Unit – 3

Product
Meaning:
A product is what a seller has to sell and what a buyer has to buy. People purchase
products, because they are capable of realizing some benefits to the purchaser.

Definition:
According to Philip Kotler, “A product is anything that can be offered to a market for
attention, acquisition, use or consumption. It includes physical objects, services, personalities,
place, organisation and ideas.”

Feature or Characteristics of a Product:

1. Tangibility:
To be called a product, an item should be tangible, i.e. it may be touched, seen its
presence felt. It has precise specifications and is offered under a given description or model
number. It denotes color, style, size, weight, durability, quality, and price features Ex: TV,
scooter, mobile, toothpaste, pressure cooker.

2. Intangible attributes:
Intangible attributes in a product are those that cannot be perceived right away or one that
is not so very apparent.
Ex: repairing, hair-dressing, banking or insurance.
3. Associated Attributes:
These help in identification of a product and acceptance by buyers. Ex: Brand, package,
warranty, credit delivering terms.
4. Exchange Value:
Every product should have an exchange value and should be capable of being exchanged
between buyer & seller for a mutually agreeable consideration.
5. Consumer Satisfaction:
Products should be able to deliver satisfaction to consumers, which could be real or
psychological.
Levels of a Product:
1. Core Product:
It includes the key feature of a product. It forms the basis for other product offering
levels. For example, the key feature of a car is to travel from one place to another. Therefore, a
simple and small car with no additional features is a core product.
2. Basic Product:
It includes some added benefits along with the basic feature of a product. For example, a
clean and spacious car is the basic product.
3. Expected Product:
It refers to a product that is desired by customers. It varies from individual to individua l
depending on other factors, such as social class. For example, a customer buying a car may
expect an air conditioner and music system in it.
4. Augmented Product:
It includes additional attributes of a product as compared to products offered by
competitors. The additional benefits satisfy rational customers more in terms of value. For
example, a car may have special in-built features, such as LCD TV or refrigerator. 5. Potential
Product:
It compares the benefit derived from the product in future with the current product. It
creates a value for customers beyond their expectations. For example, a high technology gadget
car with good ambience and comfort is a potential product.
Types of Product / Product Classification:
1. On the Basis of Nature:
a. Goods:
These are the tangible and physical materials. These have the quality of possession and
ownership.
b. Services:
These are intangible performances where the consumption and production point is the
same. One can use the service by paying for it but cannot claim ownership.
c. Ideas:
Every market offering includes the basic idea at its core. Charley Revson of Revion
commented that in the factory they make cosmetics, but in the store they sell hope.
d. Places:
Places can be marketed to attract tourists, industries, etc.
e. Properties:
 Properties are intangible rights of ownership of either real property like real estate or
financial property like bonds and stocks.
f. Information:
Information can be produced and marketed as a product. Ex: Dictionaries.
2. Basis of Consumers’ Intention:
a. Consumer Products:
Consumer products are those items which are used by ultimate consumers or households
and they can be used without further commercial and engineering processes.
i) Convenience Products:
Such products improve or enhance users’ convenience. They are used in a day-to-day life.
They are frequently required and can be easily purchased. For example, soaps, biscuits,
toothpaste, razors and shaving creams, newspapers, etc. They are purchased spontaneously,
without much consideration, from nearby shops or retail malls.
ii) Shopping Products:
These products require special time and shopping efforts. They are purchased
purposefully from special shops or markets. Quality, price, brand, fashion, style, getup, colour,
etc., are important criteria to be considered. They are to be chosen among various alternatives or
varieties. Gold and jewelleries, footwear, clothes, and other durables (including refrigerator,
television, wrist washes, etc.).
iii) Speciality Products:
These are consumable products which can only be purchased from specialist retailers and
which consumers select deliberately. Examples are medicines and alcoholic beverages.
b. Industrial Products:
Industrial products are used as the inputs by manufacturing firms for further processes on
the products, or manufacturing other products. Some products are both industrial as well as
consumer products. Machinery, components, certain chemicals, supplies and services, etc., are
some industrial products.
i) Raw material:
A raw material is a basic good that actually becomes part of a physical product. Materials
and parts are directly used in the production of final products by a firm. Two types of raw
materials include agricultural products and natural products.
ii) Capital Equipment:
It refers to the large tools and machines used in a production process and operation of the
firm. Capital equipments is normally expensive and is intended to be used for a long period of
time.
iii) Accessory Equipment:
Accessory equipments is used in production or office activities but does not become part
of the final physical product being manufactured.
iv) Component Parts:
It is a finished item or an item that needs little processing before becoming part of the
physical product. Although component parts are used in the manufacture or larger products, they
are easily distinguishable from those products.
v) Supplies & Industrial Services:
Supplies are short lived, low priced everyday necessity items that aid and expedite the
firm’s operations but do not become a part of the finished product.
An industrial service is an intangible product that many organisations require in their
operations. These services may not be a direct part of production but without these services the
production cannot carry on. Financial, legal, marketing services are the examples of industrial
services.
On the basis of Social Benefit:
From the social aspects, we ca differentiate the products depending on long term and short
term advantages.
i) Pleasing Products:
These give high immediate satisfaction, but do harm to consumers in the long run.
Examples are pan masala, cigarettes, etc.
ii) Deficient Products:
These have neither immediate appeal nor long run benefits. Firms are not interested in
such products as there is no chance to make any profit at all. Current examples are typewriter
and pager.
iii) Salutary Products:
They have long run advantages but no immediate appeal to consumers. Hence, firms are
not primary interested in such products. But they can be taken as a challenge and they can be
made initially attractive without losing long run consumer benefits.
iv) Desirable Products:
These have a happy combination of high immediate satisfaction and high long run
consumer welfare. Tasty, nutritious, ready-made food products are the examples of such desirable
products. Socially responsible firms would attempt to find opportunities to prod uce desirable
products.

Differences between Consumer Goods and Industrial Goods:

Basis Consumer Goods Industrial Goods

Nature of Customers Ultimate Consumers Manufacturing and Industrial

units

Number of Customers Very large Generally Limited

Product Analysis Consumers are generally not Consumers are very much
very well aware of comparative aware of the products
merits and demerits of all
products

Buying Factors like price, utility, Price, utility, suitability and

Consideration durability colour will be availability are considered
considered while buying

Quantity of Purchase Purchased in small quantity Purchased in Bulk quantity

Market Extension Its very large and extensive Its not so large

Marketing Strategy Advertising and Sales Promotion Personal Contacts

Product Planning and Development:

Product Planning is wider in its scope and covers product development also. Product
development is concerned with the technical activities of product research, engineering and
design.
Scope of Product planning and Development:
1. The kinds of goods or services offered by a marketer for various segments.
2. The number or kinds of products or different lines that the company offers in various
segments.
3. The width of product line offered
4. The degree of distinctiveness
5. Increased societal and governmental constraints.
6. The growing shortage of new product ideas in certain areas.

The need for new products / Significance of Product Planning:

 1. Increased consumer selectivity
2. Product life cycle
3. Product is a basic profit determinant
4. New products are essential to growth
5. Resources and environmental considerations.
Factors to be considered before introducing new products:
1. Adequate demand
2. Suitable for current environment
3. Production fit
4. Financial consideration
5. No legal objections
6. Company’s image and objective.
Types of New Product:
1. New to the world product:
These products represent innovative novel creations that did not exist before. A large
number of products that are now taken for granted and considered old were once new to the
world.
2. New product lines:
As the name of this category suggests, these products are not new to the world but are
new for the company. Companies expand their offering to grow like ITC added readymade
apparels and food products to its portfolio. Addition of new product lines fall into this category.
3. Additions to existing product lines:
Firms add new items to their existing product line in order to meet evolving consumer and
competitive conditions. For instance, Pepsi added Pepsi Blue to cash in on a particular cricketing
season.
4. Repositioning:
Existing products that are targeted to new markets or market segments
5. Cost Reductions:
New products that provide similar performance at lower cost.
Steps in New Product Development:
1. Exploration:
This is the initial stage where a business sources for ideas regarding a new product. Some
of the sources for new product ideas include the business customers, competitors, newspapers,
journals, employees and suppliers. Small businesses may be limited when it comes to technical
research-based idea generation techniques. This stage is crucial as it lays the foundation for all
the other phases, the ideas generated shall guide the overall process of product development.
2. Screening:
The generated ideas have to go through a screening process to filter out the viable ones.
The business seeks opinions from workers, customers and other businesses to avoid the pursuit
of costly unfeasible ideas. External industry factors affecting small businesses, such as
competition, legislation and changes in technology, influences the enterprise's decision criteria.
At the end of the screening process, the firm remains with only a few feasible ideas from the
large pool generated.
3. Business Analysis:
It is a continuation phase of the above. At this stage, creative analysis is applied to the
idea finally selected. Product features are analysed and a rough programme for its development
is fixed. This stage emphasizes further study on each idea in a detailed manner and determining
the desirable market feature for the product and its feasibility.
4. Development:
This is the step that comes after the management of a company declares a product concept
to be in line with the goals of the company and issues green light for development. The research
and development wing of the company then works on the product concept for many months and
even years in some cases, to come up with a working and functional prototype of the product
concept.
5. Testing:
This is the penultimate stage of the new product development process and involves the
testing of the product and its suggested marketing program in realistic market settings. This stage
provides an insight into how the product will be introduced into the market, advertised, produced,
packaged, distributed, and eventually sold to the customers, and therefore any optimizations if
required can be made by the company.
6. Commercialisation:
The final step of the product development process is that of commercialization. Based on
the information gathered during the test marketing process, the business management may either
decide to go ahead with the launch of the product or put it on the backburner. In case the
go-ahead is given, the product is finally introduced into the market and this process is called
commercialization. This stage often leads to massive costs in terms of initial infrastructural
investments as well as sales promotions and advertisements.
Brand:
A brand is a name, term, sign, symbol or a combination of them which is intended to
identify the goods or services of a seller and to differentiate them from those of competitors.

Functions of Branding:
1. It helps in product identification and gives distinctiveness to a product.
2. Indirectly it denotes the quality or standard of a product
3. It eliminates imitation products
4. It ensures legal right to the products
5. It helps to create and sustain brand loyalty to particular product
6. It helps in price differentiation of products.
Advantages of Brand:
I) To the manufacturers:
⮚ It identifies the product and distinguishes it from other competing products ⮚
It saves advertising cost if the brand name is popular

⮚ If properly promoted, brand name creates confidence for the products ⮚

It helps in segmenting markets

ii) To the Consumers:

⮚ It affords an easy way for purchase by easily identifying a product
⮚ It indirectly assures certain quality by identifying the manufacturer
The brand names assure fixed price.

Branding Decision:
1. Brand Positioning:
A firm should position its brand clearly in the minds f target customers. It can position
brands at any three levels. At the lowest level, it can position the brand in attributes of the
product. Secondly, brands can be positioned on desirable benefits. Thirdly, a brand can be
positioned on strong beliefs and values. While positioning a brand, the marketer should establish
a mission for the brand and a vision of what the brand must be and do.
2. Brand Name Selection:
A good name can add greatly to the success of a brand. While deciding the brand’s name
the benefits of the product, the target market and marketing strategies of the firm should be
considered.
3. Brand Development:
In developing brands, the following must be kept in mind, extending the existing brand
names to new forms, extending existing brand names to new product category, introduction of
new brand names in the same category and using new brand names in new product categories.
4. Brand Awareness:
It measures how many consumers in a market are familiar with the brand.
5. Individual Brand:
A separate brand name for each Product.
6. Family Brand:
Selling all products under one brand name.
7. Cobranding:
The practice of marketing two or more brands together on the same package or
promotion.
8. Brand Extension:
Changing a brand’s focus to target new markets.
Packaging:
It may be defined as the general group of activities in product planning which
involve designing and producing the container or wrapper for a product.

Functions of packaging:
1. To assemble and arrange the contents in the desired form
2. To identify the contents, the brand and the maker.
3. To protect the contents from production to final use.
4. To facilitate retailer’s function.
5. To facilitate transporting, storing and warehouse handling.
6. To enable the display of contents
Kinds or Types of Packaging:
1. Consumer packaging:
In this type of package the required volume of the product for household consumption is
put. It is used in several products such as toothpaste, shoe polish, etc.
2. Family packaging:
 The products of a particular manufacturer when packed in an identical manner is known
as family packaging. The shape, colour, size, etc. of package will be similar for all his products.
3. Re-use Packaging:
Packages that could be used for some other purpose after the packed goods have been
consumed is known as re-use packaging. For example, the glass jar of Nescafe Instant Coffee can
be used to store spices after the coffee is consumed.
4. Multiple Packaging:
It is the practice if placing several units in one container. This helps to introduce new
products and increase the sales. For example, zodiac and Park Avenue put shirt, tie, hanky and
other related items in a single packaging.

Essentials of Good Package:

1. Suitable:
A good package must suit the requirements of the products to be packed in. it should be
designed keeping in mind the size, durability and quantity of the product.
2. Attractive:
The package must attract attention of customers. The design, colour and label of the
package should be selected carefully. A picture can be used to make the package attractive.
3. Protective:
The package must e able to protect the product from sun, moisture, germs, etc. Products
such as medicines, powders, edible oils, etc. are subject to deterioration in quality and therefore
require special packaging.
4. Informative:
The information printed on the package should suggest the contents and characteristics of
the product. It must build confidence in the product and look like a fast seller.
5. Convenient:
A good package should be convenient to stock, display and handle in
use. Trademark:
Trademark is any word, name, symbol, or distinguishing device, or any combination
thereof adopted and used by a manufacturer or merchant to identify his/her goods and distinguis
hes them from those manufactured or sold by others.
Functions of Trademarks:
1. Identifies the product and its origin.
 2. Guarantees its unchanged quality.
3. Advertises the product.
4. Creates an image for the product.

Categories of Trademark:
1. Coined Marks:
It denotes no relationship between the mark and the goods or services (e.g., Bata, Kodak)
and afford the possibility of expansion to a wide range of products.
2. An Arbitrary Mark:
An arbitrary mark is one that has another meaning in our language (e.g., Apple) and is
applied to a product or service.
3. A Suggestive Mark:
A suggestive mark is used to suggest certain features, qualities, ingredients, or
characteristics of a product or service (i.e., Halo shampoo). It differs from an arbitrary mark in
that it tends to suggest some describable attribute of the product or services.
4. A Descriptive Mark:
A descriptive mark must have become distinctive over a significant period of time and
gained consumer recognition before it can be registered. The mark then is considered to have
secondary meaning, that is, it is descriptive of particular product or service.
Benefits of Trademark:
1. It provides notice to everyone that you have exclusive rights to the use of the mark
throughout the territorial limits of the country.
2. It entitles one to sue in the court for trademark infringement, which can result in recovery
of profits, damages, and costs.
3. It establishes incontestable rights regarding the commercial use of the mark.
4. It entitles one to use the notice of registration.

After - Sale Service:

It is an important part of extended product and such services includes repairs, spare parts
and smooth maintenance of the product at reasonable charge after the product has been sold and
is being used by the customer.
Methods of providing after sale service:
1. Directly by sending the staff for repair and maintenance of the product. 2. Making
 arrangements with distributors and dealers to provide the necessary services.

3. Putting greater focus on product design through more effective research, testing and quality
control thereby minimizing breakdown and the need for after sale service.
4. The manufacturer may leave it to independent service specialist firms to promote after-sale
service.
Product Life Cycle
According to Philip Kotler. “The Product life-cycle is a attempt to recognize distinct stages in
the sales history of the product.”
The product has a life cycle just as human beings have. From its birth, a product passes
through various stages, until it is finally abandoned, i.e., discontinued from the market.
Stages in Product Life Cycle:
1. Introduction:
This stage of the cycle could be the most expensive for a company launching a new
product. The size of the market for the product is small, which means sales are low, although
they will be increasing. On the other hand, the cost of things like research and development,
consumer testing, and the marketing needed to launch the product can be very high, especially if
it’s a competitive sector.
2. Growth:
The growth stage is typically characterized by a strong growth in sales and profits, and
because the company can start to benefit from economies of scale in production, the profit
margins, as well as the overall amount of profit, will increase. This makes it possible for
businesses to invest more money in the promotional activity to maximize the potential of this
growth stage.
3. Maturity:
During the maturity stage, the product is established and the aim for the manufacturer is
now to maintain the market share they have built up. This is probably the most competitive time
for most products and businesses need to invest wisely in any marketing they undertake. They
also need to consider any product modifications or improvements to the production process whic
h might give them a competitive advantage.
4. Decline:
Eventually, the market for a product will start to shrink, and this is what’s known as the
decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the
customers who will buy the product have already purchased it), or because the consumers are
switching to a
different type of product. While this decline may be inevitable, it may still be possible for
companies to make some profit by switching to less-expensive production methods and cheaper
markets.

Product Life Cycle Curve

Different Strategies to be adopted at different stages in Product Life Cycle: a. During

Introduction Stage:
i. Persuade people to try the products.
ii. Stress should be on advertising to inform the customer about the product iii. Give
introductory offers by providing some attractive gifts to entice the customers. iv. Give
a valid reason to the customers to buy the product

v. Dealers should be given good discounts.

b. Strategies during Growth Stage:

i. Aggressive advertising is required to stimulate the sales of the product
ii. Availability of the product should be ensured to a large number of customers
iii. Focus should be on developing the brand image through promotional
activities iv. Competitive prices must be maintained to grab the market.
c. Strategies during Maturity Stage:
i. More and more emphasis is required on the brand image in order to differentiate the product
from products of the competitors.
ii. More benefits may be provided to the customers e.g. extending the warranty period, guarantee
period etc.
iii. Packaging may be used as a silent salesman by making it more
attractive. iv. Requirement to explore the new markets for the product.

v. New uses of the product may be developed.

d. Strategies during Decline Stage:

i. More emphasis on the promotional schemes
ii. Distribution cost should be reduced and the benefit should be transferred to the
customers iii. More value addition to the product can be done.

iv. Cost of production should also be reduced.

v. Emphasis is on sales volume with minimum profit margins.

Factors Contributing towards PLM:

1. Shrinking Product Life Cycle:
Companies need to introduce high quality products and upgrades faster and frequently to
survive in a market where the customers have innumerable options to choose from.
2. Mass Customisation:
Amid the intense competition, companies have to differentiate themselves from the
competition, by providing highly customized products catering to specific customer needs.
3. Outsourcing and Globalization:
Companies often prefer to outsource certain components to specialized vendors, who need
to provide cost-effective and quality products than those manufactured in-house by the company.
Companies also have to form business alliances globally to derive maximum benefit from
location advantages like cost, quality, and proximity to raw material or markets.
4. Reduced Time to market:
PLM significantly reduces the time from the idea to the market place, due to a structured
coordination between related functions.
5. Reduced Product Development Cost:
PLM avoids expensive trial and error processes like prototyping, which brings down the
cost of development.
6. Do It Right the First Time:
 PLM works on this philosophy, greatly reducing the rework and rejection rates.
7. Revenue Generation:

All these result in efficient processes, which improve revenue generation.