time
▪ Geographical strategy
▪ Prospective Customers
▪ Introductory marketing strategy
Founded in 1892 and
headquartered in Founded September 1998
Kolkata, it is one of
India's oldest existing 24 August 1910, Kolkata
companies

Formed in 1946, it
is a cooperative
brand managed by
a cooperative body
PRODUCT LIFE CYCLE
 PRODUCT LIFE CYCLE

A company’s products are born, grow, mature and then decline, to remain vital firms must continually develop new
product and manage them effectively throughout their lifecycles

PLC – the course of a product’s sales and profits over its life time
▪ After launching a new product company wants the product to grow and do well in the market. Company want to
earn a decent profit through its life to cover the efforts and risk that they have taken.
▪ Every product has a stage of its life though it is very hard to determine the length of each stage
❑ Product Development – company find a new idea and develop it. In this stage sales are zero, costs mount
❑ Introduction – is a period of slow growth as the product is newly introduced in the market. Profits are non-
existent in this stage due to heavy expenses
❑ Growth – period of rapid market acceptance and increasing profits
❑ Maturity – is a period of slowdown in sales because the product has achieved acceptance by most potential
buyers. Profits slowly decline – defending product against competition
❑ Decline – is the period when sales fall off and profits drop
Not all products follow all the five stages of the PLC
 INTRODUCTION STAGE

▪ PLC stage when new product is first distributed and made available for purchase
▪ In the introduction stage profits are negative or low because of low sales and heavy distribution
and promotion expenses. Promotional expenditures are heavy because of the new and unknown
product, to attract trial of the product and to secure distribution in retail outlets.
▪ Launch strategy, market positioning, pricing strategies
▪ Important to play the right card
 GROWTH STAGE

▪ The PLC stage in which a product’s sales starts climbing quickly

▪ Early adopters – will continue to buy ; late buyers will follow the lead ;
▪ New competitors will enter the market
▪ Prices remain where they are though slightly fluctuate
▪ Educating becomes a goal at the same time meet competition
▪ Profits increase
▪ Product features are added, new models, shifts the concentration from mere advt to creating
awareness and attract more buyers
▪ Lowers the prices at right time to attract more buyers
▪ Firm faces trade off between high market share and high current profit
▪ Promotions, inventions, improvement – capture dominant position
 MATURITY STAGE

▪ At some point the rate of sales growth of a product will slow down and the product will enter a
stage of relative maturity.
▪ The slowdown in the rate of sales growth creates over capacity in the industry. This over capacity
leads to intensified competition. Competitors engage in price cutting
▪ Manufacturers increase their R&D budgets and find better versions of the product. These steps
mean lesser profits and some of the weaker competitors start dropping off.
▪ The industry eventually consists of well entrenched competitors. The product manager should
consider the following market strategies: Market modification, Product modification, Market mix
modification
 DECLINE STAGE

▪ The sales of most products eventually decrease for a number of reasons such as technology
advances, shifts in consumer tastes, increased competitions, etc.
▪ The company must constantly review sales, market share, cost and profit trends of its product to
identify those products in the declining stage. The company will have to decide whether to
maintain, harvest or terminate the product.
▪ The management may decide to maintain its brand in the hope that competitors will
leave the industry, it may decide to harvest the product that is reduce various cost such
as maintenance R&D advertising etc.
▪ Hoping that sales will continue fairly well continuing for the whole. If successful
harvesting will increase the company's profits in the short term all the company may
decide to terminate the product either way selling it to another firm or by liquidating
it.
 Product Mix Decision
An organization several product lines has a product mix. A product mix (Product portfolio) is the set of all product
lines and items that a particular seller offers for sale to buyers.
A product line is a group of products that are related either because they function in a similar manner or are sold to
the same customer group, marketed through the same types of outlets or fall within given price ranges
Ex: Nike produces several lines of sport shoes and apparels
Ex: Product mix – Colgate
Colgate divides overall product mix in four lines
• Oral care
• Personal care
• Home care
• Pet nutrition
 Product - Mix deals with product variables . It means goods and services combination
offered to the target market
THE PRODUCT MIX VARIBALES
• The product line and product range
• Product design
THE PRODUCT MIX
• Product package
• Product quality
• Product labelling
• Product branding
• After sale services and guarantees
The Product line and Product range
• Product line” is a group of closely related products which are able to satisfy a particular class of need. Product
line stands for the entire range of products manufactured by a firm.

• “Product range” on the other hand speaks of varieties offered based on customers’ purchasing capacity and
requirements.
PRODUCT LINE

Source Images : Google images (ITC Portal)

Source Images : Google images (ITC Portal)
 PRODUCT RANGE

Source Images : Google images

Company’s product mix has 4 important dimensions
• Width – number of different product lines a company carries
• Length – total number of items a company carries within its product
lines
• Depth – number of versions/ varieties offered of each product in the
line
• Consistency – how closely related the various product lines are in
end use , production requirements, distribution channels etc
COLGATE PALMOLIVE
Image source : google images
• The width of the product mix refers to how many different product lines the company has.

• The table shows a product mix width of 5 lines

• The length of the product mix refers to the total number of items the company has In this case, 20.

• The depth of the product mix refers to how many varieties offered of each product in the line. Does if the
toothpaste comes in three sizes and has three flavors or colors it has a depth of nine items.

• The consistency of the product mix refers to how closely related the various product lines are. These four
dimensions of the product mix helps to define the company's product strategy. The company can add new
products lines thus widening its product mix
EX: HIMALAYA – PRODUCT LINE - WIDTH
PRODUCT LINE LENGTH
• ALL THE PRODUCTS THAT HIMALAYA OFFERS
PRODUCT LINE – DEPTH
• The width of the product mix refers to how many different product lines the company has.

• The table shows a product mix width of 8 lines

• The length of the product mix refers to the total number of items the company has In this case, 37.

• The depth of the product mix refers to how many varieties offered of each product in the line. Does if the
toothpaste comes in three sizes and has three flavors or colors it has a depth of nine items.

• The consistency of the product mix refers to how closely related the various product lines are. These four
dimensions of the product mix helps to define the company's product strategy. The company can add new
products lines thus widening its product mix
 PRODUCT LINE DECISIONS

1. PRODUCT LINE LENGTH DECISIONS

a. Product line stretching decisions: It occurs when a company lengthens its product line
beyond its current range.

i. Downward stretch or Trading down : Many companies position their products at the
expensive and of the market and later add less expensive products to the range
ii. Upward stretch or Trading Up : Companies at the lower end of the market may want to
enter the higher end.
b. Product line filling decisions : The product line can be filled by adding more items within
the present range of the products (DEPTH)
2. Product line modernization decision
In some cases product line length is adequate but the line needs to be
modernized
 PRODUCT BRANDING, PACKAGING AND
LABELING

BRANDS AND BRANDING

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

While branding, the dealer or the producer must select such a mark, or name or symbol that is easy
to remember, appealing to eyes, ears, and brain. It must be short, sweet and attractive
ROLE OF BRANDING
▪ Brand is a Massive Asset
▪ Brand is a Promotional Tool
▪ Brand is a Weapon to Protect Market
▪ Brand is Antidote for Middlemen’s Survival
▪ Brand is a Means of Identification for Customers
CHARACTERSTICS OR REQUISITIES OF A GOOD BRAND NAME

▪ It must be Easy to Pronounce and Remember

▪ It should be Short and Sweet
▪ It should Point out Producer
▪ It should be Legally Protectable
▪ It should be Original
▪ It should Reflect Product Dimensions
MERITS OF BRANDING
A. Merits to the Manufacturers
➢ Products get individuality

➢ Control of product prices

➢ Increases bargaining power

➢ It reduces the advertising costs

➢ Ever increasing demand

➢ Introduction of new product is made easy task

➢ It is a powerful weapon of product differentiation

B. Merits to Wholesalers and Retailers
➢ Quicker sales

➢ Advertising and display of products is rendered easier

➢ Increases market share and control over market:

➢ Introduction of new products is rendered easier

➢ Branded products have more stabilized prices

➢ Economical way of doing business

C. Merits to the Consumers
➢ Brand stand for quality

➢ Consumer protection against cheating

➢ Branded products reflect their life styles

➢ Steady and regular supply of products

➢ Prevalence of stable prices

 Brand classification or types of brands
There are different ways in which brands are classified. The most
obvious ways are three
1. Individual branding and family branding/umbrella branding
2. Manufacturer branding/producer branding and distributor brand
Individual Branding Family brand
BRAND STRATEGIES
▪ Single brand product strategy ex: Nandini, Amul, TATA etc
▪ Multi-brand product strategy ex: Unilever, Godrej, P&G, lifestyle,
shopper stop
▪ Distributors or private brand strategy
▪ Mixed brand strategy – i.e single brand as well as private brand
PRODUCT PACKAGING

“Packaging is an activity which is concerned with the protection , economy

convenience and promotional consideration .” -Professor Philip
Thus, it embraces the functions of package selection, manufacturing , filling and
handling .
According to Kotler –

Packing constitutes all the activities of designing and producing the container for a
product.

It is worth noting here, that the word ‘Packing, “more comprehensive and , hence ,
covers packaging . Packing is concerned with product protection while packaging
with product promotion.
OBJECTIVES OF PACKING
• Product protection
• Product identification
• Product convenience
• Product promotion - Self advertising, Point of purchase display, Media
of advertising, Product publicity
• Product profit generation
Functions of packaging
• It protects the contents
• It provides product density
• It acts as a promotional tool
• It improves user convenience
• It facilitates product identification
• It allows easy product mix
• It extends product life cycle
ESSENTIALS OF GOOD PACKAGING
• It should protect its contents
• It should be attractive
• It should bestow convenience
• It should guarantee economy
• It should assure adjustability
• It should be pollution free
• It should be informative
PACKING STRATEGIES
• Family packaging strategy
• Multiple packaging strategies
• Reuse packaging strategy
• Ecological packaging strategy
Family packaging strategy
Multiple packaging strategies
Reuse strategy
Ecological packaging strategy
PRODUCT LABELING
Labeling is another significant means of product identification like
branding and packaging.
Labeling is the act of attaching or tagging labels. A label is anything
which is part of the package or attached to it, indicating the value of –
contents – price of, product name and place of producers. It carries a
verbal information about the product, producer or such useful
information to be beneficial to the user.
THE PURPOSES OF LABELLING
• To bring home the product features
• To facilitate the exchange process
• To encourage self-service
 PRODUCT PRICING: POLICIES AND PRACTICES

WHAT IS A PRICE??
• The amount of money charged for a product or service, or the sum of the values that customers exchange
for the benefits of having or using the product or service
• Broadly it is the sum of all values that customers give up to gain the benefits of having or using a product
or service
• Price is always been a major factor but non price factors also gained importance
 PRODUCT PRICING: POLICIES AND PRACTICES

Superficially it is easy to define the term ‘price’. A price is the amount we pay for a good or a service or an
idea basically paying for the value. Thus, rent for an apartment, tuition fees for education, fare to an air-line –
taxi-railway, honorarium for a guest lecture, salary to an executive, wages to workers, is the price in various
forms.

According to W.J. Stanton, M.J. Etzel and B.J. Walker, “Price is an amount of money and/or other items with
utility needed of acquire a product.”
Pricing Objectives
• Survival
• Current profit maximisation
• Market share leadership
• Product Quality Leadership
• Meeting competition : In a competitive market price cutting may have to be adopted without incurring high
losses. This method is known as “extinction pricing”.
• Other objectives
The company can use prices for other objectives such as:

1.Prices can be set to maintain the loyalty and support of dealers.

2.Prices can be temporarily reduced to create excitement for a product.
• Correct pricing involves finding the best possible exchange value for the products. The
manufacturer must not only know the worth of his own products but also what
competitors offer, what substitutes are available, etc.
• In addition, he must have a good understanding of cost and must understand what
constitutes value in the eyes of the customer. All these call for a set of pricing policies.
Pricing policies help a firm to meet any changes the market confidently.
Importance of Pricing
• Price denotes value of the product
• Determination of price needed for sale transaction
• Market price is the basis to fix sale price
• Price is the regulator of production, distribution and consumption of
goods
• Price influences the economic life of a country
• Price plays an important role in determining the marketing mix of a
firm
• Marketing strategies involve pricing decisions
Factors Influencing Pricing
 INTERNAL FACTORS EXTERNAL FACTORS

▪ The company’s marketing ▪ Demand

objectives ▪ Competition
▪ Pricing objectives ▪ Distribution channels
▪ Costs ▪ Legal and government
▪ Marketing mix variables regulations
Pricing Methods
• Cost based pricing - This method is also known as “The sum of the
margins method
• Break Even Analysis or Target Profit Pricing : Break even analysis
helps a firm to decide at what level of output the revenues will be
equal to the cost assuming a certain selling price. The breakeven
point is that point at which sales revenue is just equal to total cost.
• Buyer based pricing – buyer’s perception
• Competition based pricing/“Going rate pricing”
Other types of Pricing
• Psychological pricing
• Market plus (pricing above the market price)
• Market minus (pricing below the market price)
• One price versus variable price policy
• Price Leadership – dominant firm initiates the price
• Charging what the traffic will bear – based on what customers are
willing to pay
• Resale Price Maintenance
Pricing strategies
The pricing structure of the company changes over time as products move through their life cycle stages. The
company must adjust product prices to reflect changing cost and demand. As the competitive environment
changes the company must consider initiating price changes.

1.NEW PRODUCT PRICING STRATEGIES

a. Pricing an innovative / new product

• Market skimming pricing

• Market penetration pricing

b. Pricing an Imitative new product
A company that plans to develop an imitative new product must decide where to position the
product on QUALITY AND PRICE. The following directive shows nine possible price-quality
strategies
2. Product Mix Pricing Strategies
When a company offers several related products, the firm must search for a mutual set of prices
that maximize the profits on the total product mix.

Pricing is difficult because the various products have demand and cost inter-relationship and are
subject to degrees of competition. The following 4 situations arise:
3.Price Adjustment Strategies
• Discount Pricing and allowances : Reducing prices to reward customer responses such as paying early or
promoting the product Discount Pricing and allowances , Trade Discount, Cash Discount , Quantity Discount,
Seasonal Discount, Trade – in – allowances, Promotional allowance, b2b

• Discriminatory Pricing / Segmented pricing: Adjusting prices to allow for differences in customers, products
or locations , customer basis, product basis, place basis, time basis

• Psychological or Prestige pricing: Adjusting prices for psychological effect

Source and references:
• Principles of Marketing - Philip Kotler, Gary Armstrong and
Prafulla Agnihotri
• Google Images